How to tackle your business’ problem areas: A case study

Join us as we take a look at Environment Canada – the Canadian government’s department responsible for the nation’s environment. Whilst ten years have passed since the organization took the decision to adopt PRINCE2, this case study is still highly relevant to businesses today. The problem areas they were tackling are the same challenges many of us are seeking to overcome right now – projects which overrun on cost and time, insufficient focus, lack of engagement internally, inconsistencies in project approaches.

Let’s take a look at how they did it:

Some background

A public sector organisation, Environment Canada is the government department responsible for all things concerning the environment in Canada – from protection of natural resources and preservation, through to weather change and forecasting. They handle a budget of over $500 million dollars and have more than 6,000 members of staff. As you can imagine, controlling policies and programs of this scale, and this broad in spectrum is no mean feat.

The problem areas

The problem areas Environment Canada faced are struggles many of us can relate to as we strive for continuous improvement.

Projects which overrun on cost and time

A battle every project professional faces is bringing in their projects on time and within budget. The unfortunate reality is that as few as 38 percent achieve this. For Environment Canada, as a public sector organisation, they have the added challenge of using public funds judiciously. It is essential for them that they spent Canadian taxpayers' money wisely.

Insufficient focus

It’s all too easy to lack focus, whether this is a problem that occurs as early as during project planning, mid project due to scope creep, or towards the end of a project when teams become disengaged. For a large organisation like Environment Canada, it is not uncommon for project professionals to manage a suite of small projects, whereby sufficient focus on everything from project requirements to resource management is vital.

Lack of engagement internally

Likewise, whether it’s issues with onboarding from the get-go, or dwindling focus mid-project, lack of internal engagement can spell big problems for many projects. This can stem from lack of defined roles and responsibilities, or an absence of clarity which can see professional’s engagement during the project lifecycle fade. Pair that with unnecessary levels of coordination and governance, and you have a recipe for disengagement-disaster! Management must overcome this by leading by example, working to clarify at every stage, and minimising the ‘noise’ of a project which can throw project staff off-course.

Inconsistencies in project approaches

Unless the project approach is impeccably documented, it is at risk of being left open to interpretation. And even when the approach is thoroughly written up, unless it is well communicated, it can often go overlooked. This was very much the case for Environment Canada who did not have a uniform methodology for managing projects. Instead, individuals within IT exercised numerous different approaches to project management.

A study conducted by Environment Canada’s CIO office identified all the above problem areas that resulted in adverse impacts. The running theme for each was a lack of focus in approach. As an organisation they had no common or consistent method for managing large projects in all aspects of its operations.

Finding a solution in PRINCE2

Environment Canada found their solution in PRINCE2 implementation and training. Their CIO Chuck Shawcross had previously trained in PRINCE2 (Project in a Controlled Environment) whilst working with NATO, so he was well aware of the great benefits the training offered.

Mr Shawcross knew that PRINCE2 has been used successfully by both private sector organizations and in the public sector to manage projects within allotted budgets and time frames. He recognised that rolling out PRINCE2 training at Environment Canada would give them a much-needed consistent methodology. As a practitioner himself, Chuck Shawcross championed PRINCE2 within the organisation.

Leading by example paid off, and the project managers and developers within Chuck’s team were enthusiastic and ready to embrace PRINCE2 training. Adopting the practice was made easy and accessible for the Environment Canada staff as the training was available to both the English and French speakers that comprised the team, allowing them to become proficient smoothly.

“Compared with some other project management methodologies, PRINCE2 is more prescriptive in its defined roles and responsibilities. We believe that this will help our people perform better in their project roles and make our projects more successful.”

- Marc Laroche, Director at the Project Delivery Office, Environment Canada

Now armed with clear and consistent processes, Environment Canada benefits from project professionals who speak a shared language, allowing them to transition readily from project to project. Their variety of approaches has been streamlined into a single common approach. Environment Canada has turned theory into practice, in turn improving project management effectiveness, employee engagement, and the quality of deliverables. Roles and responsibilities have become well-defined and focus has been restored.

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Source: prince2.com

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Six Sigma for Software – A Role Based System

Because the application of the Six Sigma methodology is relatively new to Software and IT, many of the readers of this web site may be unclear as to the methods of deploying Six Sigma into an organization successfully. From participation in the discussions section at iSixSigma Software, it is clear that some confusion exists about the effective use and positioning of Six Sigma in a Software organization or function. This article is intended to help the reader better understand the early attributes of how Six Sigma is typically and successfully deployed inside a Software organization. It will be part of a continuing series exploring concepts and options of Six Sigma deployment designs and best practices in Software Organizations.

The Investigation and Commitment Phase

In many cases interest in Six Sigma starts as a minor point of curiosity. A few individuals either read an article or attend a conference and become interested in the significance of the results or the importance of the Company discussing those results.

Success in Six Sigma is almost always expressed in financial terms. Because of the recent economic conditions in the software industry, any significant cost saving metric is almost certain to cause an immediate and “eye-catching” phenomenon amongst most managers and executives. Frustrated by the lack of progress and efficiency, despite significant spending on tools, training and processes, management is always on the hunt for a new fix or an answer to their concerns. This in itself is part of the problem. What is needed, and what Six Sigma brings, is a systematic approach to prevention not another isolated ad-hoc fix.

Software is still lagging in terms of efficiency, quality, cost and customer satisfaction. However, uneducated decisions by these very managers may have been the cause the problem in software to begin with. Another uneducated decision about how to implement Six Sigma will only compound the problem. In response to this we need to be diligent in how we educate interested managers and executives relative to the truths and myths of Six Sigma.

As many of the readers now know Six Sigma is NOT a quick fix, a single tool, purely statistical or a new fad. It has been around for 15 years and has evolved as an integrated part of a practicing companies management system. It does not replace other initiatives or technology. We do not apply Six Sigma to everything. It is however a powerful methodology to bring a rational, common sense approach to improving cost, efficiency, quality and cycle time, based on analyzing and improving the processes that produce the work product. To maximize the long-term impact of a Six Sigma deployment on an organizations performance, the decision makers must learn early and often that their role in Six Sigma implementation must be active as opposed to passive. They are the key to selecting the resources that will lead Six Sigma projects and must drive the process of aligning and prioritizing when, where and how Six Sigma projects will be implemented.

For these reasons, successful Six Sigma deployment plans usually start with a series of Executive Sessions to orient the Executive team and plan the deployment. This is extremely important in Software because there are many traditional practices in software project management, which compromise the proper investment in up-front planning without considering downstream consequences. This is not done intentionally. It is simply the state of an industry trying to speed up progress. Sometimes we need to slow down to speed up. One example of this is software project estimation and resource loading. This problem is usually characterized by the lack of a process to understand accepted resource loading models for varying sizes of software projects (which are based on widely available and accurate data). This generally leads to poor estimation and improper resource loading creating downstream software bugs and the added (and unbudgeted) costs to fix them. Through the combination of specific estimating models and Six Sigma statistical tools we are able to make better decisions about resource loading, improve the accuracy of estimations, reduce overall cycle time and reduce lifecycle cost. (There have been several good articles and discussions on this web site that speak to the details of this topic.) The point of all this is that these are all management issues. Until management understands and acknowledges these issues it is very unlikely they will be addressed. Six Sigma finally provides a proven roadmap and methodology to drive a change in this system. And a key to that system is the specific roles, responsibilities and accountabilities of the Executives, the Management Team and the individual contributors.

