What’s Your Constrained Resource

June 11th, 2010 — 8:23am

This is one of my favorite business school concepts. In a factory, if the goal is to produce as many units per day as possible, there will always be one machine, or step in the process, that is the slowest link in the chain. If the welding department can do 30 units an hour, but the painting department can only do 20 units an hour, then increasing the output of the welding department will not increase the output of the overall factory, because the painting department will constrain the output to 20 units an hour. The constrained resources is the bottleneck.

To increase overall output, you must increase the constrained resource, or change how you are using it. Increasing non-constrained resources may appear productive, but it won’t increase overall output.

This applies to everything, not just factories.

  • In business, if the constrained resource is capital, you must increase capital or change how you are using it.
  • In farming, if the constrained resource is acres of land, you must increase acreage or change how you are using it.
  • In leadership, if the constrained resource is your time for strategic and visionary planning, you must increase time spent on that, or change how you are using it.
  • Personally, if the constrained resource is courage, your must increase your courage or change how you are using it.

Other personal constraints are initiative, hope, relationships, training, etc. This is about a lot more than machines and money.

With every goal you pursue, you must know what your constrained resource is and focus your management efforts to mitigate that constraint.

At an individual, personal level the ultimate constrained resource is time. We each get 24 hours per day with a maximum limit of about 100 years (on earth). This is mankind’s greatest limitation, and therefore our most valuable resource. There’s no way to add more, so to increase the output of your life, the only choice is to change how you use your time.

It’s worth being very deliberate about what you trade your time for. Just like money, it can be wasted, spent, or multiplied by investing it. More on this soon.