3 - Define - Selecting Projects

Define Phase
Selecting Projects
Project Selection
Understanding Six Sigma
Six Sigma Fundamentals
Selecting Projects
Selecting Projects
Refining & Defining
Financial Evaluation
Elements of Waste
Wrap Up & Action Items
OSSS LSS Green Belt v11 MT - Define Phase 2 © Open Source Six Sigma, LLC
Approaches to Project Selection
There are three basic approaches to Project Selection…
“Blatantly Obvious” “Brainstorming Approach”
Things that clearly occur on Identifies projects based on

a repetitive basis and individual’s “experience” and
present problems in “tribal knowledge” of areas that
delivering our service(s) or may be creating problems in
product(s). delivering our service(s) /
product(s) and hopefully tie to
bottom-line business impact.
“Structured Approach”
Identifies projects based on organizational data, provides a direct
plan to effect core business metrics that have bottom-line
impact.
All three ways work…the Structured Approach is the most desirable.

Project Selection – Core Components
Business Case – The Business Case is a high level articulation of

the area of concern. This case answers two primary
questions; one, what is the business motivation for
considering the project and two, what is our general area of
focus for the improvement effort?
Project Charter – The Project Charter is a more detailed version

of the Business Case. This document further focuses the
improvement effort. It can be characterized by two primary
sections, one, basic project information and, two, simple
project performance metrics.
Benefits Analysis – The Benefits Analysis is a comprehensive

financial evaluation of the project. This analysis is concerned
with the detail of the benefits in regard to cost & revenue
impact that we are expecting to realize as a result of the
project.
Project Selection - Governance
Responsible Frequency
Party Resources of Update
Business Champion Business Unit

N/A
Case (Process Owner) Members
Champion (Process
Project
Six Sigma Belt Owner) & Ongoing
Charter
Master Black Belt
Benefits Capture
Champion (Process
Benefits Manager or Ongoing /
Owner) &
Analysis Unit Financial D,M,A,I,C
Six Sigma Belt
Rep
A Structured Approach – A Starting Point
The Starting Point is defined by the Champion or Process Owner and the
Business Case is the output.
– These are some examples of business metrics or Key Performance Indicators
commonly referred to as KPI’s.
– The tree diagram is used to facilitate the process of breaking down the
metric of interest.
❖ EBIT
Level 2
❖ Cycle time
❖ Defects Level 2
❖ Cost Level 1
Level 2
❖ Revenue
❖ Complaints Level 2
❖ Compliance
❖ Safety
A Structured Approach - Snapshot
The KPI’s need to broken down into actionable levels.
Business Measures
Actionable Level
Key Performance Indicators (KPIs)
Level 2 Level 3 Activities Processes

Level 1
Business Case Components – Level 1
Primary Business Measure or Key Performance Indicator (KPI)

Level 1
– Focus on one primary business measure or KPI.
– Primary business measure should bear a direct line of site with the
organizations strategic objective.
– As the Champion narrows in on the greatest opportunity for

improvement, this provides a clear focus for how the success will be
measured.
Business Case Components – Business Measures
Post business measures (product/service) of the

primary business measure are lower level metrics
and must focus on the end product.
Business Business
Activities Processes
Primary Business Measure Measure
Measure Business Business

Measure Measure
Business Case Components - Activities
Business Business

Measure Measure
Y = f (x1, x2, x3…xn )

First Call Resolution = f (Calls, Operators, Resolutions…xn )
Black Box Testing = f (Specifications, Simulation, Engineering…xn)
Business Case Components - Processes
Business Business

Measure Measure
Y = f (x1, x2, x3…xn )

Resolutions = f (New Customers, Existing Customers, Defective Products…xn )
Simulation = f (Design, Data, modeling…xn )
What is a Business Case?
The Business Case communicates the need for the project in

terms of meeting business objectives.
The components are:

– Output unit (product/service) for external customer
– Primary business measure of output unit for project
– Baseline performance of primary business measure
– Gap in baseline performance of primary business measure
from business objective
Let’s get down to

business!
Business Case Example
During FY 2005, the 1st Time Call Resolution

Efficiency for New Customer Hardware
Setup was 89% .
This represents a gap of 8% from the

industry standard of 93% that amounts to
US $2,000,000 of annualized cost impact.
The Business Case Template
Fill in the Blanks for Your Project:
During ___________________________________ , the ____________________ for

(Period of time for baseline performance) (Primary business measure)
________________________ was _________________ .

