Years ago, I worked at a company called Creative Output.  While I was there I learned a way of thinking about management that has shaped how I see organizations ever since.

The paradigm is based on a few principles that seem obvious once you hear them, but are rarely applied.

First, every organization has limiting factors. The larger and more the organization the more there are, but at most they are a small fraction of the things that need to be. These are the things that cap how much value the whole organization can deliver. In a manufacturing plant, it might be a machine that runs slower than the rest of the line. In a software company, it could be the speed at which engineering can deliver reliable code. In a hospital, it might be the number of available operating rooms, or the staffing levels of trained nurses. If you can identify those constraints and focus on supporting them, performance improves and management gets a lot easier. The CEO’s time is almost always one of those critical constraints. Fortunately, applying this paradigm (called the Theory of Constraints) will reduce her workload.

Second, what looks smart from inside one department—production, marketing, IT, you name it—can actually be harmful to the organization as a whole. This happens because managers are optimizing their sphere or responsibility. Most teams can’t see how their choices affect the critical constraints, so they make decisions that feel right locally but slow everything down.

Third, context matters more than we like to admit. A policy that was perfect last year can become a liability this year. Changes in scale, technology, regulation, or the economy can all turn a smart practice into a problem. A resource that was ample last year is a bottleneck this year.  Last year’s bottleneck is not a problem if the product mix has changed.  There’s no such thing as a universally good policy.

Almost no one manages this way. Most organizations know their legal limits, but far fewer understand their operational ones. Even when they do, they rarely put that understanding at the center of how they manage.

But when they do? Performance improves quickly. Planning becomes easier. And the initial gains don’t fade, they build on themselves.  A virtuous cycle is launched of compounding improvements.  Stress goes down. Time is freed up to think, and to analyze.  Planning that centers around the constraints yields far more reliable results than classic capital budgeting techniques.

When I learned this, I was sure it was going to change the world.  Instead it pops up in pockets, here and there.  When I meet someone who has heard of Theory of Constraints it feels almost like a secret handshake.

This knowledge has been gnawing at me for a long, long time.  I am at a stage in life where I can take business risks I could not have afforded and so I am choosing to attempt the most valuable work I know I can do – helping businesses make the lives of their employees and customers and owners better.