Project Selection & Scoping Overview Deb Dixon

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 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

6 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

7 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

8 Critical to Satisfaction Cost CTC Quality CTQ Delivery CTD Invoice Right the First Time Invoice Delivered On-Time No Waste / Hidden Factory A/R Generate Invoice Forward to Customer Receive Payment Collect Overdue II. Develop CTQ Flow Downs CTQ Flowdown High Level Process Map Structured “Top Down” Approach II. Develop CTQ Flow Downs

9 Unstructured “Bottom Up” Approach “Pain Points” Leveragability Detailed Process Map Performance Metrics Sweet to Low Hanging Fruit COQ Work Folder forwarded to Design Forward to appropriate 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 Construction Drawings Reviewed by Senior Designer Drawings Complete? NONO YESYES Drawings by Senior Designer? YESYES NONO Drawings Approved? “As is” or “As Noted” YESYES NONO

10 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”

11 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 $ZM 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

12 Perfect Day Problem Statement: Installation processes builds x% into the job to account for problems that occur on site during the installation process. Total cost of non-perfect day = $yyM CTQ: (Critical To Quality): Margin Defect Definition: Margin less than optimal Project Objective: Understand what project management issues to address to ensure that bid margin for a job doesn’t slip. Current Goal: Cost Benefits: Reduce lost annual costs by $YYM Internal/External Client Benefits: Improve margin and cash flow Build customer relationships Dependencies: Resolving customer quality issues Progress to Date: TBD Realize margin improvement of X% IV. Scope Projects

13 V. Complete Project Charter

14 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?

15 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

Project Prioritization Deb Dixon

17 Project Prioritization Once the Deployment Champion has 5-12 project ideas a filtering approach may be needed to determine which projects to assign first This approach acknowledges that the best filters for one business unit may or may not be the best filters for another area of the business Identifying filters for your business unit is not a trivial matter. One approach is to understand the goal and the customers associated with that goal.

18 Project Filtering - History One filter used to allocate resources to projects is the 2 X 2 matrix. The 2 X 2 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!

19 Documenting Your Filters One of the easiest tools to document your filters and prioritize your projects is to use a tool called the “Cause and Effect Matrix.” This Matrix is provides a quick visual of the projects under consideration and how they rated on the important filters chosen by the deployment champion/MBB and management board.

20 Project Prioritization Tool The deployment champion applies a C&E matrix to select individual projects using the following top level requirements (examples): 1. Revenue (1 low, 5 high) 2. Growth (1 low, 5 high) 3. Employee Satisfaction (1 low impact, 5 is large impact) 4. Feasibility or Degree of Difficulty (1 difficult, 5 easy) 5. Current Measurable Process Performance (1 high, 5 low) Month Target goal ($) for each project, committed to by Champions/Process Owners Month Stretch goal ($) for each project, committed to by Champions/Process Owners If a project ranks high after sorting project totals for 1-5, 6 and 7, this project should be a strong candidate for selection The Cause and Effect (C&E) Matrix…

21 Cause & Effect Matrix Steps Identify key customer requirements (outputs) from process map Rank order and assign priority factor to each output (Usually on a 1 to 10 scale) Identify all process steps and materials (inputs) from the process map Evaluate correlation of each input to each output Low score: changes in the input variable (amount, quality, etc.) have small effect on output variable High score: changes in the input variable can greatly affect the output variable Cross multiply correlation values with priority factors and add across for each input

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