Six Sigma – A Role Based System

Six Sigma is many things to many people. But one of the key attributes that help to make it successful in today’s stretched organizations is its role-based nature. In Six Sigma we have defined clear roles for various parts and layers of the organization. These roles have provocative names including Executive Champion, Deployment Champion, Champion, Black Belt, Green Belt, Yellow Belt and so on. These are more than fancy names to get attention. They are specific roles for the various layers of the organization with defined responsibilities, time allocations and accountability. Without the accountability and full engagement of each person, the system will not function as intended. This is not unique to Six Sigma. It is true of any major organizational initiative. Therefore, organizations that have historically had successful deployments of other large initiatives may be able to apply lessons learned to the implementation of Six Sigma. These characteristics would include discipline around items such as Communications, Project Metrics, Resource Allocation, Budgeting, Project Review, Reward and Recognition.

Figure 1: Six Sigma Organizational Layers

Champion Role

Six Sigma organizational roles related to typical organizational layers are depicted in figure 1 above. At the top of the organizational pyramid are the Senior Executives and / or top managers. They usually assume a champion role of some kind. Generally champions do not spend additional incremental time on Six Sigma (other than some up front training and planning). They instead, learn how to reallocate current time from reactive problem solving to aligning critical business issues to metrics and then achieving permanent solutions to those issues by assigning and supporting the right resource (Black Belts/Green Belts), equipped with the right tools (Six Sigma Methodology) and giving them the time and support to accomplish that objective. While this may sound like common sense, research data indicates that most Managers spend between 50% and 70% of their time reacting to problems. So much so that, for many, this is simply viewed as the job at hand. In fact Managers in “best in class” organizations spend more time planning, prioritizing, aligning resources and defining problems than their counterparts in highly reactive organizations.

In a previous iSixSigma article Six Sigma…More Than a New Tool we discussed the need for a more systematic approach to improvement in Software as opposed to the current ad-hoc approaches and “programs of the month” which have not yielded the advertised results. The deployment of Six Sigma is very much a “back to basics” approach. And, it starts with Management. Without an active management role, with consequences attached, long-term behavior will never change. In practical terms this means that Six Sigma Champions must initiate a process to keep the Six Sigma system filled with projects and people. It is the Champions role to define, prioritize and scope Six Sigma projects and determine what resources will be assigned to them. It is also their role to keep those project clusters aligned with critical business issues. As the system ramps up, the Champion must maintain an ongoing role to review project status, results and issues as well as removing barriers to problem solution implementation. If this is done properly and pervasively it has been demonstrated to break the chain of firefighting behavior and replace it with data based, prioritized and preventative culture.

The Black Belt Role

The second Layer of a Six Sigma deployment usually involves middle management and the organizations professionals. Examples of job titles considered for Black Belt Positions in a software environment include (but are not limited to) Software Engineer, Product/Process Improvement Specialist, Project / Program Managers and Software Quality Specialists/Engineers. Because Black Belts are a full time resource an organization must carefully consider and have a system for, choosing, compensating and creating a succession plan for Black Belts. These should be considered prestigious assignments reserved for an organization’s fast track high potential employees. As a rule of thumb, if a person is “available” they are probably not the right person for the job. Why, because this position is going to be responsible for solving the organizations most important and challenging problems. The people you want for this job are probably some of the busiest and most important people in your organization. But, because they lack tools, priorities, and time they are spending most of their time firefighting. This creates a high level of frustration and lack of a sense of accomplishment.

This high-pressure environment contributes to another industry issue, lack of employee loyalty and high employee turnover rates. The decision to commit a person to a Black Belt role on a full time basis is probably the most difficult role commitment of all in adopting Six Sigma. But at some point, if an organization wants to break the chain of reactive behavior, disappointing results and poor quality (leading to excessive costs) it must do something dramatic. That is why, to many, Six Sigma is known as the “Breakthrough Methodology”. It facilitates a breakthrough in the management system of our people, processes and results. These individuals will be assigned high priority projects to complete during their training. Completion of these projects generally yield a cost savings and/or avoidance between US$100, 000 – US$1,000,000. Typical Black Belts will complete between four (4) and six (6) Six Sigma projects per year after completion of their training. It is typically a 2-year assignment at which time they should be moved into the next logical job on their career paths. In most Six Sigma organizations a range of about 0.5% -2% of total employee headcount are Black Belts, depending on their level of commitment, business needs (cost savings targets) and size of the organization.

The Green Belt/Yellow Belt Role

Six Sigma is not simply a group of elite individuals solving all of the organizations problems. Black Belts do lead and facilitate teams through the use of the methodology and ultimately will get the input of a team (usually comprised of product and process owners and individual contributors) in the definition, prioritization and implementation of problem solutions. What we have established as reactive behavior extends throughout all organizational layers. So, what is the role of those who are not full time Black Belts? Two roles have been established in the Six Sigma system. Green Belts and Yellow Belts.

Green Belts are in many ways similar to Black Belts with one important difference. They are not a full time Six Sigma resource. In Software, Green Belts usually hold positions such as Software Project Managers, Software Designers, IT Support Positions, Software Engineering Positions, etc. These are people who by the nature of their jobs must solve problems on a daily basis. However, prior to Six Sigma implementation their problem solving is likely done in an ad-hoc manner with a limited tool set. Their training in the Six Sigma Methodology gives them a practical and proven method and set of tools to apply to their daily problem solving activity. They may require help or mentoring from a Black Belt but usually, after completion of training, they apply the Six Sigma methodology to problems that they encounter in their regular work. In some cases Green Belts may move on to become Black Belts but only in the case where there is an organizational need and the candidate meets the organizations requirements for the position. Occasionally a Green Belt may be recruited to be a member of a Black Belts larger scale cross-functional project team. Typical Green Belt projects yield cost savings/avoidance in the range of US$25,000 to US$100,000 and are completed in 2 to 6 Months.

Yellow Belts are an important part of the Six Sigma infrastructure. In the early days of Six Sigma implementation, Black Belts found themselves spending a lot of their time teaching needed project team members the basic language and roles of Six Sigma. Items taught included the roadmaps (DMAIC/DMADV), basic data collection and display, Pareto Principles, Mapping, etc. When these early Black Belts were debriefed to learn what would make the process more efficient, most said that some basic level of training for team members prior to working on a Six Sigma project, would enable them to focus more fully on the project as opposed to training. This speeds up project cycle time and allows for a more efficient use of resources. Yellow Belts usually are from a wide range of the organization that either need a basic understanding of Six Sigma, (including members of Management and Champions) or are slated to be a team member on a Six Sigma project. One ancillary benefit of this type of training is that the Six Sigma methodology, metrics, language and approach are driven deeply into the organization and culture. In organizations where this has occurred Six Sigma yields the highest results.

