How to identify and select lean Six Sigma projects is systematically addressed in the Integrated Enterprise Excellence (IEE) business management system. In IEE, process enhancement efforts are determined analytically with a focus on improving organizational key performance metrics that are reported in a predictive scorecard format and benefit the business as a whole.
Improvement project selection with whole enterprise benefit is often lacking in organizations. Businesses need to continually make improvements both internally and with their suppliers. The survival of an organization can depend upon how well these continuous improvement (CI) process efforts were executed. But, how can the integrity and direction of such a system be created and maintained through the frequent leadership and organizational changes that often occur?
The IEE business management system addresses the business scorecard and improvement issues that are described in a 1-minute video:
How to Identify and Select Lean Six Sigma Projects with Whole Enterprise Benefit
Content of this article is from Chapters 4 and 7 of Integrated Enterprise Excellence Volume III – Improvement Project Execution: A Management and Black Belt Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III.
A clear, long-lasting mechanism for project selection is needed so that the business as a whole benefits and silo-only-benefited projects are avoided. A methodology is needed where enterprise-wide measurement improvement needs “pull” for projects that will enhance key performance indicators (KPIs), and owners of these metrics are asking for timely project completions.
Integrated Enterprise Excellence (IEE)1 is a business management system for addressing these needs. IEE, which is described in Figure 1, integrates improvement efforts with business scorecards and analytically/innovatively determined strategies so that the enterprise as a whole benefits. In addition, the IEE system provides enhancements to the balanced scorecard2 methodology, which many organizations are currently using.
In step 2 of the 9-step IEE business management system, organizational processes are mapped with associated predictive metrics and supplier integration. This created IEE value chain, which can have its metrics automatically updated, provides operations personnel to senior management an improved system understanding of their business. The result of this is that the most beneficial lean and six sigma projects (i.e., step 6) for uncovering the true root causes of inefficiencies and defects are determined, both internally and at the supplier level.
Figure 1: Integrated Enterprise Excellence (IEE) Business Management System
The following manufacturing example illustrates the application of the IEE system. The approach applies not only to product manufacturers but equally well to service and other organizations. Described in this system is not only a process for the identification of improvement projects that have enterprise-as-a-whole benefits but also a methodology where process owners will be asking/demanding for timely completion of projects in their area.
Example: Project Selection with Whole Enterprise Benefit
A manufacturing firm wants to initiate targeted improvement projects that address voice of the customer (VOC) identified opportunities. The following describes a process for accomplishing this objective:
Step 1: Describe vision and mission.
The company’s executive team agreed to the following:
- Vision: Become a preferred supplier for all major department store chains (have a branded display section in stores).
- Mission: Produce plastic injection molded items for consumer use.
Step 2: Describe value chain, including satellite-level and 30,000-foot-level metrics.
The created value chain shown in Figure 21 describes what the organization does [rectangular boxes] and the performance measures for each function from a quality, cost, and time perspective [oblong boxes], where external customer metrics are highlighted. The IEE value chain can have automatic metric updates through the Enterprise Performance Reporting System (EPRS) software.
Modification from Figure 7.1 Integrated Enterprise Excellence Volume II – Business Deployment: A Leaders’ Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Bridgeway Books, 2008
Figure 2: IEE Value Chain
From this figure’s value chain business functions, one might infer that a relationship exists between the defective rate metric and VOC satisfaction. The implication of this relationship is that a reduction in defective rates would lead both to improved customer satisfaction and to corporate profitability.
In the IEE performance scorecard system, satellite-level metrics focus on the financials (e.g., profit margins), while 30,000-foot-level metrics1 track operational performance metrics (e.g., defective rates and on-time delivery). Both corporate satellite-level and 30,000-foot-level metrics are tracked over time and are not bounded by calendar years. When a satellite-level or 30,000-foot-level chart has a recent region of stability, the process is said to be predictable, where data from the last region of stability can be considered a random sample of the future when formulating a prediction statement. If an organization does not like what is predicted, improvements are needed to the process that is the driver of the monitored metric.
To achieve long-lasting benefits, Voice of the Customer (VOC) initiatives and other improvement efforts need executive management support. For this to occur, it is imperative that there be an alignment of these process enhancement efforts with the financials.
Because of this, we first need to create a satellite-level metric baseline. Focus should then be given to determine what can be done to improve profitability, for example, and at the same time move toward achievement of a customer satisfaction/retention vision, noting that profitability metrics are equally important in non-profit organizations.
Figure 3 is the current profit-margin baseline for our manufacturing company.
Figure 3: IEE Satellite-level Metric3
Step 3 – Analyze the enterprise.
