Every Reason That HR Should Be Involved in Six Sigma

Human resource (HR) professionals who have a background or education in basic project management have a clear advantage. Being well versed in an improvement methodology, such as Six Sigma, is even a bigger plus. An HR professional who is able to present a business case with a compelling return on investment will be respected. Having a true handle on cost/time estimates, analytical thinking process and fact-based strategies will open doors.

Understanding and using statistics to convey thoughts raises the bar on necessary conversations such as:

◉ Legal compliance related to human resources management

◉ Developing a recruiting and retention strategy

◉ Performance management

◉ Job design

◉ Knowledge management

◉ Human resource information systems

Strategic, Operational and Administrative

The role of the HR professional is typically divided into three main categories – strategic, operational and administrative. In today’s world an HR professional is expected to act with confidence in all three categories. Six Sigma methodologies provide a framework for confidently capturing and presenting information in all three areas.

There are many other ways HR professionals may benefits from using Six Sigma concepts. First, Six Sigma methodology provides a solid path to implementing new projects. Second, learning to use the statistical information promoted in Six Sigma, allows the HR professional to make better, more informed decisions. Third, studying Six Sigma principles provides for better communication with project managers, technical staff, and executive management.

HR professionals who also are responsible for health and safety issues will see a benefit to applying Six Sigma methodology to high risk environments. Six Sigma forces the practitioner to study the existing system. This may lead to identifying potential dangers. Whereas many safety programs focus only on satisfying lengthy compliance agendas, they do not position employees to think about future impact or identify future risk issues.

Contributing to Metric Design

One area the HR professional can be a strong contributor in is designing metrics. It is important to distinguish which metrics are truly adding value to the organization. Measuring for measurement’s sake is time consuming and contributes to waste. To determine which metric should be used it is imperative to understand both the strategic initiatives of the department as well as the organization. Being familiar with the strategic initiatives, is key to many HR processes such as performance reviews, job descriptions and employee orientation. Six Sigma models all depend on proper measurement systems and the HR professional may have already compiled useful data that can be used in these metrics.

Internal benchmarking is an area that many HR professionals understand. Internal benchmarking involves the process of comparing a specific operation within the organization to another operation. Although the two operations do not need to be exact they need to be similar. This process knowledge is very useful to the Six Sigma project team. Identifying critical-to-quality factors (CTQs) is not vastly different than identifying items that are critical to employee satisfaction. Another a popular Six Sigma model, SIPOC, where the Supplier, Inputs, Process, Output and Customer is defined is not a great stretch for the HR professional. In the recruiting process it is important to identify each of these areas to implement a successful program.

HR professional also are astute at documenting best practices. This is another area where understanding the process is as important as understanding the subject matter. It is not unusual even in a structured Six Sigma project for internal best practices to remain unidentified. This is usually because methods for communicating best practices do not exist. To be successful organizations must implement a process that promotes and rewards the sharing of ideas. This process may already exist in the HR department.

Scorecards: Another Way to Be Involved

Scorecards may be an area that the HR professional has experience designing. Scorecards are an accepted way to keep track of business success. A successful business scorecard would promote a balance between long- and short-term goals, between financial and non-financial measures, as well as between internal and external perspectives. Implementation of a scorecard system requires translating the vision into operational or financial goals. Although the HR professional may not have experience enterprise wide, most are skilled at doing this type of measurement for their own departments. This experience benefits projects that use a scorecard system because there must be a commitment to a vision, a process and a communication plan to share with employees. Capitalizing on the HR professional’s abilities in this area a wise decision. The same competencies that allow a project manager to improve the quality and bottom line results may backfire without the necessary people skills.

At first, it may be difficult for an HR professional to get the training necessary to be successful. There may not be budget or a desire to formally educate administrative support staff. However, if the HR professional is part of a Six Sigma organization, solid experience can be gained by offering to do projects that capitalize on HR expertise.

Building Six Sigma Competency Model

Offering to build a Six Sigma competency model, for example, will not only serve to identify candidates with the right mix of technical and leadership skills, it will allow the HR professional to work closely with the project team.

Other areas that are a natural fit for an HR professional trying to gain Six Sigma experience include developing Six Sigma retention strategies and creating job descriptions. Developing a rewards and recognition program, although promoted in Six Sigma, rarely has a serious process owner. It is important that the HR professional seek out opportunities to become involved. A proactive approach will be noticed and appreciated. Although Six Sigma does require formal education and training, any hands-on experience will make the concepts easier to digest.

HR professionals also have the opportunity to use skills such as change management and leadership development. Acting as a resource and/or coach for Black Belts who encounter team-related problems will quickly build credibility. Sometimes the HR professional is positioned better to function as a liaison with Sponsors, leaders and Champions than the project manager.

Helping Manage the Changes

Introducing Six Sigma into an organization is a major change that will have a profound effect on a broad group of stakeholders. Managers and employees at many levels of the organization will be asked to engage in new behaviors. Those leading other initiatives may see Six Sigma as a source of competition for resources, executive attention and organizational power. There may be confusion over how Six Sigma fits with the large number of ongoing organizational programs such as CMMI or ISO. Improvement does not happen without out a plan. Most executives will state that people are their most important resource. It makes sense that quality initiatives and continuous improvement programs should be adopted and applied to the HR department.

The HR professional can help determine which functions to measure and which metrics to be used. The can provide education on applying realistic benchmarking and in compiling a workable scorecard. The HR professional can help reduce uncertainty and anxiety surrounding Six Sigma and be a valuable resource to the Six Sigma team.

HR professionals who are interested in studying and utilizing Six Sigma methodology are an asset to any company. They have the ability to improve processes in their own department, serve as a role model and assist in larger company projects.

Continue reading

Remove Obstacles for Six Sigma Within Agile Development

It can be challenging at first to find the connections between Six Sigma and Agile; a number of obstacles stand in the way of reaching an integrated view. But there is some untapped leverage that, if explored, may ease the use of the two methods.

It is often more interesting to find the intersections that connect things, rather than the distinctions that seem to divide them. This is true with Lean Six Sigma and agile software development. Ultimately, both aim to improve the processes used to deliver products that meet customer specifications. But it can be challenging at first to find the connections between these methods; a number of obstacles stand in the way of reaching an integrated view. With this view, though, practitioners can leverage the benefits of both greater design and programming skills and a better understanding of how to discover and meet user requirements.

Obstacles to an Intersected View of Lean Six Sigma and Agile Development

Finding the intersections within Lean Six Sigma and agile software development can be beneficial, but four obstacles may stand in the way.

1. Seeing Software Development Through the Manufacturing Lens

In manufacturing operations and repetitive services, the variation that gets in the way of doing the same thing the same way over and over is the main concern. While there are some repetitive aspects to software development – configuration management, aspects of coding standards and testing, for example – Lean Six Sigma can miss the mark when a widgets-on-conveyor-belts model is presented. In software, the variation in shared understanding is usually the main enemy.

