Six Sigma and Business Analytics: Shareholder Value Analytics

 

 

 

You’ve heard recent headlines in the news about certain airlines overbooking and treating their customers harshly when a customer wouldn’t give up their seat when asked. This is the antithesis of Six Sigma core values, and it is no wonder that the airline industry has suffered many blows.

One company that has held the number one spot among its competitors is Southwest Airlines. Using Lean Six Sigma and some of the concepts of Six Sigma has made them very successful in an otherwise failing industry.

First of all, Southwest Airlines focuses on Voice of the Customer (VOC); they make it their priority to give the customer what is important to them. By listening to the requests of their customers, they have developed a very pleasant passenger experience. According to the Department of Transportation, Southwest Airlines ranks number one among all airlines for achieving the lowest ratio in customer complaints.

Their current flights have free wi-fi, Beats audio, free eBooks and video on demand. Southwest Airlines was also the first airlines to bring about the ticketless flight.

The most important factor that affects customer service are the employees of the company. Southwest Airlines has always made it about their employees; they know that company loyalty is very important, so they have a no-layoff policy. This policy was especially meaningful at the time of acquisition with Airtran Airlines. When many companies would decide to downsize, Southwest Airlines was running efficiently and effectively, using the Lean Six Sigma model, and kept systems in place.

Lean Six Sigma tools and Six Sigma methodologies have made it possible for Southwest Airlines to create jobs in a time of recession, improving through innovation such as the ticketless flight. As a result, they have become a highly regarded example by using integrity without gimmicks.

They even redesigned their cabin interior, with improved ergonomics. With the space that was saved, they were able to add an extra row of seats, another success story using Lean Six Sigma and Six Sigma methodologies.

Six Sigma and Business Analytics: Shareholder Value Analytics

Sigma methodology is perfect for discovering innovative ways of improving your organization’s operations. Likewise, there’s more to the business process improvement methods than just manufacturing and production processes. If you are considering to publicly list your company or want to find ways to improve your market value, Six Sigma can help. Combining with business analysis, Six Sigma looks to calculate your shareholder value analytics (SVA). In today’s article, we will discuss what SVA is, why you should use it, and how it relates to Six Sigma.

What is ‘Shareholder Value Analytics (SVA)’?

SVA is a precise calculation of your company or organization’s value in the public market. This analytical tool assesses the returns you make to your shareholders and measures the financial pros and cons of your strategies. We use SVA as a measure of a company’s operations simply because all public corporations will try to maximize shareholder value. If you’re able to do this, chances are you have found innovative ways to efficiently increase your operations. Additionally, stock market analysts will use SVA to calculate your organization’s success and value. Business analysts will typically shy away from looking at only your revenue and profit since these figures can be manipulated and tell different stories. SVA, on the other hand, is not nearly as misleading and paints a more concrete picture of your operations.

Why Should You Use SVA?

There are a variety of questions your management team and shareholders will ask that you can answer by looking at your SVA. These include analyzing your operational strategies, calculating how much value you deliver to your shareholders, and seeing how you perform compared to your competitors. To make an accurate prediction for your shareholder value, you must look towards your economic value added. This metric will calculate your organization’s profit by measuring the return and cost on capital. Likewise, you must also effectively manage shareholders’ opinions. Much of the stock market is driven by expectations investors have on certain organizations. If you can prove your organization has effective operations and is resourceful with its capital, your SVA will increase.

SVA & Six Sigma

Your shareholders will only expect a payout if your returns on equity are higher than your costs. Saying this, an increase in your shareholder’s value will correlate with effectively running your organization. This is where Six Sigma methodologies come into play. There are multiple ways for you to increase the efficiency of your operations.

First, we look to the 5 K’s of Kaizen. These steps look to minimizing your usage of resources, carefully placing items, and increasing customer relations. When more people buy your products and believe they are of superior quality, your shareholder value will increase. Likewise, implementing the steps of DMAIC is an excellent way to find inefficiencies within your business processes. With the management of a Six Sigma Black Belt or higher, your team will use DMAIC to find innovative ways of improving any and all processes within your organization. This, in return, will decrease your capital costs and increase your market share value and thus, your SVA.

Course Correction? Tips for Doing a Deployment Review

It is not unusual to find that a few years down the road, the results from a Lean Six Sigma deployment are not quite as good as what a company hoped or expected. What often helps in that situation is a formal deployment review, conducted in much the same way as a tollgate review on an individual project.

The basic model for a deployment review is the same as for any review. The organization’s leadership will want to document both results and methods, as depicted in the simple grid shown in the table below. This will make it clear whether progress has been hindered by a breakdown in strategy and planning (the methods), in the execution of those plans (the results) or a combination of both.

