Project on Assessing Six Sigma

Description
Six Sigma is a set of tools and techniques/strategies for process improvement originally developed by Motorola in 1985. Six Sigma became well known after Jack Welch made it a central focus of his business strategy at General Electric in 1995, and today it is used in different sectors of industry.

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

Choosing the Project Assessing Lean Six Sigma Projects Carefully Assess Candidate Projects to Assure Success

Choosing the Right Projects
• Stakeholder impact
– – – – Customer Value Projects Shareholder Value Projects Employee Value Projects Other Lean Six Sigma Projects

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–2

by Thomas Pyzdek

1

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

Benefit-cost analysis
• Should be only as elaborate as needed – Beware of overkill • Finance experts should conduct the analysis – Review and validation at a minimum • Costs are relatively easy to quantify – Claims on existing resources • Quantifying benefits is difficult or problematic – Based on forecasts – Some units of measure must be converted to dollars – Often based on unproven relationships • To deal with these issues, leaders often require a very high ROI
Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–3

1.0 Sponsorship
Score Interpretation 9 Director-level sponsor identified, duties specified and sufficient time committed and scheduled 3 Director-level sponsor identified, duties specified and sufficient time committed but not scheduled 1 Willing Director-level sponsor who has accepted charter statement 0 Director-level sponsor not identified, or sponsor has not accepted the charter
Assessing Lean Six Sigma Projects–4

Copyright (c) 2008 by Thomas Pyzdek

by Thomas Pyzdek

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Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

2.0 Stakeholder Benefits
Note: Several stakeholder benefit categories are shown in section 2. At least one stakeholder category is required. Show benefit scores for each category, then use your judgment to determine an overall benefit score for the project.

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–5

2.1.1 Customer Satisfaction
Score 9 3 1 0 Interpretation Substantial and statistically significant increase in overall customer satisfaction or loyalty Substantial and statistically significant increase in a major subcategory of customer satisfaction Substantial and significant increase in a focused area of customer satisfaction Unclear or non-existent customer satisfaction impact Menu Process Agent Courtesy
Copyright (c) 2008 by Thomas Pyzdek

Overall Loyalty

Professionalism

Q11: “Agent knew what she was talking about”

Assessing Lean Six Sigma Projects–6

by Thomas Pyzdek

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Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

2.1.2 Quality Improvement (CTQ)
Score 9 3 1 0 Interpretation 10X or greater improvement in critical to quality (CTQ) metric 5X to 10X improvement in CTQ metric Statistically significant improvement in CTQ metric, but less than 2X magnitude Project’s impact on CTQ metrics undefined or unclear

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–7

2.2.1 Financial Benefits
Score 9 5 3 1 Interpretation Hard net savings (Budget or Bid Model change) greater than $500K. Excellent ROI. Hard net savings between $150K and $500K. Excellent ROI. Hard net savings between $50K and $150K, or cost avoidance greater than $500K. Good ROI. Hard savings of at least $50K, or cost avoidance of between $150K and $500K. Acceptable ROI. Project claims a financial benefit but has hard savings less than $50K, cost avoidance less than $150K, or unclear financial benefit

0

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–8

by Thomas Pyzdek

4

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

2.2.2 Cycle Time Reduction
Score 9 5 Interpretation Cycle time reduction that improves revenue, Bid Model or Budget by more than $500K. Excellent ROI. Cycle time reduction that improves revenue, Bid Model or Budget by $150K to $500K. Excellent ROI. Cycle time reduction that improves revenue, Bid Model or Budget by $50K to $150K, or creates a cost avoidance of more than $500K. Good ROI. Cycle time reduction that results in cost avoidance between $150K and $500K. Acceptable ROI. Project claims a cycle time improvement but has hard savings less than $50K, cost avoidance less than $150K, or unclear financial benefit from the improvement in cycle time.

3

1

0

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–9

2.2.3 Revenue Enhancement
Score 9 3 1 0 Interpretation Significant increase in revenues, excellent ROI Moderate increase in revenues, good ROI Increase in revenues with minimally acceptable ROI Unclear or non-existent revenue impact

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–10

by Thomas Pyzdek

5

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

2.3.1 Employee Satisfaction
Score 9 3 1 0 Interpretation Substantial and statistically significant increase in overall employee satisfaction or loyalty Substantial and statistically significant increase in a major element of employee satisfaction or loyalty Substantial and significant increase in a focused area of employee satisfaction or loyalty Unclear or non-existent employee satisfaction or loyalty impact

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–11

2.4 Stakeholder: Other
• 2.4.1 Specify Stakeholder:
Score 9 5 Interpretation

3

1 0 Unclear or non-existent benefit

Other stakeholder might be a regulatory agency, the community, etc.
Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–12

by Thomas Pyzdek

6

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

3.0 Availability of Resources Other Than Team

Score 9 3 0

Interpretation Needed resources available when needed Limited or low priority access to needed resources Resources not available or excessive restrictions on access to resources

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–13

4.0 Scope in Terms of Black Belt Effort
Score 9 3 1 0 Interpretation Projected return substantially exceeds required return Projected return exceeds required return Projected return approximately equals required return Projected return not commensurate with required return

Required return can be calculated as follows: Length of project (months) = Proportion of Black Belt’s time required (between 0 and 1) = Probability of success (between 0 and 1) = Required return = $83,333 * (1) * (2) ? (3) = $ Projected return: $ Based on expected Black Belt results of $1MM/year.