Therefore, Lean Six Sigma should be presented as a method that goes where the value and risk questions are, and then helps grow net value and reduce risks. Practitioners should be ready to communicate the intent and potential value of Six Sigma in ways that offer help dealing with value and risk in less physical and repetitive domains.

2. Painting Six Sigma into a Statistical Corner

Connected with the first obstacle, this problem occurs when practitioners define Lean Six Sigma in terms that are too statistical – missing the connection software developers might have with more-descriptive and language-data-based strategies in the kit. These include voice-of-the-customer tools for gathering better language data and distilling it more effectively, as well as tools such as quality function deployment (QFD), the analytical hierarchy process (AHP) and KJ, which deal with best use of qualitative facts and data, sometimes together with numbers, to drive quick learning and decisions.

Practitioners should not reduce all software development issues to a statistical problem – some reduce to logical problems but still benefit from Six Sigma tools and thinking.

3. Trying to Fight Complexity with Complexity

Software development involves a number of challenges: understanding requirements and prospective features; selecting the features to implement; and planning the resources, schedules and tests for on-time, high-quality delivery. These challenges can be extremely complex, and practitioners must be careful not to misapply manufacturing remedies such as compliance to checklists and complex forecasting and optimization to the development process.

It is easy to get enthused about “the power of the tools” and become over-reliant on roadmaps, checklists and high-octane multivariate models. On that path, practitioners may try to subdue process complexity by matching it with process complexity and model-based complexity. But that approach in a software environment may lead to missing the chance to get aboard the way that agile software development (and Lean in general) deals with complexity – by trying to make the work and the people-to-people connections simpler. Although neither approach is right for all cases, note that complexity can be fought with complexity and, sometimes, with simplicity, depending on the situation.

4. Overemphasizing the Waterfall Development Model

“Do it right the first time” and “Get the requirements right, up front” are great pieces of advice in the situations they fit. But practitioners must be careful not to over-apply this thinking when it may alienate them from potential allies. When capital equipment and manufacturing process investments are hanging in the balance, it may make the most sense to force decisions to the front end. Reducing the risk of scrapping or reworking capital equipment or manufacturing components is exactly where Lean Six Sigma should focus in a manufacturing environment. In software, though, the incremental work products are a lot less brittle.

If practitioners force signoff on requirements and specifications up front, they, and the customers, have to act like they know more than they actually may about what is important and what the choices will be. This practice cuts off the chances for learning en route – and thus, lops off a whole class of value- and risk-improvement options that might have been extremely helpful and Six Sigma friendly.

It is easy for Lean Six Sigma practitioners and software developers to become polarized over this issue. Waterfallers may see agilites as wanting to go back to Capability Maturity Model Integration Level 1. Agilites may be too quick to dismiss the value or risk-reducing aspects of things such as documentation or interim reports. The answer is often somewhere in the middle.

Understanding Scrum

Here it may help to underline a key insight about the agile software development method scrum. Scrum is a simple set of roles and practices that helps prioritize and organize people and their work – while fostering the communication and transparency vital to high-quality, high-efficiency delivery of working results. This transparency reveals obstacles and performance gaps in a daily, closed-loop way. The figure below illustrates a flavor of agile software development that is common enough to be a good reference point for Lean Six Sigma integration.

Lean Six Sigma Leverage Points for Agile Software Developmen

Done well, scrum is elegant and potent at what it does, but it is not a complete diet. The first shell that needs to surround it is a set of programming practice. Extreme programming (XP) and close variants are a common choice there. Practices such as test-driven development, pair programming and refactoring will put design and development meat on the bones of a Scrum workflow.

6 Ways to Leverage Integration

While scrum (inner circle of the figure above) can be a great foundation, there are still times when teams and individuals reach outside pure design and programming skills to the broader worlds of user-environment exploration, requirements discovery, study of design drivers and dynamics, and other areas depicted in the outer ring of the figure above. This is where Lean Six Sigma can fit in and will make everyone happy. These six steps represent the best potential for Lean Six Sigma and Agile software development integration.

1. Understand Problem and Opportunity Context

Software product owners and analysts, and sometimes even developers, occasionally need to exercise anthropology or sociology skills and learn things about people and their work or play environments. That’s not a coding or design skill per-se; it is a coding and design informing skill.

Lean Six Sigma practitioners have learned much about how to gather and understand the VOC and the voice(s) related to their environment. Skills in language-data gathering and distillation (such as effective affinity and KJ) can be welcome and may help with scrum and agile whiteboards.

2. Discover User Stories and Delivered-Value Tests

Often the focus of Lean Six Sigma VOC work is requirements discovery and prioritization. Agile practitioners will often talk in terms of user stories as potential requirements in the process of becoming better understood. Lean Six Sigma practitioners can learn valuable lessons by understanding the intent and best practices of user stories and agile teams can benefit by some appropriately tailored VOC insight. The key here is to avoid the fourth obstacle from above, about overemphasizing Waterfall. Practitioners should recognize that there are times that requirements understanding is better treated as unfolding and iterative rather than “‘spec’ now or forever hold your peace.”

While it is crucial for practitioners to use functional requirements or user stories to identify what a user or actor wishes or needs to be able to do with the software, it is equally important for them to know how to verify that value has been realized and delivered. This is where delivered-value tests come in. Thinking about the nature of the acceptance tests as part of the understanding-the-requirement process resonates with the test-driven development notions in agile/XP and with the verification sense in Lean Six Sigma.

3. Understand Value Drivers, Risk Drivers and Dynamics

The need for an understanding of key drivers and dynamics depends on the nature of each particular software project. This type of understanding is more commonly useful in firmware development, where software controls hardware and touches the physical world, but also sometimes in applications (e.g., network performance, usability testing) and even in commercial, off-the-shelf deployment. In this latter realm, this type of understanding is important because the development team must be familiar with the “what if?” dynamics related to choices they face.

These development situations call for the right form of model building. Some software teams model the hardware or network in order to reduce development time and dependency on availability of scarce resources. If and when that happens, the team is outside the sphere of scrum-plus-XP skills and tools. But if they have a friendly relationship with a Lean Six Sigma resource, they can work together to build, assess and use some models to drive their required learning.