Deployment Review Grid

Did the Organization Follow Its Deployment Plan?

Yes

No

Did the Organization Get the Results It Wanted?

Yes


No

Document the successes.


The methods the organization thought would be successful were not. Determine what went wrong

Desired results obtained despite not following the planned methods. What was missing or wrong in the plans? What new knowledge allowed the organization to get good results?


Determine why the plans were not followed. Were they poorly documented? Incomplete? Were insufficient resources (time, money, personnel) allotted to the effort?

Elements of Deployment

Elements of Deployment

What exactly should be looked at in terms of results and methods? Successful deployments are the result of the interaction of three elements – strategy integration, execution and skilled infrastructure (see figure above).

As the figure shows, it is clear that the three elements of deployment drive each other in particular ways. Strategic clarity gives the focus needed for effective execution; having skilled resources is necessary to ensure that the strategy is appropriate in the first place, that its interpretation is consistent, and that the organization has the necessary level of commitment needed to sustain the effort.

Targeting the deployment review on these areas may not catch every roadblock or barrier, but should expose those are the most harmful in terms of results.

Strategy Integration Review

Translating the table grid at this level means determining whether the organization had a clearly defined strategy associated with its Lean Six Sigma deployment, and whether both the hard and soft results are documenting.

Method Questions
> What was the burning platform driving Lean Six Sigma deployment?
> Was the strategic importance of the goals clearly communicated to all involved?
> Was progress regularly reviewed against the goals?
> How does the organization ensure that project selection is driven by priority business needs?

Results Questions
> Is there reliable data on performance before and after changes were made? (Sometimes good results are obscured by poor data collection; or vice versa, bad results can look good if data is unreliable.)
> What documentation does the organization have showing progress toward or shortfalls relating to strategic goals?

Skilled Infrastructure Review

What has made Lean Six Sigma much more successful than its predecessors is having an implementation infrastructure that effectively translates the strategic agenda into actions to maximize value and provide effective management and monitoring of results.

Method Questions
> Is there a deployment Champion in each business unit? What training and experience does he or she have?
> Have project sponsors been trained in Lean Six Sigma basics and project review basics?
> How good are the mechanisms in place for connecting resources working in terms of support and communication? What is the basis for this judgment?
> What evidence does the organization have that Lean Six Sigma is becoming integrated into the daily management practices of the business?
> What is being done to ensure that deployed resources are carrying out their responsibilities? (For example, are they held accountable for both methods and sustainable results?)

Results Questions
>
 What targets for achieving a critical mass were set around the deployment methods? (Number of Black Belts trained? Number of projects launched?) How do the actual numbers compare to the target? What barriers explain any shortfalls?
> Is there a rigorous process for measurement and tracking of project financial results?
> What is the average return per Black Belt? How does that compare to expectations?

Execution Review

The first two elements of the deployment review focused on developing a fully realized strategy and the resources to implement it. In this element, an organization needs to look at where and how execution either succeeded or failed.

Method Questions
> What made the organization confident that its expectations were reasonable? Check that those factors are still valid. If it turns out the expectations were un-reasonable, what needs to change – the expectations or the methods used to fulfill them?
> What was done to engage leadership and give them a compelling reason to embrace Lean Six Sigma?
> Were Black Belts and Green Belts fully trained in integrated Lean Six Sigma DMAIC (Define, Measure, Analyze, Improve, Control) methodology?
> Is team leadership training a standard part of the organization’s Lean Six Sigma curriculum? (Change and improvement happen through people, not just statistical tools. Black Belts and Champions must be able to draw the best from their teams. This requires that they be trained in team leadership skills as well as technical tools. Having the right teams and team dynamics in place for learning and execution can both accelerate the application of Lean Six Sigma and multiply its financial and operational benefits throughout an organization.)
> How are Champions and Master Black Belts doing in terms of opportunity identification, project selection, and prioritization? How does the organization’s leadership know?
> Does the organization have a project management system that allows it to control numbers of projects-in-progress so staff is not overloaded?
> Have project Sponsors taken on the accountability for long-term results? What indicators are there that this is happening or not? Is there a method for financial validation of results after projects are completed?
> Is there consensus on common metrics and tracking methods? What dashboards metrics are reviewed regularly? Are they helping in the management of the deployment?

Results Questions
> What hard results were expected from the deployment (quality, cost, profit, revenue, speed, etc.)?
> What results were actually achieved?
> How well do team leaders, Black Belts, Master Black Belts, etc. rate in terms of leadership skills?

