Steve Pfeiffer – Chapter Nine

Steve Pfeiffer

CHAPTER NINE:
Driving Value through Project Selection

Overview

This chapter is designed to help business owners, department heads and project sponsors gain insight into Lean/Six Sigma/process improvement project selection and prioritization. Selecting the right projects is critical to the ongoing success of any improvement program. Without a solid selection of projects, all the momentum you experience from early project success will die off quickly as resources are spent working on projects that do not drive real results.

But what do you do to keep things moving in the right direction after the initial excitement has worn off?

This chapter is about maintaining that initial enthusiasm and momentum by picking the right projects to attack in your organization. We will provide a framework of critical elements that enables a solid selection process and provides some concrete examples of utilizing the tools and frameworks described in the chapter to demonstrate their use and value.

This chapter will help you to:

  • Find good, actionable projects to maximize resources.
  • Learn how to do an initial benefits estimate.
  • Identify projects that significantly contribute to your company’s bottom line.
  • Prioritize projects appropriately.

Why Project Selection Matters

Developing a process to select improvement projects is one of the most critical tasks facing business owners and others responsible for driving improvement in the organization. If you take on the wrong projects, it is likely the results will not meet leadership expectations, and as a result, everyone in the organization may question the value of the improvement effort as a whole. Worse still, the people that are most effective at driving the improvements, those directly involved in the processes, will no longer be willing to be part of a program that does not drive real, tangible improvements they can personally see and feel. The organization will sour quickly on the program, and your initial improvements will not be sustainable.

Beyond cultural reasons, there are two more bottom line reasons to focus on the right projects: limited resources and the time value of money.

Limited Resources

Every organization deals with issues associated with limited resources. After years of cost cutting and general downsizing throughout American businesses, workers are now stretched thin to complete the myriad of tasks assigned to them. Nowhere is this more evident than in the deployment of an operational excellence program, which at least at the onset, is simply one more task for an already busy person to complete. In many cases, these projects are done on a part-time basis in addition to the day-to-day responsibilities of the team members.

With this in mind, we, as leaders of these programs, need to be certain that the time we ask our project leaders and team members to devote to these efforts deliver value – not only for the organization but also for the people involved in these processes. Without real results, our efforts will do nothing but result in “busy work” for the people assigned to carry them out.

Time Value of Money

The time value of money concept describes the idea that money held today is worth more than in the future because you can invest it and earn interest. This concept is also used to evaluate different investment alternatives: Should we buy the car wash or the laundromat? Should we spend the money to install a solar power system for our electrical needs or save it? In the same manner, this time value of money concept can be used to help evaluate and select projects based on expected benefits.

In project selection, we need to consider our alternative projects as investments. People will invest their time on these projects expecting to see benefits upon the successful conclusion of the project. Therefore, to maximize the value generated by our improvement efforts, we need to select those projects that will give us the largest benefits first. To do this effectively, we will need to develop a method for estimating benefits in the initial stages of project identification (which will be covered later in this chapter, as well as Chapter 20).

Of course, expected benefits are not the only criteria upon which we should base the selection decision. Other factors include: required effort, complexity, probability of success and the availability of the right resources. These and other factors will play a role in our decision. But at the core, the combination of the time value of money and expected benefits are two of the most important elements affecting our decision.

Key Elements to a Successful Project Selection Process

There are several critical pieces that need to be put in place within the project selection process in order to create and sustain a successful improvement program:

  • Developing a pipeline of projects
  • Connecting to the annual planning process
  • Initial Benefits Estimation
  • Project prioritization

If any of these elements is missing or not implemented properly, it is likely your improvement efforts will stall.

Developing a Pipeline

Developing the list or ‘pipeline’ of potential projects to be completed will require project leaders and others responsible for business performance to be on the lookout for improvements within their respective departments. Further, it will require that everyone in the organization is willing to view his or her own processes on a regular basis with an honest and critical eye towards improvement.

The leader of the operational excellence program will also need to develop relationships with the various internal business leaders, which will enable him or her to have an open, ongoing dialogue regarding performance issues. Ultimately, through regular interaction with these leaders in the course of monthly and as-needed performance reporting, the leader of the improvement program will become a trusted internal advisor for evaluating and developing solutions to improve performance.

Connection to Annual Planning Process

Practically speaking, pipeline development needs to stem from the ongoing planning and evaluation of the business as a whole that occurs through the financial and operating planning process. Every company goes through an ongoing cycle of planning, operating and evaluating results during a fiscal year. Budgets are created, materials purchased, parts made or staff hired to provide services, and demand is thereby satisfied.

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