Introduction
Applying the TOC TP:
a case study in the
service sector
Richard A. Reid and
James R. Cormier
The authors
Richard A. Reid is Professor of Operations Management
and James R. Cormier are based at Anderson Schools of
Management, University of New Mexico,
New Mexico, USA.
Keywords
Continuous improvement, Services, Small enterprises,
Case studies
Abstract
An increasingly utilized framework for implementing the
continuous improvement management philosophy is
the Theory of Constraints (TOC). Although this systemic
managerial approach was initially developed and applied
in the manufacturing sector, its underlying philosophy has
been expanded to address three basic questions: What
to change?; What to change to?; and How to cause the
change? Demonstrates how a manager could apply the
TOC thinking process (TP) logic tools to answer the first
two questions for a small service organization. In regard
to the first query, uses a relatively new procedure called
the ``three-cloud approach'' to determine the core problem
or root cause responsible for the majority of the
problems currently faced by management. By using this
approach, a manager creates a current reality tree (CRT)
that uses sufficiency logic to document the cause-effect
relationships responsible for a system's current state. In
regard to the second query, develops another TOC logic
tool, a future reality tree (FRT), to help construct and
evaluate planned interventions for resolving the core
conflict and improving effectiveness. Draws conclusions
relative to the feasibility and utility of using TOC TP logic
tools to help managers of service organizations improve
their overall system performance.
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Managing Service Quality
Volume 13 . Number 5 . 2003 . pp. 349-369
# MCB UP Limited . ISSN 0960-4529
DOI 10.1108/09604520310495831
349
The practice of continuous improvement (CI)
embraces the fundamental idea that whatever
success in satisfying customers that an
organization may have had in the past, it must
do better in the future. This belief in based on
the proposition that the needs and wants of a
firm's customers are in a constant state of
flux, and that ongoing success requires a
proactive commitment to implementing
frequent improvements. Competition and
continuously escalating standards of customer
satisfaction have proven to be endlessly
drivers for seeking to increase organizational
performance.
During the past two decades, managers in
many organizations have implemented a
variety of productivity and quality
improvement programs under the CI banner.
These projects or initiatives include Total
Quality Management (TQM), Just-in-Time
(JIT), Toyota Production System (TPS),
Lean Thinking, Six Sigma, and Theory of
Constraints (TOC). Among both
practitioners and academicians alike, there
has been much discussion about their
similarities and differences along with their
relative applicability in various types of
organizations (see, for example: Denecke,
2002; Hein, 1999; Moore and Scheinkopf,
1998; Nave, 2002). TQM is often
implemented using the Deming plan-do-
check-act cycle (Deming, 1986) and uses
many of the data summarization and team
facilitation Total Quality (TQ) tools
(Brassard and Ritter, 1994; GOAL/QPC,
2000; Tague, 1995) for describing and
analyzing problems that are embedded within
organizational processes. Both JIT and TPS
are historical antecedents to TQM that were
developed and extensively used for improving
processes in Japan prior to arriving in the
West (Monden, 1998). With few additions,
this same tool set is used to implement a new
five-step structured process variability
reduction effort under the auspices of Six
Sigma (Eckes, 2000). Moreover, many of
these same improvement tools are also used in
Lean Thinking initiatives that acknowledge its
historical links to TPS and seek to improve
the entire system's overall performance.
Although TOC is also systemically-oriented
(Goldratt, 1990), it has a generic set of logic
tools, known as the Thinking Process (TP),
that help a manager identify the source of an
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
organization's problems, create improvement
strategies, and implement desired changes
(Goldratt, 1994). Albeit each of the six CI
initiatives has been initially and extensively
applied in manufacturing, their charters and
frameworks do not prevent their application
to processes or systems within the service
sector.
In short, the data-driven and team-centered
initiatives such as TQM, JIT, TPS, and Six
Sigma are primarily focused on improving
work-performing processes in organizations.
They are most effective when the goal of the
process being improved is aligned with the
goal of the organization as a whole. While not
rejecting data collection and summarization,
the system-based improvement paradigms
associated with Lean and TOC do not require
a concerted effort to gather and analyze it
formally. Instead, they require a healthy
intuition about and keen understanding of the
relationships between and among study
system activities and processes. Whereas
Lean seeks to reduce costs through the
minimization of waste and non-value-added
in every system activity or process, TOC
strives to better manage the single activity or
process that constrains the system's
throughput. That is, TOC provides a leverage
point for improvement. Because of its holistic
approach, the TOC TP has been designed for
use independently of other CI initiatives.
However, many experts believe (see, for
example: Lean Enterprise Institute, 1999;
Moore and Scheinkopf, 1998; Nave, 2002)
that the six CI initiatives are not in
competition, but rather serve to complement
one another. For example, a set of if . . . ,
then . . . , logical relationships are supported
by data collected on the actual situation that,
in turn, serves to reinforce the manager's
intuition and understanding of current system
behavior.
The purpose of this paper is to demonstrate
how a manager could develop and use several
of the TOC TP logic diagrams to better
understand his/her service organization and
thereby improve its overall performance. This
objective is achieved by showing how TP logic
diagrams were developed for a typical small
neighborhood ``mom and pop'' restaurant
that will be familiar to many readers. Initially,
an overview on the TOC and the logic
diagrams that constitute its TP will be
presented. After providing some background
on the study firm and describing some
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Volume 13 . Number 5 . 2003 . 349-369
scenarios related to the team by the owners,
relevant TOC logic diagrams will be
presented and interpreted. Finally, some
conclusions will be drawn relative to the
feasibility and utility of using TOC TP
logic tools to help managers of service
organizations improve their overall system
performance.
An overview of the TOC TP
TOC is a set of concepts and tools that can be
used to implement the widely utilized CI
management philosophy. TOC improves
performance in a system by focusing
management's attention on the system's
constraint. Typically, a system has a single
factor that limits its performance and through
managing it effectively, organizational goals
can be achieved. Thus, by preventing
distractions from its primary purpose and
concentrating its limited resources on the
efficacious management of the constraint,
decision-makers are able to gain significant
leverage sufficient to attain desired
performance levels.
Much of the development of TOC concepts
and its systems-based thought processes has
been attributed to Goldratt. During the past
decade, the TOC TP and its set of logic tools
(Goldratt, 1994) have been evolving to
provide a framework to help understand
existing managerial situations, identify
desirable strategies to meet organizational
goals, and implement improvements within
organizations. Since organizations can be
viewed as dynamic systems undergoing
transformations as they seek to survive and
prosper by adapting to their changing
environments, managers need to continually
monitor their performance and seek to
develop and implement positive change.