Conclusion: Who Reviews and When

Keep in mind, that although each of these elements was addressed separately, in reality there will be overlap between them. That is okay because organizations typically will compile all the lessons together at the end so they can look for patterns across elements. If progress is not being made toward strategic goals, for example, it could be that there is a problem with project selection and prioritization, the numbers of projects launched and completed, or the resources used to support the projects (such as if Black Belt time is limited).

In practice, these reviews are often done through a combination of meetings (with the leadership team, Champions, Sponsors, Master Black Belts, etc.), reviews of project documentation, and internal surveys or focus groups that ask people about barriers and successes.

Most best-in-class companies perform in-depth deployment reviews annually. The trick is to find a balance between getting enough depth so that big course corrections can be made when needed, but not spending so much time and effort that it slows down the initiative. The stakes are high, so spending time and money on doing a good review is well worth the effort.

The emerging role of business architects in 2017

 

The emerging role of business architects in 2017 will be to encourage organizations to “be good” versus “look good.”  I recently worked with one of the top 10 executives of a Fortune 100 organization.  After several months, I recognized a pattern.  Monthly, the leader and direct reports presented a PowerPoint to the CEO and their direct reports.  As time passed, I began to realize they worked very hard to create a roughly 75-page report that did not look the same from month to month.  I mean worked very hard, 5 to 10 senior executives working 10-hour days for 6 or 7 days to create the 75-page presentation.  As for the presentation’s content, if you went back two or three months, you may not find a shred of similarity between the presentations.  I pressed for a consistent strategy, corresponding key measures of success and ongoing governance to hold leaders accountable for delivering against the strategy.  I never did succeed in moving them off the “look good” versus “be good” approach.  We amicably parted ways.

I grew up in New York City.  In my youth, I heard the phrase many times, “Fake it ‘til you make it.”  Intentionally or unintentionally, some organizations have taken on the “Fake it ‘til you make it” mantra.  In May of 2015, Fortune.com reported that the median tenure of a Fortune 500 CEO is 4.9 years.  After 35 years of being a business architect, I am beginning to wonder if looking good versus being good works over time?  The organization I previously mentioned is making a lot of money and their stock price keeps climbing.  Some of my fellow business architects would say, “Yeah, but how much more money could they have made if they focused their resources effectively?”   I don’t know the answer to the question.  I assume it would be more.  In my opinion, when an organization is making a lot of money, it is easier to survive with a “look good” philosophy.  If a “look good” organization wants to optimize its performance by architecting the business to perform at its best, it is not going to happen until the CEO and their leadership team drive the shift to a “being good” organization.

Maybe a better way to look at it is, at what point does an organization embrace Business Architecture?  Do you embrace it when you are making a lot of money or should you wait until the business starts slipping?  Do you wait to be blindsided by regulation, competition, technology, loss of a critical employee?  Wait until the organization begins losing money or all together collapses?  Wait until you are under a regulatory or criminal investigation? 

It was late morning on Friday, October 16, when Elizabeth Holmes realized that she had no other choice. She finally had to address her employees at Theranos, the blood-testing start-up that she had founded as a 19-year-old Stanford dropout, which was now valued at some $9 billion. Two days earlier, a damning report published in The Wall Street Journal had alleged that the company was, in effect, a sham—that its vaunted core technology was actually faulty and that Theranos administered almost all of its blood tests using competitors’ equipment.”

Nick Bilton, Vanity Fair, October 2016

Theranos is an overkill “look good” example, but nonetheless a disturbing example.

When I was a Quality Leader at Florida Power and Light (FPL), we were holding a qualify forum with about 300 leaders in the room.  Our guest was the CEO of a Japanese company.  Upon learning the guest had a 125-year plan for his company, one of FPL’s leaders asked a question.  They asked, “No disrespect, but at your age, why do you care about 125 years from now?”  The Japanese CEO and his team, along with the interpreters, were feverishly huddling for what seemed like eternity.  Finally, a nervous interpreter leaned into the microphone and said, “No disrespect, but we can’t understand that as a leader of Florida Power and Light why you don’t care.”  The room full of 300 FPL leaders made a collective sigh like a crowd at a sporting event when a competitor is knocked to the ground.  After an awkward pause, the meeting continued.  Does our prevalent short-term perspective drive organizations to a “looking good” philosophy?

