Lean six sigma project selection and project KPI
In this article, we will describe more in detail how to select a good lean six sigma project and how to define a good project key performance indicators to follow up the project. In a previous article, we saw how to establish a business case. Now, the business case is not the project itself.
The project selection has to fall within the business case and limits the scope further. It is possible that you can define multiple projects within the business case. Keep in mind that a project should have a reasonable scope in order to limit the duration of the project and keep your team motivated to work on the project.
When selecting a project you should make sure that the project has significant importance for the organization. This means that the project creates a major improvement in process performance. Typically this means an improvement in delivery time, quality, and/or cost. Whatever the focus is, the end result will be a major financial impact. What a company will consider as major depends on the size and turnover of the company. You will have to agree with your management.
The bulk part of projects has a scope of around 6 months since support for projects often decreases after 6 months. But depending on the type of problem, a scope of 3 to 12 months is not uncommon. Be aware of too large a project scope.
Using Pareto analysis for project selection
The Pareto analysis that we have seen in the first section could help in breaking down the business case further and therefore could help to select a good lean six sigma project. As a reminder, the Pareto principle, also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity states that, for many events, roughly 80% of the effects come from 20% of the causes.
For example, 80% of software problems are caused by 20% of bugs
Let’s have a look at the following business case:
During 2019 the cost for the packaging of our outdoor products was on average 10$. This is a gap of 33% from the target of 7.5$ and represents a 250.000$ cost impact.
A Pareto of the packaging cost could look as followed:
With this information, we could decide to create two projects: one around the packing of swimming pools and one around the packing of garden tools. By using the Pareto principle we are able to focus our limited resources on the working areas with the most impact.
Project KPI
Before we start our project there is still one thing we have to do. We have to define a project KPI. This KPI is a measurable value (metric) that signals how effectively improvements we implement during our project will be. The project KPI and corresponding target is a clear quantitative measure of success. It helps in clarifying the project goals with the team. Make sure you have not only agreed on the target but also on the baseline. If you want to reduce 30% cost, you have to state clearly compared to what: last year, last 12 months, last quarter…
Don’t forget to share and discuss the KPI with all involved actors. The management should support and approve the project in order to get access to the needed resources. They will also be able to remove barriers that endanger a successful ending of the project and make sure the project is sustainable over time.
You will need not only the support of the management but also from the people who are affected by the changes. Make sure the importance of the project and its goal is also clear to them. People are more likely willing to support a project that they understand and see as important.
Let’s summarize what we have learned so far. You best use a structural approach to define business cases. You have to make certain that there is a link with business KPIs. The business case defines what the motivation is for considering the project what the general area of focus for the improvement effort is. Use the Pareto principle to define different projects which fall within the business case. Once you have a project perform a benefits analysis to make sure the efforts are in relation to the results. Finally, select a project KPI and define a target, and do not forget to inform all the involved actors!
If you pick the right project, you will find that it is much easier to apply the six sigma methodology.