Next, one needs to determine the value chain 30,000-foot-level metrics that could be improved to address VOC inputs and the financials, such as Figure 3, so that the enterprise as a whole benefits.
From this analysis, it was noted that several improvement opportunities exist for positively impacting the bottom line. One opportunity was a 2% reduction in defective rates which would not only increase profit margins by 0.5% but reduce the number-one customer complaint. A baseline of this defective-rate 30,000-foot-level metric is shown in Figure 4, along with a Pareto chart of encountered defect types.
Figure 4: IEE 30,000-foot-level Metric3
Step 4 – Set SMART goals for satellite-level metrics.
Considered from a step-two competitive analysis, one noted that the profit margins in the manufacturing company’s industry average 16%. Since our satellite-level performance metric has a median of about 13.9%, as shown in Figure 2, a goal was set to achieve a monthly median profit margin of 16% in 12 months. Basing a profit margin goal to be the industry average is not an arbitrarily-set objective, which can lead to unhealthy behaviors, but instead addresses the achievable aspect of SMART goal setting.
Corporate management understands that in order to achieve this goal, structured process improvement efforts need to be undertaken; i.e., performance metrics improvement needs are “pulling” for the creation of projects that benefit the entire enterprise. A methodology for determining and demonstrating alignment of projects with overall business needs is the development of an Enterprise Improvement Plan (EIP), as described in the next step.
Steps 5 and 6 – Create strategies and set 30,000-foot-level performance goals.
A SMART goal was set to reduce the current five-percent defective rate by 2 percent in 6 months. With this objective, the owner of the defective rates metric is responsible for ensuring that process improvement changes be identified and initiated so that this 30,000-foot-level goal can be achieved.
The alignment of this VOC/business strategy and goal with other organizational needs is described in the partial enterprise EIP shown in Figure 5. From this figure, one notes how strategies and improvement efforts may overlap and how targeting defective rates would lead to two focused projects on reducing the occurrence of two defect types.
Through this EIP, initiatives were identified that will both support the VOC issue and an improvement in the financials.
Figure 5: IEE Enterprise Improvement Plan (EIP)
Step 7 – Execute the improvement project.
Various improvement techniques could be used to achieve process improvement goals; e.g.;
- Lean Six Sigma to address common cause or chronic problems.
- Root cause analysis when a clear special cause exists.
- Plan-Do-Check-Act (PDCA) continuous improvement process when targeting a series of small potential incremental improvements.
- Just go do it for obvious changes.
For the defective rate improvement projects, which have common-cause issues, focus will be given to following a Lean Six Sigma Define-Measure-Analyze-Improve-Control (DMAIC) roadmap.
Steps 8 and 9: Assess project’s completion impact on enterprise goals, and maintain the gain.
A shift of the project’s 30,000-foot-level metric to an improved level of performance demonstrates that an enhancement was made to the process. If the magnitude of this shift is not sufficient relative to the metric’s goal, additional work and/or analysis are needed. This assessment should also evaluate whether any additional costs and effort for achievement of this goal are worth the resources from an overall enterprise point of view.
Identified process improvements and their controls for maintaining the gains need to be integrated with the organization’s value chain system; i.e., step two of the IEE business system, which is illustrated in Figure 1.
Step 9 of the business system loops back to step 4 for additional analysis and improvement efforts. This loop back is not unlike Edwards Deming’s Plan-Do-Check-Act (PDCA) methodology, but for the enterprise as a whole.
More Information about 30,000-foot-level reporting
30,000-foot-level training is available through:
Practitioners of process improvement strive to determine what can be done to improve areas of the business that they have been told to investigate; however, often these efforts are in silos where any achieved improvements are not felt by executives who are examining the enterprise as a whole. Also, the management of an organization is not typically viewed as a process with its associated improvement opportunities.
In addition to providing a means to have improvement project selection with whole enterprise benefit, IEE offers a systematic approach to improving both the enterprise system as a whole and how it is managed.
To discuss application of the described project selection with whole enterprise benefit techniques, contact me at [email protected] or +1 512.918.0280.
- Forrest W. Breyfogle III, Integrated Enterprise Excellence Volume II – Business Deployment: A Leaders’ Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Bridgeway Books/Citius Publishing, 2008
- “The Balanced Scorecard – Measures that Drive Performance”, Kaplan, R. S. and Norton, D. P., Harvard Business Review, Jan.-Feb., 1992.
- Forrest W. Breyfogle III, Integrated Enterprise Excellence Volume III – Improvement Project Execution: A Management and Black Belt Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Bridgeway Books/Citius Publishing, 2008
Contact Us to set up a time to discuss with Forrest Breyfogle how your organization might gain much from an Integrated Enterprise Excellence (IEE) approach to identify and select lean Six Sigma improvement projects.