IMPROVING SIX SIGMA PROGRAM ROI WITH DEPLOYMENT MANAGEMENT THOUGHT LEADERSHIP WHITE PAPER

Transcription

1 IMPROVING SIX SIGMA PROGRAM ROI WITH DEPLOYMENT MANAGEMENT THOUGHT LEADERSHIP WHITE PAPER

2 Introduction Regardless of the size of the organization, when a Six Sigma program reaches a certain maturity it runs the risk of losing momentum. Once the low hanging fruit has been plucked and the obvious high reward endeavors tackled, subsequent projects typically generate less financial benefit. At the same time, administrative burden increases as the number of Belts and projects grows and the use of Six Sigma expands throughout the organization. Belts require more time to uncover and scope projects, while aggregating and validating program data becomes more of a chore. If not addressed, this pattern can sap program ROI, Belt morale, and ultimately leadership support for Six Sigma. One way to break free of this cycle is through Deployment Management, the discipline of applying the rigorous, data driven approaches of Six Sigma to the operations of a Six Sigma program. It begins with a simple realization: the practice of running Six Sigma is itself made up of processes that can be analyzed, refined and optimized. While each deployment is different, Figure 1 outlines some of the common processes used to manage Six Sigma practitioners (Belts) and projects. Figure 1: Typical Six Sigma Program Deployment Processes The Six Sigma methodology theorizes that to generate consistent results, a control plan is necessary for each critical activity. Unfortunately, many practitioners get so caught up in the execution of individual projects that they forget to eat their own cooking. According to the Lean Six Sigma Benchmark Report (September 2006, Aberdeen Group): industry is missing out on billions of dollars in potential savings, sales, and profits each year through ineffective application of Six Sigma tools and methodologies. By institutionalizing robust deployment processes, leading organizations can capture their share of this billion dollar opportunity. Improving Six Sigma Program ROI With Deployment Management 2

3 Challenges in Deployment Management There are many challenges in Deployment Management, ranging from HR (Belt selection, training, compensation and repatriation), to finance (program budget, inbusiness vs. central, etc), to project execution (efficient, effective and consistent techniques) and even marketing (publicize success in the Six Sigma community, or keep confidential). Still, the core of any Six Sigma program lies in managing project teams, and that is what we will focus on here that set of processes surrounding the projects themselves. Returning to our process inventory, Figure 2 outlines just some of the key issues confronting executives, deployment leaders and Belts. Figure 2: Common Challenges of Deployment Management The power of Deployment Management derives from the compounding effect of attacking all core deployment activities with Six Sigma rigor. But recognizing that each of the processes in Figure 2 presents an opportunity for optimization, we will focus on a critical few that typically offer the greatest potential for breakthrough results: Project Selection Belt Mentoring & Project Management Leveraging Knowledge Financial Reporting Project Selection Flawless execution will fail to deliver the goods if Belts are not working on the right initiatives. A rigorous project selection process can impact many program Improving Six Sigma Program ROI With Deployment Management 3

4 metrics, from average savings per project to project cycle time. In the early phases, converting low hanging fruit into quick wins can energize a program. As a program matures, easy projects may be more difficult to find, so it s important to undertake the right mix of projects that balances the risk/return with the resources, strategic alignment, and executive support required. It s helpful to think of the entire lifecycle of a project as a process, as shown in Figure 3. Figure 3: Project Pipeline Process This project pipeline has several steps, each of which can provide a feedback loop used to tune the process over time. Leaders will utilize these valuable feedback loops, and collect the right kind of data to enable the application of Six Sigma to Six Sigma, resulting in ongoing process improvement. Figure 4 contrasts some of the techniques employed by Leaders and Laggards to manage the project pipeline. Laggards Multiple project idea formats Infrequent collection of ideas Re create each time Keeper of spreadsheet = bottleneck Laborious with no centralization Inconsistent categorization Inconsistent prioritization Limited visibility Difficult to connect to results Difficult to connect to strategies Leaders Common idea format Continuous idea collection Persistent data Distributed responsibility Automatic consolidation Enterprise wide categorization Enterprise wide prioritization Global visibility Automatically connected to results Explicitly connected to strategies Figure 4: Project Pipeline Practices Improving Six Sigma Program ROI With Deployment Management 4