4. Make Quick, Correct Decisions

Practitioners at all levels would probably agree that they are continuously pushed to make quick decisions – under the pressure that they have to be right or at least right enough to avoid undue waste as a consequence. In simple cases, common sense methods can do well enough, and they will always have a place. But there are other times when the complexity of the decision may become too much, especially relating to one or more of these dimensions:

◉ Number of decision goals and relationships or tradeoffs between them

◉ Number of alternatives and related choices

◉ Evaluation of the merits and gaps of each alternative with respect to the goals

◉ Solution-deployment dynamics including choices about people, other resources and schedules connected with making the solution happen

◉ The number of people who need to be involved with evaluating the goals, alternatives and solution-deployment dynamics

◉ Documenting the decision thought process to inform others and compel them to align with the decision

An Agile team may find itself in need of help when dealing with these decisions, and might be glad to find a Lean Six Sigma person with some simple, practical tools to help sort things out. KJ and web-based AHP are among the tools in some Lean Six Sigma kits that can help in these situations.

5. Deliver Results Using Closed-Loop Control

It is a challenge for developers to see where they are going while they are going there – and see it in a way that delivers early course-correction signals. Scrum uses burndown charts as a primary way to watch the effort and time spent versus the tested functionality delivered, but there are aspects of product and system performance that can benefit from some real-time measurement, adaptation and optimization. Lean Six Sigma understands this realm and developers can gain greater control by fitting its principles into the agile environment.

6. Scale and Sustain Ongoing Delivered Results

After the work products are delivered, there follows the useful life of the product, where there is much to be learned by watching the right aspects of user experience and results. Lean Six Sigma has tools for streamlining the environment for the delivered, installed product – and finding Lean benefits not only for the software company, but also for the customer.

Focusing on the Similarities

It has been said that being able to see what is different in things that are apparently the same is the talent of a good problem solver – but being able to see what is the same in things that are apparently different is the sign of a good innovator and designer. This is why it is important for practitioners to focus on the “things that are the same” that might better connect Lean Six Sigma and agile development.

Continue reading

Why You Cannot Depend Totally on Statistical Software

The proliferation of do-it-yourself statistical software is giving some Six Sigma practitioners and other quality professionals, who are not strong in statistics, a false sense of confidence in their ability to collect and analyze data, and then reach sensible conclusions. What some may not realize is that much of the critical work is done long before any data is collected, let alone analyzed.

Before the first research question is formulated, researchers must clarify the aims of their study. Until that is done, there is little chance that a proper format for analysis can be constructed. Before firing up the statistical software, eight important points should be considered as quality professionals move toward producing the best possible data, which, in turn, should allow the most accurate analysis. The examples used here are drawn from the pharmaceutical industry.

Point 1 – Study’s Objective

The most important stage of the pre-analysis process is understanding the aims of the study. For instance, a pharmaceutical company would like to know if Drug A is better then Drug B. This seems a simple and clear-cut question. But is it? One drug can be better than the other in many different ways:

◉ Drug A may cure a larger percentage of people than Drug B.

◉ Drugs A and B may cure the same percentage, but Drug A does it in half the time.

◉ Drug A may have fewer side effects than Drug B.

◉ Drugs A and B may be bio-equivalent, but Drug A costs half what Drug B costs.

Each of these study aims calls for different research formulations.

Point 2 – Study Design

The next point is clarifying the study design. Is there a set study hypothesis (i.e., Drug A works faster than Drug B)? Is it a preliminary exploratory setting (i.e., workers in a firm are experiencing health problems), but the cause is, as yet, undetermined? Is it an observational study in which the researcher has no control over the parameters? Or, is it a strict, audited clinical design?

Point 3 – Target Population

Defining the target population is next. In the drug example, this is the group of people who are candidates for using the drugs. It is crucially important do define all different subgroups within this population. For instance, will this drug be prescribed to pregnant woman (remember Thalidomide)?

Point 4 – Sampling Population

The population which will be used for sampling purposes ideally should be the same as the target population, but in many cases a sub-population is used for sampling. For instance, many studies are run on college students as surrogates for young adults. College students, however, generally have a higher socio-economic status and health score than the population at large. These differences can bias study results and must be taken into account. Of course, it is essential to select the best sample size to economically reach the researchers’ aims.

Point 5 – Target Parameters

Next is defining the main and secondary target parameters (i.e., the variables of interest to the researcher). It is important to identify possible confounders (variables which can mask real relationships between the target parameters). This is especially crucial for observational studies.

Researchers also must define what would be considered a clinical difference. A clinical difference is often confused with statistical significance, but in fact the two are entirely different. To continue the drug example, suppose a drug company will produce Drug A only if it can be proven to be 50 percent faster acting than Drug B. A clinical study is done and it finds that Drug A is only 25 percent faster than Drug B. Thus, while the result of the study is highly significant statistically, the clinical difference is not good enough to meet the drug company’s requirements.

Point 6 – Control Group

The sixth point is choosing a proper control group, if needed. A control group is a necessity for cause and effect studies. For example, a certain working condition is thought to cause excessive health problems. To test this hypothesis, workers exposed to the suspected hazard must be compared to similar workers who are unexposed.

Point 7 – Randomization

Setting the proper randomization needed to find test subjects is important. Good randomization evens out chance differences between test subjects in order to avoid biasing study results. Bad randomization does the opposite. For example, it was suspected that a certain drug had a dampening side effect on subjects’ cognitive skills. In order to test this premise, the researcher randomly selected two freshman classes from an academic institute. One class was given the drug, the other a placebo. The researcher wasn’t aware that the drug group had mastered a skill not yet undertaken by the placebo group. This chance difference invalidated the experiment’s findings.

Point 8 – Questionnaire

Another topic that should be well explored is questionnaire planning. The best planned study can fail due to poorly collected data. One physician collected annual data on workers’ health. The EKG diagnosis was coded in “free text.” The range of values included “OK, NEG, N.F., NORM, NOR, etc.” When the findings were positive, the coding was even more inventive. As a result, it was impossible to statistically analyze the EKG findings.

It is prudent, when possible, to leave certain types of data-gathering to professionals. Even such things as a computerized database against which new data is to be measured needs to be evaluated. In one case, a perceived change in workers’ cholesterol levels was caused by one laboratory being used when the database was compiled and another for newer data. There was no change in the workers’ health.

Continue reading

Six Habits of the Highly Effective Master Black Belt

Six Sigma practitioners across the globe are trying to accomplish similar objectives. Some might be surprised that these goals do not vary much from countries where Six Sigma is just beginning to take root to those where Six Sigma practitioners work in organizations where Six Sigma has become a way of life. As evidence, one might consider a recent conference in Arizona on Six Sigma in transactional environments. There speakers from across the globe shared concerns over achievement of the same objectives.

What makes Six Sigma a success in an organization? Achievement of Six Sigma objectives comes when organizations:

◉ Involve their Six Sigma Master Black Belts in management decision making.

◉ Acknowledge Six Sigma deliverables by its management in terms of financial savings.

◉ Allocate strategic initiatives to Six Sigma Master Black Belts to Champions.

The formula for this success is a simple equation:

A = f(c) + k

…where A is achievement of Six Sigma objectives; f is top management alignment; c is competency of Six Sigma Master Black Belts; and k is a constant (some might call this good fortune).