Deployment Roadmap

The following illustration depicts a typical Six Sigma deployment roadmap. It is important to note the order in which training occurs so that each layer of the organization is trained, prepared and is practicing their specific roles in a timed sequence designed to maximize results and eliminate risk of failure.

Figure 2: Typical Deployment Wave

This deployment example will yield 10-20 Black Belts and 10-20 Green Belts all of whom will complete a project during the training sequence. In addition, 20-30 Yellow Belts will be trained in the foundations materials to support the projects as needed. This deployment would be typical for a small organization with 1000 employees or would be a good Phase 1 model for a larger deployment where multiple training waves would be required. During the training phase a typical cost savings / avoidance of between $1.25 Million and $6 Million (depending on the number of students, usually 10-20, and the ranges of savings mentioned earlier in the article) would be realized. Once all candidates are certified and the complete system is institutionalized, annualized cost savings/avoidance from this size of deployment would be between $4.5 Million and $20 Million per year, again based on the number of Black Belt and Green Belt candidates and the per project savings thresholds achieved.

Reaction to these types of numbers is often skeptical but the savings ranges are based on a long history of thousands of projects and hundreds of companies. The early adopters in software have already validated that these ranges are in fact available and achievable. Six Sigma for Software and IT is now starting to gain momentum and with the current expansion of companies moving towards Six Sigma in this environment the number of success stories and the availability of case studies will further substantiate this model and it’s associated savings figures. Through this forum we will continue to bring that information forward and invite others to share their successes, idea’s questions and builds.

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Basic Strategies for Avoiding and Overcoming Resistance

The pattern is so predictable as to be universal. A leadership team announces to a company that they are going to launch Lean Six Sigma. The next few months are a blur of activity with executives and their direct reports scrambling to conduct an assessment, plan the deployment and determine how to recruit and allocate resources.

After the initial excitement dies away, however, whispers are heard among middle management and rank-and-file employees, and perhaps even on the executive team. These whispers are saying things such as: “I don’t have the time/resources to do this.” “We’re doing fine in my department, so I don’t need to do Lean Six Sigma.” “I’m not going to give up my best people to become Black Belts. I need them for more important work.” and “This is just another fad. I’ll wait it out.”

Sound familiar? It should. Every company runs into resistance of one form or another whenever it adopts a new strategy or launches a new initiative.

The problem is serious. Often, millions of dollars in savings and profits are at stake with Lean Six Sigma initiatives. Vocal or persistent resistance will slow down how quickly a company can achieve those kinds of gains – and, in the worst case, it can derail the initiative entirely. That is why part of every executive’s repertoire needs to be the knowledge, skills and tools to minimize the occurrence and impact of resistance.

Four Strategies for Countering Resistance

The most important thing to know is not to label resistance as impediments or barriers. Cultural resistance is really a form of communication. Actions and words that indicate resistance are exposing people’s concerns. A leader’s role is to understand those concerns and take action to either solve the issue or demonstrate that the concerns are unfounded. Here are four strategies to help do those things.

1. Understand the resistance and its root cause. Think for a moment about reasons why anyone in a company would not embrace Lean Six Sigma. Truth is, if someone thinks engaging in the initiative is in their best interest, they will support it. People who do not are obviously responding to other cues from the work environment that make them think their best option is either to not support the initiative or to actively work against it. The leader’s job is to figure out what is shaping those perceptions.

Here are some of the typical forms of resistance – the reasons why someone would have a reaction that managers would interpret as resistance:

◉ “This is just another ‘flavor of the month.'”

◉ “I don’t have time…cannot free up resources.”

◉ “This does not apply in my part of the business.”

◉ “Is this just a way to cut headcount?”

◉ “Is this incremental to my existing business plan?”

When considering the root causes behind these symptoms (see the table below), the negative reaction suddenly appears not only understandable, but like a perfectly reasonable path.

The company’s leadership team, therefore, must first talk to people throughout the company, all departments and all levels, and see which complaints or resistance behaviors are most often seen. Then discuss them as a team to identify the likely root cause. The leadership team may also want to do a postmortem on other initiatives in the company: Which ones succeeded, and why? Which did not, and why? That information is essential to help shape the appropriate response.

2. Act and/or communicate to address the root cause. Once the leadership understands the root causes of the resistance in the company, a plan of specific actions is needed to address each cause.

For example, one of the most commonly heard complaints is that people are already overloaded with work. In most cases, that is true. A company cannot expect fast, significant results through Lean Six Sigma if improvement work is loaded onto already overcrowded schedules. Ways to counteract this problem might include:

◉ Demonstrate commitment. Dedicate those most responsible for Lean Six Sigma results (such as Black Belts and Champions) to the work full time. That will mean empowering managers to either distribute the original job responsibilities among other individuals and/or hire new people to take on the old work. These actions signal to everyone that the company is serious about achieving the targeted goals for the Lean Six Sigma initiative.

◉ Identify and constantly reinforce corporate priorities. It is the role of the company’s leadership to help people allocate their time appropriately. For example, if it is a strategic priority to reduce lead time by 50 percent within the year, then efforts related to any other goal (such as reducing defects) should be put on the shelf if that work conflicts with cycle-time projects. In short, leaders need to learn to say no.

◉ Build capacity/manage workloads. Do the people who may have to take on additional work have the training/skills to do that work well? If not, an investment in cross-training may need to be made. Establish a mechanism to provide early alerts if workloads are getting uneven and an individual or workgroup is in danger of falling behind on priority work. Monitor everyone affected by the additional work – including co-workers of team members who are expected to pick up new work.

The table below lists typical forms of resistance, their root causes and proven solutions that are targeted at those root causes.

Common Forms of Resistance and How to Combat Them

Common Complaint	Root Cause	Proven Solution
“This is just another ‘flavor of the month.'”	Multiple past initiatives have been launched with high fanfare and little results or staying power	Demonstrate leadership belief… > Select best people as Black Belts and assign them to the most important problems in the business. > Minimize fanfare (hoopla without substance). > Integrate into daily operation of the business; a review of Lean Six Sigma efforts should be on every executive team agenda.
“I don’t have time…cannot free up resources.”	Too many projects/activities in process	> Identify and stop other initiatives and even Lean Six Sigma projects that are either not related to current strategic priorities or that will make only a minor contribution.
“This does not apply in my part of the business.”	Misconception about how Lean Six Sigma works; lack of information about how it applies	Lean Six Sigma has been proven in all business sectors and applications. > Have team members from inside business make presentations to co-workers throughout the company. > Procure case studies from other companies that demonstrate project success in areas relevant to the business. > Invite outside speakers to make presentations to managers and employees.
Unwillingness to provide “best people” as Black Belts	Would rather apply them to their own highest priorities	> Involve several layers of managers in identifying the priorities for the Lean Six Sigma efforts. Cascade the decisions throughout the organization. > Incorporate progress towards these priorities into annual business goals for each manager. > Drive alignment of priorities through the project selection process.
“The results are not real.”	Lack of confidence that the results will materialize	> Deploy detailed, conservative “rule book” for tracking project financial results.
“How is this different from past quality/improvement initiatives?”	Fatigue from multiple quality initiatives	> Explain and demonstrate key differences.
“Is this just a way to cut headcount?”	Fear and/or mistrust	> Drive a desired mix of projects – x% cost reduction, y% growth, z% capital effectiveness. Communicate honestly about expected impacts. Most companies work hard to avoid job cuts related to Lean Six Sigma. If productivity gains mean fewer workers are needed on a particular process, the companies will either (a) use the capacity to take on additional business, or (b) cross-train employees so they can take on other job responsibilities.
“Is this incremental to my existing business plan?”	Don’t want to add to existing workload	> Align all Lean Six Sigma work to directly support the existing business plan, rather than developing a set of collateral goals.
“Does management really believe/support it?”	Lack of confidence that everyone is on board	> Genuine leadership engagement in the process is required – not just talk.

