DW: What distinguishes Theory of Constraints from other man- agement techniques you've looked at?
RP: I think it can be very easily applied in a simple process. As I have said, the one I use more than anything else is the five focussing steps. A lot of the problems which arise in business are about lacking focus. I guess if people were to describe Positive Solutions, it would be as a very focussed organization. We don't seek to be all things to all people. We stick to what we know will be the most profitable areas to us at any point in time. We've been working on the same constraint for five years.
DW: And that is?
RP: Our ability to recruit the right people at a pace which fits our business plan. The more people we have, the more profitable we become. A lot of companies by now would have given up at about 300 advisors, something of that nature. And they'd say the constraint is no longer recruiting people, what we should be doing is trying to improve the productivity of those people, or trying to get a better deal out of the manufacturers of financial products. But we've kept the focus on the fact that as long as the people that you are recruiting
378
are profitable, then why stop recruiting them? Just because it's not getting any easier? Well, it's not actually getting any harder, either. It's just another day at the office. But we can work all of our financials back to simply the number of advisors that we have. Therefore, we don't go any farther.
DW: That's your focus?
RP: That's our focus. We've identified the constraint, now let's ex- ploit it, make the most of it. Therefore we have easily one of the best recruiting machines in the UK in this sector. We approach recruit- ment very differently from all our competitors. Our competitors will advertise, they'll try to acquire businesses, for example, rather than the approach that we have, which is to recruit people one by one. Our rate of growth might at first appear to be slow. But because our advisors have been recruited in the right way, we don't lose many of them. That's the beauty of TOC: As you really dig in to identify the constraints, you begin to understand these things.
DW: Have you thought about what the next constraint will be?
RP: Of course, at present there is still a market for further indepen- dent financial advisors to join us. There are about 25,000 of these people in the UK and we have less than 1000 of them. Now the qual- ity of some of those 25,000, and the fact that not everybody will join us in any case, means at some point the effort needed to increase the capacity just won't be worth it versus the energy we could put into something else. At that point, you say, "We've now changed our plan. What is the constraint in our new plan?" Frankly, it's about retaining the clients' money. At present what we do is introduce clients to a variety of manufacturers of financial services. The money goes to the manufacturers and they give some of it back to us in the form of commissions or fees. The next step really is for the clients to give us the money, and for us then to give some of it to the fund managers and the life insurers. So once we're a certain size, the constraint will begin to move. We'll have a brand, and the revenue needed to com- municate that brand, so there won't be quite as much effort to get people to join us. At that point the constraint shifts.
379
Interview with Dr. Antoine Van Gelder A South African Hospital
University of Pretoria
DW: You're not a typical Eli Goldratt disciple, are you?
AV: I'm a university professor with a dual appointment, head of the department of internal medicine at the University of Pretoria and head of the department of internal medicine at Pretoria Academic Hospital. In 1992 I got an invitation to attend one of Eli Goldratt's courses in Pretoria. Not one run by him himself but by a subsidiary of the Goldratt Institute. At that time I knew nothing about theory of constraints and I had not read The Goal. I got myself into this out of curiosity more than anything else.
DW: Why? What kind of help were you looking for?
AV: Let me put it this way. I was literally sitting in my office, with mv head in my hands, highly frustrated, with piles of paper all around me, going through correspondence. I opened a letter, saw that it was another invitation to a course, threw it away, and as I threw it in mv wastepaper basket my eye caught the price of this particular course. It was the South African equivalent of about $18,000. That caught mv attention. I thought if any course was worth that amount it was worth looking at. This was a two week course in production management, the invitation was addressed to the engineering faculty. It had gotten to the medical faculty by mistake. The course was actually offered free to university professors. So because of my deep frustration with some of the management issues I had in my department, and because I had some time off the next week, I phoned. I planned to only go for the first week, because this was the time I had available. I was told that I had to attend the full two-week course. I said, "Yeah, we'll see about that."
DW: But you went?
AV: I went the first week. The course was taught with reference to a production environment and the logic around it. Now you don't find much of this logic-the reality trees and that sort of thing-in The Goal.
380
Quite a lot of that is in It's Not Luck, which was published later. But the logic grabbed me because I was this frustrated man who was run- ning a department of medicine and I had not been trained to do that. I had no insight into management issues. Suddenly I saw that here was a potential way of analyzing my department.
DW: What were the parallels?
AV: My department was in chaos, total chaos. Everything coming and going, not knowing what was what-much as things were in the factory that is the setting of The Goal. During the course, The Goalwas mentioned. I bought it, read it through in one night, and I thought to myself, that's my environment. A chaotic system is not necessarily a factory. It could be a hospital with people coming and going. It could be a department with a whole lot of prima donnas-the doctors-that need to be managed. That parallel struck me.
Now if I can answer your question a bit more precisely. When one is introduced to theory of constraints, the first thing you see is a system where the causality is hidden. In other words, it's chaotic. Things happen, you have no control. Suddenly, though, it becomes a system that can be analyzed in terms of certain key points-leverage points. And one learns that addressing these key points-rather than launch- ing a symptomatic firefight-is the way to exert control over these systems. Remember, this was in the early 1990s, before frameworks like systems theory had moved to the forefront and become part of the main buzz. Though the theory of constraints doesn't talk about systems theory, already it was offering an approach by which a com- plex system could be managed in terms of a few key leverage points.
DW: Did you wind up attending both weeks of the course?
AV: Correct. Then I came back to the hospital. There are two points I want to make. The first was that I underwent a mental change. In- stead of thinking that things were too complicated, too complex and not manageable, I now saw that if I could analyze the system cor- rectly, it was manageable. That was the first important breakthrough that I had, and many people I've taught this to subsequently have had the same breakthrough. There is a way-find it!