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SBTI Lean Six Sigma Podcast
#4
February 2, 2006
Critical Success Factors in a Lean Six Sigma Deployment
Dan Kutz & Bill Hertzing
http://www.sbtionline.com/podcast/Critical_Success_Factors_in_a_Lean_Six_Sigma_Deployment.mp3
http://www.sbtionline.com/podcast/Critical_Success_Factors_in_a_Six_Sigma_Deployment.mp3_transcript.php

Bill Hertzing (Intro): Hi this is Bill. Welcome back to another episode of the SBTI Lean Six Sigma Podcast. Episode 4: Critical Success Factors in a Lean Six Sigma Deployment. In this episode I sit down with Dan Kutz, President for Sigma Breakthrough Technologies, Inc., to discuss the process inputs and outputs of a successful Lean Six Sigma Deployment.

Bill Hertzing : Dan, thanks for joining us.

Dan Kutz : Hey, good afternoon, Bill

BH: Dan, what are some of the critical success factors companies or program leaders should know about?

DK: Well, first the critical success factors line up against the process of leading Lean Six Sigma Deployments. So, the process, like any, has inputs, steps and outputs. The inputs are business strategic targets, the annual targets, maybe quarterly goals but generally a little longer term targets. And then, the output is to make the financial numbers and make stakeholders happy. So, the steps along the way. There is usually five steps in the process. I'm sure we could define it differently but we've used these steps successfully with many of our programs. The first is Select the right projects. The second is Select and train the right people. Third, develop and implement the improvements, plans and projects. And then manage the process for excellence and sustain any gains that are achieved.

So, those are the typical five steps. The critical success factors are within those.

BH: So, which are the most important steps? The ones that have the most influence on the output.

DK: Lean Six Sigma uses, variation and understanding the steps up early.if there's a problem early on, tend to cascade throughout the system. Probably I'd say the first two steps are the most important. Picking the right projects to work on making sure they are tied to business goals and objectives. And then, getting great people to work on them. And, unfortunately that means the part of our business that we do a lot of is probably most robust to good or bad delivery, let's say, the improvement plans and the management of those do program reviews. Those are probably not the most important. And then finally, the last step definitely is one of the, I say, the very most important piece which is locking in any benefits that have been achieved. Sustaining the gains, encouraging those and getting setup for your next round of improvements.

BH: So, what are some of the critical success factors in these most important steps? For example: in the selecting the right projects step.

DK: There's probably four that I have picked out. Great communications plan: people are going to help the effort they are going to make a better contribution to the effort. They understand what is coming and what is expected. They know what's happening in any lean sigma program. So, that's probably the first thing is making sure that all parts of the enterprise are properly communicated with. We've got some templates and methods by which we can help customers do that efficiently without having to go write it themselves and so forth.

They second one is getting finance heavily involved up front. If the output is to make the numbers, the finance organization tends to hold the key to where those numbers are. What's holding us back. Certainly there are issues that are not in finance's hands or visibility but many are and they can point to places where the company's ratios are out of alignment maybe a little too high in SG&A expenses or constrained in certain areas. A finance organization knows that. They also know how a project will impact the financial statements making sure that any project we work on, we know how we are going to count the benefits.

The third one would be focusing on great breakthrough change projects. Ones that deliver a high financial benefit for the energy invested. Different companies in different circumstances have different financial hurdles but we definitely look for high financial benefits.say $250,000 per project. Some companies aren't used to that kind of thinking the say, "Well a 5% improvement or a $50,000 per project is good." And, it is. But, asking people to look for a really big impacts really makes a difference. The way we can find that is we make sure they are tied to strategy that sure those projects were selected by company leaders. Also, best practice is to make sure ownership of those projects is established. That.say a key executive maybe a VP of Operations or if it's a corporate deployment which is always a good idea, a CEO review session where chief officer of the company says, "Yes. Ok, I see these projects. I think they're good ones. We're definitely going to pursue them and now I know who's responsible for each one," from a champion's perspective. So, establishing accountability on those breakthrough projects is always a best practice within selecting the right projects.