One way I have noticed organizations working hard to look good versus be good is through the measurements they choose to report.  Key Performance Indicators that shed a negative light are often dropped from the reporting.  Measurements that make management look good are encouraged.  In my experience, some of the metrics chosen are not sound.  One of the tools/methodologies I have employed over my career is called Measurement System Analysis (MSA).  MSA looks at how the measurement is constructed, the source of the data, what is included, what is excluded, is the measurement calibrated, is it accurate, is it repeatable, etc.  Many of the metrics I have seen reported would not pass an MSA.  Yet, they are reported as hard, 100% factual information.  While a Master Black Belt at GE, another employee asked Jack Welch a question about one of his direct reports leaving the organization.  The question was to try to determine if the executive told Jack Welch about the shortcomings in their business or if the leader was not aware of the deception taking place.  Jack’s response was brilliant.  He said, “There are two possibilities.  The leader knew it was going on and did not tell me or the leader was not aware it was going on.  The latter is worse.”  Business Architects need to ensure organizations are reporting sound measurements.

Choosing a “looking good” strategy over “being good” can lead some to call into question the ethics of an organization and the competence of leadership.  “If it comes down to your ethics vs a job, choose ethics.  You can always find another job.,” Sallie Krawcheck.  “Being good” allows leaders, employees and shareholders/investors to have an honest and true assessment of the organization’s capability.  One day while attending Georgia Tech, I did not want to participate in Track and Field practice.  My Head Coach, Buddy Fowlkes, asked me to come up to his office.  We sat down.  Buddy said, “If you miss one day of practice, you know it.  If you miss two days of practice, your competitors know it.  If you miss three days of practice, the crowd knows it.  What do you want to do?”   I went to the locker room and suited up for the practice.   Imagine if organizations had to compete within rigid rules, the starting line and finish line were well defined and the measurement system recorded everyone accurately to thousandths of a second.  You can “look good” prior to the race, but the clock is the true measurement.  Realistically, it would be difficult to get organizations to agree to being measured as rigidly as a Track and Field event.  As a Business Architect, you can choose to accurately measure and report your organization’s performance, identify strategic gaps you want to close and align your organization to close the gaps.

The speed of change today is unprecedented.  For many organizations, the pressure to make more money is greater than any other priority.  The pressure to make money or get fired can lead to a short-term, can’t fail mentality and a “look good” philosophy.  Can Business Architects persuade leaders to accurately report on customer loyalty, attracting and retaining great employees, delivering flawless products and services, optimizing costs, meeting customers’ timelines, investing in and deploying the latest technology, etc.?  The emerging role of Business Architects in 2017 will be to encourage organizations to shift their culture from “looking good” to “being good.”

Six Sigma and KPI’s: Waste Reduction Rate

 

 

philosophies behind Six Sigma is waste reduction. This idea results from improving your organization’s efficiency and deterring production and manufacturing errors. However, simply saying that you wish to reduce waste can be a rather broad term. To help with this, we will introduce you to a simple KPI that measures your organization’s waste; Waste Reduction Rate. With this rate, you will gain insight into how your company operates, how you utilize your resources, and what areas need improvements and changes.

What is Your ‘Waste Reduction Rate’?

Your Waste Reduction Rates measure to what extent your organization tries to minimize the amount of waste you generate. This can vary greatly between companies and organizations, especially depending on the field and industry you’re in. Likewise, there are multiple factors that determine your waste reduction rate. But why is calculating this so important? While it may not be obvious at first, your waste determines your organization’s disposal costs, how expensive it is to manufacture your products, and even lost production time. With these figures in mind, it’s important to calculate your organization’s waste reduction rate.

To calculate your waste reduction rate, you must first find two variables. These are the amount of raw materials you use within a certain period and the wasted raw materials from the previous period. Then, you divide the first variable by the second and multiply your results by 100 to get a percentage. This is your waste reduction rate. However, it’s important to note a few variables about your calculations.

First, you must collect the appropriate data for each of your time periods. If the data is inaccurate, your waste reduction rate will not be proportional to your actual results. Second, data collection can be expensive. If you want to calculate your waste production, begin setting up the infrastructure to do so. This includes monitoring a number of raw materials you bring in regularly. Additionally, how much of the materials you use and what’s left over. We recommend using a Six Sigma professional who understands how to correctly mine and analyze data. If you do not have employees with the appropriate training, we offer multiple courses for each Six Sigma certification level you might require.

Six Sigma and Waste Reduction

As a founding principle of Six Sigma, waste reduction is critical to every organization. Whether you specialize in manufacturing, logistics, or production, there are ways to improve your organization’s efficiency. By calculating your waste reduction rate, you can instantly see how well your operations are running. If you wish to improve your rate, there are ways to do this. For example, implementing the steps of DMAIC is an excellent way to find inefficiencies and replace them with innovative changes. These steps and more will help improve your organization’s raw material utilization and save you from unexpected disposal costs.