If one were to remove the organizations wherein top management is completely aligned with Six Sigma initiatives (relatively few), the achievement of Six Sigma objectives becomes almost directly proportional to the competence of the organization’s Six Sigma Master Black Belts.

Since competence not put in action will not lead to achievement of results, it is important that Master Black Belts not only know how to be competent, but they regularly practice those things that proved their competency. Thus, the six habits of highly effective Six Sigma Master Black Belts:

Habit 1: Understanding Business

Different than business understanding – a competency, understanding business is a habit. The Master Black Belt should engage department heads and functional leaders to understand business. This habit not only provides an opportunity to understand aspects of business at macro and micro levels, but also helps to comprehend strategies framed to further business. At a personal level, it will ensure a face is put to the name, when these leaders think of Six Sigma. No functional head or business leader will likely say “no” when a Master Black Belt wants to understand their aspect of the business.

Habit 2: Creating Opportunities for Improvement

An effective Six Sigma Master Black Belt is always creating or searching for opportunities which will have significant impact on business. This might range from refuting existing measurement systems to capturing better voice of the business/voice of the customer data to creating new measurement systems, or from providing expertise in analyzing some data to sensitizing top management on validity of solutions being worked upon. Each strategy meeting provides ample improvement opportunities to be grabbed, and taken to logically data-oriented solutions. A Master Black Belt needs to understand the pain areas and nominate him- or herself for action planning. Even if these sometimes lead to few miniscule process improvements with abysmal levels of Six Sigma rigor usage, it will help showcase the rigor to management. This habit is often supported by assertiveness and good inter-personal relationships of the Master Black Belt.

Habit 3: ‘What Cannot Be Measured Cannot Be Improved’ And ‘What Cannot Be Seen Has Not Improved’

An effective Master Black Belt always ensures few projects are being championed by him- or herself and team. A Master Black Belt proactively, self-initiates identifying few critical complex pain areas of the business and offering their services be rendered by management to improve and deliver expected results. This habit ensures three things. First, it ensures dependence of management on the Master Black Belt for the progress of the projects and solutions to be implemented. Second, it ensures involvement of the Black Belt to drive the critical project. And third, it ensures the credit of the improvements is not divided among too many stakeholders. The habit is supported by a Master Black Belt’s understanding of business and to strategically balance improvement initiatives to both reduce costs and enhance revenue.

Habit 4: Communicate and Communicate Well

Though communication does wonders for any change initiative, particularly for Six Sigma project improvements, communication is all the more vital. As a habit, the Six Sigma Master Black Belt keeps note of communication sent across the Six Sigma desk. From small solutions with no noticeable impact to larger projects with large financial implications, all are regularly communicated. Any communication can be effective if it has supporting facts and figures. An effective Master Black Belt ensures that communication is complete with data or with examples from the work life.

Habit 5: Data Analysis Is Only Worthwhile When It Is Understood

Many Master Black Belts are fixated on the complex graphical outputs generated by statistical software programs. Though these charts might impress some members of the executive committee, the Master Black Belts must ensure that with or without graphics presentations must be straightforward enough to clearly highlight the key points of the analysis. The habit of presenting the data succinctly and making the point across the entire strategic committee significantly enhances the effectiveness of the Master Black Belt.

Habit 6: Identify and Engage the Key Stakeholders

Apart from the business leader (chief executive officer, chief operating officer, operations head, etc.), the chief financial officer and director of sales and marketing are key stakeholders and also are among the most influential people in most organizations. The effective Master Black Belt ensures that these people are always engaged. This can be achieved through involving them:

◉ In discussions to identify areas of improvement.

◉ As reviewers, Champions or Sponsors for projects.

◉ By collaborating with them to train their team members to facilitate analysis to highlight focus areas.

◉ By launching knowledge management/idea sharing initiatives supported by reward and recognition programs.

◉ In any other way where their expertise and influence is showcased.

One of the most effective ways of engaging these key stakeholders is by having them hand over project completion certificates in front of employee gatherings. This ensures their social commitment toward Six Sigma initiatives. An effective Master Black Belt leverages such engagements to help drive Six Sigma initiatives.

Continue reading

Is tech a threat to the future of the project profession?

Technology is disrupting the project profession at rapid speed. It is revolutionising business and transforming operations. In various industries staff have been replaced by robots, and tech advancements have resulted in job losses. Is it only a matter of time before the project profession suffers too? As automation becomes more intelligent, and AI increasingly has the ability to make decisions using big data and smarter algorithms, are we next in line to be taken over by tech?

Technology can boost productivity and improve efficiency, but does so by reducing the number of employees needed to generate the same or even higher levels of production.

So, is technology a threat to our project profession? The counter argument of course is that Industry 4.0 will open doors for future careers, and that job gains and losses will even out. Yes, our roles will be transformed, even revolutionised, but even in the digital world humans will still be needed to project manage.

Bracing ourselves for tech

Disruptive technology can be perceived to threaten the profession, but by bracing ourselves for new developments in project management, and in wider business, we can be far better equipped to ride out and even embrace the change. By coming to expect tech innovation we can equip ourselves to be ready for a future which advances at a rapid pace.

‘Choosing the right technologies to invest in’ was found to be one of the top factors leaders identified for achieving success. PMI’s 2020 Pulse of the Profession report spoke with executives at top organisations who also listed ‘organisational agility’ and ‘securing relevant skills’ as their most important factors.

The skills which organisations were found to prioritise echoed those listed to be important factors for achieving success – a focus on change, tech and development:

Project professionals who are struggling to meet these in-demand skills may struggle to execute projects successfully in the future. Forward-thinking organisations are investing in tech, re-imagining their vision, and adopting new ways of working. And so, project managers must look to advance proficiencies which allow them to thrive in Industry 4.0.

Unlocking our potential

In terms of change management, organisations are recognising the harsh reality of having to keep up or risk being left behind; and the same goes for project managers. Developing talents will unlock our potential. Whether that means expanding our tech and digital skills, working on our business/leadership acumen, or building on our soft skills.

The digital revolution is set to make soft skills ever more important. The focus will shift from traditional project skills such as planning, scheduling and resource management, to one which values problem solving, creative thinking, empathy and understanding. Essentially the ‘human touch’, which we can still use to outperform machines (for now).

Future-fit project professionals will need to be agile in their approach. An ability to think on your feet will make change a constant and allow you to progress. Pair this with a strong understanding of human behaviour and you have a futureproof recipe for leadership success. Soft skills such as people skills will have a vast impact on how projects are run. Technology is only as smart as the people behind it and so project leaders must have the training, understanding, processes and talent in place to utilise tech to their advantage.

