Our organization specializes in construction projects. The main goal of such a company is to complete tasks as quickly as possible while maintaining high gross margins for each individual job. The Theory of Constraints (TOC) uses the term Throughput—the difference between what the market pays the company and what the company pays external suppliers. The total annual Throughput across all projects must cover the company’s fixed operating costs (rent, payroll, etc.). In TOC terminology, these are “operational expenses.” What remains after subtracting those from Throughput is the company’s profit.
Obstacles to the Goal
Project timelines are often delayed due to factors beyond the control of team members. These issues are difficult to predict, influence, or manage, and even modern project management methodologies frequently fail to produce desired results. Managers study risk management, PMI or IPMA techniques, and organizations invest in enterprise project management systems—but a simple documentation error can delay a project by months. Sound familiar? These issues are common and recurring. Every day, the project manager and their team must decide which fires to put out, knowing they can’t do it all in just 24 hours.
Top managers face their own constraints. Often, there are limited resources—money, labor, equipment—that must be allocated across several projects. The need to choose emerges precisely because something is in short supply. If there were no constraints, we could send people to the moon…
The Path Forward
In December 2011, our company discovered the Theory of Constraints. We were especially interested in its application to project management: Critical Chain Project Management (CCPM).
I had previously applied TOC in a manufacturing setting with great success. In eight weeks, we reduced order lead time from seven to two days and increased production capacity by 80%—without increasing operational expenses. We achieved this by following a step-by-step TOC implementation approach learned in the “TOC Strategic Solutions” program. I saw no reason why TOC wouldn’t have similar benefits in project management.
TOC gives leaders and teams the tools to focus more clearly on what really matters for both the project and the organization. We returned to the “TOC Strategic Solutions” program to gain deeper knowledge.
The Nine Steps
After training in TOC-based project management, we analyzed our system, identified recurring undesirable outcomes, mapped their logical connections, and designed nine focused process improvements. We began testing these changes in pilot projects.
1. Record Throughput and Duration in the Project Charter Each project charter now includes both expected Throughput and project duration. We also calculate:
Throughput Velocity = Throughput / Project Duration
Internal reports show projected delivery dates, and we document weekly any changes in Throughput or time.
2. Assign Tight but Realistic Durations to Each Task For every task in the network diagram, we assign specific executors and set challenging yet achievable durations.
3. Eliminate Resource Contention in the Network Diagram We remove scheduling conflicts for resources, replacing traditional Critical Path with the Critical Chain. This prevents excuses like “I was doing something more urgent,” and focuses on prioritization and reliability.
4. Insert Buffers at Strategic Points We add feeding buffers (to protect task chains) and a project buffer (to protect final delivery). These buffers guide team focus and remove the need for complex calculations like earned value analysis. You always know where you’re ahead or behind schedule.
5. Base Execution on Buffer Status Tasks are performed according to buffer status. Daily resource reports include expected task completion dates. Contractor updates take only 10–15 minutes and can be done via phone.
6. Monitor Resources for Upcoming Critical Chain Tasks We proactively check materials, labor, equipment, permits, and funding for upcoming critical chain tasks.
7. Use Buffer Trends to Plan Recovery Actions Daily buffer data allows easier, faster decisions about resource reallocation and recovery plans.
8. Analyze Weekly Buffer Penetrations By analyzing weekly buffer penetration causes, we identify systemic problems and make informed organizational fixes.
9. Track and Optimize Critical Resources We monitor resources that frequently penetrate buffers to better manage or increase their availability.
Early findings included funding bottlenecks and subcontractor labor shortages.
Now, when managing multiple projects generating Throughput at different speeds, we allocate limited resources more rationally. Previously, decisions were intuitive. Today, we calculate:
ROI = Expected Drop in Throughput Velocity / Required Quantity of Scarce Resource
If resources are abundant, we allocate them everywhere. But when scarce, we prioritize projects with the highest ROI—those that maintain throughput velocity with minimal resource input.
This doesn’t negate political or strategic factors in decision-making, but it adds a powerful analytical tool.
Results
These new TOC tools allow us to:
- Accurately forecast task completion dates
- Focus teams on high-impact work
- Take corrective action in time
Team motivation is tied directly to Throughput Velocity. Our quality control team now gathers data on the root causes of delays, enabling continuous improvement.
The Theory of Constraints gives us a practical way to accelerate projects, increase annual profitability, and stay focused on what truly matters.