Training & Life: When to Start Your Course

matter what industry you work in, at some point, gaining Six Sigma certification will be highly beneficial to your career. Although it’s mostly common for professionals in manufacturing and production to enroll in training, countless other industries are now expecting their employees to have a basic understanding of Six Sigma. So, when is it the right time to start your certification or training course? Unfortunately, the answer is not black and white. Because everyone holds a different level of experience, education, and drive, there are different times in everyone’s lives when it’s most beneficial to enroll in Six Sigma courses. Here are a few distinct moments when it might be right for you to begin your Six Sigma journey.

Start as a New Graduate

The first opportunity for Six Sigma training is if you are a recent college graduate and are having trouble finding a job that suits your degree. Depending on your career preference, one of our training courses may be a faster and more economical way to gain a leg up on your competition. Applying for positions as a new graduate with little to no experience is extremely challenging, especially in technical fields. Instead of investing thousands of dollars into another year or more of school for a second degree, enroll in our Green Belt training course. This course will introduce you to Six Sigma methodologies and fast-track you to your dream profession.

Start as a Professional

Additionally, another ideal time to gain Six Sigma certification is if you want to change career path. Sometimes, professionals feel stuck in their roles, completing the same tasks every day without new challenges. If this describes you, Six Sigma may be your answer. Unlike other certification courses or degree programs, we provide concise and highly detailed training that will gain your certification quickly. Typically, those who want to become project managers, business analysts, or assistant managers benefit from Black and Master Black Belt training. Although, usually these certifications require you to either hold a Green Belt certificate or have adequate experience.

Start as an Entrepreneur

Likewise, the third best time to enroll in Six Sigma training is if you want to become an entrepreneur. Today, organization and corporations are requesting more Six Sigma training for their employees. If you wish to become your own boss and operate your own company, certification may be right for you. Usually, Six Sigma consultants possess at least a Black Belt certificate. This proves that you have a thorough understanding of the methodologies and know how to implement them effectively. Likewise, you know how to properly lead a project team and perform comprehensive data analysis. For many, becoming an entrepreneur is an excellent way to gain time and financial freedom.

Regardless of your experience or education, you can benefit from a Six Sigma certificate. Achieving any level of certification places you above the competition and close to your dream career. If you want to become a Six Sigma professional, contact us today to see which program is right for you.

LEAN TAGGING: A TOOL THAT INSPIRES DEMOCRATIC PROCESS IMPROVEMENT

How Lean is your business?

It’s a question that many people aren’t prepared to answer, and there’s two primary reasons why:

  • They’re unfamiliar with the Lean methodology
  • Their processes are too complex to qualify

Here’s the solution to the first problem: the Lean methodology is a tool used to streamline your production processes, and the concept is actually very simple. Your goal, as a business, is to create value for your customers. To achieve that goal, you’ve created processes and systems. But are those processes running as efficiently as possible? To find out, break the processes down into steps, and ask yourself, “Can I cut out any of these steps without sacrificing the value this process is creating?”

That’s Lean.

The second problem is a bit trickier. That’s the problem Promapp is trying to solve.

Lean Tagging Tool

Promapp is a leading provider of cloud-based business process management (BPM) software. Instead of thick binders and old, worn out manuals that detail your business processes, Promapp has created a tool that stores all processes in a central online repository. Process owners, like you, can view and dynamically edit business processes with a few clicks of the mouse.

It gives you a clear, bird’s-eye view of your processes from beginning to end, and makes it easy to spot redundancies, inconsistencies and other inefficiencies. And with the addition of a new function called Lean Tagging, the tool became even stronger.

Lean Tagging allows users to look at a process, select any step of that process, and label it. It doesn’t sound like much, but Lean Tagging is creating powerful, meaningful change for processes.

Lean & BPM

“Right now, there is a disconnect between business improvement and Lean thinking,” said Ivan Seselj, CEO of Promapp, in a press release. “We have these terms and labels that we apply to improvement but they are passive language only. Lean thinking needs to be totally engaged with process, it needs to be visual and it needs to be easy to use so that organizations can drive innovation and continuous improvement, and then promote track, identify and report on improvement opportunities and benefits.”

Picture this—you think you’ve trimmed a process down to its essential steps, but you open the BPM tool, and you notice that four other users have labelled a step as “inefficient” or “redundant.” They’re providing a perspective that you don’t have, and at the very least, that label is starting a conversation about what’s necessary and what’s not.