5 Belt Mentoring & Project Management While conceptually these are distinct disciplines, in practice it is easier to discuss them together, since there is significant overlap in the activities involved in each. At essence, both are about making sure Belts have the right tools and resources to successfully complete their work. Belt mentoring and project management can have a substantial impact on program results, especially in the areas of Belt productivity, project success rates, and cycle time. New Belts often struggle with their newly acquired skills, and need easy access to tools, templates and training materials, as well as guidance on how to use them. Experienced Belts require less hand holding, but often need help overcoming roadblocks and keeping projects on track. Even if you have sound processes in place to select the best projects, and have equipped your Belts with the tools they need to succeed, inevitably stuff happens. Project management needs to dynamically adjust with contingencies to keep projects moving forward. Timely and accurate status reporting are vital to best practice execution, so that leaders can manage by exception, and devote their scarce time and resources where help is needed. Figure 5 outlines approaches of leaders and laggards to common Belt mentoring and management practices. Laggards Belts don t know what to do next Laborious gate reviews Phone calls to check status No time to mentor Minimal visibility Data & documents locked on desktops & in Month end reporting nightmare Reports only on request Data overload Leaders Productivity tools guide Belts Electronic gate reviews Standardized status reporting Focus on value added mentoring instead of NVA statusing & reporting Global visibility Globally accessible data & documents all in one place Real time reporting Automated alerts & report delivery Configurable business rules manage by exception Figure 5: Belt Mentoring & Project Management Practices Improving Six Sigma Program ROI With Deployment Management 5

6 Leveraging Knowledge One way to improve the productivity of your Belts is to leverage knowledge. That is, use knowledge gained in the course of one project to benefit another, or better still several other projects. The challenge is that it can be difficult for Belts to access this knowledge, particularly across the dimensions of time and space. At a macro level, organizations can benefit greatly from replicating their most successful projects in additional business units and locations. On a smaller scale, Belt productivity can be enhanced through the reuse of best practice project and document templates. Enterprises that excel at Deployment Management are adept at capturing this knowledge and making it accessible, even pushing it out to the feet on the street. Figure 6 outlines some of the knowledge practices of leaders and laggards. Laggards Difficulty promulgating changes to project roadmap Projects and tools captured in random documents on PC s, , network drives No meta data Belts don t search due to difficulty Minimal replication of projects Leaders Project Roadmap delivered automatically Projects captured in fullysearchable, globally accessible database; all data in one place Robust meta data for categorizing Similar projects pushed to Belts automatically Relevant projects easily replicated Figure 6: Knowledge Management Practices Financial Reporting For most corporations, all activities are undertaken to improve the bottom line, including Six Sigma. But unlike a product line, where it is relatively easy to account for costs and revenue, the financial accounting of Six Sigma programs can be quite complex, as projects are often initiated on behalf of another division or business unit. Once a program has scaled beyond a few projects, gathering this financial data can become both time consuming and error prone. And as much of the aggregation falls to Belts, it directly affects their ability to complete the very projects that create value for the company. Improving the processes of data gathering, validation, and reporting can directly reduce program overhead while improving project success. Figure 7 lists some of the reporting practices of leaders and laggards. Improving Six Sigma Program ROI With Deployment Management 6

7 Laggards Inconsistent formats Errors in calculations Month end consolidation headache Uncontrolled data changes Loose access control Limited access / visibility Leaders Common format Calculations centrally controlled Instant roll up Audit trail and locking Tightly permissioned Global access / visibility Figure 7: Financial Reporting Practices Supporting Systems Even a cursory glance at the best practices we ve examined reveals some common themes: automating routine activities wherever possible, creating a central repository for project data and documents, and enabling real time access to information all contribute to demonstrated savings. To again cite the Lean Six Sigma Benchmark Report: By implementing project management tools that support collaborative efforts and provide workflow automation, Six Sigma practitioners are able to focus on analytical aspects of the methodology to drive to true results. Clearly, some kind of underlying information system is required to support a Deployment Management approach. But what is right for your organization? It s not unusual for companies starting out on the Six Sigma journey to begin by using spreadsheets for program monitoring and control. Initially, spreadsheets may meet most program needs as they are ubiquitous, most users are comfortable with them, and they can be quickly configured to track basic data such as who is working on which project. As more Six Sigma users come on board, the spreadsheets are often shared via or posted on a network drive, where they might continue to serve the needs of a small deployment. Spreadsheet limitations become apparent when a program scales and Belt involvement begins to span functions, divisions and locations. Many of these shortcomings stem from the fact that a spreadsheet is designed to be a single user tool, and not an enterprise wide solution. Problems arise when Belts need to aggregate data across multiple sources or across an extended time horizon. Larger Improving Six Sigma Program ROI With Deployment Management 7

8 Six Sigma programs that continue to rely on spreadsheets to address some of the key questions of Deployment Management (such as Where is the latest data? refer again to Figure 2) will find themselves forced to admit We don t know. Mature programs that require collaboration among dispersed teams, access to realtime program information, and automation of project management tasks will be better served by a Deployment Management system. Putting Deployment Management Into Practice Moving from the theoretical to the concrete, we ll conclude with real world case examples for each of the key processes previously described. By including baseline assumptions for a Six Sigma program of moderate size, we can model the return of a modest Deployment Management effort. First, we ll define the scale of our Six Sigma example program: 100 Black Belts, 5 Master Black Belts 1.5 projects per year per Black Belt (for 150 projects total) $150,000 net benefit per project Master Black Belts cost $75/hour in salary and benefits Now we ll examine the potential benefit of adopting the following demonstrated Deployment Management practices: Project Selection Case Study Applied to Our Example A large corporation had unsatisfactory project cycle times, despite good project management. Analysis revealed a root cause that was the length of time it took Belts to research and scope their projects. The company launched a proactive process to identify and prioritize potential projects on an ongoing basis. This resulted in a 50% drop in cycle time, since Belts started their next project immediately after completing the previous one. Assume that the reduction in average project cycle time is 10 days (in the real world case, the results were much more dramatic). This frees up 1,500 days worth of Black Belt time enough resources to complete an extra 6 projects a year, for $900,000 in incremental benefit. Improving Six Sigma Program ROI With Deployment Management 8