3. Pay attention to the need to continue to act. As any experienced manager knows, resistance does not just disappear one day. Even though one problem may be solved, other conflicts or misunderstandings will inevitably arise that lead to future resistance. Be creative in finding ways to make sure that both managers and employees feel they can safely share their concerns with company leaders. In other words, they will not be subject to reprisals if they speak up. Minimally, company leaders should occasionally “walk the floor” to look middle managers, supervisors and employees in the eye and ask for their reaction to how things are going. They should do the same with any dedicated Lean Six Sigma personnel – ask them direct questions and be sure to follow up.

4. Provide mechanisms to continually engage the broader population in the change. The two most powerful weapons in the leadership team’s arsenal of culture change are 1) involving people directly in the new initiative and 2) creating a cadre of converts able to share their experiences with peers. As a company plans its initiative, therefore, it should build in mechanisms that will expose people to either or both of these weapons. Provide as much Green Belt and Yellow Belt training as possible. All managers should be required to attend a one-day workshop that involves them in process change. Open team membership as much as possible without having unwieldy teams. Team members should be required to make presentations to their work group and management teams.

Key to Unlocking Resistance: Addressing Root Causes

How many times have leaders on all levels thought they had solved a problem only to have it resurface again at a later time or place? Lean Six Sigma teaches that this is common whenever there is a failure to address the root cause of a problem.

The same is true for dealing with cultural resistance. While every company has some people who will resist anything new just because it is new, the vast majority of employees who demonstrate a reluctance to get involved have legitimate concerns. The role of the company’s leadership is to uncover what those concerns are and come up with targeted countermeasures.

Talking the talk is a good beginning because it reinforces what goals are important to management. But, there is no substitute for walking the walk. If the leadership of the company consistently acts in ways that support strategic goals and reinforces the idea that Lean Six Sigma is part of everyone’s job (not instead of or in addition to), most resistance will fade away because the root causes of the concerns will disappear.

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Three Steps to Successful Six Sigma Project Selections

Project selection is one of the most critical and challenging activities faced by Six Sigma companies. Most organizations are able to identify a host of project opportunities, but the difficulty arises in sizing and packaging those opportunities to create meaningful projects. To be successful, the project selection process must be well defined and disciplined. One process that has proven successful incorporates a three-step approach.

Step 1 – Establish a Project Selection Steering Committee

A project selection steering committee should include managers who have been trained as Six Sigma Champions, as well as other key Six Sigma knowledge resources, such as the deployment Champion and Master Black Belts or Black Belts, who bring experience in determining the feasibility and manageability of projects under consideration.

Step 2 – Generate Project Ideas

The frustrations, issues, problems and opportunities visible inside the company are key sources of potential projects. These ideas should be examined during a project selection workshop. Two weeks before the workshop, the project Champions each compile a list of project opportunities from their areas, keeping in mind that Six Sigma projects should align with the organizational strategy and be linked to core business issues.

Using predefined guidelines, the opportunities are accompanied by supporting project rationale data including defect type, historical volumes and financial impact. The project Champions meet with their team members to identify which process improvements are beneficial to the business, customers and employees.

To help generate viable project ideas, the project Champions should ask the following questions:

1. Defect Reduction

◉ Is any scrap produced by the process?

◉ Is anything falling outside of the desired specifications?

◉ Where are high volumes of defects and/or rework occurring?

◉ Does the process have a high degree of variation?

◉ Where do inputs need controls in order to produce a consistent output?

◉ Can scientific adjustments to the process create robust changes?

2. Cycle Time Reduction

◉ Are there any processes that rely on multiple hand-offs between individuals?

◉ Is the process producing less than expected?

◉ Is the process requiring a lot of overtime?

◉ Is the process bogged down with computer/machine downtime?

3. Resource Consumption Reduction

Does the process experience high variation in the material consumption?

Is the process requiring more labor to do the job?

Once identified, project information is summarized in a standardized quad chart format used to present to the steering committee. (Figure 1)

Figure 1: Project Quad Chart

Step 3 – Assess and Prioritize Projects Using a Project Selection Matrix

During the formal project selection workshop, all identified projects are reviewed together to determine integration opportunities and review expected benefits. Existing projects also are included in this review and all projects are then ranked to determine prioritization using a project selection matrix (see table below).

Project Selection Matrix
Project Number		1	2	3	4
Project Description/Potential Project Title (X)Project Owner/Champion		Project A Gary Brosi	Project B Kim Glover	Project C	Project D
Project Characteristic (Y)	Priority 1-10	X Correlation with Y (1 = weak, 3 = moderate, 9 = strong)
1. Is it likely that the project can be completed within six months?	7	3	3
2. Does the project represent a significant improvement in quality?	10	3	3
3. Does the project justify the deployment of a Six Sigma team?	8	9	3
4. Can the project support a minimum 2:1 ROI regardless of capital investment?	8	9	3
5. Does it appear a minimum of investment will be required to solve the problem?	8	3	3
6. Is the problem easily defined (the function, Y, the defect, Xs)?	9	3	3
7. Will success significantly improve customer satisfaction?	3	3	9
8. Is the process currently measured?	3	9	3
9. Is the process measurable?	6	3	9
10. Is it likely that the solution will be highly leverageable?	4	6	3
11. Is the scope of the proposed project appropriate?	8	3	3
12. Does it appear that Six Sigma DMAIC is the right problem-solving approach?	7	9	3
13. Is success likely?	8	9	3
Totals		483	321

Whether or not the project is a candidate for the DMAIC methodology is a key question to answer during the workshop. Lean, value stream mapping or Design for Six Sigma may provide a more suitable methodology for some of the projects. At the end of this process, Black Belt resources are assigned to projects based on the prioritization list. 

This project selection process provides a straightforward way to gather the appropriate data from all areas of the business, segregate by improvement categories and apply a rating for prioritization. The goal of any project selection process is to create a clear path to implementing process improvements that benefit the business as a whole.

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Improving Lean Six Sigma Process with Lean Six Sigma

Lean Six Sigma is a process improvement program, a management engineer would say, that is built upon basic industrial engineering techniques.