Harnessing disruptive technologies

In their report, Pulse also asked senior executives what area they expect to make the most considerable investments in over the next three to five years. The top responses were technology advancements - 49%, and digitalization - 44%. With these figures in mind we must be sure to also invest the time and resources for reskilling and retraining.

Not only can upskilling allow us to keep up in the digital age, but also get ahead. Finding a way to harness technology means it can be used to the project’s advantage. What’s more, organisational change is often fueled by shifts in technology. Ensure you have the talent and knowhow to utilise tech as it has the power to drive progression and turn ideas into reality.

Reskilling ourselves and our teams will help to shape a company culture which is receptive to change. It will minimise tech disruption and make implementation much smoother. Digital skills are no longer perceived as an added benefit. The future-fit project professional is tech fluent and equipped with strong people skills.

Source: prince2.com

Continue reading

ASQ Six Sigma Certification Preparation Steps and What to Do About Them?

What Is Six Sigma?

The Six Sigma methodology was formed in the mid-1980s by engineers at Motorola to improve manufacturing processes. At its core, Six Sigma includes collecting and leveraging data to reduce defects and waste in manufacturing to improve overall efficiency and quality.

The term sigma is a measure of how far from complete a system or producer can get. By Six Sigma standards, companies should reduce manufacturing defects to less than 3.4 per 1 million units.

Businesses use the Six Sigma methodology to develop processes by identifying the errors that lead to defects and implementing new management systems once mistakes have been addressed. The method is most effective with repetitive, assembly line-style operations where individual steps can be isolated, examined, and improved upon.

Learning Objectives of Six Sigma Certification

Here are the essential learning objectives of ASQ Six Sigma Certification:

• Six Sigma certification helps you to improve your value to your employer and its clients.
• It helps you to improve customer comfort and quality of product and service.
• Reduce the process cycle time and therefore gives overall cost saving up to 30%.
• It helps you to identify and improve requirements in the project definition phase.
• Explain how to measure product and process.
• It helps you to do data analysis and hypothesis testing.
• It provides possible improvement actions for the production of variations.
• They are the right fit to obtain organizational aims.
• You will get higher levels of jobs in the organization.
• This certification training improves your chances of Promotion.
• You can make your current job more comfortable by applying the Six Sigma tools and techniques.
• Overall Business improvement.

How to Get an ASQ Six Sigma Certificate?

To achieve an ASQ Six Sigma certificate, a candidate should meet the experience requirement, give his or her competency for the skill applied, and finally pass a written certification exam.

The written exam is mostly of multiple-choice that progress in assigned time and difficulty at each certification level.

For example, the Yellow Belt exam may take 150 minutes. A Black Belt may take 270 minutes. The hands-on part of the certification examination may require you to complete one or more quality project management with signed affidavits.

Who Needs to Attend Six Sigma Certification?

Some of the professional for whom this training is considered extremely relevant are:

• Quality control professionals
• Process improvement professionals
• Production managers
• Process control specialists
• Frontline and factory supervisors
• Management professionals such as HR
• IT and Finance Engineers
• Business Analysts

Begin Your Preparation for ASQ Six Sigma Certification

To prepare for the Six Sigma Certified exam, make sure that you stick to the given instructions.

Here are the moves that will aid you in the process of preparation:

• The syllabus is the most important part, be it any exam, so make sure you go through the syllabus of the Six Sigma Exam. Prepare your regular study schedule to keep your free time and the time duration until the exam date.
• Every topic of Six Sigma requires to be studied given in the study guide, in-depth.
• Scenario-based logical questions are asked in the Six Sigma exams. Therefore, try to describe every thought with a real-time business scenario while preparing for the exam. Not just will this help you in answering the question better but will also help you expand your knowledge.

Tips and Tricks for Preparation ASQ Six Sigma Certification

• Performing exercises for all the topics will assist you in getting a better grip on the issues.
• Solving exam-oriented ASQ Six Sigma sample questions proves to be of great help. You can find them on ProcessExam.com.
• You can contribute to the practice test for Six Sigma. The questions format will give you an idea of what to assume in your final exam. It will prepare for the real exam as the questions are close to the actual exam, making you feel that you are giving the real exam.
• This will make you know your weak areas at the end of every practice test. Refer to Six Sigma study material for several topics.
• Endeavoring Six Sigma practice tests more and more will aid you to score better than every prior attempt.
• Every practice test you take will take you a move closer to pass the final Six Sigma exam. So make sure you score better every time. This will lead you to your aspired target in the actual exam.
• There are available resources for ASQ Six Sigma Certification Preparation.

How Is Six Sigma Used?

Initially developed for manufacturing, Six Sigma can soon be found across many industries. However, just because companies in various sectors have applied, this methodology does not necessarily mean using it correctly or effectively. Six Sigma often fails to yield the results required to justify such a time-consuming and expensive management change outside of a manufacturing operation.

Read: Six Sigma Certification: Importance, Benefits, And Future

To function effectively, Six Sigma needs buy-in from everyone involved. It requires a sizable upfront cost to complete and train employees on the methodology of Six Sigma and its performance.

Employees of all levels must be decreased in the different positions of the methodology as well. Individuals who have made a Six Sigma certification class earn belts to designate their group - Green Belts are for boots, Black Belts are for project leaders, and Master Black Belts are for those in charge of achieving Six Sigma the business.

Conclusion

It will become more comfortable for you to crack ASQ Six Sigma certification if the points mentioned above are kept in mind. Always mind it. The more serious you will be regarding your time, the easier it will be for you to utilize it in the right manner.

Continue reading

Case Study: Streamlining Coast Guard’s Accounts Payable Process

 

The local senior leadership of the U.S. Coast Guard Finance Center was confronted by the problem of maintaining high levels of service in its accounts payable (AP) process in the face of increasing process complexity. Compounding the issue was the fact that the center’s information technology (IT) systems had been modified to accommodate the growing complexity without a comprehensive business process review, which in turn added even more complexity, resulting in a vicious and endless cycle.

The center, located in Chesapeake, Virginia, employed approximately 360 full-time federal employees and 180 contractors who provided a range of accounting transactional processing and financial statement preparation services for the Department of Homeland Security (DHS), Coast Guard and Transportation Security Administration (TSA). Beginning in October 2006, the center commenced full accounting services for the Domestic Nuclear Detection Office. It also operated and maintained the financial system and associated data bases for some components of DHS. The center processed approximately 2.5 million transactions annually.

Overcoming Process Complexity

An area of particular concern for the local senior leadership was the accounts payable process supporting TSA. It wanted this process to be world class and become the standard process for all their accounts payable services. The finance center leadership was convinced the process used the correct basic financial system tools and architecture for long-term sustainability, but the complexity of this process had grown since its inception of just two short years before. This complexity (Figure 1) over-stressed people, processes and systems with re-work loops, delays, errors, penalties, duplicate payments and more. The center was in a bind, and bringing in additional resources was not an acceptable option.