It’s Lean via democracy. It’s a multitude of individuals thinking about process improvement in many unique and interesting ways, and offering their opinion on how to make things better.

“The hunt for continual improvement encourages everyone to identify new ways to reduce resource usage, develop and deliver products faster, at a higher quality and at a lower cost,” Seselj added. “At the same time, it encourages creative input from the people responsible for carrying out the work with a management process which engenders improvement. All of this means that within lean organizations, processes cannot be static. They are dynamic, constantly changing and therefore, must be managed through Lean tagging.”

Better Project Management Performance with Six Sigma

Every organization faces the daunting task of executing projects that meet or exceed the expectations of its customers. That makes project management a key component of most enterprises, regardless of the business sector. Yet project management is not always met with organization-wide satisfaction. One major reason is that many project management offices (PMOs) are replicated and not designed. Inevitably many PMO processes are little more than copies of what other companies have implemented. They lack a root-level connection to the company they support.

PMO Designed to Meet Customer Needs

When a project is not properly planned, the PMO may be forced to improve systems never designed to meet the customer’s needs, and subsequently appear to fail to meet those needs. The root cause of this failure arises from the disconnection between process performance metrics and customer needs. When this is the case, the PMO is forced to find ways to repair a problem that never had to exist.

The key to consistently maximizing project performance metrics is rooted in the proper development of the PMO metrics. To maximize a project’s performance, management needs to build a better project management process dedicated to meeting the customer’s most important needs.

By applying Lean Six Sigma in a multi-generational model, a strong project management process can be developed. A successful metrics model can be developed using the Design for Six Sigma’s DMEDI (Define, Measure, Explore, Develop, Implement) roadmap. The application of successive quality function deployment (QFD) iterations will be a core step in this process. Subsequent generations of PMO improvements should utilize the DMAIC (Define, Measure, Analyze, Improve, Control) roadmap.

DMEDI Step 0: PMO Charter

No project should ever be launched without a well-defined charter. Regardless of the project leader’s skills, if the expectations of the PMO are not well-conceived, the cycle time, goal attainment and acceptance will be limited.

The PMO charter should answer all of the following key questions:

  • Sponsor/Champion
    • Who will be where the buck stops? The project Sponsor/Champion must hold a position high enough in the organization to enforce the plans defined for the PMO.
  • Business impact
    • What are the quantifiable desired gains from the PMO?
    • What stands to be gained when from a successful PMO?
  • Opportunity or problem
    • What is the current quantifiable deficiency that has caused the need for a PMO?
    • What is the greatest pain the PMO is targeted to heal?
  • Goal statement
    • What should the PMO look like and produce?
    • What will the data say to provide a picture of success?
  • PMO scope
    • What should the PMO be doing and not be doing?
    • Where should and should not the PMO operate?
  • Project plan
    • How long and when will the PMO operate?
    • What are the key milestones in its development and measurement?
  • PMO team
    • Who are the players on this project?
    • Who will manage the daily activities?
    • Who will participate in establishing the PMO?

DMEDI Step 1: Define

In order to maximize individual project performance, the company’s senior leadership must first establish and agree upon what the overall objective is for the PMO. This objective must fall in line with the overall company’s and customer’s objectives. Without a corporate standard and objective for the PMO that is globally accepted, individual projects have little chance of being viewed in their proper light.

This task is significant and many organizations still struggle with it. Operational definitions must be clearly defined and reinforced by C-level management. Without their support, the implementation and adherence to these operational definitions will cause project performance to be seen as lacking. Operational definitions which need clear definition include:

  • Project must be defined and scoped:
    • Who is authorized to initiate a project?
    • What is required to initiate a project?
    • What is the breadth and scoped of the project?
    • What is the project engagement process?
  • Customer must be defined and stratified into clear categories:
    • Internal (finance, sales, service, delivery, etc.)
    • External (new customers, existing customers, vendors)
  • Financial benefit must be clearly defined, according to the following elements:
    • Direct external (i.e., new business, new customers, etc.)
    • Direct internal (i.e., reduction in production costs)
    • Indirect (i.e., losses or costs avoided)
    • Benefit recognition period (i.e., time period benefits are realized for accounting purposes)
    • Currency (gross or net profit to the organization)

Finally, the chief financial officer (CFO) or chief operating officer (COO) must regularly assess PMO performance. This timetable and scope must be defined early on. The CFO/COO should monitor how the quality of execution has met the strategic vision and overall business needs. Without this high-level oversight, the PMO may come to serve an internal department as opposed to the overall business.

