1. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Advanced Project Chartering

2. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 1 Chartering Module Content Project Charter Defined Why a Well Written Charter? Roles and Responsibilities Charter Flow Charter Components Good and Bad Charter Example Intro to Benefits Calculator Charter Troubleshooting Examples, Examples, Examples Charter Exercises

3. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 2 Project Charter Defined The Project Charter describes the problem baseline state and anticipated project results. It does not propose a solution. The Charter is handed-off from the Process Owner and Steering Committee to the Belt. It reflects the agreement regarding what the Belt will work on. The Charter is a living document, reflecting changes to scope, anticipated benefits, project duration, etc. throughout the project cycle

4. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 3 Why a Well Written Charter? The better definition of the problem and the clearer the expectations from the project that the belt receives in the form of a charter, the -Shorter the project cycle time -Fewer project cancellations -Less likelihood of declining project benefits -Less likelihood that project will need to be re-scoped

5. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 4 Chartering Roles and Responsibilities Champion MBB Black Belt Process Owner Steering Committee Identifies areas of opportunity within span of control Works with Champion to write charter Used as needed on a limited basis supports Champion in charter writing (data collection & analysis) Handed finalized charter Directs Company project focus Approves final charters Supports Champion with the technical aspects of the charter Helps validate assumptions Writes charters based upon business needs Works with Process Owners and MBB to identify projects Financial Analyst Works with Champion on financial metrics Validates first pass financial benefits of projects Finance Champion Works with Financial Analysts to ensure consistency of approach 6Sigma Exec Team Manages Project Pipeline Encourages Champions to fulfill deployment goals

6. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 5 Charter Flow Champion MBB Process Owners Business Leaders Finance Development of Project Ideas Focus on Best Charter Opportunities Steering Committee Approval Write the Formal Charter Handoff to Blackbelt Charter ideas developed from assessment activities with process owners, business leaders and finance Filter the list of possibilities based upon agreed project guidelines: Financials Business Priorities Data Speed … Champion pulls together required elements to write charter Involves MBB, Process Owners and Financial Analysts where needed Steering committee reviews charters for proper business focus and completeness Cancels or sends back for rework charters which are inadequate Charters handed to Blackbelts based upon agreed criteria Project officially kicks off into the Define Phase Champion MBB Process Owners Financial Analysts Champion MBB 6Sigma Exec Team Champion Steering Committee 6Sigma Exec Team Champion MBB BB Process Owners

7. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 6 Charter Components Charter Template Charter Header Information Problem Statement Metric Defect Definition Project Objective Project Benefits Calculation Amendments

8. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 7 Charter Template

9. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 8 Charter Header Information

10. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 9 Problem Statement Purpose and Function of the Problem Statement: To provide Black Belts with a well defined issue upon which to apply the DMAIC method To quantify current performance relative to customer expectations To identify the financial impact of current performance

11. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 10 Problem Statement Characteristics Of A Good Problem Statement It should be a concise but complete description of the issue It should focus on a specific problem aligned to high-level business objectives It should be as detailed as possible including quantifiable performance characteristics It should not include any presumed causes or pre-determined solutions

12. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 11 Example – Needs Improvement What Changes Need to Be Made? No baseline period indicated No baseline data, only speculation of uncharged fees No calculation of baseline financial impact of the problem

13. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 12 Example - Good

14. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 13 Metric The Project Metric should be Measurable Indicate a source for the measurement data Same units as Baseline and Objective

15. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 14 Example – Needs Improvement What Changes Need to Be Made? Metric is not normalized such that volume changes will impact project benefit How often will measurement take place?

16. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 15 Example - Good

17. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 16 Defect Definition The Defect Definition should be Specific to the issues described in the Problem Statement and Objective Consistent with the metric

18. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 17 Example – Needs Improvement What Changes Need to Be Made? What if, on a given day, 98% of the audit confirmation fees are charged? Is the day a “defect”?

19. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 18 Example - Good

20. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 19 Project Objective Objectives should Agree with validated measurements of performance Be based on clear project boundaries Be attainable by the scheduled project completion date Be consistent with VOC (Voice Of the Customer) requirements

21. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 20 Project Objective The objective should be based on accurate baseline data versus entitlement. When no entitlement can be determined, an average Six Sigma project will yield a 70% improvement in process performance; in those cases, it is typically appropriate to set the Project Objective for a 70% reduction in defects.

22. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 21 Example – Needs Improvement What Changes Need to Be Made? -The Objective statement should not assume a solution -The Objective should begin by stating from [baseline data] to [objective] -The anticipated completion date should be indicated

23. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 22 Example - Good

24. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 23 Project Benefits Project Benefits are generally characterized as Margin improvements that can be directly attributed to the Lean Six Sigma project A reduction of operating expenses Operating Income contribution resulting from revenue enhancement projects

25. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 24 Project Benefits The Project Benefits should Cite a minimum of $250,000 in hard dollar savings (Black Belts) Cite a minimum of $40,000 in hard dollar savings (Green Belts) Be achievable in 4 to 6 months Have P&L Impact

26. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 25 Example – Needs Improvement What Changes Need to Be Made? Given baseline data and a stated objective, the specific calculation of anticipated benefits should be on the face of the charter or attached

27. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 26 Example - Good

28. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 27 Amendments A Project Amendment is typically required When project benefits decline by 15 to 20% When the anticipated project close date slips by more than 30 days

29. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 28 Charter Troubleshooting Process Owner Buy-in  Has the Process Owner agreed to the Charter, proposed benefits and has resources available to go forward with the project? Problem Statement  Does the Problem Statement contain a date range of baseline data, a baseline and source of data and the timeframe it was gathered? Is there a “Pain” sentence as the last sentence in the Problem Statement? Objective  Does the Objective state an “increase” or “decrease” from the baseline to the goal (% improvement) by a specific project target end date?  Do the Problem Statement, Primary Metric and Objective support one another?

30. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 29 Charter Troubleshooting - Continued Metrics  Is the Primary Metric documented and normalized for volume (i.e. if volume increases or decreases will the way the metric is used still make sense?)  Is there a Secondary Metric that ensures no undesired results occur due to a change in the Primary Metric? If not, is there a good reason there is no secondary metric?  Do metrics contain units (i.e. % defective, cycle time in mins., daily, weekly, monthly, etc.)?  Does the Defect Definition tie to the Primary metric and will it aid in establishing the Primary Metric chart? Finance  Is the financial value supported by computations?  What assumptions are in the financial value?  What business line will benefit from the savings?  Does the business line manager agree to any resultant budget adjustment?

31. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 30 Be sure that the team members have been identified. A project should not be approved without Process Owner buy-in. More Charter Examples Needs Improvement

32. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 31 No baseline data available. Is this the best use of the belt resource? This is a recurring issue that often results in cancelled or lengthy project cycle times More Charter Examples Needs Improvement

33. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 32 The entire charter is focused on the financial impact (cost) of the problem. The problem should be stated in terms of what drives the need for Outside Sorting. The Project Objective does not indicate when the project will be completed. When the Problem Statement has been properly stated, the metric and defect definition should align to the driver. The financial benefit of this project would be $488K (67% of $729K) and the charter writer would likely have caught this mistake if the calculation was on the face of the charter. This is NOT cost avoidance but a reduction in expense from one period to the next (P&L impact). More Charter Examples Needs Improvement

34. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 33 More Charter Examples Needs Improvement How was the $1.34M Baseline calculated? The Problem Statement includes 5 quarters of data. We don’t know why Q105 is 89% higher than the average 2004 quarter – is it seasonality? Volume of shipping? Increased freight damage per million opportunities? Show the benefit calculation. $268K is 20% of $1.34M. With 25% COG should the savings be 75%? How does the discounted shipment contract mentioned in the Problem Statement factor in? The Metric and Defect are related to product but the problem statement is not aligned, only speaks to $.

35. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 34 No baseline data. Overall poorly written charter in which the defect, metric, and objective are not aligned. No financial benefits determined. Based on the Project Objective, isn’t the defect definition “any box that must be opened after taping”. Without knowing specifics of the business, scope seems too large. More Charter Examples Needs Improvement

36. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 35 More Charter Examples Needs Improvement

37. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 36 More Charter Examples Needs Improvement Well written charter but Metric is not normalized based on cash flow.

38. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 37 More Charter Examples Good Note that this is the same as the previous “needs improvement” charter. Baseline period has been updated with more recent data, project goal was changed from 70% improvement to 60% improvement and metric has been normalized.

39. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 38 More Charter Examples Good

40. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 39 More Charter Examples Good

41. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 40 More Charter Examples Good

42. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 41 More Charter Examples Good Good…but should the project also be given credit for gross profit on sales that would otherwise have been stock-outs?

43. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 42 Charter Review Checklist Does the Objective “structure” follow the mechanics of “Improve (increase, decrease, etc.) from the baseline to goal, X %, by project end date? Does the Primary Metric contain units (i.e. % defective, cycle time in minutes, etc.)? Does the Problem Statement contain a date range of baseline data, a baseline and source of data (if known)? A pain sentence is often useful – last sentence. Is the financial value supported by computation and/or assumptions? Is there “linkage” between the Problem Statement, Objective and Primary Metric (i.e. same units) Is a Secondary Metric appropriate and if so, list in the Primary Metric section Ensure the header sections are as complete as reasonably possible at this time Is the Primary Metric documented and normalized for volume, if appropriate? Does the Defect Definition tie to the Primary Metric and will it aid in establishing the Primary Metric Chart?

44. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 43 Charter Exercise Within the Packaging Department at Lava Lamps R Us, there are multiple packaging lines each performing two types of packaging set-up changeovers. “A” packaging set-up changeovers are performed when the team is packaging the same lamp branded for a new wholesaler. “B” changeovers are performed before the team begins to package a different lamp. The current times to perform both changeovers are above industry averages. With the tremendous growth in our U.S. market share and the expansion into several new markets abroad, we are capacity constrained. Our union agreement does not allow us to hire weekend staff. Since we are not meeting customer demand, all employees are required to work Saturday and Sunday to get product packaged for shipment. A 6-Sigma project was just completed that optimized the number of changeovers. Your project is to reduce the set-up time for both changeover types. Your goal is based on research done to benchmark changeover times for both processes. If your project is successful, all changeovers can be performed during normal business hours and you will achieve Management’s goal of no overtime. There is no opportunity to reduce staff (union again!) and the company does not recognize cost avoidance savings.

45. Copyright © 2006 Six Sigma Academy International, LLC All rights reserved; for use only in compliance with SSA license. Pg 44 Charter Exercise Below is data gathered for this project. Working with your team, write a project charter for this project with the goal as stated for the respective changeover types. If you make any assumptions to calculate financial benefits, document each assumption on the face of the charter or an attached benefit calculation sheet.

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