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Six Sigma Project Guidance

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Roles and ResponsibilitiesRoles and Responsibilitiesof the Finance Support Teamof the Finance Support Team

• Define Savings/Benefits

• Provide Financial Support– Project Selection and Review

– Project Evaluation

– Track Savings/Benefits

• Validate/Audit Financial Results

• Management Reporting

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Finance TeamFinance Team

Being Developed

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Roles and ResponsibilitiesRoles and ResponsibilitiesBlack Belt vs. Financial Analyst Black Belt vs. Financial Analyst

Black Belt– Data Collection

– Original Analysis

– Cost Analysis

Financial Analyst– Provide Budget Information by Cost Center

– Cost/Benefit Analysis

– Review / Validation

– Budget Adjustment

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Project Process MapProject Process Map

Project Consideration Close

Project

Finance Sign-Off

Project Assignment

Project Champion

Enters High Level Estimate of Cost Savings

Measure & Analyze

• Establish Budget and Savings.

• Enter Data into Tracking Model

• Finance Sign-Off by Project Team Financial Analyst.

• Sign-Off by Functional Deployment Champion - Finance

Improve & Control

• Sign-Off by Project Team Financial Analyst

• Sign-Off by Director-Level Deployment Champion - Finance.

• Sign-Off by Functional Deployment Champion - Finance.

• Appropriate Budgets Adjusted.

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Finance Sign-OffFinance Sign-Off

1. Before an Opportunity becomes a Project– High-level “sanity check”– The Project Champion should have already entered numbers and attached the

model spreadsheet– The spreadsheet should contain values, in thousands of dollars– Questions to ask:

– Are hard, realized, net benefits recorded correctly?– Are there any other possible sources of savings?– Is there an opportunity to save $250,000 or more?

2. Before the Process Improvement Takes Place– The Black Belt should have already reviewed and updated the benefits

spreadsheet– The spreadsheet should contain values, in thousands of dollars– Questions to ask:

– How do these estimates compare with the previous estimates?– Do these savings look realistic for the proposed improvement?– Are there any errors in the data entry?– How do the savings estimates compare with current budget numbers?

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Finance Sign-OffFinance Sign-Off

3. After the “Cooling-Off” Period– Detailed audit of savings– Questions to ask:

– Did the process improvement take place?– Does the process improvement result in the reported level of savings?

4. Verify Financial results– Time required to validate financial benefits

5. Budget Adjustment– Adjust budgets to realize financial benefits

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Savings DefinitionSavings Definition

• “Hard” Savings– Measurable, controllable and contribute to earnings– Sources

• Reduction of operating expenses• Lower carrying cost related to Capital Expenditure reduction• Margin improvements directly attributable to Six Sigma projects• EBIT contribution from Revenue enhancement projects

• “Soft” Savings– Difficult to measure or not tied directly to earnings– Examples

• Customer satisfaction• Safety or regulatory compliance• Cash impact of reduced Capital Expenditure

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Savings DefinitionSavings Definition - Examples- Examples

Hard Savings • Reduction in Cost OF Goods Sold• EBIT contribution from Increased Revenue

• Decrease in Office Supply Expense• Decrease in Overtime Paid• Decrease in Postage Expense• Decrease in Travel Expense• Decrease in Late Payment Fees• Decrease in Rent/Lease Expense• Decrease in Utilities Expense• Decrease in Repair Costs

Soft Savings • Increase in Customer Service• Increase in Customer Satisfaction• Increase in customer/employee Safety• Aid in Regulatory Compliance

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Tracking BenefitsTracking Benefits

• System will be implemented to record & report

project benefits:

• Record approved projects

• Track through DMAIC stages

• Forecast Benefits stream, track actual benefits

• Report results by Business, BB, Champion, Fiscal

Periods, Benefits category, etc.

• Changes to a project’s Benefits Measurement

method requires Steering Committee approval

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Project Benefits Template

Needs To Be Tailored To Client & Tracking System And EnvironmentNeeds To Be Tailored To Client & Tracking System And EnvironmentNeeds To Be Tailored To Client & Tracking System And EnvironmentNeeds To Be Tailored To Client & Tracking System And Environment

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Sample List of Sample List of DeliverablesDeliverables

Action Items for Functional Champion - Finance Updated 12/19/02Task Sub Tasks Point Person Date Due Dependencies

Create a Model to be used to calculate SavingsMust be done prior to BB and Financial Resource Training

Define Hard Savings Needed for the Executive SummitDefine Soft Savings Needed for the Executive Summit

Establish Finance Support Resources Must be done prior to TrainingDefine Expectations Must be done prior to DeploymentIdentify Resource Contacts DoneCommunicate Expectations

Define Savings Validation ProcessMust be done prior to the end of the 1st w eek of BB training

Identify Points w ithin each project w here sign off is requiredDefine the logistics of how the sign off w ill occur.

Educate the Black Belts on the Financial ProcessesMust be done before the end of the1st w eek of BB training

Define the f inancial process w hich Black Belts w ill need to understand.Develop the PresentationTrain the Black Belts

Develop an Educational Presentation for the Financial Support Resource Team

Must be done before the end of the 1st w eek of BB training

Define the f inancial models and how to use them.Develop the PresentationPresent the Training

Ensure Project Savings are monitored.Must be done before the 1st w eek of BB training

Clarify w hat needs to be tracked.Verify Project Tracking Softw are has appropriate f ields.

Establish Communication Among Functional Champion - Deployment Champions, CEO

This does not need to be on the project plan.

Identify how these groups w ill communicateDefine the communication tools

Develop a Reporting Template that summarizes Financial Progress

Define w hat should be included in the templateDevelop the template