Originally conceptualized by Goldratt and
Cox (1992), the TOC approach to the
management of change involves answering
three basic questions:
(1) What to change?
(2) What to change to?
(3) How to cause the change?
Responses to these three questions provide
managers with guidance as they seek to
improve their organization by effectively
implementing the change sequence
(Reid, 2000).
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Being comprehensive in scope, the change
sequence typically involves the use of the six
logic tools to effect system change (Burton-
Houle, 2000; Scheinkopf, 1999). These six
TOC TP tools or logic diagrams are the
current reality tree (CRT), evaporating or
conflict cloud (CC), future reality tree (FRT),
negative branch reservation (NBR),
prerequisite tree (PRT), and the transition
tree (TT). In general, a management
improvement team initially creates a CRT
that depicts prevailing logical relationships
responsible for the current, and relatively
poor performing, state of the system under
study. CCs are often used to identify the
assumptions that are underlying dilemmas
that appear to inhibit management from
taking effective action. By assimilating these
assumptions into the CRT, the root cause or
core conflict underlying a significant majority
of the organization's problems is revealed.
Once identified, the core conflict becomes the
team's focus of ``what to change?''
Next, the improvement team focuses on
determining what changes need to be
implemented to successfully eliminate the
core conflict. Once these interventions or
injections (Burton-Houle, 2000) are
identified, the team creates a FRT. This
second tree or diagram demonstrates logically
that the proposed changes will produce a
more desirable future system state. That is,
the FRT illustrates that upon implementation,
the suggested solution will answer the
question: ``what to change to?'' In addition to
producing desired or positive effects, an
injection may also stimulate some unintended
consequences that have a negative impact on
performance. Typically, within a small logic
diagram, the NBR illustrates the causal
relationships between planned change and its
negative effects. Finally, the improvement
team creates a PRT and/or a TT to establish
the list of obstacles to be overcome, the
ordered sequence of actions to be taken,
and the rationales for doing so, in order to
effectively transition from the current system
state to the more desirable system future
state. In effect, these two logic tools help
guide the team through a structured and
planned approach to answer the third
question in the change sequence, namely,
``how to cause the change?'' All of these tools
use either sufficiency or necessity logic along
with the categories of legitimate reservations
(Cox and Spencer, 1998; Scheinkopf, 1999)
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to understand why desirable or undesirable
system states occur, ascertain the impact of
interventions designed to eliminate
undesirable conditions, and offer guidance on
how to manage the change required for
improved performance.
TOC has gained much of its notoriety
through Goldratt's initial business novel, The
Goal (Goldratt and Cox, 1992), a realistic, yet
fictionalized, story in which many of the TOC
concepts are applied to rescue a medium-
sized manufacturer from being shutdown by
its corporate management. Thus, it is not
unexpected to find that the vast majority of
verified TOC applications have occurred in
production-oriented firms (Mabin and
Balderstone, 2000). While TOC based tools
and concepts have been frequently applied to
improving manufacturing performance with
varying degrees of success (Schragenheim and
Dettmer, 2001), the application of these TP
tools in service organizations has not been
widely documented.
This paper seeks to overcome this
shortcoming by addressing the first two
questions in the change sequence. In regard
to answering the first query, ``what to
change?'', a relatively new approach (Button,
1999) is presented for creating a CRT. This
approach uses three CCs to provide a
structured analysis of the underlying
relationships associated with three seemingly
independent problems and then synthesizes
these relationships into a single generic or
core conflict. As the root cause of many of the
organization's problems, the core conflict is
logically linked to the majority of these
problems, and thus, it becomes the primary
focus for managerial improvements. Next, a
FRT along with a NBR containing the
proposed injections for resolving the core
conflict are presented to answer the query
``what to change to?'' The purpose of these
diagrams is to logically demonstrate how the
planned changes will impact the performance,
both positively and negatively, of the system.
Specifically, the FRT shows that the proposed
interventions should logically produce a more
desirable system future state by eliminating
many of its current problems while the NBR
shows some of the potential or unintended
negative consequences associated with the
planned interventions. The third query in the
change sequence, namely, ``how to cause the
change?'' will not be considered because the
understanding and analysis necessary to
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
overcome the resistance to change inherent in
the study organization is beyond the scope of
this article.
Study firm: background and current
situation
The Red Bull Cafe (RBC) is a family owned
and operated Mexican food restaurant
located in a major southwestern metropolitan
area. Initially opening in 1927, the RBC
remained a viable service organization for
over 50 years until it was forced to close when
the neighborhood in which it was located fell
into economic deterioration. The building,
however, had historical significance and it was
saved from destruction by the city. In 1996
the current owners bought the dilapidated
facility that housed the historical cafe from
the city. After two years of refurbishment,
they reopened the RBC.
The cafe is a relatively small operation with
seating for 59 customers. It has six full-time
employees, including the two owners:
manager/head cook (co-owner Jack), assistant
cook, dishwasher, dining room supervisor
(co-owner Thelma) and two waitresses. In
addition, two part time employees are
available to help out during peak demand
periods. The restaurant is open six days a
week, seven hours a day. The owners arrive at
the restaurant an hour before it opens and
leave an hour after closing. Thus the
owner's workweek is about 54 hours. Prior to
opening in the mornings, employees make
preparations, such as setting-up equipment,
chopping garnishes and pre-cooking entrees.
Jack works in the kitchen doing much of the
cooking, supervising the assistant cook and
the dishwasher and managing the inventory of
food and supplies. Thelma works in the
dining area operating the cash register,
supervising the waitresses, seating and serving
the customers, as appropriate. After closing
the restaurant for the day, the staff cleans the
kitchen and the dining area, performs any
routine or preventive maintenance on
equipment and ensures that the security dogs
are fed and deployed. Reflecting on his
experience during the last few years, Jack says,
``The learning curve has been huge and slow.
This is the kind of business that takes a long
time to get the processes down.''
The owners describe their goal in operating
the restaurant as ``making money by serving
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customers a quality product and keeping
them satisfied''. They measure the cafeÂ's
performance in terms of customer
satisfaction, daily revenues and publicity.
The RBC's base of return customers has
continuously grown until recently when it
appears to have leveled out. When the owner
was asked if he would like to increase the
business, he answered, ``Yes, but the problem
we have faced in the past is that when
clientele increases, our quality drops''. This
issue was revealed during peak demand hours
that typically occur during lunch. After being
asked if there are any conditions or aspects of
the operation that he would like to change,
Jack's response was immediate, ``I would like
shorter work days and weeks. However, I feel
that a great deal of my money is not made by
how much I sell, but rather by how much I
save. I can't leave the employees in charge
because I will lose money through employees
over portioning food, stealing food, or stealing
money from the cash register. In any event,
this has been my experience in the past.''