Figure 1: U.S. Coast Guard Finance Center Current-State Accounts Payable Value Stream Map

But the center’s senior leadership had a strategy for success: Bring in an experienced Lean Six Sigma consultant with a finance background to lead the project team, break through the complexity, and design a Lean, effective and scalable process.

Project Starts with a Value Stream Map

Where did the project team start? It began with a value stream map, then it identified where the non-value-added time was spent. Next, the team developed a measurement system so that it could determine how much time was spent in these non-value-added areas. In addition, the team began to measure queue volumes by specific activities over time within the process. For example, during the initial analysis, the team determined from the Define and Measure phases of a DMAIC (Define, Measure, Analysis, Improve, Control) project:

◉ Current process cycle efficiency is less than 1 percent

◉ Current lead time is 14 days

◉ Sigma level = 1

Some tough questions were asked and that forced many process owners and stakeholders to re-think why they were doing things the way they were. Finally, the project team measured the voice of the customer by conducting a phone survey with their TSA customers. Many Lean Six Sigma tools, such as process mapping, cause-and-effect analysis, failure mode and effects analysis, and basic statistical analysis, were used. In addition, two Kaizen events were conducted. This resulted in some quick wins.

One of the Kaizen events, in particular, produced tremendous results in the authorized certifying officer (ACO) invoice approval queue. This queue contains invoices that had already been entered into the system, and were approved by the contracting officer and his or her technical officer. The ACO invoice approval is the final step in the center’s payment approval process before the invoice is submitted to the U.S. Treasury for payment.

Fixing the ACO Queue Problem

This specific ACO queue was identified through the value stream mapping exercise as a constraint in the process due to the high level of items in the queue (an average of 175 invoices daily with spikes to nearly 700 at times). When the level of invoices spiked, overtime was required to process them. In one Kaizen event, code-named “Queue Blitz,” the ACOs did nothing other than review and approve invoices. After 10 days with intense focus, the queue reached an all time low of one invoice in the queue. That was almost a 100 percent reduction in work in progress (WIP) as shown in Figure 2.

Figure 2: Authorized Certifying Officer Queue

The next step was to maintain an acceptable level of WIP, and institutionalize this as a daily goal. The team determined that one day of WIP would equate to 80 invoices in the queue. (This was based on four ACOs reviewing and approving 20 invoices a day in addition to their other duties.) The finance center management teams are currently using control charts to manage the WIP to no more than 80 invoices a day with a stretch goal of 50. With this revised process, the level has never exceeded 83, resulting in little need for overtime and a reduction in interest and late penalties.

More Plans for the Future

This effort has begun to “turn the ship around,” but there is more ground to cover to get to a world class process. By utilizing the Lean Six Sigma methodology, the finance center now better understands where the pain lies (the root cause) and has already started developing improvement plans aimed at reducing the complexity and streamlining the larger process. The team identified process and management improvements that could be implemented quickly and expected to be completed with the Improve phase by the second quarter of fiscal 2007. After the process changes were implemented, the team defined areas requiring software changes or the use of new software tools, defining the requirements and performance outcomes for these software changes that will be given a high priority for completion and implementation

Continue reading

A Roadmap for Deploying Six Sigma in Small Businesses

Many Six Sigma experts have expressed doubt that Six Sigma can be used effectively in small, or even in some medium-sized, organizations. However, while the approach to deployment must be modified, it is possible for small businesses to successfully implement Six Sigma. Here is how.

At the outset, several givens must be in place:

◉ The owner of the business supports Six Sigma completely and actively, and is willing to personally spend time on it.

◉ The company has a routine core of work that will benefit from the process rigor of Six Sigma.

◉ The organization’s culture is open to change.

All businesses, but small businesses especially, must understand that Six Sigma is not a panacea. There are many aspects to business, and only some of them should involve Six Sigma. Business owners should not abandon their instincts, intuition, taste, feel for the market, competitive spirit, empathy with customers and employees, common sense or good judgment.

A business that wants to change must also meet three requirements:

1. Tolerance for variation and the failures that result. Change requires variation; in fact, it is defined by it.

2. “Slack,” i.e., spare resources that can be diverted to change-related activities.

3. Redundancy built into its systems, so that the areas being changed can still provide essential stakeholder services.

Big companies meet these requirements easily. But such is not the case with all small businesses. Their approach to Six Sigma must be modified in the following respects.

Increasing Tolerance for Variation

Small businesses cannot afford too many mistakes. Many are flirting with the line between survival and success. Thus, when choosing Six Sigma projects, the leader should err on the conservative side, especially in the beginning. Follow the rule used by successful professional gamblers: “Do not risk more than you can afford to lose.”

Before embarking on the Six Sigma journey, small businesses will want to be sure their customers are shielded from any problems that changes might cause. Prior to deployment, they must be sure that they have installed basic quality systems. ISO 9000 has proven to be useful in this regard. When conducting Six Sigma projects, small businesses must take special care to insulate customers from unintended consequences. Also, they must be prepared to forgive and forget when mistakes are made. The safe path of the status quo may result in fewer mistakes, but it is not viable in the long run.

Creating ‘Slack’ and Redundancy

Slack is the amount of time the change agents (Green Belts and Black Belts) spend on Six Sigma project work. Typically, a company’s most scarce resource is human talent. Six Sigma change agents must be a company’s best employees, so slack is the most important category and the most difficult to come by. Likewise, a company must have the ability to cover the important duties of these key individuals (redundancy.) The company leadership team must prepare a plan for creating this redundancy and slack before it launches its Six Sigma effort.

As a rule of thumb, a small business can begin deploying Six Sigma when it reaches a size where one person can devote one day per week to Six Sigma. Assuming an eight-hour day, this threshold is reached when total employment is 20 full-time equivalents (FTEs). This level of commitment is necessary to justify the time and money that must be spent training the change agent, educating the leadership and orienting employees.

This falls in line with what should be a small company’s maximum change agent commitment – 0.5 to 1 percent of its total employee hours (i.e., 20 employees [800 hours a week] means devoting no more than eight hours a week of one employee’s time to Six Sigma projects). The total time spent on change will be much greater than just the change agent’s, and will include time for team meetings and time spent by others implementing the changes. Too much change all at once can be disruptive to normal operations. The 1 percent rule will keep things manageable.

For companies with fewer than 100 employees, Green Belts should be added when total employment reaches 20 and 40 employees, rather than increasing the workload on a single individual. This is recommended for several reasons:

◉ It is usually easier to create small amounts of slack in different areas than it is to replace 40 percent of a key person’s time.

◉ It will create Six Sigma expertise in more areas of the company, which will help create a culture where Six Sigma can thrive.

◉ It will be easier to work on cross-functional projects if there are trained people in more areas of the company.

◉ It will more quickly create a change-agent community where people can learn from one another and share a common bond.

