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How to claim savings from improvement enabler work

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  • #49984

    Yeliz
    Member

    Hello all,
    Most recent assignments of BB’s in our Lean Six Sigma Group is turning out to be projects of high level scope where we do a very meticulous Define Phase type of work (or a Kaizen) to identify lower level scoped areas to attack. Example: Improve New Product Development Cycle Time was a project assignment, and at the end or a Recognize and Define phase work, this whole “boil the ocean” problem assignment pointed to 7-8 exclusive projects, and the managers of the areas wanted to own/assume/execute the projects beginning to the end …Other cases exist in the form of Lean Kaizen events that look at at a broad level business issue and ends up delivering a TO BE state process and its detailed couple month duration 3W1H plan which relevant organization assumes to follow through all the actions….So, in cases like this where Black Belt is not the one to follow through all the implementation that are identified for “GO DO” kind of improvement activities and hand off a detailed plan of attack back to groups, I am curious as to how other companies look at this from the perspective of what the Six Sigma program should claim as savings…I’d love to hear how other companies might have established maybe a rule of thumb on these kinds of situations like “claim 50-50 of the resultant financial benefits”, or something of that sort? ….When the BB group is as small as ours (only 3 people), the financial metric of the group suffers a lot if 2 out of 3 BB’s get assigned to these kinds of work by the Champions….What is our “fair share” to claim?

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    #171639

    Engine Lady
    Participant

    Excllent question for Stan or Brandon

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    #171646

    Brandon
    Participant

    Nope, not from me. This issue addresses your firm’s total performance assessment approach. Can’t help you. Not in a forum approach at least.

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    #171650

    Outlier, MDSB
    Participant

    The short answer to your question is that your BB’s should be recognized as “change agents.” As such, they should get “credit” for the changes they cause to happen, no matter who actually does the grunt work and no matter what business unit collects the savings.
    One way to make sure your BB’s get some credit for their efforts is to track these multiple projects in an MBF (Management by Fact) document. An MBF is a good way to track progress toward a top level metric that might have many smaller incremental projects contributing. It is usually a one-page dashboard that starts with a problem statement at the top, and shows a graph of the primary metric with the target and the gap to close. You will often see a pareto of key drivers to close the gap of your metric. The lower half of the page lists the individual efforts that usually are aligned to the key drivers identified in the pareto. Each effort lists a brief summary of the project, the leader of the project, the start and end dates and the benefit in the form of the amount of the gap closed on the primary metric. You also capture the financial benefit of that individual project as it relates to the primary metric.
    So using your example: “Improve New Product Development Cycle Time.” You would start with a problem statement like, “Our new product development cycle time is currently 12 weeks. Each week of development time costs the company $1 million in opportunity cost in lost time to market and hard engineering costs. The benchmark for our industry is XYZ Corp. who has an average 4 week development cycle time.” Then you would graph your development cycle time and show the benchmark 4 week line on your graph. The gap between your current performance and the benchmarl is 8 weeks and $8 million.
    Then you might do a pareto chart on the key drivers of long cycle time.
    At the bottom of the page you would list each project and how much of the 8 week gap it will close and the corresponding $$ benefit.
    At the end when all 7-8 projects are complete, your BB has a record of what was done, how much was saved and who contributed. Your BB can keep an eye on the big picture while the individual teams focus on their own little worlds. Everybody wins.
    That’s one of the ways I make sure my BB’s get credit for driving change.

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    #171652

    Marlon Brando
    Participant

    A real practical proposal 

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    #171662

    Yeliz
    Member

    Thank you so much for the insight Outlier MDSB…I’d like to tie the topic to the performance assessment thought too and see what your opinions on that might be if you would not mind. Let me first state that one main way of assessing our Lean Six Sigma Group’s (LSSG)  performance and value-add is the total financial metric of our own ROI that gets reviewed by Exec. Mgmt quarterly : total annualized savings (hart+soft) of the group minus the total annualized group budget+expenses+solution costs.
    So, do you mean, in that specific new products example, that the total savings in closing the gap at the end of all projects’ closure is going to be ringing the cash register for that metric of the LSSG? Even though the BB walked away into another project where the organization is working on making the small projects crank through and happen till the end of the year?
    Getting a proper credit by recognizing that we drove the change is an absolute must have, I cannot agree more with you on that. I am trying to find if there’s a clean balance of claiming portion of results between the “change agent” who ignited the whole thing in the right path and the “do-ers” who are actually doing the project work where it may also include them devising process changes/solutions themselves (so they do feel ownership in their fair own rights too)….
    The other path I am speculating on is whether we track the “enabler work” total dollars seperate from the total ROI financial metric: The ROI metric is saying “if we did not exist, you would not have had these savings”. It just does not feel fair (or acceptable to other groups in the company) to say the same thing for those other types of projects…That’s why I am not adding those total dollars into our ROI metric tables yet, and rather than that looking for any creative solutions to kind of “split the financial benefits”, hoping somebody else in Lean six sigma world might have gone through simliar judgement….
    So,let me try to ask it more clearly: what can go into my group’s financial ROI metric for those types of i”enabler to improvement projects” kind of  work ?

