Tuesday, January 31, 2006

Financial Flush Method (FFM) - Part 2

Part 2 Financial Analysis Concept known as Flush by Jeff 'SKI' Kinsey, Jonah People are only human. That is the good news, as well as the bad news. In part one, we talked of problem solving. And of using Dr. Eli Goldratt's three step approach:
  1. What to change?
  2. What to change it to?
  3. How to cause the change?
But humans resist change, or so it seems. If that is true, why do we buy lottery tickets? We must be seeking a change on some level. Goldratt has used the lottery example on at least one occasion to prove that behavior can and will change on a dime. No one excited about your suggested changes? Consider the source: you! Have you failed to excite them? Failed to understand the true nature of the environment? Failed to take the time required to do a proper analysis? The great news about failure: it does not have to be permanent. This series of articles seeks to explore a method for changing how you determine what projects get selected, and in what order they are implemented. Pretty important stuff. It you want it to be. As Les Brown (and others have) said: "you are going to be just as happy as you make up your mind to be!" It must start with you. If you are happy with your business and its approach to managing projects, then stop reading. Now. Period. Go back to the sports page. Or whatever. Still reading? Great. Here is the heart of the matter: FFM (Financial Flush Method) works. Better than all other evaluation tools when cash (in the form of working capital for projects) is your constraint. Let us define constraint: a bottleneck that prevents or restricts throughput. Let us define Throughput (from Purple Curve Effect): Systems define objectives in terms of goals. For example, for-profit businesses may set a goal based upon cashflow or gross profit. Throughput is the rate at which a system produces "goal units," i.e. dollars of profit. Selecting the proper projects in the proper order will have huge ramifications on your company or organization's throughput. Enough said? Part three next Monday. -ski (c)Copyright 2006, Jeff 'SKI' Kinsey, Jonah All rights reserved.
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