The company should consider rotating people through the Green Belt position, which will require additional training expenditures. Of course, a cost/benefit analysis should be conducted before investing in training additional people, but by then the company should have seen the benefits of Six Sigma and be willing to reinvest some of its gains to spread Six Sigma through the organization.

Growing Six Sigma

A company should stay with two or three active Green Belts – rotating Six Sigma projects among them – until the company reaches a size of about 140 employees. At this size it is large enough to have a full-time change agent, i.e., a Black Belt. Assuming that a company has two active Green Belts, its commitment to change will be 1 percent after the company hires its first Black Belt. (That is calculated as 5,600 hours x 1 percent = 56 hours, or one full-time Black Belt and two part-time Green Belts.)

It is not a good idea to replace all of the Green Belts with a Black Belt when the minimum for the 1 percent rule is reached at 100 employees. Black Belts do better when there are Green Belts with whom they can work.

Ideally the Black Belt should be chosen from the ranks of the company’s Green Belts, unless they are uninterested or clearly unqualified for the greater technical skills required of a Black Belt. An individual who not only has successfully completed Green Belt projects, but who exhibits a passion for the role is a good choice. The company will need to invest in Black Belt training, of course. Costs vary widely; a training program should be chosen on the basis of operational requirements as well as cost. If a Black Belt from outside the company must be hired, a knowledgeable consultant can help assess candidates.

As a company grows, its investment in Six Sigma process improvement projects should grow at a rate of one additional Black Belt and two additional Green Belts for every additional 140 employees. While a company has fewer than five or six Black Belts, the Black Belts should report to local supervisors.

However, when the company reaches approximately 700 to 840 employees, it should consider creating a formal Six Sigma organization headed by a full-time Six Sigma Champion. This individual should possess strong leadership skills and should report to the CEO. Black Belts are more effective when they report to a central Six Sigma organization. Typically, Black Belt success rates, measured by the value of completed projects and Black Belts who complete certification requirements, are about twice as high when Black Belts report to a Six Sigma Champion instead of a local or functional leader. There are two reasons for this. First, centrally reporting Black Belts are in a better position to work cross-functional projects. And second, local leaders often cannot resist the urge to have talented Black Belts work on their current local priorities, which, while important, are less urgent than Six Sigma projects.

Other Challenges

In addition to insuring a tolerance for variation and failure, and creating slack and redundancy, small businesses face additional obstacles not encountered by larger organizations. Two of the more daunting challenges are lack of expertise and the especially dynamic nature of small business. Here are some suggestions for dealing with these problem areas.

Inadequate Expertise – Use leverage to create “Super” Green Belts and to provide additional Black Belt support:

◉ Invest in software and books on Six Sigma. This “expert in a box” approach is dangerous in the hands of amateurs or Six Sigma newbies, but it is a necessary risk.

◉ Get help from large customer companies and suppliers. Caution: Tap into their expertise, but be wary of getting bogged down in their bureaucracy. Some Six Sigma programs have become remarkably hidebound.

◉ Local college faculty often can help with statistical expertise. Caveats:

     ◉ Six Sigma is not academic research. Know when to cut the analysis and act.

     ◉ The KISS rule (keep it simple, stupid) applies. Be sure the faculty member uses the simplest approach possible. Choose a person who can explain things in layman’s terms. (A good test might be to ask the candidate to explain binary logistic regression.)

     ◉ The faculty member may not understand what Six Sigma is. The company’s Green Belts and Black Belts might need to guide him or her.

◉ Use semi-retired experts. After 20-plus years of Six Sigma, there are plenty of people around who understand it and have used it. Find them.

◉ Take advantage of free support: iSixSigma.com’s online discussion forums, articles and information; the International Society of Six Sigma Professionals (ISSSP), etc.

◉ Cut travel costs by using online training and consulting.

◉ Hire interns from local colleges or universities. Juniors, seniors or graduate students can provide a lot of help with number crunching, data gathering, preparation and cleansing, and many other time-consuming tasks.

◉ Commission projects to be done by college students. Students are frequently assigned projects by their professors, and they are looking for partners. Be one.

◉ Many individuals are working to be certified as Black Belts and have passed a subject matter exam, but they need successful projects. Small companies can provide project opportunities.

It is important that outsiders sign non-disclosure agreements before being given access to proprietary information. This requirement might need to be bent for professors at research universities.

Dynamic Nature of Small Business – Most Six Sigma projects take four to six months, which is often too long in a small business environment. However, long cycle times often are the result of big company bureaucracy. They are not a built-in limitation of Six Sigma. Choose projects carefully, sponsor them effectively and pursue them aggressively. A small business will find that it can successfully complete most projects in four to six weeks, instead of months.

Continue reading

Lean Six Sigma for Poets

Lean can be of great value in office environments. However, the use of complex jargon and statistics, plus a focus on manufacturing, have hindered the adoption of these tools in other settings where they can be useful.

I was a liberal arts major in college while almost all of my friends majored in hard-core subjects like nuclear engineering, material science or biochemistry. (I believe they did this because wanted a thing called a “job” when they graduated.) One of the textbooks I had from my freshman physics class was called Physics for Poets. Now you can image my friends’ delight in tormenting me when they got a look at the dust cover of this masterpiece. They spent weeks thinking up new ways to insult me for not taking “real” classes.

However, I was pretty much mock-proof and their insults were lost on me. The reason was that I didn’t really give a rat’s behind about their version of physics. I couldn’t care less about the differential equations they used to prove the laws of thermodynamics, the atomic weight of barium or whatever arcane thing they studied. I only had an interest in the practical applications of physics for someone like me who was never going to be a scientist.

I craved pragmatic knowledge, like did the oil in my car really break down from engine heat every 3,000 miles and need to be changed? Or could I store bottles of vodka in my freezer? I was interested in real-world applications that would help me in my everyday life. I have a similar interest in the tools offered in Lean. (By the way, the answers to the two physics questions above are no and yes.)

My first exposure to Lean occurred twenty or so years ago when the general manager of the large manufacturing business I worked in purchased a book on the Toyota Production System for each member of his leadership team. Several weeks later in our team meeting he was talking with our production manager and said to her “That’s exactly the kind of muda we have to address right now.”

Now, I’ve never been known for my good common sense or for the ability to keep my mouth shut when I really should, so I asked him to repeat what he just said. He repeated it and I then asked what the word muda meant. He said it’s the Japanese word for waste discussed in the book he gave us several weeks ago. Being very quick on my feet I said, “Oh, I didn’t get to that part yet.” My team member friends burst into laughter. It turns a discussion of muda was in the book’s introduction. This began my twenty years of a tortured love-hate relationship with Lean.

