The second paper I wrote for my Project Management class. Main point - people procrastinate, complete work first and schedule buffer at the end in case anything slips. But, don't tell the folks doing the work that they have extra time or Parkinson's Law will apply itself.
Critical Chain
A review of the book and its concepts
By JBC
Critical Chain is a business book written by Eliyahu Goldratt (1947 – 2011). Goldratt’s approach is similar to his previous book, The Goal, in that it suggests solutions to process problems in a narrative format. These solutions are woven into the plot which follows a middle aged university professor, Rick Silver, who is seeking to be selected for a tenured position in his Department. As the book progresses we learn that enrollment in the School of Business where the professor teaches is dropping and this will no doubt impact his chances of promotion. Opportunities and challenges arise when Silver is assigned to teach a Project Management class in an Executive MBA course. Goldratt uses this platform to introduce the theory of constraints (previously introduced in The Goal) and develop methods for its application to project management.
In the first few chapters we learn that Dr. Silver is a skilled teacher who aspires to a tenured position as a full Professor with his university. Students flock to his classes and his instructional talents are clear to his peers and his supervisors. However, he is aware that he falls short in the areas of research and publishing. He knows that these are critical outputs of anyone seeking to advance along an academic career path. When his Dean suggests that teaching a Project Management course might give him the opportunity to increase this skill set he jumps at the chance.
As he maneuvers for his future Silver does not know that overall enrollment in Business Schools has been dropping. Based on this hard truth University President, B.J. vonBraun, has begun to think the market for MBAs may soon be dried up. She knows she cannot afford to bring the superstar Professors and researchers to her small University to attract more MBA students. She doubts that there is any internal talent that could develop any ground breaking research. In light of this she informs the Dean of the Business School, Chris Page, that she does not want to promote any additional faculty into tenured positions.
As is the norm in Executive MBA programs the students in Dr. Silver’s Project Management class are all experienced, up and coming, managers in the business community. On the first day of his class Silver asks if they would rather hear him lecture on known techniques and theories or attempt to develop new solutions that address actual problems. The class opts for the latter in the hopes of learning methods that can help them with their own ‘real world’ projects. As they conclude the first day they identify 3 problems faced by all their projects.
The three common problems they identify are budget overruns, time overruns and compromised content. Budget overruns are when costs exceed the resources originally assigned to the project. Time overruns are when projects run longer than intended. Content is compromised when the parameters of the project are reduced in order to stay within budget or time requirements.
When class re-convenes they discuss the reasons for the various overruns in their projects. This leads to a discussion about how schedules are developed. The hypothesis is posed that when developing a schedule people will automatically build in a time buffer based on their worst case experience. The class estimates that when building a time line managers will pad their estimates so that they have an 80% - 90% chance of completing each step within the time allowed. This happens at each level of planning so that overall project schedules may be expanded 200% beyond the actual time required.
If this is the case, they wonder, why so many projects fall behind. One student suggests that this is because there is a tendency to stretch work out so that it takes up the entire amount of time given (Parkinsons Law). This deadline effect occurs because people tend to wait until the latest possible start time to begin a task. In doing this they use up their entire buffer at the beginning. This is also called student syndrome due to students’ tendency to procrastinate on homework until the last minute.
The class looks further for issues that cause the bloating of project schedules until they identify multi-tasking requirements as another problem. The extra time built into the student effect means that there are long lead times between each stage of a project. In an effort to keep people, or resources, working during these gaps many projects encourage work on other requirements. This leads to a loss of focus on tasks that should take priority. In addition, set up and break down time for multiple projects cuts into work on more critical items.
The third item identified as contributing to project overruns is not taking advantage of buffer or early finish time when it is available. Instead, delays are compounded and when steps are completed sooner it does not lead to moving on to the next step. Even when projects are ahead of schedule the next step in the critical path is often delayed until its original start time, rather than progressing ahead.
