The quality of project selection is a critical driver of the success of your initiative, and therefore requires the attention of the Executive Team and the Steering Committee.
In the first few months, identifying projects is relatively easy and can be accomplished in short brainstorming sessions with the senior team. Rath & Strong helps firms uncover the wealth of information in existing data and reports to accomplish a more in-depth scan of projects and priorities for the pipeline.
In the long run, a sound Process Management System is necessary to identify the projects that really matter. The question is, when does this system need to be in place? We find that companies with revenues of more than $500 million and more than one location need at least six months to establish a useful Process Management System that can guide project selection.
Institutionalizing Data-Driven Project Selection
Often, issues have plagued the organization for many years, and will be readily apparent when the data is compiled. Most firms use their business strategy and other operating data to establish a sense of the issues. Internal and external studies and benchmark data can further help to determine where improvements are needed.
Firms sometimes use a Cost of Poor Quality assessment to define the opportunity or use customer feedback to get a sense of customer priorities:
- GE Mortgage, a unit of GE Capital, conducted a customer survey that clearly demonstrated that winning market share would require substantial improvements in transactional quality.
- Siemens Power Generation used an assessment of nonconformance cost to establish the case for change.
The existing data often provides a clear sense for the size of the opportunity. For example, in the case of Siemens PG, Randy Zwirn, President and CEO, said in his interview in Rath & Strong’s Six Sigma Leadership Handbook, “Six Sigma is our most important lever… Because if you look at the nonconformance number, the math is pretty easy: 8% on $10 billion is $800 million.”
Why Process Management?
An ad-hoc approach to project identification and selection is not sufficient for providing the number of significant, well-defined projects needed to sustain a large-scale deployment. Process Management can facilitate project selection, since it provides a comprehensive view of an entire business process and allows the pinpointing of those steps in the process that require improvements. In addition, a Process Management System includes a measurement framework that can substantially reduce the time required in the early stages of business process improvement. Using a Process Management approach, Process Owners are responsible for establishing process goals, monitoring process performance relative to business and customer goals, and identifying projects that significantly enhance the performance of the entire business process.
Rath & Strong advocates a holistic approach to Project Selection that includes strengthening the Steering Committee’s strategy for selecting high-impact projects, integrating business dashboards, and implementing a Process Management plan.
“A Steering Committee is vitally important. For us, getting the Steering Committee to focus on developing the business dashboard and then linking and deploying process dashboards throughout the organization provided us great leverage to drive improvement projects. Without this, project selection would be a much less effective and more arbitrary process. Now that our dashboards are in place and being used, we as a Steering Committee are starting to become much more focused on reviewing projects. Doing that at this level provides a spotlight so the organization can see how important this is, and also allows us to more effectively learn and translate process improvements across the organization. We will maintain the Steering Committee structure.”
Tim Hannemann, President and Chief Executive Officer, TRW Space & Electronics
Rath & Strong’s Six Sigma Leadership Handbook