I’ve been fortunate to work in a number of highly technical and process-oriented research and manufacturing companies. These firms put a premium on process improvement and high-quality products. The firms were sufficiently successful to offer abundant opportunities to learn and grow your personal capabilities. One of the areas in which I have received significant training and exposure is in the area of Lean and Six Sigma. The training I’ve had had been conducted by experts in the field with much experience and education. I’ve had the chance to take the training and in multiple formats over many years. Most of the training I have had I really hated.

I should perhaps state at this point that I love to learn and try new things; I am not a total luddite. I’ve got an advanced degree from a premier party school; I’ve taken subsequent classes in law, participated in executive retreats at Ivy League schools and read most anything I can get my mouse to click on. I’m good at math and love statistics. My master’s thesis used statistical modeling to attempt to predict job attachment. However, Lean training and I, we’ve had our issues. These issues I believe have hurt the ability of regular working folks like me to utilize Lean’s excellent tools to their potential.

My main concern with Lean training I have had is the cult-like focus on using Japanese words to describe everything. It seems to me that if you really want to impart knowledge to me you would go out of your way to make the tools easy to understand. I have asked probably a half-dozen expert instructors why the tools and techniques are described in Japanese and have heard a number of well thought-out explanations, which never made sense to me. It feels to me like Lean is presented almost like some kind of secret society of which only a chosen few can really enjoy the benefits. However, no one has ever accused me of being the brightest bulb in the chandelier, so let’s just assume there is a good reason which I am not clever enough to understand. Still, I think the language hurts the ability of regular working people to use the tools.

The other concern I have with the Lean training I have had is that it is exclusively focused on manufacturing process improvement, and the generic training is often focused on vehicle manufacturing. This is completely understandable and appropriate as that is where the most common use occurs, but I have had trouble seeing myself as an office person with office processes in the training I’ve had.

That said, although I’ve struggled with the training, I have loved the concepts and have worked over the years to apply the tools, frequently with English terms, to the work I have been engaged in.

Continue reading

Optimize the Total Costs of Quality

Boosting a product or service offering with optimized costs is a strategic objective of most manufacturing and service industries in the world. The ways to achieve this objective can range from shortsighted organizational downsizing and payroll cuts to farsighted plans to combat hidden costs. In the latter tactics, management exerts tight control over cost of quality (COQ) to achieve more with less while balancing the trilogy of profitability, customer satisfaction and employee satisfaction. If inflated, COQ becomes a serious silent killer that eats profitability for breakfast.

Monitoring and controlling COQ is indispensable to survival.

What Is COQ and COPQ?

COQ and cost of poor quality (COPQ) are sometimes erroneously thought to be synonymous, but COPQ is one component of COQ. COQ, sometimes referred to as total COQ, is the sum total of costs associated with preventing failures and appraising quality level and costs resulting from failures. So COQ is made up of two main components:

1. Cost of good quality (COGQ) represented by prevention and appraisal costs, and

2. COPQ for failures costs.

Failure costs are divided into external costs (supply chain costs) and internal costs (field failure costs). Total COQ can be represented in the equation below.

Figure 1: Equation for Total COQ

COQ Components

The key differentiator between internal and external failure costs is whether they occur before or after reaching the customer. Internal failures are those resulting from a product or service’s nonconformance to requirements that occurs before reaching the customer – whether those failures take place in any of the design, procurement or production processes. For instance, if a finished product requires rework due to design changes, it takes place before delivery to the customer and is an internal failure. Similarly, replacing defective raw materials acquired from a supplier happens during the procurement process and is considered an internal failure.

Figure 2: Examples of Internal Failure Costs

Conversely, external failure costs are those costs incurred by a product or service’s nonconformance to requirements that occurs after reaching the customer. Toyota’s 2019 recall of vehicles due to unintended acceleration is a poignant example of an external failure, which caused 52 deaths, 38 injuries and a financial loss of $5.5 billion. Another example of an external failure is the tragic 1986 Space Shuttle Challenger explosion that occurred 73 seconds after takeoff, causing seven deaths and a financial loss of more than $1 billion. A more mundane example would be when a customer returns a defective product to the seller for a refund or makes a claim against the manufacturer’s warranty.

Figure 3: Examples of External Failure Costs

On the other end of the spectrum exists the COGQ that, if leveraged, combats poor quality costs. Despite being costs, appraisal and prevention activities are desirable to a certain extent beyond which the law of diminishing returns dominates. Raw materials being inspected (appraisal activity), for instance, will decrease the odds of having nonconforming input to the manufacturing process. Even better, reviewing and rating your suppliers regularly (prevention activity) increases the odds of receiving consistent quality materials which could eliminate the need for frequent inspections down the road.

Although appraisal costs are considered COGQ, they must be used sparingly. This is because they are detective rather than preventive activities. For example, inspection of a finished product at the end of the line would probably detect defects, but will never eliminate the root causes; thus, defects recur. Appraisal costs are costs incurred to determine the degree of conformance to quality requirements – not to prevent causes of failure. This component of the COQ can take place anywhere during procuring raw materials, producing an item, or could be in activities external to the organization such as inspections, tests or audits conducted at the site for installation or delivery.

Figure 4: Examples of Appraisal Costs

Prevention costs are the other part of the COGQ; they are the costs of all activities designed to prevent poor quality in products or services. It is best to maximize the equation as they keep failure and appraisal costs to a minimum. Cost to eliminate a failure after delivery is five times that at the development or manufacturing phase. Prevention activities, therefore, are best performed at upstream rather than downstream processes. For instance, reviewing a design before release to manufacturing would spare the organization extra costs that might be incurred due to internal or external failures after production. Prevention activities might be deployed anywhere in the value stream, from marketing through production.

Figure 5: Examples of Prevention Costs

Optimizing TCOQ

Going back to the total COQ formula mentioned above, logically yet still controversial, the TCOQ value cannot be zero. It is an optimization problem. Since nobody is operating in a perfect world, no organization can ever produce or offer a defect-free product or service without deploying appraisal or prevention measures. Obviously, COGQ components – appraisal and prevention costs – need to be maximized, while COPQ components – internal and external failure costs – are to be minimized to reach to the minimum TCOQ value.

Figure 6: Optimizing COQ

As shown in Figure 6 above, COPQ declines as the quality level improves, but this doesn’t occur without exerting some level of prevention efforts. The key question that the TCOQ formula should answer is: To what extent should the organization invest in COGQ so that it reaches the minimum TCOQ with the optimum quality level of the product or service? The answer points to where the organization needs to position itself consistently to retain competitiveness or, more bluntly, to survive.

Improving a product or service quality level while keeping profitability at decent levels is not a walk in the park endeavor. It means having a proper grasp of the COQ concept and methodology, coupled with a standardized approach of monitoring and controlling over optimum levels of cost. Such mastery will allow the organization to balance the competing demands of profit and customer and employee satisfaction.

Continue reading