Team improvement charter
The RBC improvement team decided that
they would take the owners' point of view in
analyzing the situation. Because they were
committed to ongoing improvement through
employing a TOC systems-based philosophy
of management, the team sought to examine
the restaurant from an overall perspective.
Thus, the first step was to work with the
owners to verbalize their goal for the
organization as a whole. After understanding
the owners' current situation and discussing
their perceptions on operating the business,
the team and owners agreed on the following
goal statement for the improvement effort:
Reduce the owners' workload while maintaining
(or improving) the existing quality of customer
service and current profitability.
The team recognized that the TOC TP is
initiated with a very simple premise, namely,
that there is a single core conflict that is
preventing a system from achieving its goal.
Moreover, this core conflict manifests itself
through a set of symptoms or undesirable
effects (UDEs). The application of the TP is
initiated by recognizing that only through the
identification and elimination of the core
conflict will there be a lasting improvement in
the performance of the system. Thus, the
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
identification and elimination of the core
conflict will be the focus of the team's efforts
to answer the first two questions of the change
sequence.
The change sequence: query one ± what
to change?
As previously mentioned the first stage in
the TOC change sequence is to determine
``what to change''. That is, the initial focus of
the improvement team is to identify the single
root cause that underlies many of the poorly
performing dimensions of the organization.
Coupling on-site observations with the
background presented above, the team sought
to describe the prevailing cause-effect
relationships that appear to be responsible for
many of the negative aspects of the current
situation.
It is appropriate to use a CRT to help
identify the root cause or core conflict of an
organization's less than ideal performance.
A CRT provides the team with an effective
means for ascertaining the valid core conflict.
A CRT is ``a logic-based tool for using cause-
and-effect relationships to determine root
problems that cause the observed UDEs of
the system'' (Cox and Blackstone, 2001).
The CRT is a particularly effective tool if the
core problem is a prevailing policy or
paradigm as opposed to a physical limitation
of the existing system (Schragenheim and
Dettmer, 2001). As with any approach to
constructing a CRT, the first step is to
identify the UDEs or symptoms reflecting
performance problems. By definition, UDEs
are effects that are negative in their own right
(Burton-Houle, 2000). Moreover, UDEs
describe what is wrong with the current
system, that is, they characterize the problems
that are preventing the system from meeting
its goal.
UDEs
The team's observations and interviews
enabled the identification of four main UDEs
that needed to be eliminated in order for the
owners to meet their goals.
(1) The owners are overworked. As previously
discussed, the owners are heavily involved
in the restaurant's operation and after six
full workdays a week, they are too tired to
do much of anything else. They would
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Volume 13 . Number 5 . 2003 . 349-369
both like to have more time for leisure
and community activities. Although this
UDE does not directly affect how well the
restaurant functions, it is a major concern
of the owners and it may indirectly affect
their attitude, and hence, their long term
commitment towards the RBC.
(2) The owners do not trust employees. The
owners have had some negative
experiences concerning employee
misbehavior to include theft of inventory
and cash receipts. In addition, it seems
that many of RBC employees have been
of average or below average quality in
terms of ability to follow instructions,
commitment to the cafeÂ, and capability to
learn job skills. All this has made the
owners wary, somewhat suspicious and
quite reluctant to delegate any
responsibilities. In particular, Jack feels
that he needs to be present at all times
during business hours and intimately
involved in operations to prevent
mistakes and reduce theft.
(3) There is a high employee turnover rate. When
a new employee is hired, the owners
prefer to pay him/her minimum wage
until they believe that the employee has
developed satisfactory job skills and
demonstrated a commitment to the cafeÂ.
Since restaurant work is often physically
demanding, new employees frequently
quit before they have earned the owners'
trust, and consequently, any increase in
their wage rate. Moreover, since there is a
recurrent influx of new employees of
unknown value and trustworthiness, the
resultant high turnover rate also
contributes to UDE 2 (above).
(4) There is excessive variation and error in the
customer order taking, preparing and
delivery process. This problem typically
occurs during peak demand hours. Both
illegible order tickets and a limited
reading capability appear to be
responsible for some problems related to
kitchen personnel being able to produce
correct customer orders in a timely
manner. Occasional staff shortages
caused by absenteeism or unforeseen
employee resignation also contribute to
this UDE. Moreover, sporadic inventory
shortages and unanticipated demand are
responsible for some of the variation
observed.
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
In traditional problem solving approaches, it
would be natural to develop four separate
initiatives to address each of the four problem
scenarios. For example, this might involve:
. a training program for the owners to learn
how to effectively delegate some of their
current responsibilities;
. a staff retreat to develop trust among
members of the RBC workforce;
. a program to increase employee morale
and reduce turnover; and
. the redesign or reengineering of the
customer order, preparation, and delivery
process.
In effect, each problem would be addressed
through an independent project to correct the
stated deficiency. However, since TOC uses a
systemic-based thought process, it initiates a
search for a common cause that is responsible
for all four of the problem scenarios. The
TOC tool best suited for this thought-
provoking endeavor would be the CRT.
While there are several variations on the
standard approach to creating a CRT, for
example, see Dettmer (1997), Cox and
Spencer (1998), and Scheinkopf (1999),
the team sought to use a relatively new
approach called the three-cloud process
(Button, 1999, 2000). This approach uses
another TOC TP logic tool called an
evaporating or CC (Goldratt, 1994;
Scheinkopf, 1999). The three-cloud process
involves creating a CC for each of three
scenarios that captures the dilemma
associated with a particular UDE (2 and 3). A
CC uses necessary condition logic to create a
concise description of a current problematic
situation (see Appendix 1 for a short tutorial
on constructing a CC). After three CCs are
constructed, they are examined for common
patterns that are extracted and generalized
into a core conflict cloud (CCC). The CCC
embodies the underlying conflict or dilemma
that is responsible for most for the UDEs
(Smith, 2000).
Three CCs
The team discussed their formulation of the
four UDEs with the study firm owners who
agreed that they captured the essence of their
problems, thus confirming their validity.
Next, in an attempt to identify the underlying
causes of the symptoms, the team used
directed interviews with the workforce and
continued making observations of customer-
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Volume 13 . Number 5 . 2003 . 349-369
staff and staff-staff interactions. The team
noted that the UDEs were not independent,
and postulated that this fact may be indicative
of some conflicting service requirements or
some overriding operating policies. After
some reflection, the team used ``necessary
condition thinking'' to establish some logical
relationships about RBC operations and the
owners' goals. For example, they reasoned
that in order to ``maintain or improve the
current quality of service'', RBC must
``improve the customer order taking,
preparing and delivery process'' because ``there
is too much variation and error in the current
process''. The pattern of in order to . . . , we
must do . . . , because . . . is the prevalent format
for the logical thought process involved in
creating CCs. This effort leads to the
development of the following three CCs. The
interested reader may wish to refer to
Appendix 1 for a short discussion on how to
create a CC.