And then finally fourth and last, any projects maybe we've got Lean Masters working on projects or we've got Black Belts working on projects if that's the terminology used in your company, those should be included in budgets and annual operating plans right away. If they are not tied to budgets and annual operating plans, maybe the budget is set. People say, "Oh.we can't go change the budget." If they are not tied to them, then it's not clear who's expected to deliver what change in the budget or what savings in the annual operating plan. It becomes a special project. Special projects don't just get resources off the side of people's desks.

So, those are four good lessons learned in picking the right projects and making sure that proper accountability is established.

BH: What are some of the critical success factors in selecting and training the right people step?

DK: Obviously, selecting the right project leaders. How do you do that? Well, I think it varies company to company. People say purse your high potentials. Which is always a good thing. However, your system of identifying high potential folks may not always identify every one. So, we want to use this as a chance to, maybe, select some folks that you hadn't thought of before. And, the way you can do that varies by company. Perhaps you have a great technician who maybe isn't considered a great project leader. But, we could give him a chance if they have done good work in their area. Maybe some junior engineers that haven't been given a key project yet. But, we think they've got some good ideas. We can test them. You may not do that on your first round of project leaders. But, if you've got a couple of key advocates in a company that thinks somebody is a great person, it might be a good chance to give it a try and select some of your best people.

The other way to make sure you are selecting your best people, is to not necessarily go bottom's up. Just say, "Hey, send us twenty people." Well, let's actually come up with a mechanism in the company by which we proactively look at all the resources and determine who's working on what. That's a hard thing to do. The more we actually look as a selection team a key executive can vet and say, "Yes. This person really does look like a high potential person." He's not just somebody who happens to be available. Available resources tend to be the ones you might want to at least be concerned about avoiding because maybe the are not the best folks. So, it's a little bit difficult to do that. But, obviously we want great people leading the projects and they really get it done.

Also, let's make sure we get excellent, well developed and trained and clear expectations at the champion level. So, we want to pick champions. We want to train them in two ways about the program deployment and the technical tools that they'll need to be coaching. And, make sure they have an actual hand-on role in the project work. Don't forget to proactively select champions. Not just project leaders and really cultivate that champion network.

Another lesson learned is set great expectations up front. What is the commitment of time expected for these resources? Are they going to work at 10% off the side of their desks? If so, then you should expect significantly less results in their project and significantly longer project timeline.

Companies like to say, "We're going to say we are going to have Lean Leaders or Master Black Belts.," and don't allocate the time. And, therefore, then wonder why did the projects take 8-10 months.

So, set the right expectations for time and financial results. If I'm going to be selected as a project leader, what do I need to deliver back to company? Is it one project a year of X financial value over the forward twelve months. What is my expected delivery? The fourth one is to put those expectations in the company's existing people management structure. So, if you have a performance review system. Some system by which you document goals and objectives for the individuals and have their direct supervisor agree to that, then let's go ahead and use that system. Because if you don't, then there's always this other mechanism by which somebody is supposed to be evaluated. When it comes down to evaluation time, I like to work on the things I get evaluated on. So the forth lesion learned is let's put it in the pay-for-performance management system.

BH: So talk to me more about sustaining the gains. What's involved in that step?

DK: Essentially if you imagine 50, 100, 10 projects have reached their completion, we don't want to ever have to waste resources going back to keep those processes that were improved on target. We want to make sure they are locked in and the mechanism by which they maintain their performance is developed, matured and implemented as part of the existing project work. Not some afterwards project where people get called back 3 or 6 months down the road. That's on the project level.

On the system level, you want to be able to measure 3 months, 6 months, 12 months down the road how much benefit are you getting from the project. Where if you did earlier and maybe last year what benefit am I getting this year from last year's projects? So, that's the key components.

You also want to continually identify and launch new projects. We have to refresh. That's the elements to the step.