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    #171666

    Outlier, MDSB
    Participant

    Yeliz,
    You asked, “So, do you mean, in that specific new products example, that the total savings in closing the gap at the end of all projects’ closure is going to be ringing the cash register for that metric of the LSSG? Even though the BB walked away into another project where the organization is working on making the small projects crank through and happen till the end of the year?”
    ABSOLUTELY! If your team is really doing their job right, they are thinking strategically and thinking beyond just a single project. They should be able to paint a clear picture of what’s broken, align resources to fix what’s broken, and under the best case scenario, walk away and have confidence that it will be fixed. What I proposed usually requires periodic follow-up with the teams executing the changes, but it isn’t a must if you have trained, hard-working people. And since your team started the ball rolling, they should get some “top of the house” credit (or to be fair, some blame) for the results. 
    I recognize that most companies track their productivity or ROI savings for the projects their BB perform. The issue becomes one of “double-counting” the benefit if the BB get’s full credit for the change while the business unit also records a save. Your bean counters should be able to figure out a way to count the real financial savings one time while acknowledging the productivity of your BB team to upper management. Management needs to be fully aware of the changes that occur simply because your BB’s started the process. Maybe you can enlist the help of a finance partner to develop a second “enabler” metric that stays off the balance sheet but shows the hidden benefit of your team in addition to your traditional ROI calculation. That way you keep the number clean. 

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    #171748

    Yeliz
    Member

    Thank you very much Outlier MDSB.
    I can seee what you recommend most definitely working if there’s a corporate-wide Six Sigma acceptance and aBusiness Excellence group. Our program is deployed only in one group of the company (Ops and NPI, does not have all other Corporate Groups and Design Engineering), and it’s a super-small scale of early-hase deployment. …And so even though I wholeheartedly believe all that you say, at the end of the day, we will come out to be too aggressively claiming success selfishly all ourselves if we cannot figure out a way to share the credit for the work….It works quite allright when it’s about “recognition”, about who did what part of the work and giving the “recognition” credit in business meetings, newsletters etc, but not for financials, not in or case unfortunately….So, I am really hoping to get an answer that’s in between “claim it all” and “cannot claim nothing” …Is there a road in the middle? What do you think Outlier MDSP? And  my question is open to any other folks out there, pls enlighten me if any others came up with a creative way of splitting the financial benefits of the projects with other groups if the Belt did the Kaizen, or the Define phase work of a major project beginning, and the organization assumed the rest of the go-do” type of project execution/depliyment which was pointed by the Belt’s work….I really need this kind of feedback to turn our tiny little Six Sigma groups ROI from negative to positive, so any feedback, be it real examples or creative ideas, is going to be so very greatly appreciated !!!
    Thanks again!

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    #171755

    Engine Lady real
    Participant

    The above post is not from the real Engine Lady.  I am she and I didn’t post this.
     

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    #172096

    Eastern Voice
    Participant

    Why not allow the Blackbelt to get a percentage of the overall savings?  Granted he/she should not be able to get credit for the full savings obtained, however, they should be compensated for their time and efforts for their detailed scoping efforts.  This would be similiar to the method some contractors get paid.  Thoughts?

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    #172100

    I’Anson
    Participant

    this would create the problem that you have to cut this certain percentage from the savings of the following projects which may not fully calculated yet or which will lead to confusing calculations.
    i’m struggeling with this problem as well, usually we call those ‘enabler’ projects ‘umbrella projects’ and so we can avoid the savings discussion. from a financial point of view, this is not really a perfect solution and it needs a lot of commitment of the top management, especially when it comes to implement the recommended improvements. it is the same for projects which aim to build up reliable measurement and reporting systems. you won’t get any hard dollar saving from those projects but they are mandatory for further improvements.

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