9 Belt Mentoring & Project Management Case Study At an international conglomerate, a Master Black Belt in one business unit spent a full day each week telephoning Black Belts to obtain status updates and then compiling them in Excel. In another unit, the status of projects was maintained in a centralized system. The unit president ensured projects were up to date by monitoring a project dashboard and immediately calling to offer help for any off track project. This combination of accountability and realtime access saved the second unit the equivalent of 4 days per month of Master Black Belt time. Applied to Our Example Leveraging Knowledge Case Study Applied to Our Example Financial Reporting Case Study Applied to Our Example To be conservative, let s say this savings in Master Black Belt time is just half a day per week. This equates to saving $15,000 per Master Black Belt per year, or $75,000 total. At the start of every Six Sigma project, Raytheon encourages its teams to search for ways to leverage previous projects, deliverables, and best practices. The result: Raytheon observed a 50% reduction in average project cycle time, and an improvement of over $200,000 in net benefit per project. Assume just 1 in 25 projects can leverage past work. Cutting cycle time in half for just 6 projects results in a savings of 24 months of Belt time, enough to complete an additional 3 projects a year for $450,000 in incremental benefit. Using spreadsheets, Master Black Belts at Huber Engineered Woods required 4 days to compile monthly management reports. Upon adopting a Deployment Management application, the same task now takes 15 minutes. Conservatively estimate that automating the reporting process saves 2 days of time each month per Master Black Belt. As in the Mentoring example, this nets the company the equivalent of $75,000 a year. Improving Six Sigma Program ROI With Deployment Management 9

10 Deployment Process Best Practice Example Value to Program Project Selection A pipeline of pre approved projects $900,000 increases Belt productivity and reduces cycle time Belt Mentoring & Project Management Availability of real time data frees Master Black Belts to manage by exception $75,000 Leveraging Knowledge Financial Reporting Leveraging past projects cuts cycle $450,000 time, allowing Belts to complete more projects Automating the production of $75,000 monthly reports eliminates non value added work Total Annualized Value Created $1,500,000 Figure 8: Example of Potential Return The isixsigma Test Lab article cited typical costs for Deployment Management software as: $6,000 $20,000 for initial setup $400 $600 per user per year Using figures in this range, we can estimate the cost of Deployment Management software for our example program, and then factor these costs into the value realized above to calculate a return. Item Description Year 1 cost Software Setup $20,000 one time fee $20,000 Software Subscription Internal Resources setup & training Internal Resources ongoing system management 125 users, consisting of 100 Black Belts, 5 Master Black Belts & 20 Others (managers, executives, etc.), at $500/user/year 5 MBBs, 5 days $75/hr for training & system configuration. 1 Admin, 1 day/week, 52 $75/hr $62,500 $15,000 $31,200 Total Year 1 cost $128,700 Figure 9: Example of Typical Costs Improving Six Sigma Program ROI With Deployment Management 10

11 Even in this limited example, with costs of approximately $130,000 and benefits of $1.5M, implementing a robust Deployment Management solution can have a firstyear payback in excess of 11 times the investment. While the full advantage of Deployment Management is derived from the aggregate effect of tackling all critical deployment processes with Six Sigma discipline, the previous examples demonstrate that significant benefit is achievable even by addressing just a few narrow areas. Any Six Sigma deployment leaders with more than a few dozen Belts should consider adopting a systematic Deployment Management approach to reinvigorate a languishing program, turn modest program results into stellar returns and ensure ongoing executive support and engagement. Improving Six Sigma Program ROI With Deployment Management 11

12 ABOUT POWERSTEERING SOFTWARE PowerSteering Software is the leader in business-driven project & portfolio management (PPM) solutions for managing IT Governance, New Product Development, Performance Improvement, and other Business PMO initiatives. Its easy-to-use software provides executives at BayCare, Johnson Controls, Merck, PolyOne, Shaw Industries, UK National Health Service, US Department of Defense, and over 140 other customers with executive visibility, strategy alignment, and team productivity to drive strategy and accelerate results across the organization. PowerSteering was rated Strong Positive in the "MarketScope for Project and Portfolio Management Applications" published by Gartner, Inc.