A lecture from a professor returning from a sabbatical in the corporate world provides a brief explanation of Goldratt’s Theory of Constraints introduced in The Goal. It is explained that production is hampered by bottle necks (or constraints) in the process. In order to maximize potential managers must first, identify the bottle neck or point in the process where capacity is equal to or less than capability. Second, they must exploit the bottle neck by ensuring that it is running at full capacity all the time. Third, all other steps leading up to the bottle neck must be subordinated so that their out puts do not overwhelm its abilities. Fourth, resolving the bottle necks must be elevated in importance above all other problems. Finally, when the bottle neck is resolved the process must be started over while being careful not to allow inertia to keep focus on areas no longer needing attention.
After explaining the Theory of Constraints the Professor continues the lecture with a discussion of his experience applying these principals in a steel mill. He also notes that many of the problems faced by the mill were caused by scheduling and the way performance was measured. The mill measured success in tons of steel produced per hour. This ignored the fact that individual steps required to produce the steel were different and had different capacities for throughput.
The Professor points out two main contributors to the mills inefficiencies. First, the mill had excessive inventory. This was because they over produced some materials in order to ensure they had enough on hand when needed. Second, the mill suffered from a shortage of materials needed at bottle necks because they had been used to produce items in the excess inventory. The solution was to apply the theory of constraints so that materials were only created at a rate determined by the bottleneck’s capacities.
Back in the classroom Dr. Silver and his students set about determining how to combine the principals of the Theory of Constraints with their own observations about Project Management. Over time they define a set of terms that they can use to differentiate between production and project management. The production terms Work Center, Product, Pre-work Center Inventory and Bottleneck Work Center may be translated as Task, Time, Feeding Buffer and Bottleneck Resource in Project Management.
Because many project schedules are bloated with as much as 200% safety margins it is estimated that many could be drastically reduced. A more realistic estimate would be to place the odds of completing a task on time at around 50% to 60%. This would be closer to the actual time required to complete a step if all resources were fully focused on doing so. There is a danger with placing the safety so close to capability that ‘murphys law’ may cause some steps to take longer than expected. This, however, would likely be made up as other steps took less time than expected. Also, removing the excess safety takes out delays associated with the deadline effect, student syndrome and multitasking distractions.
The class arrives at the revelation that buffer should not be completely removed from the path but rather placed at the end. Some buffer is also required in the “feeder paths” but this is also placed at the end just prior to joining the main path. This ensures that each step follows a reasonable schedule and allows for any delays at the end of the project.
In order to combat the habit of starting steps on time project managers must understand that schedule estimates are just that. These are not absolutes. If a step is finished early then the next step should begin as soon as is appropriate. Approaching the project in this way can result in reducing project times by 25% - 50%.
The class struggles with how to solve various applications of these approaches and makes several determinations. First, since in project management the critical path can itself be a constraint/bottle neck they develop a new term – critical chain. This identifies the path to be scrutinized. Second, since organizations seldom only have one project going at a time there should be a method for approaching multiple projects simultaneously. This requires that schedules be developed in a way that allows resources/people to focus on the highest priorities first (ie. depending on the due date). Finally they look at the cost of money. This is a method for deciding which projects to take on. Organizations should make these decisions based on “dollar days” or the value of the product produced compared with its cost and time spent working on it.
As Silver’s MBA students implement their theories at their own companies the new approach to project management begins to develop a reputation as a recipe for success. Other companies, and Silver’s university, begin to take note.
In the end Dr. Silver achieves his goal of being appointed a tenured professor and University President vonBraun sees the value of the MBA program. With his theories on critical chain methodology being implemented and proven in the business world other opportunities open up to Silver in the way of consulting. The students in his class take their knowledge back to their companies to spread the word about the benefits of critical chain thinking.
THE END
REFERENCES
Goldratt, Eliyahu and Cox, Jeff, 1984, The Goal third Edition, Massachusetts, North River Press
Goldratt, Eliyahu, 1997, Critical Chain, Massachusetts, North River Press
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