DMEDI Step 2: Measure

This step focuses on capturing and understanding the voice of the customer (VOC). The VOC must be used to appropriately design a PMO to deliver maximum project performance. Capturing the VOC is no small task. To accomplish this effectively, the appropriate customer segment must be identified. In theory, any internal department, external customer, potential customer or vendor may benefit from the services from the PMO. But specific organizations will receive greater benefit of the PMO based on the definitions established in the previous phase. To truly maximize project performance, the needs expressed by organizations with the greatest overall benefit must weigh more heavily.

The secret in the definition of metrics is that customers value services differently. This is where the QFD tool pays off. This tool quantifiably identifies the priorities of the customer’s needs. The QFD tool helps develop the services a PMO will need to satisfy the customer’s needs. Once the services are identified, metrics can be developed to measure them. Properly developed metrics will be closely tied to PMO services that are:

  • Essential to the customer’s core needs: Services and metrics must address needs important to the customer and not the company.
  • Quantifiable: A company cannot show excellence if it cannot measure what it has done.
  • Comprehendible: The PMO services will not be utilized if customers do not understand them.

House of Quality Template

House of Quality Template

Here is a high-level overview of the QFD house of quality process.

1. Customer needs (VOC)
– For each critical customer segment, capture customer feedback and VOC input consisting of customer “needs.”
– Prioritize each need on a scale from 1 to 9.

2. Critical customer requirements (CCRs)
– The top row of the house contains the CCRs.
– How will meeting customer requirements be measured?
– Translate customer’s terms into process or feature terms.
– Identify ways to deliver on customer needs.

3. Interrelationship matrix
– Evaluate relationships between customer needs (whats) and critical customer requirements (hows).
– Determine relative importance of each critical customer requirement.

4. Customer rating of competitors
– Who is the competition?
– How do customers perceive the competition’s ability to meet the requirements?
– What do competitors do that the company’s customers value?

5. Correlation matrix
– Compare CCRs (hows) to identify conflict, influence or no effect on each other.

6. Process targets
– Determine minimum and desired performance specifications for each CCR.

7. Analyze and diagnose
– Evaluate the house of quality process.

The output of the QFD should provide a ranked set of mission critical deliverables that need to be both implemented into the company PMO and measured on a continual basis. These key deliverables should become the company’s your key performance metrics.

DMEDI Step 3: Explore

The Explore phase seeks to discover the most efficient and best way for the PMO to meet or exceed the customer’s needs. While still at a high level, the company can recognize the opportunity for great innovation. The objective is to identify innovative ways to provide what the customer’s need.

Here again, the QFD is used, but in this iteration the tool is used to conduct a functional analysis. The functional analysis dissects each service into specific features or tasks that must be accomplished to provide the service. Once these have been identified, the company has the ground work to begin developing the model for its PMO.

Remember to ensure that all of the functions in the PMO model are measurable. Therefore this is the perfect time to build a system to measure the PMO’s services. This system must measure each project key metrics and aggregate their sums.

DMEDI Step 4: Develop

This step is where the detailed PMO structure is developed. Keep the core PMO deliverables in focus and make sure the team does not omit any of the following:

  • Human resources and staffing plan
    • Who will work the PMO?
    • How many will work in each role?
    • What will they be paid?
  • Facilities plan
    • Where will the PMO be located?
    • What physical resources will be needed?
  • Supplies and materials plan
    • What will the PMO need to operate?
    • What will it cost to set the office up?
    • What will it cost for the PMO to operate?
  • Technology plan
    • What hardware and software will be needed for the PMO?
    • What IT services will be needed?
    • How will the PMO fit into the company’s business continuity/disaster recovery plans?

One key component that should not be overlooked in the technology plan is the implementation of an automated monitoring/tracking tool. This tool should provide the PMO with a single-pane-of-glass view of key metrics for the entire project portfolio.

DMEDI Step 5: Implement or Re-launch

When the PMO model has been developed or improved, it is time to implement a pilot of the new process. Select a reasonably achievable, moderate-risk project and process it through the new model. The measurement tools should evaluate how the pilot project met or missed the service objectives established in the Measure step. Any necessary changes should be made to ensure future projects will meet the defined customer requirements. Once any necessary changes are completed, the company should be ready to formally launch the PMO organization-wide.

Conclusion: DMEDI Is a Logical Course

The Lean Six Sigma methodology will benefit efforts with its implementation and process control discipline. Without this initial investment in the quality of design for the PMO, the company may see the initiative fall apart after its initial launch.

