Project Selection & Scoping Overview Dan Sommers PG: Dan this does not appear to be a full hour of material??? PG: Dan this does not appear to be a full hour of material???

2 Objectives Explain why effective project selection is so critical Project Selection Approach Characteristics of a Good Project

3 Why is Project Selection So Critical Management Can Only Apply Resources (People) to Activities That Support the Business Objectives Management Can Only Spend Time on Activities That Support the Business Objectives Black Belts Need to Execute Projects Quickly

4 Project Selection Continuum Discrete projects are chosen by BBs Management brainstorms projects Projects are selected from a brainstormed list and mapped back to the strategic goals of the firm Strategic goals are determined and projects flow down from these goals based on available data Strategic goals are determined and a statistical relationship is determined to describe how the strategic goal is improved by completing the project (CTQ flowdowns) Worst Best

5 Questions To Be Asked When Evaluating Potential Projects What is the impact to the business? What is the linkage to top level goals? Where Are the Gaps? What processes are not meeting or exceeding customer requirements? How efficient are our processes? Who is the customer and how will that customer benefit? What is the impact on the customer? What areas are causing the most “pain” in terms of customer satisfaction and loyalty? What are the largest customer complaints? What processes are currently causing the defects leading to poor satisfaction?

6 Questions To Be Asked When Evaluating Potential Projects Prioritization Projects need to be prioritized and phased/scoped −Direct impact or enabler projects Focus on prioritized sub-processes to maximize chances of success Constraints What are the constraints that limit maximizing the goals of the business? Are the projects focused to remove or exploit constraints?

7 Questions To Be Asked When Evaluating Potential Projects Scorecard/Metrics Have defects/defect opportunities been defined? Do measures exist? −Does baseline defect data exist to support project selection? Are right things being measured? Team Can this project be led by a Black Belt? Is there management agreement on project, the priority, and Champion Black Belt assignment for cross-functional projects? Can you identify team members to start this project?

8 Questions To Be Asked When Evaluating Potential Projects Financial Are projected savings greater than or equal to $250K per year? Will this project lead to improvements with little or no capital? Has finance approved project? Project Management Can project be completed in 4-6 months?

9 Questions To Be Asked When Evaluating Potential Projects Tools Could process improvements be handled with lean methods or is six sigma methodology desirable for this project? −Is priority to improve effectiveness or efficiency? −Is process stable enough to support lean efforts? Research/Internal Benchmarking Are there similar projects under way or proposed at another location? −Do differences warrant a separate project? −What are plans for coordination? −Are there opportunities to replicate improvements in other areas/sites?

10 The "4-Whats" Problem Statement: Customer Satisfaction score for the XY subsystem is 31 percentage points lower than Best-in-Class Benchmark, resulting in a potential lost revenue of $9.6MM! Customer Satisfaction scores for the XY subsystem are too low Compared to Best-in-Class Benchmark company (which is at 94%), Customer Satisfaction is at 83% 11% relative Customer Satisfaction gap represents lost revenue & earnings potential 4 points of Customer Satisfaction translates to 1 point of Worldwide market share which equals $3.5MM of revenue What is too Low? What is the impact of this gap? What is the correlation between % Customer Satisfaction and revenue? What is the total lost potential?

11 Cash Flow, ROE, Customer Satisfaction, Asset Utilization etc. Develop Business Unit Specific Flow Downs Scope projects to ensure timely execution IV. Scope Projects V. Complete Project Charter Leverage proven project management principles Project Selection Approach II. Develop CTQ Flow Downs I. Identify Strategic Business Priorities Examine financials and explore improvement opportunities with subject matter experts III. Isolate Potential Areas of Focus

12 I. Identify Strategic Business Priorities TFS Strategy Increase margins through operational excellence Grow revenue faster than industry Build a more capital-efficient security business Create a customer-centric, data-driven, process- focused culture I. Identify Strategic Business Priorities

13 I. Link to Strategic Goals Projects must be aligned to the goals and objectives of the business unit. No Science Projects! I. Identify Strategic Business Priorities