CC1
CC1 results from analyzing the situation
associated with the first UDE and the
establishment of entity A based on the goal
statement for this improvement effort.
As shown above in Figure 1, two of the
necessary conditions for the owners to be
successful (entity A) are to ``reduce their
workload'' and to ``maintain existing profit
margins''. The mutually exclusiveness of the
logical prerequisites leading to these
conditions embodies the managerial conflict.
That is, it is not possible for the owners to do
both D, ``hire more employees'' and D',
``maintain the existing level of employees''.
The first condition is to reduce the
workload on the owners (entity B) that
directly addresses UDE 1 (the owners are
overworked). The owners feel that availability
of leisure time is one of their measures of
success and consequently, it is necessary
condition for entity A. Thus, in order to ``be
successful'', the owners must ``reduce their
workload'' because ``sufficient leisure time is a
measure of success''. In order to ``reduce the
owner's workload'', they must ``hire more
employees'' because ``additional employees
will allow the owners to delegate some of their
workload''.
The second condition for success is to
``maintain existing profit margins'' (entity C).
This is based on the owners' personal
economic needs and reflects their feeling that
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 1 CC associated with issues related to RBC owners' personal goal
current profit margins need to be maintained.
Moreover, they understand that total income
is a function of profit margins and customer
sales volume. Thus, despite their previous
comment that they would like to increase
business, they are satisfied with current sales
levels. Regardless of its impact on profit, any
increase in sales volume would create an
increase in the owners' workload that, as
previously discussed, is undesirable. Thus, in
order to be successful, the owners must
``maintain existing profit margins''. Likewise,
in order to ``maintain existing profit margins'',
the owners must ``maintain existing employee
levels'' because additional employees will
increase operating expenses that, in turn,
reduce profit margins.
CC2
CC2 results from analyzing the situation
associated with the fourth UDE and
incorporates part of the goal statement for this
improvement effort.
Entity A, in Figure 2, is a direct response to
UDE 4, namely, that there is excessive
variation and error in the customer order
taking, preparing and delivery process. The
conflict is between introducing a new
customer order recording form (D) and
maintaining the current customer order form
(D'). Although, as described below, this is
only one of the factors contributing to the
UDE, it allows some of the current
operational policies and practices to be
considered.
The waitresses currently write out each
order on a small piece of paper that is
delivered to the kitchen staff. This method
has two potential problems. First, the kitchen
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Volume 13 . Number 5 . 2003 . 349-369
staff occasionally misinterprets customer
orders due to illegible handwriting, and
prepares an incorrect order. Second, delays in
preparing the orders are experienced because
the cooks have to ask the waitresses to
interpret what they have written. The
proposed new form would be comprised of a
pre-printed list of all available menu items
and possible additions, substitutions and
cooking states (e.g. rare, medium, or well-
done). Each item would have a small box
associated with it and the waitresses would
only have to check the appropriate boxes in
order to convey the customer's order.
The upper branch of the cloud represents a
statistical process control approach to
improving the quality of RBC's customer
service. The necessary condition,
prerequisite, and their respective supporting
logic appear to be straightforward. Thus, in
order to ``improve customer service'',
management must ``reduce special cause
variation'' because ``reducing variation
increases service quality and special causes
should be eliminated before addressing
common causes of variation that are systemic
in nature''. Further, in order to decrease
special cause variation standardized pre-
printed order forms must be used because
they will reduce errors and promote
consistency.
The lower branch represents the manager's
current attempt to address the problem.
Improved communication between RBC
front and back office personnel should
improve the customer order fulfillment
process through reducing errors relative to
customer requirements. The necessity logic
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 2 CC associated with customer order, preparation, and delivery process
elements between entities C and D' are based
on the owners' faith in training and their
reluctance to change something that is
thought to be working reasonably well and
really does not need changing.
CC3
CC3 results from analyzing a possible
contributing factor to both the second and
third UDEs concerning employee recruitment
and hiring practices or policies and again
focuses on customer service dimension of the
goal statement for the improvement effort.
The owners consider entity A to be the key
to maintaining productivity and providing
good service to customers. The upper branch
of the CC represents their current practice
and policy. Entity B reflects the owners'
current practice in attempting to maintain a
full staff and the supporting logic AB is logical
from their perspective. Entity D is based on
the current policy of hiring only those persons
who happen to stop by and inquire about
employment possibilities at the RBC.
Currently, the owners are not proactively
seeking any particular type of employee, and
therefore, the applicant pool is limited to only
those persons who come by and complete an
application. As shown in the upper branch,
the supporting logic underlying the BD
relationship is the paraphrased response that
one of the owners has verbalized about why
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Volume 13 . Number 5 . 2003 . 349-369
they follow the existing recruiting and hiring
process.
The lower branch of the CC represents a
quality versus quantity approach to staffing.
Entity C and the supporting logic suggests
that another way to maintain a full staff is to
hire people who are likely to be more
conscientious and diligent, and therefore, will
be more reliable. These potential staff
members would be above average employees
and would not necessarily be representative of
current members of the restaurant's applicant
pool. For the purpose of this analysis, these
personnel have been labeled ``exceptional
employees'' (EE). The ``note'' in Figure 3
provides a detailed description of the EE.
Entity D' and the supporting logic suggests
the owners will have to expand the scope of
the applicant pool through actively recruiting
and compensating above average applicants,
perhaps through advertisements, incentives,
and/or contracts with employment agencies.
This CC raises another issue that relates to
the current situation. In particular, the
resulting high turnover rate could be a
consequence of filling ``staff vacancies as soon
as possible''. It may not necessarily be the way
the owners' would prefer to handle the
situation, but is has become the prevailing
mode of operation. Since they need to have a
full staff to provide good customer service, the
owners fill vacancies as soon as possible and
are forced to accept whoever applies. Only
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 3 CC associated with employee untrustworthiness and high turnover rate
when more than one person applies for a
vacant position do they have some degree of
choice. It is possible that this policy may
actually contribute to the high turnover by
hiring inappropriate personnel.
CCC
The purpose of constructing three CCs is to
use a disciplined and structured approach to
logically depict the team's understanding of
RBC's current situation. A major premise
underlying the TOC management philosophy
is that there is a single basic conflict or cause
that is precluding managers from attaining
significant system performance improvement.
