Determining Project and Program ROI

When organizations embark on a continuous improvement program, one of the first steps is to determine how they should measure the success of their projects and program. iSixSigma asked experienced Master Black Belts for their thoughts on the topic.

Q: What metrics should I use to measure the success of my Lean Six Sigma deployment?

A: To ensure your deployment is aimed at what is most important to the business, be sure to use a metric that is focused on how well projects tie into the business strategy. It also is nice to know how much innovation was involved in a project and how well the project solved the problem being tackled. Of course, you should measure the financial benefit the business gains by doing the project in the first place. Because Lean Six Sigma is geared toward reducing variation and waste, metrics around process capabilities are reasonable to include, as is a time-to-execute metric for Lean projects, given that Lean is focused on immediate or near-term results.

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As with any measuring system, you might be tempted to go overboard with metrics. For example, you might craft metrics around how likely someone trained in Lean is to recommend a colleague to take the Lean training – essentially measuring the program’s Net Promoter Score. It all depends on what you want to get from your measurements.

If your company is new to this, measure a lot to start with and narrow it down after determining which metrics provide the best indicators for your organization.

Elizabeth Marks is a certified Master Black Belt at Toshiba America Information Systems.

Q: What is the typical investment a company makes in a Six Sigma project? What about return on investment (ROI)?

A: The investment and return depend completely on the nature of the project being completed, and the maturity and capability of the process being improved.

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Most companies target the low-hanging fruit first. In this case, the investment is mostly in soft costs of personnel time and expense dollars for training and mentoring. These investments become minimal after the organization develops capable resources. If there are experienced Belts on hand, the majority of the project investments are the burdened costs (such as salaries) of the employees participating in the project.

ROI can vary greatly. Small changes in a continuous process (e.g., manufacturing) in a high-volume environment can generate a return in the thousands, in my experience. Of the 200-plus projects I’ve been involved with, the average ROI (in a mature continuous improvement environment) is in the 500 to 800 percent ballpark for transactional process improvement. For capital projects (those that involve acquiring or upgrading equipment or other assets), the typical ROI is closer to 200 to 300 percent, on average.

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Russell D. Ollie Sr. is a Master Black Belt and Project Management Professional, and is a former continuous improvement lead for Toshiba America and Microsoft Corp.

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