iSixSigma

Compensation for business process improvement

Six Sigma – iSixSigma Forums Old Forums General Compensation for business process improvement

Viewing 15 posts - 1 through 15 (of 15 total)
  • Author
    Posts
  • #40134

    RJRJ
    Member

    I have been involved in business process improvement at a large financial services company in the midwest.  I am not a manager but have directly led projects resulting in significant cost savings.  What is the typical compensation structure for outside consultants who come into a company and save money?  Is it a percentage of the save? If so how much?  How do they measure it?
     
    Thanks,

    0
    #123628

    BB Steve
    Participant

    Comp for an outside consultant is normally around 10% of one years annualized savings less project costs (new HW/SW or Equip) and , project team members costs, (Salary, travel). 
    If you are an independent consultant you would get the balance, if you are working for a concultancy firm, that would be split with the firm on a 50/50 basis.
    The actual savings would need to be validated in the realization phase and the closeout which would occur around six months after the projects final phase. So actual payment is delayed.

    0
    #123630

    Mikel
    Member

    What nonsense – did you come up with this answer in your dreams?
    No rational organization is going to pay 10% of savings.
    Daily rates of US$600 – US$5000 are the usual compensation schemes.
    There are a few north of US$5000.

    0
    #123642

    BB Steve
    Participant

    Stan – What I quoted was a fee to a consultancy firm.  The data comes from my balance sheet and 1040.

    Egotism is nature’s compensation for mediocrity.
    L. A. Safian

    0
    #123668

    Mikel
    Member

    Sure – I believe you (wink wink)

    0
    #124265

    BobBB
    Participant

    Trying to tie compensentation to savings can result in disaster.
    You need a very good way to define specific measurement criteria.  Often companies do not have good baseline measurements of the current cost of doing business.  After the change, they have no way to truly measure results.
    This is a great way to sour a good relationship and in some cases incur lots of legal fees.

    0
    #124266

    Ropp
    Participant

    As a consultant, I can tell you that daily rates of $1000 – $2000 and hourly rates of $ 100 – $200 are typical. Individual rates will vary depending on the reputation, success rate, and credentials of the consultant(s).

    0
    #124270

    Geckho
    Participant

    I usually try to dissuade people from tying realized savings to compensation, whether it’s an outside consultant or an internal employee.  I’ve never seen it end well.

    0
    #124277

    TriBB
    Member

    It’s a real problem if the management do not walk the talk when the Belters has deliver their promise to complete their project and they donot receive the reward. Becareful when make promises.

    0
    #124278

    Heebeegeebee BB
    Participant

    Dave,
    Rates are not in question…the bonus scheme is.
    A good BB/MBB can garner in the neighborhodd of $#K/Day plus expenses, but a 10% bonus?   I’m with Stan and call Bull-ish.
    10% is not plausible, unless you happen to sucker a really stupid Leadership team.

    0
    #124429

    Mike Carnell
    Participant

    Dave,
    I do not know a decent consulting firm (in SS, LSS) that goes for $1000 – $2000 per day. The minimum is around $2500 per day and runs up around $4000 per day.
    If a person is a price shopper there are people available for less. it has actually become a great source of revenue. Fixing deployments is almost more enjoyable than the initial deployment because the Leadership Team tends to be more receptive.
    Just my opinion.
    Good luck.

    0
    #124430

    Mike Carnell
    Participant

    Heebeegeebee,
    10%! I just want one of those. We keep offering.
    In the words of Ron White (Blue Collar Commedy): “You will never see my a*s around here again. I will be in Palm Springs with all my new friends.” Well maybe not Palm Springs.
    Regards

    0
    #124431

    Mike Carnell
    Participant

    Geckho,
    If a company employs accountants and they can’t figure a way to get to a savings number then the first improvement project should be an easy one to select.
    BTW – the most common form of reward for Belts and their team that we have seen is a % of savings.
    Just my opinion.
    Good luck

    0
    #124549

    Geckho
    Participant

    In my experience, the problem isn’t getting the number, it’s the “complexities” associated with the principle.
    Example:  My project is really complex but the hard savings is limited (say, a low DPMO defect that the customer is particularly hacked off about).  My counterpart’s project is a pretty simple, but has huge cost savings associated with it.  He gets a lot, I get a little, even though I worked a lot harder.  I get mad. I quit my job, even though I was good at it.  (This isn’t a true story, BTW).
    When there is something highly coveted like how much money I get to take home involved, bad things happen.  People start competing instead of cooperating.  They fight over projects.  They only work hard on projects that have big payoffs, etc.
    In one of my former lives, we were given a bonus (% of salary) for being involved in Six Sigma.  After that, performance was monitored on a case-by-case basis by the Champion.  BB’s who didn’t perform got the boot (at the very least sent back to their “old job”).
    Not saying this is the end-all solution…or even close to being the best one.  I just see a lot of potential problems with the % of savings option.
    Good discussion, though.

    0
    #124550

    Geckho
    Participant

    Incidently, I’ve often thought that a group % savings wouldn’t be a bad plan.  The Six Sigma group has a given savings task, and they receive a percentage of the excess, which is divided up evenly between them (maybe even them and Green Belts, team members, etc.)  Also, the bonus could be tied to some metrics other than “hard savings”, such as customer complaints, etc., to prevent the group from focusing only on the “big money winners”.
    By basing everything on group performance, you become free to put your best Black Belts on “barrel-scrapers” without risk of discouraging them from helping your less experienced/knowledgable folks.
    Just a theory…

    0
Viewing 15 posts - 1 through 15 (of 15 total)

The forum ‘General’ is closed to new topics and replies.