Ultimately a Design for Lean Six Sigma deployment is the most logical course for any organization seeking to develop a strong PMO or resurrect an ailing one. The DMEDI roadmap can guide any company through the development process and help reduce or eliminate unwanted complexity. Proper use will infuse the PMO with customer-oriented services that satisfy the customer’s most important needs.

Top 10 Reasons for Six Sigma Black Belt Training

 

 

Whether you have just begun your Six Sigma journey or have experience with the methodologies, chances are achieving Black Belt certification has crossed your mind. And, rightfully so! Six Sigma Black Belt certification, for many, is one of the highest achievements accomplishable. For most employers, Black Belts are the superior professional, possessing skills to manage most projects. However, you may be on the border about completing a SSBB training. If that case, here are the top ten reasons for you to complete our Six Sigma Black Belt training course.

First – A new, challenging training course.

Above all else, SSBB training is a great opportunity for you to face a new challenge. While you will already have White and Green Belt certification, Black Belt is a whole new level of expertise and knowledge.

Second – New leadership opportunities.

For Six Sigma projects, the highest-ranking professional leads the group. Now, as a SSBB, you will have the ability to do so. Take this opportunity to enhance your leadership skills and work as a project manager.

Third – Improve your communication skills.

As a SSBB now, you will be expected to effectively lead group projects within your organization. To do this, you must have the necessary communication skills. In Black Belt training, you will learn how to effectively communicate with other team members throughout a project’s duration.

Forth – A thorough understanding of DMAIC.

The foundation of Lean and Six Sigma methodology is DMAIC. While you will have exposure to this as a lower level belt, SSBB training will offer you a more in-depth understanding of the steps and how to perfect them.

Fifth – Increase your technical understanding.

Leading your group as a project manager, you will need to understand different types of data programming and analysis software. In our Black Belt training course, we will prepare you for the most common types of programming you will experience in your career.

Sixth – Learn how to become a business leader.

Lower level belts will work on quality management and efficiency improvements. With Black Belt training, you will learn how to connect the business requirements of your organization with the hands-on capabilities of your workforce.

Seventh – Improve your customer relations skills.

Now, as a Black Belt, you are the face of your organization. When problems arise with your products or services, your customers will look to you for solutions. With the right training, you will be prepared to handle all your customers’ needs and requests.

Eighth – Better understand your competition.

No longer are you simply a workhorse for your organization. As a high level Six Sigma professional, you will need to analyze your competitors and find innovative ways to win over market share and value. You will learn this specific skills and more in the fourth week of our program.

Ninth – Learn how to be the link between management and your team.

Senior management depends heavily on Six Sigma Black Belts as they are the natural project managers within their organizations. One of the most valuable skills to learn is how to effectively communicate management’s requirements to the project team. You will learn the necessary skills for this, such as project planning and deliverables and more.

Tenth – Grow your passion for quality improvement.

In our SSBB training course, we do more than just teach you the technical skills you need to succeed in your profession. We help you find and uncover a new passion for quality improvement within your industry. As a Six Sigma professional, you will always strive for innovation and improvements. We are here to help make sure that happens!

Getting Specific with the Pareto Chart

 

The Pareto chart is a great Six Sigma tool based on the Pareto principle named after Vilfredo Pareto, an Italian economist. The Pareto principle can be used to divide just about everything up into an 80/20 ratio.

An example of the 80/20 principle is exemplified in what Vilfredo Pareto observed himself back in 1906 — that 80 percent of the property in Italy was owned by 20 percent of the population.

Another example of this principle would be a non-profit charity receiving 80 percent of their donations from 20 percent of the donors.

 

Pareto Charts in Six Sigma

A super useful tool to use in Six Sigma is a Pareto chart, because these charts visually show you where to apply your efforts. When applying DMAIC, one can usually see exactly where the effort is needed. The Pareto chart would be used when you want to break the ratio determined into more specific, granular information.

Let’s take the non-profit example to show what type of specifics we could gather. So out of the donors that gave the least of amount of donations, where did those donors live? By determining this, perhaps one could increase marketing efforts to that exact population, and generate more donations.

In a company, 80 percent of the important tasks are done by 20 percent of the staff. If a Pareto chart is done, one can pinpoint exactly which tasks are crucial to the smooth running of the company. Not all tasks are created equal — it is the unity of necessary tasks that make the wheels spin at a company, and the lack of doing these tasks correctly would start a free-falling bender headed for disaster.

So the bottom line is when you want to get specific and pinpoint your efforts within an organization, a Pareto chart is the right tool of choice (once you have utilized DMAIC) to pinpoint specific data.

For more information on our Six Sigma training courses or services please click here.