You’ve got more capacity than you think

In the current era of economic uncertainty, there is no dearth of gloom and doom news. Europe, Asia, the Americas all have fallen like dominoes to the credit crisis of 2008. Austerity measures have been put in place in a number of countries. Economies are spiraling downward. There is talk of the breakup of the Eurozone with Greece being the first causality. People are tired; tired of losing jobs; tired of having limited opportunities for growth. Companies are downsizing and people are asked to do more with less. But doing more with less does not have to be all about burning the midnight oil. Managing your business in this new era means bring smart about how you run it. If you are always complaining that you need more people, think again. You may have more capacity than you think.

A case for throughput

Managing a business today means leveraging your existing capability to maximize throughput. Why am I focusing on throughput? If you think about your organizational value stream, you only make money (or realize revenue) when you deliver a product or a service to your customer. Having a large volume of work within your organizational pipe while not delivering anything means your investments are tied up with work-in-progress inventory. The more work-in-progress inventory you have the more investments are needed. How are you going to fund this investment? The faster your deliver, the faster you realize revenue. Hence, the focus on throughput.

Note: For IT & software companies, any code written or any data migration not complete or any hardware assembled but not delivered is inventory.

Leveraging existing capacity

Now that we have established a business case to maximize throughput, how would we go about doing it? Let’s also not forget we have constraints in achieving this objective function. These constraints are quality, budget, risk, expectations and a slew of others depending on the project. Let’s say your regular work per person is 40 hours/week and you have a 100 people. This means that you have 4000 hours/week or 208,000 hours/year at a 100% utilization. But let’s not kid ourselves about the utlization. Let’s say your organization’s productivity is at say 65%. This translates to a working capacity of 135,200 hours per year or 2600 hours per week. The trick is to ensure that we utilize this time to maximize throughput.

Let’s say the team of 100 people are segmented into teams. You can do this in a number of ways:

  1. Segment the teams by technology groups
  2. Segment the teams so that each is a self contained cross-functional group
  3. Form and disband teams as projects are started or completed
  4. And so on and so forth

Whatever the team size and composition, if the result is that work stays within your organizational pipe longer, the longer it will take to convert your investment into cash. Note that I said “result” and not “intent”. We all start of with the best intentions but they do not always translate into intended results.

Goldratt in his book “The Goal” introduced the 5 focusing steps:

  1. Identify the constraint
  2. Decide how to exploit the constraint
  3. Subordinate everything to the above decision
  4. Elevate the constraint
  5. Repeat steps 1 to 4 for ongoing improvement

If we use this analogy, you need to figure out the process and policies that constraint your organizational throughput. If you are an IT shop, your constraints will wander. This is due to the nature of IT and software engineering work. So you need to figure out the best use of your team’s capacity of 2600 hours per week. If wasted, this time is lost forever. If used properly, you can improve your throughput significantly and create high performing teams.

Focus on queues and flow

Leveraging your team’s time means focusing on queues and flow. Ignore queues and flow at your own peril. This will enable you to create a PULL system of completing work. The traditional approach of planning and scheduling is a PUSH system and high work-in-progress inventory is a characteristic of a PUSH system. Remember high work-in-progress means investment is tied up and not being converted into cash by deliveries.

The next time when you are driving down a highway (or any road for that matter), notice the impact of the traffic on your ability to drive the speed limit. You’ll find that greater the traffic, the slower you go and the longer you take to arrive at your destination. Reduce the traffic on the road and the faster you can go. This same principles applies to your work too. To reiterate, a high volume of traffic, while ensuring a high road utilization, will slow you down. Conversely, a low volume of traffic will speed you up. But your utilization drops in this case. You need to make up your mind as to what is important to you – utilization and all its unintended consequences or throughput.

I have experienced this phenomenon in my work as a project manager. If people are complaining about the speed of your delivery, examine your work-in-progress (WIP) tasks and lower them. Lower WIP also means less time is wasted during hand-offs. And this is where you’ll find your extra capacity. Reduce the wait time of tasks and you’ll find that you have increased your team’s capacity.

So the next time someone in your team says, “We need more people”, examine your queues and flow. Reduce queues and improve flow to increase your capacity. Trust me – you have more capacity than you think!

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