(A key business process) (Baseline performance)
This gap of ____________________________

(Business objective target vs. baseline)
from ___________________ represents ____________________ of cost impact.

(Business objective) (Cost impact of gap)
Business Case Exercise
Exercise objective: To understand how to create a

“strong” Business Case.
1. Complete the Business Case template below to the best

of your ability.
During ________________________ , the ____________________ for

(Period of time for baseline performance) (Primary business measure)
_______________________ was ___________________ .

(A key business process) (Baseline performance)
This gap of __________________________

(Business objective target vs. baseline)
from __________________ represents ____________ of cost impact.

(Business objective) (Cost impact of gap)
What is a Project Charter?
The Project Charter expands on the Business Case, it

clarifies the projects focus and measures of project
performance and is completed by the Six Sigma Belt.
Components: • The Problem
• Project Scope
• Project Metrics
• Primary & Secondary
• Graphical Display of Project
Metrics
• Primary & Secondary
• Standard project information
• Project, Belt & Process Owner
names
• Start date & desired End date
• Division or Business Unit
• Supporting Master Black Belt
(Mentor)
• Team Members
Project Charter - Definitions
• Problem Statement - Articulates the pain of the defect or error in the

process.
• Objective Statement – States how much of an improvement is desired

from the project.
• Scope – Articulates the boundaries of the project.
• Primary Metric – The actual measure of the defect or error in the

process.
• Secondary Metric(s) – Measures of potential consequences (+ / -) as

a result of changes in the process.
• Charts – Graphical displays of the Primary and Secondary Metrics

over a period of time.
Project Charter - Problem Statement
Migrate the Business Case into Problem Statement…
Project Charter – Objective & Scope
Consider the following for constructing your Objective & Scope
What represents a significant improvement?

• X amount of an increase in yield
• X amount of defect reduction
• Use Framing Tools to establish the initial scope
Project Charter – Primary Metric
Establishing the Primary Metric:

The Primary Metric is a
very important measure
in the Six Sigma project;
this metric is a
quantified measure of
the defect or primary
issue of the project.
We can have only One

Primary Metric. Recall
the equation Y = f (X);
well once your defect is
– Quantified measure of the defect located then Y will be
– Serves as the indicator of project success your defect…your
– Links to the KPI or Primary Business measure primary metric will
– Only one Primary Metric per project
measure it.
Project Charter – Secondary Metrics
Establishing Secondary Metric(s):
Secondary Metrics are

put in place to measure
potential changes that
may occur as a result of
making changes to our
Primary Metric.
They will measure
ancillary changes in the
process, both positive
and negative.
– Measures positive & negative consequences as a result of changes in

the process
– Can have multiple Secondary Metrics
Project Charter – Metric Charts
Generating Charts:
Primary and Secondary

Metrics should be
continually measured
and frequently
updated during the
projects lifecycle.
Use them as your
gauge of Project
Success and Status.
This is where your
Project’s progress will
– Displays Primary and Secondary Metrics over time
be apparent.
– Should be updated regularly throughout the life of the project
– One for Primary Metric and one for each of the Secondary Metrics
– Typically utilize Time Series Plots
Project Charter Exercise
Exercise objective: To begin planning the Project

Charter deliverable.
1. Complete the Project Charter template to the best of
your ability.
2. Be prepared to present your Stakeholder Analysis to
your mentor.
Project Charter Template.xls
What is the Financial Evaluation?
The Financial Evaluation establishes the value of the project.
The components are:

