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Confirming Financial Results

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  • #57888

    Jim Johnson
    Participant

    I work in a service environment and presently serve as Black Belt candidate. Our organization uses Financial Analysts in the specific areas that are affected by the project. These analysts receive a specialized four-hour class on the 6-Sigma Project Income statement that we use in our tracking system as well as an overview of the DMAIC process.In addition, these FAs are also trained as Green Belts because of their position in the organization. I believe that it is very important for the FAs to have some specialized training in 6-Sigma.Once trained, it is also important that a good open relationship exist between the FA and the BB/GB. This only comes about after a couple of projects and will not happen automatically…it requires work on the part of both people.I hope that this helps.Jim Johnson

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    #24161

    Tim
    Member

    It is often agreed that all Six Sigma financial results must be reviewed and confirmed by a financial person.
    However, what methods do companies use for this?
    Can ‘any’ finance person audit any Six Sigma project?
    One proposal I’ve heard is to require a finance person aligned to the same business unit/division/department audit the results of the Projects in their own unit/division/department.
    Possibly still independant from the SS team, but not independant from the business unit.
    The rationale being that future budgets for that business unit would be affected by the reported results from the SS projects so it would be in their best interest to report accurate results.
    I see ‘some’ potential hurdles in this approach bu they may not be significant.  eg. will business units under-state savings to assist their budgets, or accurately state savings to assist SS initative?
    Would welcome a discussion on how other companies perform the financial audit.

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    #57889

    Whitehurst
    Participant

    I think the best way is to tie both the financial baseline and the final savings to the same finance data that drives the P&L. This ensures no opportunity to inflate or misstate actual savings, and reinforces the importance of bottom line savings. To achieve this, we have finance people aligned with our Black Belt teams, most importantly in the DEFINE phase of the project. However, with standardization in the methods of defining the baseline, the tie to Finance for later projects may be less important.

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    #57890

    Andreas Wandelt
    Participant

    At Viterra Energy Services (internationally active service company, ca. 3.000 employees, 50 or so locations) we have one central BQA (Business Quality Analyst), who reports to the head of central controlling, and spends roughly 50% of her time verifying Six Sigma cost and benefit numbers. She is educated as a Green Belt, and received some additional briefings on the topic.
    We have a set of “Net Benefit Guidelines” characterizing what is and what isn’t Net benefit. These were fixed by the Quality Council (i.e. board, Quality Leader) at the beginning, and they are the base for any discussion. To change the guidelines, it needs the QC to approve.
    We have a clearly defined process for making sure to create solid numbers, which every BB has to follow for every project he/his part of the organization want to claim NB for:
    1. At the beginning of the project (Define), if there is a Net benefit to be expected, the BB has to give the BQA an estimate, together with the reasons why this is so, and how the NB is connected to the project. The BQA will look at the logic, and either accept the effects or some of them, or partially, or not. If she needs more in-depth info that she has, she confers with the BB, local controlling, or the responsible MBB, but ultimately she decides. If she says no, the BB still has the opportunity to resubmit and, through better measurements or whatever, convince her to accept.
    2. In Analyse, the BB will make the first calculation of the NB (more accurately than at project start), and should talk this over with the BQA if there are significant changes. But he does not have to at this point.
    3. At the end of the project, a BB who wants to claim NB has to give the BQA a detailed calculation, and a monthly NB plan for the tracking period. She will again review, maybe discuss, and decide.
    4. During the tracking period, the monthly NB numbers are reported to her, and she checks for plausibility etc., and also occasionally does in-depth NB reviews for individual parts of the business.
    So to sum it up: All Six Sigma numbers go through the BQA, and all the leverage the BBs/MBBs have is to convince her that any effect they measure is (a) real and (b) connected to the project. Having this function centrally secures that the standards are the same throughout the whole company, and also that the BQA very quickly gains a good overview and solid experience what happens financially in Six Sigma, what BBs try, etc. . I do not see that this could be done decentrally for an organization of our size and structure. BQA knowledge would not reach the critical mass and the diversity necessary to judge the projects.
    At our company, this is a very constructive process. The BBs/regional businesses want to maximise NB, the BQAs interest is that every Euro is a real Euro, and neither funny money involved nor any effects not tied to the projects. The guidelines are very clear. In case the BB feels treated unfairly, there is the possibility to discuss this in the Quality Council, but this has not been necessary in the 90 projects we have completed so far.
    Best Regards
    Andreas WandeltQuality LeaderViterra Energy [email protected]

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