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Financial Validation of Six Sigma Projects

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  • #46093

    mpousland
    Participant

    My company is currently in the process of deploying Lean Six Sigma. With our deployment, we set an initial definition for financial validation. We are currently revisiting the original definition to validate if it makes sense moving forward. We are looking to get benchmark information from other companies as to how Six Sigma savings are being measured and rolled up.
    Here are a few questions we are trying to get input on… in answering the questions, please state the name of your company.
    1. How long is your financial realization period after project closure? What is the frequency of validation during the realization period?
    2. Do you have a realization period for BOTH black belt and green belt projects?
    3. Do you have a savings threshold whereby you have a realization period for only projects exceeding a certain savings threshold?
    4. Are your Green Belt savings rolled up along with Black Belt savings into total program savings?
    Thank you for your help,
    Mike Pousland, BB

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    #151881

    McD
    Participant

    A year is a pretty good realization period.  A quarterly or monthly session between the BB and the process owner should generally keep things on track, then a serious review of the financials by the controller’s department at the end of the realization period.
    I think most places aren’t likely to keep quite a close a watch on Green Belt projects.  From what I’ve seen, there is an anticipated savings before something becomes a Black Belt project, but then is everyone agrees to reduced savings, it is still scrutinized the same as any other BB project.
    The one exception is that projects that are meaningful (maybe a million) are sometimes audited by the corporate (external) auditor.  This adds credibility to the effort.
    –McD
     

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    #152317

    O’Connell
    Participant

    Mike,
    We use a 2 year period for realization, which includes the initialization period to get the improvements up and running. After 2 years the improvements should be instilled as part of the normal work process. We also look at 2 years as some behaviors take longer to modiy.
    All the Six Sigma efforts regardless of belt level (no thresholds are used) are evaluted in this way so we make sure we are getting the savings we anticipated and incorporating the improvements into our processes. So all savings are combined (but we can break it out by belt level) and validated into one program number. The only exception being some of the Go-do or Lean improvements which are evaluated on a case by case basis.
    Hope this helps.
    Brian
     

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