When we think of constraints in a system, the first image that usually pops into our mind is a physical constraint, like a machine that holds up the workflow. But this isn’t the only kind of constraint. And physical constraints are not usually what cause problems in a sales organization. So let’s learn more about the three kinds of constraints.
The three types of constraints are physical, policy and paradigm. All three of these inter-related constraints exist in any system.
Physical constraints are resources that physically hold the system back from increasing its throughput.
To locate the physical constraint, Lisa Scheinkopf says we need to ask this question: What is the resource, that if we had more of it, we could increase the throughput of the system?
This physical constraint can be internal to the system or it can be external.
Where inputs enter your system, external physical constraints could be due to a shortage of raw materials. If you cannot purchase enough of what you need from your vendors, then you have a constraint.
At the other end of your system, where you release your transformed products to customers, you could be constrained by lack of sales. In this case your constraint lies in the market. You have plenty of raw material and plenty of capacity, but not enough customers to consume what you can produce. Most organizations today are constrained by the market.
Internally, you may be limited by a lack of capabilities or a shortage of capacity inside your organization. We likely first think of being constrained by a machine but today it’s more typical that our constraining resource is people or skills—not enough of the right kind of software engineer or the inability to hire enough quality customer service agents.
Organizations are composed of a system of interdependent resources. The system is designed to perform the process that enable the organization to accomplish its goal. Every organization has one primary physical constraint. If you can improve the throughput of this constraint, you improve the throughput of the entire system.
Many organizations have successfully used the five focusing steps to improve the throughput of their physical constraints.
Policy constraints are harder to visualize than physical constraints. They are the rules and the metrics that an organization uses to govern how it goes about its business. You could call them managerial constraints.
Policies define the source of your inputs—who you buy from, how much you are willing to pay, and the terms of your agreements.
They also define the direction of the output of your system—which markets you will serve, how you will compete, and your selling model.
Internally, policy constraints include the myriad of work rules inside your organization.
If you ask anyone in a company, they can tell you about many stupid policies in their organization. No one intentionally develops a stupid policy. People work in groups and through their belief systems they develop policies that seem correct at the time. Once policies are in place, they take on a life of their own and people feel obligated to follow them. We believe that these policies will enable us to make decisions and take actions that will produce the results we want for our organization.
Paradigm constraints are the beliefs, attitudes, and assumptions that inform the policy constraints we develop and follow. These paradigm constraints cause us to see the world in certain ways and prevent us from considering alternatives. In a famous example, companies that ran railroads viewed themselves as being in the railroad business. They couldn’t see an alternative paradigm until Theodore Levitt pointed out that they could view themselves as being in the transportation business.
The three types of constraints affect each other. Lisa Scheinkopf says that “paradigm constraints cause policy constraints, and policy constraints result in mismanagement or misplaced physical constraints.”
The five forces have been used widely to manage the physical constraint and improve the throughput in their organization. They are relatively easy to improve because they are easier to see.
Policy and paradigm constraints are harder to see and harder to improve. But they also hold the most opportunity for significant improvement in organizations today.