The program combines two ideas – Lean and Six Sigma. Lean is a collection of techniques for decreasing the time to provide products or services by eliminating process and time waste. Six Sigma is a collection of techniques for improving the quality of products and services while minimizing rework, and substantially increasing customer satisfaction.

Are Lean Six Sigma processes working efficiently? There are no immediate answers. Lean Six Sigma program involvement is undoubtedly expensive for the organization that applies it; but it does justify specific efforts on a project-by-project basis. There has been little effort to identify and measure the overall performance of Lean Six Sigma as a program.

Using Expertise of Industrial Engineering

And now to industrial engineering, a source for expertise in operating efficiency. The primary industrial engineering (IE) efficiency technique starts with a process that works; and then finds and implements improvements that minimize resources consumed while maximizing accomplishment. Application of these basic IE approach to the processes of Lean Six Sigma is one obvious direction for development. A basic IE technique for addressing the Lean Six Sigma process would involve applying Lean Six Sigma methods

To apply Lean Six Sigma to itself, one needs to start with a process challenge. In this case, the working assumption is that Lean Six Sigma is unnecessarily expensive in its own internal operation. The requirement for training personnel is extensive, and its insistence upon data-driven changes to document improvements creates a substantial work requirement, a management cost, that is difficult to associate with any specific productive result.

As a direction for solution, the Lean Six Sigma process is applied to minimize its own internal costs and assure the best quality from the standpoint of its customers.

Figure 1: Typical Lean Six Sigma Management Before Improvement

To get this application started, one needs to add perspectives derived from another specialty, management engineering. This study, is basic industrial engineering applied to the work of gaining performance through organizations. It approaches management as work that is to be performed, opening the door to assuring that the work of management is performed efficiently and effectively.

The Purpose of Any Management System

The purpose for having a management system is to gain results through an organization. Process improvement, the Lean Six Sigma purpose, is then recognized to be a management purpose. The Lean Six Sigma process is, accordingly, to be handled as a management process.

In a unique management perspective, the purpose for management is bringing resources together to gain a result. The Lean Six Sigma process must be part of this larger effort, one that brings a wide spectrum of organizational resources, including managers, performers and internal support workers, to focus on gaining the desired result of process improvements.

The first rule of management engineering is: “Management is an essential; You cannot improve management by replacing it with something else.” With this perspective, the first general improvement in the Lean Six Sigma process can be immediately identified. The most effective way to use Lean Six Sigma will not be through an applied improvement program, but through incorporating it into management so that it becomes part of how senior management gains performance through its subordinate organization.

With this engineered perspective, if process improvement is work for managers to perform, then Lean Six Sigma is to be incorporated into the performance duties of managers. Application is by senior managers assigning process improvement responsibility to subordinate managers, with the promise to hold them personally accountable for gaining the desired results.

The Green Belts and the Black Belts

Also, with the performance of the Lean Six Sigma process as management, the primary subject for Green Belt training will be the working managers, those who will be responsible for the performance. This becomes management improvement training supporting how responsible managers will succeed in their assigned responsibility for gaining process improvements.

The goal of incorporating Lean Six Sigma into management is not an end to be accomplished. This analysis provides a different, and obviously more effective, organizational position for the Lean Six Sigma process experts. Those with Black Belt training become the means for process managers to meet their assigned process improvement responsibilities. The Black Belts are the technical experts upon whom the Green Belt managers will rely.

True to the purpose for management, this brings the efforts of senior managers, subordinate managers and Lean Six Sigma experts to focus on gaining a valuable result. This addresses performance of the function of senior management, bringing the resources of the subordinate organization to a singular coordinated focus on assuring a value recognized at the top of the organization.

In Lean Six Sigma terms, directly assigning improvement responsibilities to subordinate managers is the low-hanging fruit that may be harvested almost immediately.

Then the Lean Six Sigma process improvement logic can actually be applied to itself. The Lean Six Sigma process works through individual process improvement projects. The Lean-based effort here will be directed toward minimizing Lean Six Sigma projects that are in queue, and minimizing the time that they spend waiting between steps for the next process action.

Adding Management Engineering Perspective

Management engineering is able to add a potent technical perspective to the purpose proclaimed by Lean Six Sigma. It is to accomplish improvements. Organization-level improvement would be based on only two metrics, the value that the organization delivers to its customers, and the cost of running the organization as it produces that value. The difference between these two metrics measures the profitability of the organization. The ratio of value-out to cost-of-operation is a measure of organization-level operating efficiency.

Both management engineering and Lean Six Sigma recognize that improvement follows where each element in a process contributes to the desired result. For application to Lean Six Sigma, each project must either reduce the operating cost of the organization, or increase the value of its products being delivered to its customers. Projects that have no reasonable possibility of doing either can be eliminated from further consideration. They would represent a cost without an organization-level benefit.

This is an effective pre-filter on projects, and would eliminate much of the Lean Six Sigma process work now being performed. This would remove most of the projects now in queue – a Lean benefit. Also, it would assure that the results of projects will actually contribute to organization-level improvements – a Six Sigma quality benefit.

SIPOC for Improved Lean Six Sigma Process

One of the primary Lean Six Sigma tools is the SIPOC, an acronym addressing the major elements of the process that is under study in an individual process. The SIPOC for the Lean Six Sigma process being examined here is:

Sources – Assigned improvement responsibility, Lean Six Sigma expert resources

Inputs – Process challenges, performance tracking, Lean Six Sigma expertise and/or training

Process – Study of processes with focus on improvements

Outputs – Improved process – organization-level impacts

Customer – Performance managers who are responsible for improvements

The first process concern is sources. Now included as a driver for Lean Six Sigma performance is senior management. Subordinate managers would no longer have to be sold on the application of Lean Six Sigma. They only have to be given opportunity to see that there is an improvement potential. This is how they can meet process improvement requirements that senior management has placed upon them.

The second element of a SIPOC is inputs. By minimizing of the number of projects necessary to assure improvement, and with the new input of process management insistence arising from the subordinate manager’s assigned duties, the organization would have both greater resources and less work.

The third element is process. Only those projects that contribute to the organization-level improvement would be processed. The workload to gain organization-level improvement is reduced through handling only projects with organizational impact.

The outputs element has major differences. The Lean Six Sigma concept of data-driven change would be dropped as the working manager is part of the effort. Nobody but senior managers need to be convinced of the necessity of the effort. They would be measuring organization-level impact, rather than trying to evaluate local process effects. The need for justification through local process metrics is removed.

The customer of this process is the subordinate manager, the one who is directing the effort. If any project is considered a success by this manager, it would be presented as a success to senior management.

New Look at DMAIC Improvement Process

Lean Six Sigma often uses DMAIC (Define, Measure, Analyze, Improve, Control) as a step-by-step improvement process for projects. After each step is a tollgate review, an effective point for management to determine if the project is ready to progress to the next step in the DMAIC process.

Through assigning responsibility to sponsoring managers, there would be another immediate improvement. The potential divergence between the Lean Six Sigma expert and management interests has been removed. A manager’s need to find improvements is already made an intimate part of the improved Lean Six Sigma process. This working manager also is the customer. The process manager’s permission would no longer to be gained at the tollgate. If the Lean Six Sigma effort is working to effect, then the manager could be expected to continue it as a matter of self-interest.

