local optimisation

For the last couple of days I’ve been studying the results of a local process improvement exercise. The exercise was run earlier this year, and had its own business case, complete with a financial justification. The plan was to reduce by 50% the number of defects that this department’s support team had to deal with, and the justification was that this would save around £30,000 per month in overheads. Now of course I believe that fixing defects is muda, so any reduction in this waste gets my full support. And indeed the improvement exercise was successful, as the bug statistics for recent months have shown.

So the company has saved a load of money, right? Well, certainly there are fewer bugs to fix in this one department. But no-one was laid off – instead, people now simply spend less time in support, and more time doing other work. This is a classic case of what TOC calls local optimisation: this department is now spending less of its own money, but as a result some others are probably spending more. And as I look around I find that the entire organisation – which is large – is incentivised in a similar way. Each department’s objective is to “save” costs by cross-charging its staff to other departments. But because they all ultimately work for the same company, this local accounting is obscuring the bigger picture. I’m convinced that end-to-end project costs are therefore significantly higher than they could be.

Could it be done differently? TOC says it can. The key measure of success in this company’s business is time to market. What if we could find a way for each department to somehow be measured on throughput? (and such that fixing defects is seen to reduce throughput)

I guess I’ve found a mission…

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