This core conflict is the root cause of the
UDEs. The rationale is that if the core
conflict is identified and if managerial action
is taken to eliminate it and if it is successfully
eliminated, then most, if not all, of the UDEs
will cease to exist (Burton-Houle, 2000).
Thus, the next step is to isolate this conflict
for the current situation. A recently developed
approach for synthesizing the information
revealed in the three clouds into a general
or CCC is called the three-cloud process
(2 and 3). By definition, a valid CCC is
responsible for a significant majority of the
identified UDEs. Therefore, it is necessary to
find five general statements, one for each
position in a cloud: A, B, C, D, and D', that
captures the essence of the respective
individual statements. Although the CCC can
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be constructed by combining the contents
contained in each of the three CCs, it may be
necessary to bring additional understanding
of the existing situation along with current
policies, measurements, behaviors, and other
insights about the system to achieve a valid
core conflict (Burton-Houle, 2000). That is,
sometimes, the core problem or conflict is
revealed by looking for a pattern of
relationships that are intermingled among the
assumptions or practices that underlie the
entity relationships within the three CCs.
As shown in Figure 4, the common
objective was for the owners to successfully
operate a small neighborhood restaurant.
Thus, entity A of CC1 became the objective
for the CCC. This common objective
subsumes the other two objectives because
quality customer service is a necessary
condition for being successful. Two of the
necessary conditions to achieve this objective
were specified and the prerequisites
supporting these needs embodied the core
conflict. In particular, it would not be possible
to do D, ``hire EE'' and D', ``maintain the
existing employee hiring and wage policy''.
As shown on the upper branch, the first
necessary condition for success was for the
owners to increase their delegation of
activities to employees because this action
would increase their leisure time, which they
equate to success. However, as specified in
CC3, in order for the owners to feel
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 4 Synthesizing the CCC for the RBC
comfortable in delegating some of their tasks
to employees (entity B), they must have
dependable employees available to accept
these additional responsibilities. Thus, in
order to increase the delegation of the owner's
activities, they must ``hire EE'' because only
EE are able to perform owner-delegated
activities and have the potential to earn the
owners' trust.
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The lower branch of CC1 became the
stimulus for the lower branch of the CCC. In
particular, in order for the owners to be
successful, they must ``maintain existing
profit margins'' (entity C) because they
``equate existing profit margins with success''.
Moreover, in order to ``maintain existing
profit margins'' the owners believe that they
have to follow the current employee hiring
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
and wage policy because existing profit
margins reflect current revenue levels minus
current costs and additional labor expenses
could be significant. It appears impossible to
do both because it is not possible to
successfully recruit EE under the existing
employee hiring and wage policy.
Since the CCC contains the root cause or
core conflict responsible for a significant
number of UDEs, the next step is to use
sufficiency logic to link the core conflict to the
UDEs within the context of a CRT.
CRT
Being able to learn enough about RBC's
current situation to construct the three CCs
and then mapping their underlying themes
into a CCC has made the construction of the
CRT a relatively straightforward proposition.
In general, a CRT is a cause-effect logic
diagram that has been developed by Goldratt
(1994) as a critical component in the
TOC TP. The CRT is constructed with
``sufficient cause'' reasoning and is used to
establish a stream of cause and effect logical
relationships that link the core conflict with
the UDEs. Sufficient cause logic uses if . . . ,
then . . . relationships in one of two forms:
if . . . , then . . . or if . . . , and if . . . , then. . . .
The CRT is used to logically validate that
the core conflict revealed in the CCC is the
primary cause of those aspects of our existing
situation that are deemed detrimental to
meeting the stated goal(s). The CCC is used
as the base for the CRT and rational
connections were derived to logically link the
entities in the core conflict with the various
UDEs. In particular, this is done by:
. rotating the CCC counterclockwise 90
degrees and placing it along with relevant
assumptions embodied as entities at the
bottom of the page;
. placing all of the original UDEs at the top
of the page; and
. adding appropriate intervening entities
such as current policies, behaviors,
measurements, and facts-of-life that exist
in reality to link the base entities logically
to the UDEs.
Note that some slight wording changes in the
entities may be required so that the
relationships between entities flow naturally
together in a seamless manner. More detailed
procedures and guidelines for developing
these linkages are presented in a variety of
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sources (see, for example, Burton-Houle,
2000; Cox et al., 1998; Scheinkopf, 1999).
In regard to constructing a CRT for the
RBC situation, the team documented
potential connecting entities by identifying
them in a structured brainstorming session
and recorded them on ``post-it'' notes. Next
the team used ``if . . . , then . . .'' logic along
with the categories of legitimate reservation
(Scheinkopf, 1999) to clarify their own
thinking and challenge one another's
understanding of the current situation. The
result was a gradual improvement of entity
wording and of relationship strength between
the entities. Several iterations of tree
construction and significant refinement of
words and phrases contained within the
entities were necessary to create a CRT that
was acceptable to the team. The final CRT is
presented in Figures 5 and 6. The interested
reader may wish to refer to Appendix 2 for a
short discussion and illustration on how to
create a generic CRT.
The three-digit entity identification
numbers have been arbitrarily assigned. The
five entities from the CCC are labeled
accordingly (A through D'). The four UDEs
are entities whose identifying number is
preceded and followed by two stars
(**NNN**). The entities labeled as ``facts of
life'' (FOL) represent some basic assumptions
considered as truths in the current situation.
As is true in all systems, at least one mutually
reinforcing or feedback loop was identified.
Specifically related to the first UDE which has
been labeled as entity number 700 ± ``owners
are overworked'', the loop serves to aggravate
this problem through naturally occurring
reinforcement of the related entities. In
particular, the loop involves the following set
of entities: numbers 700, 190, 200, 300, 400,
500/510, 610, 700, etc. The phrase ``more'' in
entity number 700 indicates that this circular
flow feeds upon itself and exacerbates the
condition of overworked owners.
The team presented the CRT to the owners
of the RBC for their edification. At first, the
owners were somewhat taken back by this
approach to the characterization of their
business. The scope and depth of the CRT
initially overwhelmed them. However, after a
slow and deliberate presentation, the flow of
the cause-effect logical relationships
embodied within the CRT made sense to
them. They were impressed by the power of
the reinforcement loop and could see that
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 5 CRT for RBC ± part one
some change would be necessary to escape
from the negative consequences of the current
situation. They agreed with the situational
essence as reflected in entity number 400,
namely, that while they would like to hire
more EE, the additional labor expenses
appear to threaten their current profit
margins, and thus, appears to prohibit any
change in their existing recruiting and hiring
policy. By nature, the owners are cautious and
conservative but they seemed willing to listen
to an approach to address their dilemma.