The changed nature of the relationship between management and Lean Six Sigma would have another general effect. The working manager becomes the Sponsor, and also a key team member. It is this manager who would promote improvement projects to senior management as a way to fulfill his or her assigned improvement responsibility.

Also, the number of potential projects have been reduced through a pre-filter based on organization-level improvement criteria. This reduces the number of projects to be developed and worked at every step in the DMAIC process.

Phase by Phase Through DMAIC Process

For the Define phase, the Lean Six Sigma experts would function as unassigned technical support for the process managers, and would help these managers identify potential projects, and support project definition as how the manager presents the potential to senior management. The managers would support the Lean Six Sigma experts by helping to identify improvement opportunities.

The purpose for the first tollgate would be a sponsoring manager’s request for Lean Six Sigma resources supporting his or her improvement project. Other Black Belts and Green Belts would be approached as senior management assets. They would take part as technical experts supporting the manager’s effort. The desired outcome from passing this gate is assignment of Lean Six Sigma experts to take part in the subordinate manager’s project.

The Measure phase can be greatly reduced and would be combined with the Analyze phase. The purpose would be to establish sufficient knowledge to support a process improvement. The program’s current data-driven requirement would therefore be a recommendation rather than a mandate. Data only has to be gathered to “understand” the process and its capacities, not to justify or measure local process improvement. The only improvement that will count is that seen by senior management at its level; which may or may not be measured locally.

The tollgate that follows the Analysis phase is there only to inform senior management that there is sufficient reason to study the process for improvement. The manager would present available cost and benefit analysis as incentive to continue the assignment of Lean Six Sigma experts to the effort.

Accomplishing Organization-level Objectives

Improve phase efforts are essentially the same as in the current Lean Six Sigma application, except that the goal of the improvement would no longer be local to the process. The project was approved by senior management, and was resourced with Lean Six Sigma experts to accomplish impact upon the larger organization.

The tollgate following the Improve phase would be there to have the manager present a new process as a proposed change. The desired result is a direction to implement the new process, authorizing any necessary or convenient resource changes; and releasing Lean Six Sigma experts from the project. A new Lean Six Sigma assignment would be for monitoring the performance of the new process and measuring its impacts on organization-level metrics.

The Control phase is handled by the manager, who would assume immediate and complete operational authority for implementing the improved process. Lean Six Sigma experts are once again available for technical advice, but otherwise step out of the project.

The final tollgate in the process would be a presentation by the Lean Six Sigma expert who is tracking performance. The purpose is giving credit to the manager for success in meeting his or her improvement responsibility, and freeing up this Lean Six Sigma expert for work on other projects selected by senior management.

Figure 2: Lean Six Sigma Management After Improvement

The results from this improved Lean Six Sigma performance process would be as it is from any other improved performance process – increased throughput accomplished at a reduced cost. It will be a simplified process that is better focused on what must be accomplished to gain the desired result of organizational improvement.

Benefits of Improved Lean Six Sigma Process

Also as is typical for Lean Six Sigma projects, there are benefits that are not planned at the beginning of the improvement effort. In this case, it is “management improvement.” Where most current Lean Six Sigma processes remove some key performance-improvement responsibilities from working managers, the improved process cited here would involve managers from the beginning. It would assure that they are more in charge of their performance areas than before the process was improved.

The new Lean Six Sigma process also provides a general tool for marketing this improved process to senior management. As organization-level improvement would be addressed directly, projects are approached in terms of how the senior managers improve their own areas of responsibility.

This improved Lean Six Sigma process is designed to provide organization-level effect from improvements to local processes, and to provide this at reduced expenditure in organizational resources. It would require less senior management time and effort to assure the organization-level results. And it would expend less organizational resource to realize the benefits gained.

If that is not enough of a selling point, this improved Lean Six Sigma process will – in accord with the principles of management engineering – put the senior manager more effectively in charge of the improvement process taking place in his or her organization.

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Six Sigma Aids in Resource Planning for IT Employees

Effective resource planning is an important part of any process improvement program. Formalizing processes and developing measurement systems helps to determine the value of internal projects from a human capital perspective. A measurement system for effective resource planning in implementing project goals may be particularly helpful for information technology (IT) divisions of companies.

Developing a Measurement System

A first step in defining the measurement system must be establishing formalized processes for resource planning. Practitioners should gather and analyze the business requirements within the process to determine deficiency input points. This can be done using process flow diagrams of both current, or “as is,” and modified, or “to be,” processes.

Next, practitioners should determine critical-to-quality (CTQ) requirements for project task deliverables. Metrics for evaluating resource planning processes consider these CTQs. Once CTQ characteristics are identified, the cost of poor quality (COPQ) can be determined. A project skills matrix and a failure mode and effects analysis (FMEA) for resource planning can be used to capture data for measurement. Then practitioners can identify the defects per million opportunities (DPMO), a number that can be converted to a sigma level. The sigma level will focus on measuring and eliminating defects in core resource planning processes.

Six Sigma can be used to define process capability in order to identify metrics for evaluating the outcome of CTQ requirements.

Identifying CTQ Variables

In evaluating project resourcing planning, the earned value management model can be used in defining CTQ variables. In order to evaluate performance, practitioners can use a general variance model, in which the actual resource cost is compared to the standard budget for a given project, to examine the cost of a resource in terms of hourly amount, hours utilized and scheduling. When actual utilization in terms of cost and scheduling exceeds the standard budget, it is deemed unfavorable.

Within the variance model framework, a resource manager should construct a CTQ FMEA template that is applicable to staffing requirements outlined in the Define phase. The CTQ specifications should be stated, and measures devised. Variables can be associated with defect opportunities (Table 1).

Table 1: Example of CTQ Requirements

Requirement	Variable	Defect Threshold
Set up server hardware	Resource skill	Hardware malfunctions due to incorrect setup four times
Install and configure Oracle on server	Resource skill in specialty area	Incorrect settings in system global area four times
Post go-live application support	Resource training relevant to skill	Incorrectly diagnose problem as user training issue when in actuality it is an application bug three times

The conversion of actual defects in task delivery to DPMO will derive a sigma value denoting either organizational excellence, satisfactory performance or unfavorable results. Practitioners can compare sigma values at the start and end of the project to determine improvement gains. A sample of a CTQ measurement is illustrated in Table 2.

Table 2: Sample CTQ Measurement

Define	Measure	Analyze	Improve	Control
CTQ: The customer will tolerate up to four hardware malfunctions due to incorrect setup	Defects: Hardware malfunctions four times Units: 196 (47 file servers x 4 setup errors) Opportunities: 1 per file server DPMO: 85,100 Process sigma: 2.81	Two system engineer resources, A and B, are assigned to task: Resource A sets up 23 file servers over a period extending beyond the planned 10 workdays (13 workdays actual). Resource B sets up the remaining 24 file servers under the planned 10 workdays (9 workdays actual). Six file servers that Resource A sets up experience malfunctions due to incorrect setup.	Resource A caused a cost and schedule variance and failed to meet CTQ requirements six times. Defects: Hardware malfunctions six times Units: 138 (23 file servers x 6 setup errors) Opportunities: 1 per file server DPMO: 260,900 Process sigma: 2.14	Identify opportunities for Resource A to improve server set up ability through training or journeying.

