Rick Phelps

Synchronous Solutions

I have visited a number of businesses this summer to see how we can help them get their profits up to where they need to be for long term thriving. A common theme has emerged during this tour – the actions they are taking are often not aligned with the objectives they are stating. 

Some are following excellent processes such as EOS, meeting regularly to choose their Rocks, the key the things they will work on for the next ninety days. When a business chooses their Rocks poorly, they just weigh themselves down, squandering scarce resources and good will in the process.

Let me give a simple example. I asked about the Rocks at one business and among the list of misaligned actions was ‘build a new website.’ This could be a very good idea when you can handle more business IF it is aligned with the goals of the business.

This particular business served multiple markets, ranging from very profitable to barely profitable, so I asked the next logical question: ‘Which market are you targeting, and how do you know that market will increase your overall profitability?’ An awkward moment followed.

We could easily get into a discussion on Target Marketing here, but I will save that for a future article. Let’s just focus on the simple task of choosing projects to increase profits.

The generic goal of every business is to ‘make more money now and in the future’. It comes straight out of Goldratt’s book The Goal. The top Goal/Objective/Rock of your business should be some variation of this generic goal.

We use OKRs (Objectives & Key Results) in our Synchronous Flow Operating System. OKRs were developed at Intel and are used by the likes of Google, the Gates Foundation, and many other successful companies to align their massive organizations. It works great for the big guys, and great for us too!

When we work with clients to align their businesses using our Synchronous Flow Operating System, we start with that #1 Objective of every business: make more money now and in the future. The Key Results associated with this Objective are straight forward:

1. Increase $T (Throughput Dollars)

2. Decrease $I (Inventory)

3. Decrease $OE (Operating Expense)

Leadership OKRsYou shouldn’t have to think about these, they are the natural conclusion if you understand Throughput Accounting, and how a business actually makes money. Spend time saved turning these Key Results into S.M.A.R.T. goals. [Use Google if you don’t know about this form of goal setting]. A Key Result might read ‘Increase $T Earned to greater than $75,000 per day by the end of March 2024.’

Two parts of your organization would ‘own’ this Key Result. Operations clearly owns the Key Result as stated. Your Marketing & Sales group would own the prerequisite Key Result: ‘Increase $T Made to greater than $75,000 per day by the end of January 2024,’ since you need to Make money before you can Earn money. Sales is accountable for MAKING the $T.

Not all $T is created equal, and I use “created” in the literal sense. Production needs to create the countertop that carries the $T, and that consumes Constraint capacity. Therefore, the measure $T per Constraint Minute, which we refer to as Octane, is the ONLY measure of relative profitability.

Back to the new website example. Every job has a different Octane, as does every Market. You want to be sure Marketing and Sales are seeking business from the markets whose $T flow the fastest through the Constraint, assuming you don’t already dominate those markets. There is an assumed bit of knowledge here – you must know the Octane of your relative markets. It’s also smart to know the Octane of each job you produce (and toward that end our software partners have integrated this measure into their systems).

But the point I am trying to make is not about marketing, it’s about aligning your business through identifying projects that are directly related to the Key Results your business needs to realize. Align your scarce resources to do projects aligned with how you make money. It’s worth the up-front effort to get it right!

We are always happy to help!

If you think having a skilled facilitator to walk your leadership team through this process will make it go a lot more smoothly and efficiently, contact Synchronous Solutions  though our website
www.synchronous-solutions.com/contact-us .