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This chapter is from the book

Selecting the Right Projects

As noted earlier, the project selection process is started in the Executive workshop where areas for improvement are identified. Initial projects are selected in the Champion workshop based on the improvement areas identified by the executives, project selection criteria, and the project chartering process. This section discusses the characteristics of a good project and how to select one (see Snee [2001], Snee and Rodebaugh [2002]). Project selection is one of the key success factors for the launch phase.

What is a Six Sigma Project?

Six Sigma is about solving business problems by improving processes. Typical problems fall into two major categories: solution known, and solution unknown. Six Sigma is aimed at solving the problem in which the solution is not known.

Such problems include decreasing errors in invoices, increasing the yield of a chemical process, decreasing the defect rate of an assembled project, and decreasing the days outstanding in accounts receivables. In 1989, J.M. Juran pointed out that "a project is a problem scheduled for solution." We define a Six Sigma project as a problem scheduled for solution that uses a set of metrics to set project goals and monitor progress.

The second category of problems frequently encountered is that in which the solution is known at the outset. Implementing a new computer network to conform to corporate guidelines, installing a new piece of equipment in manufacturing, or building a new plant are examples of known-solution projects. Most capital projects also fall into this category.

In each of these situations it is known what has to be done. The project is completed by assigning a project manager to the project, providing the needed resources, and using good project management techniques. Six Sigma techniques are usually not needed here, although project management can benefit from the process thinking, measurement, and monitoring techniques used by Six Sigma.

An organization's improvement plan typically includes projects of both types: solution known and solution unknown. Both types of projects are important and are needed to improve the performance of an organization. Solution-unknown projects are led by Black Belts or Green Belts. Solution-known projects are lead by project managers.

It is also essential that you carefully identify and document the process that contains the problem. The process provides the focus and context for the Six Sigma improvement work. Process identification is usually easy in manufacturing where you can simply follow the pipes, but it is much less obvious in finance or marketing. A Black Belt or Green Belt who utilizes the Six Sigma methodology then completes the project. Of course, there is no guarantee that every problem will be successfully solved, but with proper project and people selection we can expect a very high (80 to 90%) success rate.

To use Six Sigma, you also need one or more measurements that quantify the magnitude of the problem and can be used to set project goals and monitor progress. These measurements are usually called critical to quality (CTQ) measures. Six Sigma takes a disciplined, rigorous approach to problem identification, diagnosis, analysis, and solution. It is well suited for problems that do not have a known solution.

Selecting Good Six Sigma Projects

Now we turn our attention to selecting a Six Sigma project. The characteristics of a good Six Sigma project are—

  • Clearly connected to business priorities

    • Linked to strategic and annual operating plans

  • Problem is of major importance to the organization

    • Major improvement in process performance (e.g. >50%)

    • Major financial improvement (e.g. >$250K/yr)

  • Reasonable scope—doable in 4-6 months

    • Support for project often decreases after 6 months

    • Project scope too large is a common problem

  • Clear quantitative measures of success

    • Baseline, goals, and entitlement well-defined

  • Importance is clear to the organization

    • People will support a project that they understand and see as important

  • Project has the support and approval of management

    • Needed to get resources, remove barriers, and sustain over time

Projects should be clearly linked to business priorities, as reflected by the strategic and annual operating plans. It is also important to include projects addressing critical problems that must be solved in order for the organization to be successful in the next year.

A project should represent a breakthrough in terms of major improvements in both process performance (e.g., greater than 50%) and significant bottom-line results (e.g., greater than $250,000). The determination of project impact is the responsibility of the financial organization working in cooperation with the Black Belt and Champion.

This approach to measuring project impact sets Six Sigma apart from most other improvement approaches, because the financial impact is identified for each Six Sigma project by the finance department. Finance should know what the project is worth to the bottom line before work begins. This makes it an active participant in the improvement of the organization. This will be a new role for Finance in many organizations. Of course, Finance and other functions will still have their own projects, in order to improve their own processes.

The projects should be doable in four to six months. As pointed out by Bill Gates (1999), it is critical that projects be completed in this time frame in order to keep the organization and resources focused on the project. Organizations typically lose interest in projects that run longer than six months. Projects requiring more than six months of effort can usually be divided into subprojects of shorter duration, with the projects being conducted sequentially or in parallel. For this approach to work there needs to be strong project management to coordinate the set of projects.

There should also be clear quantitative measures of success, the importance of the project to the organization should be clear, and the project should have the full support and approval of management. These three characteristics are needed so that the organization sees the importance of the project, provides the needed support and resources, and removes barriers to the success of the project. People are more likely to support a project that they can see is clearly important to the organization.

Of course, these are generic attributes of a good project. Organizations still need to develop their own specific project selection criteria. Compare the generic attributes on page 78 to the more specific project selection criteria from one company listed on page 71.

The criteria on page 71 defined areas that were important to improve for this company, and projects based on these criteria did, in turn, produce significant bottom-line results. Note also that the areas to improve included customer satisfaction measurements. Project selection criteria communicate what types of improvements are important to the organization.

Project ideas can come from any source such as process assessments, customer and employee surveys and suggestions, benchmarking studies, extensions of existing projects, and so on. Many organizations struggle with how to find high-impact projects. Some sources that we recommend are:

  • Rework and scrapping activities

  • Overtime, warranty, and other obvious sources of waste

  • Products with major backlogs—need for more capacity

  • High volume products (small improvements can have huge impact)

  • Problems needing solutions to meet annual operating plan

  • Major problems with financial impact (customer or environmental crises)

  • Large budget items, receivables, payables, treasury, taxes (follow the money)

Collectively these ideas are focused on major sources of waste, major problems (customer and environmental), major opportunities (capacity limitations in sold-out markets), and places where the money is going. Budget statements and cost of quality studies are also good sources for identifying opportunities (Conway [1992, 1994]).

Experience has also identified some characteristics of projects to avoid, or at least to further refine. Briefly stated, you should avoid, or redefine, projects that fall into any of these classifications:

  • Fuzzy objectives

  • Poor metrics

  • No tie to financials

  • Too broad a scope

  • No connection to strategic or annual plans

  • Solution already identified

  • Too many objectives

For example, for the project to be successful the objectives need to be very clear. Such clarity is usually reflected in the process performance metrics and goals associated with the project. The process metrics should be clearly defined, and have baseline and entitlement values identified. In the case of non-manufacturing projects, the most useful process performance metrics are typically accuracy, cycle time, and cost. Cost is usually directly related to accuracy and cycle time metrics.

The project must be tied to the bottom line in some way. The project scope should be for improvements that are attainable in the four to six month time frame. An unrealistic scope (often referred to as a "boiling the ocean" project) is probably the most commonly encountered cause of project failure. Projects that are not connected to business priorities or that have too many objectives also need further refinement. Projects with an "identified solution" should be handled by a project manager instead of Six Sigma, or as mentioned earlier, be redefined to omit the specified solution in favor of allowing the Six Sigma methodology to identify the best solution.

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