Quantifying COPQ in Resource Planning Processes

There are many causes that affect COPQ: demand constraints, labor cost to fix problems, cost of lost opportunity, underutilization, loss of sale or revenue, and lower service level to customers. Table 3 describes these causes from a resource planning perspective.

Table 3: Poor Quality Causes in Resource Planning

Poor Quality Cause	Description
1	Underutilization of resources is also termed spoilage in Six Sigma. It occurs when there is inconsistence or inefficient processes.
2	Reworking a deliverable due to wrong resources skill applied involves the labor to repair the defect.
3	Additional resources includes any burden of consumption of resources in order to accommodate an unforeseen step in project deliverables.
4	Lost opportunity is the loss in business of a failure. Included are the loss of margin and the capital to be invested for regaining lost revenue to offset the cumulative revenue loss.
5	Lost revenue due to poor quality considers the loss of new business due to defective quality in a deliverable.
6	Poor customer satisfaction is the sum total of all COPQ. Cost is compounded by losses customers suffer due to defective quality in a deliverable.

The calculation of COPQ uses weighted risk for potential failures. It considers an estimation of four components:

1. Probability of occurrence for each failure

2. Potential severity of each failure

3. Current detection provisions

4. Resolution cost of a single failure

Table 4: Sample COPQ Measurement

Goal: Reduce Customer Dissatisfaction Incidents Due to Resource Related Project Failures by 75

No.	Potential Resource Deficiency	Risk Priority Number	Effort Hours to Resolve	Average Cost Per Hour	Average Cost to Resolve	RPN x ACR
1	Right skilled but underutilized in project task	30	10	$90.00	$900.00	$27,000.00
2	Wrong skill to repair defect	27	40	$48.00	$1,920.00	$51,840.00
3	Added resource due to scope creep	27	56	$240.00	$13,440.00	$362,880.00
4	Loss of business opportunity due to downtime (daily revenue = $10,000)	18	40	$416.67	$16,666.80	$300,002.40
5	Lost revenue due to resource incorrectly working project task	21	10	$4,166.70	$41,667.00	$875,007.00
	Total:	123				$1,616,729.40

Formula 1: Weighted average cost to resolve = (RPN x ACR)/RPN = 1,616,729.40/123 = $13,144.14

Formula 2: COPQ (annualized) = Weighted average cost to resolve x annual reduction in resource related project failures 13,144.14 x 75 = $985,810.50

The connection of COPQ to DPMO means that poor quality costs are proportional to sigma levels. The yield should be compared to the cost of quality in the finished project deliverable. The sigma level correlation to DPMO and cost of quality is stated as percentage of revenue (Table 5).

Table 5: Sigma Level, Value, DPMO and Cost of Quality Percentage

Sigma Level	Range Value	Yield	DPMO	Cost of Quality Percentage
2	Unfavorable	-	298,000	More than 40%
3	Satisfactory	93.3%	66,870	25%-40%
4	Satisfactory	99.8%	6,210	15%-25%
5	Organization excellence	99.977%	233	5%-15%
6	Organization excellence	99.99966%	3.4	Less than 1%

Control System Benefits

A performance measurement system enables management to plan and make decisions. The approach identified here provides a control system that aligns practical standards against ideal, or perfect, conditions. Standardization provides performance baselines for control efforts in budgeting and planning of resource allocation. From here, practitioners can devise a simple formula that compares actual costs in resource allocation against the baselines. Variances should be noted to determine the extent of favorable and unfavorable outcomes. The data used to derive costs can be maintained in the project management application for creating reports and scorecards.

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9 Lessons Project Managers have learned this year

We are itching to see the back of 2020. It has been a year unlike any other.

The pandemic brought us stress and worry. The government's ever-changing guidelines threw us curve balls and had us jumping through hoops. And for months on end, we have been in a state of sink or swim.

But hey! You’re here. You’re reading this and you have made it through. So, take a moment, sit down, and reflect. You have learnt so much from surviving 2020. We’ll set the ball rolling for you; here are nine lessons we know project managers have learned this year:

1. Planning for the unplannable

In business not everything goes to plan, but no one could have predicted the coronavirus pandemic. And so, project managers have been given a crash course in planning for the unplannable. No risk management assessment could ever have taught it to this level. Project professionals have learnt the importance of being able to react, adapt and pivot; adjusting plans at speed as new information comes to light and government guidelines change.

2. How to be resilient

Speaking of changing guidelines, the pandemic has taught us a lot about following legislation and even having to make tough calls as a consequence. One such example is the difficult decision of furloughing staff or even worse, making redundancies – challenging choices that are sure to have tested many managers. In the interest of business continuity project managers have made numerous hard decisions throughout the pandemic and gained great resilience through the process.

3. The ability to prioritise

For many of us, long term projects have taken a back seat, been delayed, or halted altogether to make way for more pressing matters. Project managers have had to put aside those ‘nice to do’ projects and paused all but the necessary in order to free up time for urgent projects and measures that will protect the organisation in the long term. In this way project professionals have had a stark lesson in rethinking priorities.

4. Managing distributed teams

Remote working was no new thing, but that’s not to say the transition to fully distributed teams at the hands of COVID has been easy. Project managers in charge of large numbers of staff have been challenged with having to lead teams from afar. We are all guilty of micromanaging on occasion, but hopefully you’ve struck the right balance; checking in, not checking up on your employees!

5. Thinking outside the box

Priorities shifted and ‘business as usual’ became a thing of the past, and so out of the box thinking became essential for surviving the unprecedented environment of COVID-19. Project leaders should be proud of all they and their teams have achieved this year in terms of innovating and reimagining. This enhanced skill is sure to continue to be of benefit in the future.

6. Improving your work / life balance

Daily work life as you once knew it is sure to have been shaken up in some shape or form – whether you’ve been operating on a part-time basis, or just gaining back those hours normally wasted on your commute. Being given this time has been a blessing for many of us who have used these exceptional circumstances to improve our work / life balance. Afterall, the pandemic has taught us the great importance of loved ones, our health, and valuing a slower pace of life.

7. Building better relationships

Whilst it may have felt like the blind leading the blind, the pandemic is sure have bettered your relationships with your team. The comradery of “we’re all in this together” has echoed through our lives and brought a new sense of support to our workplaces. Adopting a leadership style which values empathy, active listening and engagement has been crucial for this journey. A management approach which cultivates wellbeing is surely a lesson we can carry forward too.

8. Investing in your employees

On the topic of prioritising relationships and building trust amongst your staff, this crisis has taught managers the value of investing in employees. The way people have risen to the pandemic’s challenges is amazing. Your teams are capable of great things – innovative thinking, resilience, and commitment; and so harnessing and developing their skills is essential.