14 Critical to Satisfaction Cost CTC Quality CTQ Delivery CTD Invoice Right the First Time Invoice Delivered On-Time No Waste / Hidden Factory A/R II. Develop CTQ Flow Downs Structured “Top Down” Approach II. Develop CTQ Flow Downs

15 II. Develop CTQ Flow Downs Flexible “Bottoms Up” Approach “Pain Points” Leveragability Detailed Process Map Performance Metrics Low Hanging Fruit COPQ Work Folder forwarded to Design Forward to appropriat e Design Project Manager Design work sorted by job type (Mech, Elect) Design Project Manager assigns Designer Drawings Prepared Equipment Ordered (depends on design type and schedule) Drawing Submitted for AHJ Approval Installation Drawings forwarded to Constructi on Drawings Reviewed by Senior Designer Drawings Complete? NONO YESYES Drawings by Senior Designer? YESYES NONO Drawings Approved? “As is” or “As Noted” YESYES NONO

16 III. Isolate Potential Areas of Focus Financial Data Operational Data Resource Availability III. Isolate Potential Areas Of Focus Executable in 4 months Don’t “Boil the Ocean”

17 IV. Scope Projects Problem Statement: Accounts receivable of $xxxM is $yyyM above the desired level. In addition, $zzzM is spent on administrative costs to address customer invoicing concerns and finance center opportunities. Total EBIT opportunity for accounts receivable = $XXXM CTQ: (Critical To Quality): AR DSO Administration expenses to address invoicing and finance center concerns Defect Definition: DSO greater than 60 days Admin time spent chasing invoicing and finance center errors Project Objective: Improve DSO and invoicing errors Realize margin improvement of Y% Current Goal: DSO <= 60 days Cost Benefits Reduce admin costs by $zzzM Cash flow from accounts receivable Internal/External Client Benefits: Improve cash flow Build customer relationships Dependencies: Resolving customer quality issues Progress to Date: TBD IV. Scope Projects A/R

18 V. Complete Project Charter

19 Project Evaluation Approach Project Selection CriteriaYesNo 1. Has the project been done already (or in progress)? 2. Is there a pre-determined solution to the project goals? 3. Does this project conflict with other projects? 4. Does this project have a high probability of success? 5. Is project linked/aligned to goals of the business? 6. Does the cost reduction opportunity meet the goals of the business? 7. Has the project been properly scoped? 8. Can starting and end points for the process be defined? 9. Does the Champion have functional control of impacted process? 10. Are metrics available, on Primary Metric – Y, or could they be developed quickly at low cost? 11. Is data collection relatively easy and does the process complete at least one cycle weekly? 12. Is there a “good” measurement system in place (on the Primary Metric – Y)? 13. Are resources available and supportive for this project (Process Owner, team, Champion)? 14. Can you define the defect definition for the project?

20 You know you have chosen the right project when: You care if it is completed…“skin in the game” Linked to the business need and metrics Clear “line of sight” and accountability Clear financial impact…$250k plus Scoped to ensure completion in 4-5 months The project has a definable beginning and end The project is open to thorough evaluation One of many projects building a “cluster of projects” Characteristics of Good Projects

21 Black Belt Training Projects 70% reduction in defects First-time projects should: Have high priority Include opportunities to learn and apply the appropriate tools Have a high probability of success Have commitment of resources Focus on process with frequent units and defects Have a measurement system in place Executable in 4-6 months

Project Prioritization

23 Project Prioritization Once the Deployment Champion has 5-12 project ideas, prioritizing may be needed to determine which projects to assign first. This approach acknowledges that the prioritization for one business unit may or may not be the best prioritization for another area of the business

24 Projects Have Been Prioritized By The Deployment Team Early six sigma efforts should be geared to maximize chances of success Applying this strategy is intended to neutralize resistance from within the organization Feasibility assessments are made by the leadership team and the Champions/Process Owners Are projects of low to moderate degrees of difficulty? Will they have use of resources? Are they timely?

25 Project Prioritization One method used to allocate resources to projects is the 2 X 2 matrix. This matrix is one of the simpler approaches, but an approach that has withstood the test of time… where will I get the biggest impact – quickest. Ease of Completion Hard Easy Value Low- Hanging Fruit!