– Impact OK, let’s add it up!
• Sustainable
• One-off
– Allocations
• Cost Codes / Accounting System
– Forecast
• Cash flow
• Realization schedule
Typically a financial representative is responsible for evaluating the

financial impact of the project. The Belt works in coordination to
facilitate the proper information.
Benefits Capture - Calculation “Template”
There are two

types of Impact:
One Off &
I
M Sustainable Impact “One-Off” Impact
P
Sustainable
A
C
T
Cost Codes
C allocate the
impact to the
O
S
T Reduced Increased Implemen-
Costs Capital
appropriate
C
Costs Revenue tation
O
area in the
D
E
S
“Books”
Forecasts allow
F
O
Realization Schedule
R (Cash Flow)
for proper
E
C
A
management of
S
T
By Period
projects and
(i.e. Q1,Q2,Q3,Q4)
resources
Benefits Calculation Involvement & Responsibility
Project Selection D-M-A-I-C Implementation 6 Month Audit
Financial Financial Financial Financial

Representative Representative Representative Representative
Champion Black Belt Champion Process Owner

& &
Process Owner Process Owner
Benefits Capture - Summary
• Performance tracking for Six Sigma Projects should use the

same discipline that would be used for tracking any other
high-profile projects.
• The A-B-C-D categories can be used to illustrate the impact

of your project or a “portfolio” of projects.
• Establish The Governess Grid for Responsibility &

Involvement.
It’s a
wrap!
Benefits Calculation Template
The Benefits Calculation Template facilitates and aligns with

the aspects discussed for Project Accounting.
Summary
At this point, you should be able to:
• Understand the various approaches to project selection
• Articulate the benefits of a “Structured Approach”
• Refine and Define the business problem into a Project

Charter to display critical aspects of an improvement
project
• Make initial financial impact estimate

3 - Define - Selecting Projects

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3 - Define - Selecting Projects

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Define Phase

Understanding Six Sigma

Six Sigma Fundamentals

Refining & Defining

Wrap Up & Action Items

There are three basic approaches to Project Selection…

“Blatantly Obvious” “Brainstorming Approach”

Things that clearly occur on Identifies projects based on

All three ways work…the Structured Approach is the most desirable.

Business Case – The Business Case is a high level articulation of

Project Charter – The Project Charter is a more detailed version

Benefits Analysis – The Benefits Analysis is a comprehensive

Business Champion Business Unit

The KPI’s need to broken down into actionable levels.

Level 2 Level 3 Activities Processes

Primary Business Measure or Key Performance Indicator (KPI)

Level 2 Level 3 Activities Processes

– Focus on one primary business measure or KPI.

– As the Champion narrows in on the greatest opportunity for

Post business measures (product/service) of the

Measure Business Business

Measure Business Business

Y = f (x1, x2, x3…xn )

Black Box Testing = f (Specifications, Simulation, Engineering…xn)

Measure Business Business

Y = f (x1, x2, x3…xn )

Simulation = f (Design, Data, modeling…xn )

The Business Case communicates the need for the project in

The components are:

Let’s get down to

During FY 2005, the 1st Time Call Resolution

This represents a gap of 8% from the

Fill in the Blanks for Your Project:

During ___________________________________ , the ____________________ for

________________________ was _________________ .

This gap of ____________________________

from ___________________ represents ____________________ of cost impact.

Exercise objective: To understand how to create a

1. Complete the Business Case template below to the best

During ________________________ , the ____________________ for

_______________________ was ___________________ .

This gap of __________________________

from __________________ represents ____________ of cost impact.

The Project Charter expands on the Business Case, it

• Problem Statement - Articulates the pain of the defect or error in the

• Objective Statement – States how much of an improvement is desired

• Scope – Articulates the boundaries of the project.

• Primary Metric – The actual measure of the defect or error in the

• Secondary Metric(s) – Measures of potential consequences (+ / -) as

• Charts – Graphical displays of the Primary and Secondary Metrics

Migrate the Business Case into Problem Statement…

Consider the following for constructing your Objective & Scope

What represents a significant improvement?

Establishing the Primary Metric:

We can have only One

Establishing Secondary Metric(s):

Secondary Metrics are

– Measures positive & negative consequences as a result of changes in

Primary and Secondary

Exercise objective: To begin planning the Project

Project Charter Template.xls

The Financial Evaluation establishes the value of the project.

The components are:

During _______________ , the for

________ was _ .

from _ represents __ of cost impact.

During ____ , the for

_____ was _ .

from ______ represents of cost impact.