In short, the purpose in constructing a CRT
is to logically capture the cause-effect
relationships responsible for the undesirable
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conditions as stated in the UDEs and the
underlying core conflict as identified in the
CCC. The next step is to determine what
managerial action should be taken to
eliminate the core conflict at the RBC.
The change sequence: query two ± what
to change to?
The second stage of the TOC change
sequence is to determine ``what to change to''.
That is, the team needs to develop a simple,
yet effective, intervention that will eliminate
the core conflict. The TOC TP logic tool best
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 6 CRT for RBC ± part two
suited for revealing how proposed changes
would affect the current reality is a FRT. Its
primary purpose is to logically demonstrate
how the planned changes will impact the
performance of the system (Dettmer, 1997),
that is, the FRT helps the team ascertain the
effectiveness of new ideas or injections before
they are actually implemented. More
specifically, this tool provides a reasoned-
based demonstration that the proposed
changes will replace a significant number of
the current UDEs with desirable effects
(DEs).
Also associated with any proposed change
is the possibility that a NBR may exist. A
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NBR is a relatively small logic tree used to
demonstrate that along with overcoming a
set of existing UDEs, an injection logically
yields some negative consequences. Upon
realization that this negative impact will
occur, management needs to proactively
create and implement a secondary injection to
prevent its occurrence (Dettmer, 1997).
Anticipating any negative effects and being
able to neutralize them with additional
planned changes is highly desirable.
FRT
As a tool for logically visualizing the future,
the FRT is often created through a
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
transformation of the CRT. The transformed
CRT or FRT presents the results from the
planned implementation of some action that
will eliminate or mitigate the core conflict.
This action, often labeled an injection
(Goldratt, 1994), can be introduced at any
point in the CRT. It can be in the form of a
new entity or it can describe a proposed
change to an existing entity. By definition, an
injection logically provides a change in the
sufficient cause relationship to a subsequent
entity, and therefore, all ensuing entities will
need to be modified. The goal is to design an
injection that would ultimately cause all
UDEs to be invalidated, thus converting them
into DEs. More than one injection may be
required to convert all the UDEs.
The improvement team started building the
FRT by reviewing the CRT to identify entities
that, if changed, would ultimately cause most,
if not all, of the UDEs to change to DEs.
Obviously, a good place to attempt to
eliminate the core conflict was at the entities
comprising the core conflict itself. Because
the team was unclear about its validity, RBC's
current wage and hiring policy referred to in
CRT entity number 310 (also entity D' of the
CCC) was a likely candidate for change. The
team experimented by inserting the word
``don't'' so that it reads: ``Owners don't feel
pressure to keep costs down by maintaining
existing hiring and wage policy''. This would
be one way to resolve the core conflict since
entities number 300 and 310 (also CCC
entities D and D') would no longer be
mutually opposing. The team then examined
how the subsequent entities would logically
have to be rewritten and observed that the
overall effect was positive but not complete.
That is, only some of the entities leading to
UDEs were changed in a desired manner so
that UDEs would be converted to DEs. After
a brainstorming session involving extensive
trial and error testing, the team developed two
injections that would eventually cause entity
number 310 to be rewritten as stated above.
Figures 7 and 8 show the resultant FRT.
The injections are indicated as shaded boxes.
From a logical perspective, the first injection,
entity number 001 ± ``RBC institutes a
compensation package that is sufficient to hire
EE'', is shown in two locations. In the first
instance in Figure 7, it supercedes CRT entity
number 440. In the second instance in
Figure 8, it is combined with the second
injection, entity number 002 ± ``RBC actively
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Volume 13 . Number 5 . 2003 . 349-369
seeks out and hires EE'', to replace CRT
entity numbers 160 and 170. The CRT
entities that have been retained in a modified
format on the FRT are outlined in bold. As a
result of implementing these two injections,
all of the UDEs have been converted to DEs.
As FOL entities on the CRT, numbers 230
and 640, have not changed but were
eliminated from the FRT because they were
no longer relevant. Three new entities,
numbers 720, 730 and 740, were created to
indicate the positive consequences of
converting CRT entity number 710 (UDE 4)
into a DE. These three entities comprise the
critical logic that enabled the change of CRT
entity number 310, and thus, help resolve the
core conflict. As shown on Figures 7 and 8
with heavy-dashed lines, there are two
mutually interacting and reinforcing logical
chains of related entities that revolve around
entity number 400. These logic chains are
comprised of individual entities that provide
positive reinforcement for the resulting DEs.
That is, through a feedback process, these
reinforcing loops help sustain the positive
consequences of the injections.
The FRT represents one of the significant
advantages of the TOC TP as it seeks to
answer the second query in the change
process. In particular, the FRT helps in the
identification and development of a small
number of corrective actions or injections that
are aimed at eliminating the core conflict or
root cause. By focusing on mitigating the
source of the vast majority of the UDEs, the
improved performance of the entire system
will be effective over a longer duration than
might otherwise occur. Relative to the
traditional piecemeal approach where each of
the four UDEs would have been addressed
separately, the set of TOC TP tools support a
systemic perspective relative to system
improvement. In addition, through assessing
potential negative consequences of proposed
injections, the TOC logic-based tools reduce
the possibility that the proposed corrective
action may result in any NBRs.
NBR
Associated with any proposed change is the
possibility that a NBR would result. A NBR
is a logic diagram for specifying the causal
relationships between an injection that is
designed to overcome existing UDEs and
any resulting new negative effects that could
logically materialize (Dettmer, 1997). From
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 7 FRT for RBC ± part one
a managerial perspective, anticipating any
negative effects and being able to neutralize
them with additional planned changes or
secondary injections is highly desirable.
The process of creating a negative branch
begins by reviewing the FRT for the purpose
of developing a comprehensive listing of the
potential undesirable impacts that could
result from the injections or obstacles to
overcome if the injection is to be effectively
implemented (Schragenheim and Dettmer,
2001). That is, the improvement team
generates a list of new UDEs that might occur
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when the injection is activated or reasons why
the injection may not work. Some examples of
negative effects or obstacles include:
. this improvement is too expensive;
. the union will not support the change;
. it is unclear that the proposed approach is
ethical or even legal; and
. the new initiative will require extensive
employee retraining.
A negative branch is a relative small,
sufficiency-based, logic tree that is created in
a similar fashion to the CRT. Often, it is
initiated by the injections proposed in the
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 8 FRT for RBC ± part two
FRT. Additional entities from the CRT or
FRT may be added to complete the logic.
The result is a logical depiction of
possible negative effects caused by the
injections.