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–14

by Thomas Pyzdek

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Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

5.0 Deliverable
Score 9 3 0 Interpretation New or improved process, product or service to be created is clearly and completely defined New or improved process, product or service to be created is defined Deliverable is poorly or incorrectly defined. For example, a “deliverable” that is really a tool such as a process map

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–15

6.0 Time to Complete

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Assessing Lean Six Sigma Projects–16

by Thomas Pyzdek

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Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

7.0 Team Membership
Score 9 3 1 0 Interpretation Correct team members recruited and time commitments scheduled Correct team members recruited, time committed but not scheduled Correct team members recruited Team members not recruited or not available

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–17

8.0 Project Charter
Score Interpretation All elements of the project charter are complete and acceptable. Linkage between project and deliverable is clear Project charter acceptable with minor modifications Project charter requires major revisions

9 3 0

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–18

by Thomas Pyzdek

9

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

9.0 Value of Lean Six Sigma Approach DMAIC or equivalent
Score 9 3 0 Interpretation Lean Six Sigma approach essential to the success of the project. Black Belt/Green Belt skill set required for success Lean Six Sigma approach helpful but not essential. Black Belt/Green Belt skill set can be applied Usefulness of Lean Six Sigma approach not apparent. Specific Black Belt or Green Belt skills are not necessary

There are many great projects that are not Lean Six Sigma projects

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–19

Importance Weighting
Relative Importance of Criteria
30%

25%

Importance Weight

20%

15%

10%

5%

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Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–20

by Thomas Pyzdek

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Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

Assessment Summary Sheet
Project Name: Black Belt: Weighted Overall Project Score: Date of Assessment: Master Black Belt: Project Number:

Criteria 1. Sponsorship 2. Benefits (specify main beneficiary)
?? ?? ?? ??

Score

Weight 0.23

Weighted Score 0.00

2.1 External Customer: 2.2 Shareholder: 2.3 Employee or internal customer: 2.4 Other (e.g., supplier, environment):

Overall Benefit Score 0.19 0.00

3. Availability of resources other than team 4. Scope in terms of Black Belt Effort 5. Deliverable 6. Time to complete 7. Team 8. Project Charter 9. Value of Six Sigma Approach TOTAL (sum of weighted score column)

0.16 0.12 0.09 0.09 0.07 0.03 0.02 1.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

Note: Any criterion score of zero must be addressed before project is approved
Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–21

Example of Project Assessment

Project most likely to succeed

by Thomas Pyzdek

11

Assessing Six Sigma Projects

ASQ Old Pueblo Section Meeting March 2012

Q&A and Exercise
• Any questions before we give it a try on a hypothetical project?

Copyright (c) 2008 by Thomas Pyzdek

Assessing Lean Six Sigma Projects–23

by Thomas Pyzdek

12

Project Assessment Exercise
A project candidate has been proposed to the Black Belt, Mary Smith who has a $1,000,000 per annum improvement target for her projects. Here is all of the information available to Mary: ? ? ? ? ? The finance department estimates that if it succeeds the project will have a projected hard savings of approximately $175,000. The project sponsor, a high level business leader, has informed the Black Belt via an email that he is willing to support the Black Belt as she conducts the project. The Black Belt and sponsor have not met to discuss the project. The opportunity being addressed involves improving customer satisfaction. In a recent survey customers have expressed dissatisfaction with the speed of response to their order inquiries. The response to this survey item is correlated with the “likelihood to recommend” score, which is, in turn, correlated with profits. A typical example is Jane Doe, who wrote “I asked about my order via email and I didn’t get a response for two whole days. This is unacceptable!” Mary Smith has determined that she will need access to the customer survey database. The information systems department manager informed Mary that she must get the information from Sarah Jones. Mary has been unable to contact Sarah, and her voice messages haven’t been returned. Mary believes that the project will consume about 20% of her time for a period of six months. The deliverable for the project is unclear at this time. Mary believes that she will need to develop a new process for handling customer inquiries that involves a personal response to customer inquiries. However, it may be possible to achieve the goal with an improved version of the existing process. The sponsor believes that Mary should also consider an automated response system because the last place she worked used one and she thinks it worked pretty well. The automated system might be Internet based, or it might involve in-house information systems. The project’s charter is incomplete. However, the problem statement, business case, and deadline have been determined. The sponsor has asked that the team commit to a 33% reduction in customer complaints and a 1 standard deviation improvement in customer responses to the survey question that addresses the company’s responsiveness to order status inquiries. No one is clear on how to do this. The problem has been around for quite some time, despite repeated efforts to address it. Mary believes that the Six Sigma toolkit is essential to identifying the real drivers and taking definitive action to improve the system.

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