Theory of Constraints: Increasing Performance in Your American Income Life Agency

American Income Life weakest link chain breaking

No matter where you are in your career development in American Income Life, there is always opportunity for boosting your Agency’s overall performance. Bottom line is that we can always do more to push to that next level.

American Income Life Regional Director of Sales - Murray Horowitz

American Income Life Regional Director of Sales - Murray Horowitz

A great way of doing this is to identify and eliminate “bottlenecks,” or things that are holding you back. Are you reaching your hires number? Are hires turning into codes? Are codes turning into submitting agents? Are submitting agents turning into bonus earners? Are bonus earners becoming managers? Are your managers strengthening the foundation of your organization by growing their hierarchies? Are you developing and growing your Agency so that it can reach its fullest potential?

So how do you identify these bottlenecks?

One approach is to use the Theory of Constraints (TOC). This helps you identify the most important bottleneck in your processes and systems, so that you can deal with it and improve performance.

Understanding the Theory

You’ve likely heard the adage, “A chain is only as strong as its weakest link,” and this is what the Theory of Constraints reflects. It was created by Dr. Eli Goldratt and was published in his 1984 book “The Goal.”

According to Goldratt, organizational performance is dictated by constraints. These are where bottlenecks occur that prevent an organization from maximizing its performance and reaching its goals. Constraints can involve people, supplies, information, equipment, or even policies, and they can be internal or external to an organization.

The theory says that every system, no matter how well it performs, has at least one constraint that limits its performance – this is the system’s “weakest link.” The theory also says that a system can have only one constraint at a time, and that other areas of weakness are “non-constraints” until they become the weakest link.

You use the theory by identifying your constraint and changing the way that you work so that you can overcome it. It’s most useful with important or frequently-used processes within your organization. Think recruiting systems, training systems, and management systems.

Nobody should expect to be right 100 percent of the time in identifying the constraint. Besides, you don’t always have to be right in order to come out an overall winner. So, don’t get hung up waiting for all of the facts before coming to a conclusion. Satisfy yourself that you understand the issue and have weighed all of the options. Test the alternative solutions among those who know the situation and will be impacted by the decision. Identify, Decide. Act.

Learn to trust your intuition in decision-making. Hunches are not random bolts out of the blue. They are rooted in all the knowledge and experience one has accumulated in general and with regard to the issue at hand.

Applying the Theory

Let’s look at a step-by-step process for using the theory:

Step 1: Identify the Constraint

The first step is to identify your weakest link – this is the factor that’s holding you back the most.

Start by looking at the processes that you use regularly. Are you working as efficiently as you could be, or are there bottlenecks – for example, because your people lack skills or training, or because you lack capacity in a key area? If you build into those you lead, and make them better, you will add value to your Agency and survive mistakes, challenges, downturns and other obstacles that will inevitably occur.

Here, it can help to use tools to map out your processes and identify what’s causing issues. Are you tracking your results, do you really know what is happening in your organization?

You should also brainstorm constraints with team members to identify possible issues. Openness often leads to better problem-solving. Be transparent and allow your team to help you find solutions to your largest challenges. You don’t have all the answers, and science is showing that a group of committed collaborators trumps a single genius for finding amazing solutions. One study revealed that highly engaged employees outperform their peers by as much as 28 percent. The study also revealed that organizations with low employee engagement saw an average decline in operating income of more than 32 percent. Get your people involved.

Remember that constraints may not just be physical. They can also include intangible factors such as ineffective communication, restrictive agency policies, or even poor team morale.

So, you need to decide which factor is your weakest link and focus on it.

Step 2: Manage the Constraint

Once you’ve identified the constraint, you need to figure out how to manage it. What small changes can you make to increase efficiency in this area and cure the problem, without committing to potentially expensive changes?

Your solutions will vary depending on your team, your goals, and the constraint you’re trying to overcome. For example, it might be changing personnel or reevaluating your process and systems to make workflow more efficient, or cross-training team members to give you extra capacity in the constraint. All other organizational processes should also focus on eliminating the constraint. For example, can you move some types of work out of the constrained area and into other processes, thereby eliminating the constraint?

Step 3: Evaluate Performance

Now review how your system is performing with the simple fixes you’ve put into place. Is the constraint still causing a bottleneck? If it is, you need to do whatever you can to solve the issue. For instance, do you need to invest in new equipment, outsource certain tasks, or take on more staff?

Again, you’ll also find it useful to brainstorm possible solutions with people in your team, and to use problem-solving tools to identify the real issues behind the problems you’re having, so that you can come up with good solutions.

Once you’ve identified possible solutions, test your ideas for a period of time and be prepared to continue making changes to the solution.

Step 4: Start Over

Once you’ve eliminated the constraint, you can move back to step 1 and identify another constraint. The Goal is to have Continuous Improvement (CI) which is an ongoing effort to make incremental improvements to products, services or processes over time. Processes are constantly audited and modified based on their efficiency, effectiveness and sustainability. CI is often referred to as a management process, but this does not mean that it needs to be executed by managers. Continuous Improvement dictates the decisions and directions of the processes being improved and of its own application.

Remember that the theory says that every process has at least one constraint. While this may be true, be sensible in how you apply the theory – sometimes removing this constraint will have a minimal impact on performance.

Key Points

The theory says that every system, no matter how well it performs, has at least one constraint that limits its performance. You use the theory by identifying your constraint and restructuring the way that you work so that you can overcome it.

You can minimize constraints and work more efficiently toward accomplishing your goals by working through these steps:

  1. Identify the constraint.
  2. Manage the constraint.
  3. Evaluate performance.
  4. Start over.

About Mark Ting

Mark Ting is a Staff Writer at Torchmark Corporation, writing about American Income Life and National Income Life Insurance Companies. Google+

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