Figure 9 depicts a negative branch for the
RBC. Reading from the bottom to the top,
the first three entities are taken directly from
the FRT in Figure 8. If injection entity
numbers 001 and 002 exist, then entity
number 320 will exist. Entity number 319
depicts a potential problem associated with
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FRT entity numbers 710, 720, 730 and 740.
In particular, the team questioned whether
cost savings resulting from reducing waste
and rework would be sufficient to attract, hire
and retain EE. Entity number 461 describes
the likely consequence that current profit
margins cannot be maintained. When this
entity is coupled with entity number 175,
from the CRT in Figure 5, the logical result is
entity number 561 that states that the owners
will not successfully achieve their profitability
goal if EE are hired.
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 9 An illustrative NBR for RBC
The negative branch can be transformed in
the same way that the CRT is transformed to
produce the FRT. In particular, the
improvement team develops another or
secondary injection that will impact the logic
chain in such a manner as to ultimately
produce a positive effect. A shown in
Figure 10, the team developed a new
injection, entity number 010, to develop and
deploy an exceptionally attractive offer to
RBC customers. This action logically assures
that the system constraint will remain
internal, entity number 011. When this entity
is coupled with entity number 003, RBC's
increased flexibility and productivity
associated with employing EE, the result is
entity number 004, an increase in RBC's
effective capacity. If RBC capacity is
increased and there is not a market constraint,
then, as shown in entity number 005,
throughput will increase. Increased
throughput will offset additional expenses
associated with EE that will allow the current
profit margins to be maintained, entity
number 461. As before, if ``current profit
margins can be maintained'' and if ``owners
equate these margins with success'', then
entity 561, ``owners are successful'', will
occur. This transformation process is called
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``trimming'' the negative branch (Cox and
Spencer, 1998).
The team presented the FRT and the NBR
to the owners of the RBC for their reaction.
Although it was unclear if both of the owners
were able to follow all of the logic embedded
in the trees, they appeared to relate
enthusiastically to the interacting positive
reinforcing loops. Moreover, they were
favorably disposed towards the structured
presentation of the prevailing relationships
associated with the EE and recommendations
of what should be done to eliminate the
UDEs. However, given that the owners are
relatively conservative small business
entrepreneurs, they seemed cautious about
making a total commitment to the EE
concept. In particular, the owners were not
sure that they wanted to incur the up front
out-of-pocket expenses associated with
recruiting, interviewing, and hiring an EE.
After giving it some additional thought, they
decided to conduct a pilot project and hire
just one EE. If it worked out like the team
suggested it should, they would be willing to
consider making a stronger commitment in
the future.
Summary and conclusions
For a small service organization, the
improvement team was able to successfully
utilized four of the TOC TP tools, namely the
CC, CRT, FRT, and NBR, to guide and
structure their managerial analysis of the first
two stages of the change sequence. Initially,
these logic diagrams helped the team
understand the necessity relationships
underlying the conflicts associated with
various UDEs, and then generalize the results
into a generic CCC that was linked to the
individual UDEs using sufficiency logic
within a CRT. Next, the CRT was used to
facilitate the identification of planned action
or injection to eliminate the core conflict.
This resulted in a FRT that logically
demonstrated that the proposed injection
would convert UDEs to DEs. Moreover, a
secondary injection was developed to address
concerns associated with the expenses
required to underwrite the new EE recruiting,
hiring, and maintenance policy by trimming
that negative branch. The TOC tools
provided the discipline and structure
necessary to think deeply about the current
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
Figure 10 A trimmed negative branch for RBC
situation, develop and analyze some potential
solutions, and assess the impact of these
proposed changes on various aspects of
system performance. In short, the TOC TP
logic diagrams helped determine the core
conflict, logically link it to the UDEs, and
develop and validate the impact of the
proposed injections.
Although the application of the TOC TP
tools required significant attention to detail
and a disciplined structured thought process,
the team felt that constructing the CRT via
the three cloud process seemed to be faster,
simpler and more straightforward than the
traditional approach as presented by Dettmer
(1997). The primary reason for this belief is
that once the core conflict was identified, the
team was able to work both logically upward
from the CRT base toward the UDEs as well
as logically downward from the UDEs toward
the CRT base to identify the intervening
relationships. This two-way approach was
efficient in creating a viable set of cause-effect
linkages that captured the prevailing
relationships within the RBC. Because the
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Volume 13 . Number 5 . 2003 . 349-369
fundamental relationships were better
understood, only two corrective actions were
necessary to logically change the UDEs to
DEs within the FRT. Besides having a more
lasting effect on the organizational
performance through directly addressing the
core conflict, the planned action is much
more efficient and effective than the
traditional managerial approach of
implementing an uncoordinated set of four
interventions that had been designed to
separately address each of the four UDEs.
It is noteworthy to recognize that while
many service organizations have an
abundance of technology and equipment
management issues, personnel concerns are
likely to dominate organizations that provide
personalized customer service. Regardless of
the problem context or orientation, the TOC
TP logic diagrams facilitate an alternative CI
approach that is effective in developing a
systemic solution because ineffective or
obsolete policies are often the stimulus for
dysfunctional system behavior. Thus, in
reality, service systems have to be aware of
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
the major role that managerial policies have
on the overall organizational performance.
While the focus of this paper has been on
demonstrating the utility of some of the TOC
TP logic tools, it is important to realize that
most authorities agree (Goldratt, 1999; Lean
Enterprise Institute, 1999; Moore and
Scheinkopf, 1998; Nave, 2002) that a
combination of data-driven and logic-based
tools are most effective in managing CI
initiatives.
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Button, S.D. (1999), ``Genesis of a communication current
reality tree ± the three-cloud process'', Constraints
Management Symposium Proceedings,
APICS-Educational Society for Resource
Management, Alexandria, VA, pp. 31-4.
Button, S.D. (2000), ``The three-cloud process and
communication trees'', Constraints Management
Technical Conference Proceedings,
APICS-Educational Society for Resource
Management, Alexandria, VA, pp. 119-22.
Cox, J.F. and Blackstone, J.H. (2001), APICS Dictionary,
10th ed., APICS-Educational Society for Resource
Management, Falls Church, VA.
Cox, J.F. and Spencer, M.S. (1998), The Constraint
Management Handbook, St Lucie Press,
Boca Raton, FL.
Cox, J.F., Draman, R.H., Boyd, L.H. and Spencer, M.S.
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operations'', Production and Inventory Management
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Deming, W.E. (1986), Out of Crisis, MIT Press, Cambridge,
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Denecke, J. (2002), ``Lean vs six sigma: the battle for
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ASQC Press, Milwaukee, WI.
