What is the Goal of Business?
Poll your colleagues to find out what THEY think the goal of your organization is. You may get answers such as:
How can anyone make sense out of so many competing objectives? How should we make intelligent trade-offs between objectives?
- To provide value to our customers
- To make profits for our investors
- To be a market-share leader
- To be a source of employment in the community
- To make great, high quality products
How can anyone make sense out of so many competing objectives? How should we make intelligent trade-offs between objectives?
Understanding Necessary Conditions
Although there may appear to be many competing objectives, in reality several necessary conditions are co-dependent. Consider:
Curiously, if any of these three is removed, the others can never be achieved. A business might make hefty profits in the short-term, but no one will work there very long if employees are dissatisfied. What will happen to profits then? And if the customers are unhappy, they will find alternatives as well. How long can profits continue to grow and employees continue to be satisfied without any customers? Curiously, if you define the system goal as any of the above three necessary conditions, the remaining two are automatically required as essential input!
“Wealth, like happiness, is never attained when sought after directly.
It comes as a by-product of providing a useful service.”
- Henry Ford
“Wealth, like happiness, is never attained when sought after directly.
It comes as a by-product of providing a useful service.”
- Henry Ford
What, then, is The Goal?
The Theory of Constraints defines every system in terms of it's Goal. Without a Goal there can be no constraint!
Not all three necessary conditions are equally measurable. Gauging Employee Satisfaction is not nearly as straightforward as just taking a survey. And customers, no matter how satisfied, always crave for more. Profits, on the other hand, are easily quantifiable in currency units and lend themselves to comparison vs. prior periods. So, for convenience sake, TOC frames the Goal of a publicly traded companies in terms of making more and more money.
Not-for-profit companies, wholly owned companies, and individual people are not as straightforward, they require more introspection to determine their goal. For example, a not-for-profit hospital may exists to heal more and more people, etc. The table below illustrates two examples:
Not all three necessary conditions are equally measurable. Gauging Employee Satisfaction is not nearly as straightforward as just taking a survey. And customers, no matter how satisfied, always crave for more. Profits, on the other hand, are easily quantifiable in currency units and lend themselves to comparison vs. prior periods. So, for convenience sake, TOC frames the Goal of a publicly traded companies in terms of making more and more money.
Not-for-profit companies, wholly owned companies, and individual people are not as straightforward, they require more introspection to determine their goal. For example, a not-for-profit hospital may exists to heal more and more people, etc. The table below illustrates two examples:
|
Goal (score) Purpose (game) Necessary Conditions (means) |
Individual Person
Happiness; satisfaction of living a full life
Varies: truth, beauty, mastery, worship, helping others, etc. Secure & satisfied physical body, self-esteem, family/group |
For-Profit CompanyMaking more & more money
Rendering valuable service to customers Secure & satisfied employees, customers, suppliers, investors, lenders, etc. |
Recommended Reading
- The Goal Book Summary - Discusses Dr. Goldratt's first book The Goal at length
Photo Attribution: http://www.flickr.com/photos/hydropower/7175547790/sizes/l/in/phot
