How to determine lean Six Sigma project benefits? Should benefits only be reflected in the financials or should other aspects be considered?
Lean Six Sigma Project Benefits: Business Impact
A student in this week’s class shared his project progress. As many students find, the problem statement had changed during the project due to a better understanding of the issues. An expectation that a problem statement is perfect at the start of an effort is unreasonable. Most LSS projects are initiated by business leaders because they perceive a problem that they are unable to resolve. This always leads to an issue that many LSS project have to deal with: What is the Real Problem?
Many times this problem can be resolved with the 5-whys. Take your initial problem statement and ask, “Why does it matter?” or “So what?” When you get an answer, ask “Why” again and again until you find the true business impact. It nearly always should resolve to $ of some kind. Until you get there, I am not sure the project is well enough defined to ensure success.
In today’s presentation, the student indicated that he had estimated the entire $ impact to the company, as the original problem statement was written, to be around $600 a quarter or $2500/year in labor savings. In my estimate, the project would expend more labor hours to work the problem than could be saved. The project champion directed the student to quit being concerned with dollarizing the project and just fix it. (By the way, that is not good advice.) The student properly restated the problem statement so that labor savings were not the goal. Instead he chose to make the problem statement about lost production opportunity and one potential impact of the problem, delayed deliveries.
As a good Black Belt, he will now go off to validate the problem. I am not sure if he will be able to confirm this impact as large. My advice was to re-define the problem as a Supplier Satisfaction project and drop the financial impacts, which are still worth working but are not as big a deal unless you are at risk of losing suppliers.
This discussion supports the use of one tool in Forrest Breyfogle’s Integrated Enterprise Excellence system, the Enterprise Improvement plan (EIP). In this tool you directly link your project to a corporate goal and strategy. In a perfect world, the project is identified and aligned with a corporate goal, and a strategy is created to change the performance and attain the goal. But nothing is perfect or ideal. This student, like most, must take his assigned project and find out if it links to a corporate strategy. If it does not support a current strategy, why is it being worked? Stop the project, and assign the resources to work a strategic issue.
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