Read Online Critical Chain: A Business Novel by Eliyahu M. Goldratt - Free Book Online Page B
Authors: Eliyahu M. Goldratt
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comments. He thinks for a little while and then grabs the pile and starts going through it. I turn back to my work. At least ten minutes go by. Jim puts the pile down and starts to pace the room.
"Interesting," he finally says. I refrain from commenting that he had the same opinion fifteen minutes ago.
"Rick, I think that we should make this very interesting finding the center of the article. Our cases certainly back it up. Fortyfour different organizations, ranging from non-profit service organizations to industry; seventy-eight different projects, ranging from less than thirty thousand dollars to over three hundred million, and the same pattern appears in almost all of them. Rick, it's great! At last we have something important around which to center this impressive, in-depth survey. We should even choose the title in accordance."
Making so much fuss about such a minute point. But he is the expert on how to dress up an article, so I'm not about to argue. Still...
"Jim," I hesitantly start, "there is something else I've noticed, going through the reports." I rifle through the pile trying to find Fred's pages. "Where is it?"
As Jim is about to lose his patience, I find it and hand it over. "Read the financial status."
He locates it quickly. "Okay. ‘Due to budget overruns (sixteen point two percent) and delays in production, the original estimate of three years payback is now modified to five.' Typical. What's your point?"
"The budget overrun, being only sixteen point two percent, cannot possibly change the original estimate for the payback period by more than half a year."
"So?"
"But they had to increase the estimated payback period from three years to five. By the way, the person writing it is a project auditor and he claims that his friends are already pushing to change the official estimate to seven years."
Jim still doesn't get it. It's not like him. Patiently, I continue, "If the budget overrun can't possibly cause such a change in the payback period, it must be caused mainly by the delays in completing the project."
"So it seems." He starts to pace again. "So it seems," he repeats. "Let me see. What you claim is that the major, negative financial ramification does not stem from spending too much money."
"Financially, the overruns are much less important than the overdue," I stress.
"In this particular case you are right."
"I found it in six more cases."
"What about all the others?" Jim isn't overly enthused.
"I don't know," I admit. "As you said, for many cases we don't have the numbers for the overruns and overdues, not to mention the payback period."
"Pity," he says, and puts back Fred's report. "It could be an interesting addition, but never mind, we have enough."
"Jim, forget the article for a minute. I think that it is an important point. Important enough to highlight it to the students."
"Peculiar maybe. But important? In what way?"
"In the same report," I don't give up, "it's indicated that they chose the cheap vendors over the more reliable ones. How much do you think they saved?"
"How do I know? Maybe five percent. Can't be much more."
"You can also see," I continue, "that delays in getting the machines from those vendors was the prime reason for the delay in completing the project."
"I see what you mean." He picks up Fred's report again and looks at it intently. Finally, he says, "So they saved about five percent on the machines, which is, probably, less than three percent of the total investment in the project." Very slowly he continues, "And this savings caused them to turn a three-year payback project into..." He stops.
"Saving a miserable three percent caused them to turn a very good project into a loser," I summarize.
"Rick, calm down. We have made a lot of assumptions. It's not so simple."
I don't know what he is talking about. The effect is clear. Companies are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save
"Interesting," he finally says. I refrain from commenting that he had the same opinion fifteen minutes ago.
"Rick, I think that we should make this very interesting finding the center of the article. Our cases certainly back it up. Fortyfour different organizations, ranging from non-profit service organizations to industry; seventy-eight different projects, ranging from less than thirty thousand dollars to over three hundred million, and the same pattern appears in almost all of them. Rick, it's great! At last we have something important around which to center this impressive, in-depth survey. We should even choose the title in accordance."
Making so much fuss about such a minute point. But he is the expert on how to dress up an article, so I'm not about to argue. Still...
"Jim," I hesitantly start, "there is something else I've noticed, going through the reports." I rifle through the pile trying to find Fred's pages. "Where is it?"
As Jim is about to lose his patience, I find it and hand it over. "Read the financial status."
He locates it quickly. "Okay. ‘Due to budget overruns (sixteen point two percent) and delays in production, the original estimate of three years payback is now modified to five.' Typical. What's your point?"
"The budget overrun, being only sixteen point two percent, cannot possibly change the original estimate for the payback period by more than half a year."
"So?"
"But they had to increase the estimated payback period from three years to five. By the way, the person writing it is a project auditor and he claims that his friends are already pushing to change the official estimate to seven years."
Jim still doesn't get it. It's not like him. Patiently, I continue, "If the budget overrun can't possibly cause such a change in the payback period, it must be caused mainly by the delays in completing the project."
"So it seems." He starts to pace again. "So it seems," he repeats. "Let me see. What you claim is that the major, negative financial ramification does not stem from spending too much money."
"Financially, the overruns are much less important than the overdue," I stress.
"In this particular case you are right."
"I found it in six more cases."
"What about all the others?" Jim isn't overly enthused.
"I don't know," I admit. "As you said, for many cases we don't have the numbers for the overruns and overdues, not to mention the payback period."
"Pity," he says, and puts back Fred's report. "It could be an interesting addition, but never mind, we have enough."
"Jim, forget the article for a minute. I think that it is an important point. Important enough to highlight it to the students."
"Peculiar maybe. But important? In what way?"
"In the same report," I don't give up, "it's indicated that they chose the cheap vendors over the more reliable ones. How much do you think they saved?"
"How do I know? Maybe five percent. Can't be much more."
"You can also see," I continue, "that delays in getting the machines from those vendors was the prime reason for the delay in completing the project."
"I see what you mean." He picks up Fred's report again and looks at it intently. Finally, he says, "So they saved about five percent on the machines, which is, probably, less than three percent of the total investment in the project." Very slowly he continues, "And this savings caused them to turn a three-year payback project into..." He stops.
"Saving a miserable three percent caused them to turn a very good project into a loser," I summarize.
"Rick, calm down. We have made a lot of assumptions. It's not so simple."
I don't know what he is talking about. The effect is clear. Companies are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save
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