Some of the best critical success factors: first, each project that is implemented must have a world class control system. And, a control plan is usually the tool that is used. And they're usually pretty soft if you don't work on them. You'll get some sheet of paper that looks like spreadsheet that might have some key X's in it. But, maybe it's more like measuring the outputs. So, there's a real skill to developing great control plans and making sure each project had them. So, to transfer that skill and focusing on that skill is a critical success factor.

We had a great major customer that did an excellent job. They had a structured review project where each project if it closed, let's say it close on December 31st of last year, on the end of March which would be three months after project closure, they would review it again. A quick review 15-20 minutes. Is the metric on track and did we get the financials? At 6 months they would review it again. Is the metric on track and how much financial benefit have we gotten? And again at the end of the year forward, where's the metric today? And, is the financials on track.

If you kept it on track for a year, and you reviewed it just three times in that year for quick reviews.and these can be done at remote location without travel.15 minute chunks.if the metrics are on track, your getting your financials you know where you are at.

And if you do that for every project that closes the project leaders and teams know they are going to be reviewed three time in the forward year, it forces them to do a really great job on the control plan. So, that's another lesson learned.

Quickly two more: regularly review the effectiveness of the overall lean sigma program. It could be 6 month intervals. It could be annual intervals. I think world-class is quarterly reviews of some steering teams. Just have a regular review that's formal to identify what going well and what's not going so well and make active adjustments.

And then the last is: Get Ready. You'll have new projects kicking off all the time, keep evaluating and identifying great ideas. Now we've got great software system that can help the management and visibility of those. Where you've got program management software that's available through a variety of providers in the industry. Many of which are SBTI partners. Those internal system that can identify and bring visibility to your future project ideas help you prioritize, sort them and pick them is another best practice in critical success factor in sustaining the gains step.

Those are the key things. And if you focus on your Lean Sigma program as a process of which there are some steps that are probably more important than the others and you know your critical success factors, hopefully in all the steps but especially in those most important steps and you manage those very well, you should have a great program return.

BH: So, in closing, what is the impact on Lean Six Sigma deployments when they miss one or two of the critical success factors? Or, better yet, if they are carefully considered and properly implemented?

DK: Bill, the great news is that any program can succeed if the majority of the success factors are well handled. You don't have to hit every one of them. Certainly any miss is going to show up. But, if you do a good job on most of them you can get a 10X ROI within 12-24 months. Benchmark companies are getting 1-3% of revenue in terms of productivity benefits if they are just doing a good job on them. They don't have to hit everything.

The great opportunity, however, is companies that have covered these basis well deliver much higher ROI, 20X to even 80X. People sometimes wonder is that obtainable? Are you just promoting this stuff? No. Ask customers. They definitely get this. But, you have to have a pretty well put together program and be managing the vast majority of these especially those critical success factors.

Essentially, I look at that and say we've got a job, executive directors and program managers whose role or job description is to go out and manage those. Make sure we keep reminding customers that this is something that you need to do and here's an easy way to do it. That's essentially what I think is the job description of a great program manager whether from us or inside of a customer if they are managing their own program as they take ownership. It's always a challenge but the factors are well known. Solid financial results are the norm for programs. Tremendous financial results is possible with great program leadership and attention to critical success factors.

BH: Thank you for taking time out of your busy day to join us.

DK: It's been a pleasure, Bill. Thank you.

BH: Thank you.

BH (Outtro) : And that concludes another episode of the SBTI Lean Six Sigma Podcast. I hope you return for another. For a direct download or transcript of this podcast, visit sbtionline.com/podcast . Or, you can subscribe to this podcast through many of the popular podcast directories like iTunes, Yahoo, Podnova, Odeo and more. We welcome any type of feedback. You can email us with questions, comments, topic suggestions at podcast@sbtimail.com. Again, that address is p-o-d-c-a-s-t@s-b-t-i-m-a-i-l.com . For more information on this or many other topics visit the SBTI main website at www.sbtionline.com or call 888-752-7070. I'm Bill Hertzing.Thank you so much for joining us. I'll see you next time.