Application of TOC-based framework to improve market orientation in a non-profit organization

Abstract

The theory of constraints (TOC) is a relatively new management philosophy, especially to the marketing function, which recognizes that system constraints limit the performance of a system and that proposes a unique methodology (a process of five focusing steps (FFS) to manage system constraints) and set of measures (throughput, inventory, and operating expenses). We show how Mental Health Services (termed as the MHS institute) was able to apply the said framework to systematically improve the degree of market orientation (MO) and thereby, significantly impact business performance measured in terms of billable products/services provided while ensuring stakeholders', for example, employees' and customers', satisfaction. This paper discusses an application of the TOC-based framework to improve MO, both external and internal, in a not-for-profit psychosocial rehabilitation MHS institute. TOC measures encourage the MHS institute's employees across functional areas to work together and find innovative ways of increasing flow of customers instead of cutting or containing costs. The TOC methodology, using the FFS-based improvement process, reveals multiple physical and policy constraints within the MHS institute, and their successful resolution improves revenues, customer care, employee satisfaction, and importantly constraint resource utilization. However, empirical research is needed to develop strong theory explaining the (mediation/moderation) relationship between MO and TOC. Furthermore, there is a need to introduce Evaporating Clouds to initiate new acceptable process improvement ideas. Most of the recommendations in the paper require little or no net costs to implement. We show how MO of other community mental health centers and health delivery systems can be improved by using the proposed TOC-based framework.