9. You are capable of so much

Whilst looking back on 2020, you must recognise just how much you have accomplished in these whirlwind months. No one could have anticipated the mammoth changes this year brought with it, nor how successfully project managers have been able to adapt. Projects that could take months in normal times have been executed in days, and you have navigated your way through it all. You are capable of so much and should feel a great sense of pride! This should boost your confidence, motivate and enhance your future work.

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Applying Theory of Constraints to Manage Bottlenecks

The theory of constraints is an important tool for improving process flows. The implications of the theory are far reaching in terms of understanding bottlenecks to a process and better managing these bottlenecks to create an efficient process flow.

The theory of constraints is an important tool for operations managers to manage bottlenecks and improve process flows. Made famous by Eliyahu M. Goldratt in his book The Goal, the implications of the theory are far reaching in terms of understanding bottlenecks to a process and better managing these bottlenecks to create an efficient process flow. Simply put the theory states, “the throughput of any system is determined by one constraint (bottleneck).” Thus to increase the throughput, one must focus on identifying and improving the bottleneck or constraint.

Goldratt in another book, Theory of Constraints, outlines a five-step process to applying the theory:

1. Identify the process’ constraints

2. Decide how best to exploit the process constraints

3. Subordinate everything else to the above decisions

4. Evaluate the process constraint

5. Remove the constraint and re-evaluate the process

Illustrating Theory with Boxes of Candies

Teaching the theory of constraints can be aided by a simple simulation exercise with people in any training class: Take small five boxes partially filled with 15 small candies each. The instructor hands the boxes one at a time to the first participant who empties the contents and then hands the box and candies to the next participant. The second person counts the number of candies, puts them in the box and hands it to the third person who returns the box the instructor. The instructor varies the rates at which the five boxes of candies are handed to the first person in the “value chain” and times are recorded for each member’s part in the process.

Candy Box Value Chain

As the boxes of candies are handed to the first person slowly, it is easy to observe that all participants have ample time to carry out their activities. At the slow pace, all resources are being starved of work and the bottleneck is external to the process, i.e., the instructor. Now consider what happens if the instructor speeds up the process and hands over the boxes at a much faster rate – then, all three participants start to work faster, with the person in the middle always busy as the other two participants wait for him/her. In essence the bottleneck has now changed to Person B, and a process constraint or bottleneck has been identified.

Consider for the sake of argument that it takes the following average times for the participants to carry out their activities:

Person A: Time = 2 seconds (Throughput = 30 boxes/minute)

Person B: Time = 20 seconds (Throughput = 3 boxes/minute) <— Bottleneck

Person C: Time = 5 seconds (Throughput = 12 boxes/minute)

The efficiency of the process has slowed down to the slowest resource, the output of the whole process is three boxes a minute; and Person A and Person C are not contributing to the overall efficiency. If they were to slow down, they would not have an adverse impact on the process, since they will always have idle time. Such resources with extra capacity are non-bottleneck resources.

Considering the Effect of Inventory

Now consider the impact of inventory on the process. If only one box is sent through the value chain, the total time taken by the box to be serviced is the sum of the activities of all three participants, i.e., 2 + 20 + 5 = 27 seconds. This is the minimum theoretical time that a box of candies can be processed in. From a customer perspective it would take 27 seconds for their box of candies to be delivered. However, if there are other boxes within this value chain, then these boxes will be serviced first. The number of boxes within the system is sometimes referred to as work in process (WIP) and the relationship is expressed through Little’s Law:

Inventory = Throughput x Flow Time

Where Throughput is the throughput of the process and is the throughput of the slowest resource (Person B) and Flow Time is the average time that a typical flow unit spends within the process boundaries.

Now suppose there are a total of four boxes ahead of a particular customer’s box, thus Inventory = 5 and the formula is:

5 boxes = 3 boxes/minute x Flow Time

On overage the packet spends 1.67 minutes within the value chain before a customer gets his box back. While the value-added work on the packet is just 27 seconds, it spends a total of 100 seconds within the system boundaries. A 27 percent efficiency ratio (value-add time/total flow time).

While this simple example has been used to demonstrate the theory of constraints, the implications are clear for an operations manager who deals with processes. Suppose the three persons in the example represent three business units working together to create a horizontal value chain. If Business Unit A becomes more efficient (e.g., reducing its cycle time from 5 seconds to 2 seconds), it may actually be detrimental to the overall process. Yet quite often, Business Unit A’s improvements will be rewarded since there is a tendency to measure results vertically in silos. Additionally sometimes the work that an entity does is non-value-added. In the candies example, Person C was transporting the boxes and did not provide any value to the overall process. A good operations manager will think in depth about these issues.

Several other corollaries result:

Corollary 1: Implications on Inventory

Adding inventory to a system can greatly increase the lead time for a customer. Using the above example, the table below shows the effect of different inventories.

Inventory	Throughput	Flow Time	Efficiency Ratio
5	3 boxes/min.	1.67 minutes	.27
10	3 boxes/min.	3.33 minutes	.135
100	3 boxes/min.	33.3 minutes	.0135

In the extreme scenario where there is an inventory of 100 units on average within the system boundaries, an individual box only spends 1.35 percent of its time having value-added work performed. The rest is all waiting time. This is an important result, which means that wait time is an output Y, which is determined by inputs (X) such as inventory or throughput of the system. Some managers erroneously focus exclusively on reducing the wait times without understanding why these wait times occur (i.e., looking at the bottleneck resource or the amount of inventory that may be causing it).

Since inventory is usually a function of external demand, at some point it may be feasible to limit the number of units that can enter into the system. However, this may result in lost revenue opportunities. If this is not a viable solution, an alternative may be to put more resources to the bottleneck which will have a cost implication to the process but may speed up delivery.

Corollary 2: Implications on Throughput

In the candies example, Person B is the bottleneck. At this point all efforts should be focused on alleviating the bottleneck (theory of constraints). This can be done in a number of ways, for example, putting more resources on the bottleneck activity (like two persons acting as B instead of one), leaning, standardizing, fool proofing, flexible resourcing, job leveling (shifting some of Person B’s work to either Person A or C), etc. The idea is to alleviate the bottleneck as much as possible.

Suppose some work is shifted from Person B to Person C by asking them to fill the box with candies and the new times are recorded as follows:

Person A: Time = 2 seconds

Person B: Time = 15 seconds

Person C: Time = 10 seconds

Note that the total value-add time is still the same, i.e., 27 seconds. However, the flow times are reduced and efficiency ratios are improved, as the table below indicates.

Inventory	Throughput	Flow Time	Efficiency Ratio
5	4 boxes/min.	1.25 minutes	.36
10	4 boxes/min.	2.5 minutes	.18
100	4 boxes/min.	25 minutes	.018

Person B is still the bottleneck, however, if we continue to shift work from B to A or C, the bottleneck may change.

By simply shifting work, without any additional cost, the efficiency of the process has significantly been improved. This, however, may not be easy to do in a work setting with specialized jobs and roles.

It is obvious that theory of constraints can be applied in a number of work situations, whether it is the service industry or the manufacturing sector. The theory of constraints helps to focus on areas where improvements should be made and enables leveraging of other Six Sigma and Lean tools to improve that focus area.

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