Eckes, G. (2000), The Six Sigma Revolution, John Wiley,
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GOAL/QPC (2000), Problem-Solving Memory Jogger,
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Lean Enterprise Institute (1999), ``What is the theory of
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Appendix 1. Constructing a CC
The CC embodies the assertion that many
organizational problems are the result of
differing perspectives regarding a situation.
Although a CC has several purposes
(Dettmer, 1997), within the context of the
three cloud process, its primary purposes are:
. to surface all of the assumptions
underlying organizational problems and
conflicting relationships; and
. to provide an in-depth understanding of
why various UDEs are currently prevalent
in an organization.
The conflict may be among existing
procedures, policies or paradigms as well as
between existing and other more effective
operational approaches to problematic
situations. The CC uses necessary condition
thinking meaning that issues, requirements, or
prerequisites involved in CC entities indicate
necessary, but not sufficient relationships.
To create a CC within an organizational
context, it is required to logically link an
organizational goal with two (of possibly
several) necessary conditions that are
responsible for causing that goal. Underlying
the link are the reasons that one condition is
necessary for causing the other one to exist.
The result is an unambiguous depiction of
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
cause and effect relationships between
organizational conditions that result in a
conflict. This conflict is a root cause of a
problem that prevents the organization from
achieving its goal. Figure A1 depicts a
representative CC.
Typically, a CC is built from the left side to
the right side (Smith, 2000). By starting with
a goal and rewording it, as appropriate, to
depict a desirable condition, entity A is
created. Next, two conditions necessary for
that goal to exist, entities B and C, are
identified. The rationales associated with each
of these two relations are recorded as ``reasons
why entities B and C cause entity A''. This
process is continued for conditions identified
in entities D and D' in that they represent
conditions that cause entities B and C,
respectively, to exist. However, by definition,
entities D and D' must be mutually exclusive.
When this approach is applied to a process
improvement effort, the focus is on
identifying organizational policies, behaviors,
work habits, standard procedures,
performance metrics, or other organizational
practices as reasons or logical links for the
existing conditions.
It is important that the flow of CC entities
and their relationships is natural or reasonable
to an informed reviewer who is familiar with
the organizational situation. Therefore, it is
common practice to read aloud the entities
and their stated relationships. The CC upper
branch can be read as follows: In order to
``achieve entity A'', the organization must
Figure A1 An illustrative generic CC
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Volume 13 . Number 5 . 2003 . 349-369
``do entity B'', because of the ``reasons why B
causes A''. The lower branch on the CC is
read in a similar manner. If it is not obvious
that D and D' are mutually exclusive, then it
is appropriate to read the conflicting
relationship between D and D' as follows:
Both D and D' cannot exist because of the
``reason(s) why the organization can not do
both''.
Instead of using a stated organizational goal
for entity A, it is permitted to create a
desirable condition that is closely related to or
supports a goal such as shown in Figure 1
where entity A is the simple statement that
``the owners are successful''. In addition to
organizational goals, it may be appropriate to
use part of the goal statement contained in the
process improvement team's charter. Figures
2 and 3 are illustrative of this practice.
Appendix 2. Creating a CRT
A CRT is a logic diagram that depicts the
existing state of an organization. It displays
the prevalent cause-effect relationships that
appear to be responsible for current reality
within the organization. Although the CRT
has several purposes (Dettmer, 1997), its
primary use in addressing the first query in
the change sequence is to improve
understanding of an organization through the
depiction of a logical chain of cause-effect
relationships between the UDEs and their
root cause or core conflict. The CRT uses
 Applying the TOC TP: a case study in the service sector
Richard A. Reid and James R. Cormier
sufficiency condition thinking that means that
the relationships depicted in this logic
diagram contain enough conditions embodied
in the prerequisite entities to cause the stated
effect.
It appears instructive to present an
example to illustrate the process involved in
constructing a CRT within an organizational
analysis context. Figure A2 depicts a possible
CRT for the fourth RBC UDE that can be
stated as ``there is excessive variation and
error in the customer order taking, preparing,
and delivery process''. Each entity is assigned
a reference number that, by convention,
increase in the direction of the arrows. The
arrows connecting two entities represent a
sufficiency cause-effect relationship. Start
building the CRT by asking what conditions
cause UDE 4 or entity number 300. One
condition that leads to UDE 4 is entity
number 250, namely, ``most existing
employees cannot perform to desired
standards''. Then ask the following question:
``Is the condition stated in entity 250
sufficient to cause UDE 4?'' In this example,
the answer is yes. Next, you want to ask if
there are any other conditions that might be
responsible for UDE 4? Again, in this
example, the answer is yes. If one considers an
Figure A2 A partial CRT
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Volume 13 . Number 5 . 2003 . 349-369
additional entity, number 200, which states:
``service quality is degraded by mistakes made
by new employees'', it also is sufficient to
cause UDE 4. Thus, two conditions, the
first reflecting current employee traits and
the second describing new employee
characteristics, have been identified as being
sufficient, in and by themselves, to cause
UDE 4.
Continuing in a downward manner, it is
appropriate to determine if there are any
prerequisites to entity numbers 200 and/or
250. In the case of entity number 250, one
can conceivable speculate about many causal
conditions that could lead to some
downward-directed, perhaps lengthy and
multi-stemmed, branches. This could be an
interesting exercise that ultimately could lead
to a variety of diverse factors such as social
conditions, education, family, and/or
genetics. Many of these factors would be
beyond an improvement team's sphere of
influence. This downward expansion can be
curtailed by labeling entity number 250 as a
FOL and/or by recognizing it as core driver
(Cox and Spencer, 1998).
Entity number 200 has two sufficient
causes. Entity number 100 states a RBC
organizational reality that the ``owners must
constantly hire new employees'' while entity
number 110 identifies an additional FOL that
``new employees make mistakes''. The ellipse
connecting the arrows from entity numbers
100 and 110 indicates that they must both be
present to cause entity number 200. The
ellipse represents a logical `and'. The way to
read this grouping of entities is: if 100,
``owners must constantly hire new employees''
and if 110, ``new employees make mistakes'',
then 200, ``service quality is degraded by
mistakes made by new employees''. In this
situation, entity 100 has a necessary
condition, namely, entity number 050, ``there
is excessive employee turnover''. For the
purposes of this example, it is assumed that
entity number 050 is the root cause of UDE 4.
It is quite conceivable that additional
conditions leading to entity number 050
could be identified and that one of these
would be a more likely root cause. It is also
possible that there are additional conditions
leading to UDE 4. In practice, an
improvement team will continue constructing
the CRT until all relevant conditions have
been incorporated into the logic tree.