With the new year approaching, I am meeting with many clients to discuss their Lean Six Sigma Programs for next year and one question that many are asking is, “How do we determine how many Lean Six Sigma projects to do in order to achieve our project benefit goals?” Our founder, Brent Drever, shared about this in one of our blogs back in 2017. Let’s revisit the Rule of Thirds.
The Common Mistakes that Companies Make
Many companies approach their Lean Six Sigma Program project selection applying a few common mistakes:
- They deduce that every project needs to achieve equal benefit. If we launch 10 projects and want to achieve $350,000 in benefits, then we set the benefit target goal for each project at $35,000 to be successful.
- They expect all the benefits to come from a handful of projects. This leaves very little room for error in order to be successful.
Just like in baseball, not every hit will be a home run. Some will be singles, some doubles and others may be walks. Every hit helps. The more hits you have, the better your odds are that you will get the home run that helps put your team on top. The key is to look at all the projects collectively rather than judging an initiative by each project’s success. We call this the rule of thirds.
Let’s Consider a Lean Six Sigma Program Example
An organization is looking to train 10 people in Lean Six Sigma Green Belt and the deployment team has identified a target of $750,000 in project benefits. Let’s look at what happens if they decide to kick off 10 Lean Six Sigma projects, having each person head up their own project.
The first third are great projects but ones that didn’t have the expected financial ROI that yielded hard dollar benefits. Maybe these projects improved the customer experience or had other soft benefits. Just because they didn’t have quantified hard dollar savings doesn’t mean they weren’t successful, it just means the benefits in an ROI matrix isn’t there. In our example 4 of our projects fell into this category. While they were beneficial, the ROI would be calculated at $0.
The second third are projects that did have a hard benefit ROI, but it wasn’t anything outstanding. The company still realized benefits and savings, and these projects are considered to be a success. In our example 3 of our projects fell into this category and each one realized a $75,000 Return on Investment. When combined with the first set of projects, we are still falling short of our $750,000 goal.
The final third are projects that have an impressive ROI. These projects were successful in every way, and far exceeded the expectations. In our example 3 of our projects fell into this category and had an ROI of $200,000 each!
Let’s Do the Math
4 projects with no hard benefit ROI ($0) + 3 projects at $75,000 ROI ($225,000) + 3 projects with $200,000 ROI ($600,000) = Total Benefits for 10 Lean Six Sigma Green Belt projects was $825,000. As you can see from the example, while 7 of our projects only met or failed to meet expectations, 3 projects exceeded expectations and we exceeded our targeted benefits! It’s not as hard to achieve as you may think when you work as a team to get there.
What Would the Math Have Been?
What if they had decided to only do 5 projects and set a target for each project of $150,000? 2 projects with no hard benefit ROI ($0) + 2 projects at $150,000 ROI ($300,000) + 1 projects with $350,000 ROI ($350,000) = Total Benefits for 5 Lean Six Sigma Green Belt projects was $650,000. As you can see from our example, when we started with 10 projects, we increased the likelihood that we could meet or exceed our expected benefits.
Increasing the Demand for Coaching
This approach will demand more engagement from your Operational Excellence team. Be sure that you can provide the necessary coaching and support for project leaders. If needed, consider bringing in coaching services to help support your teams.
Not only can Acuity Institute meet your Lean Six Sigma training needs, we also offer expert coaches and consultants that can help you with your implementation and project coaching needs. Expert coaching can help you accelerate the achievements of results in your Operational Excellence program and strengthen your return on investment.
Contact Acuity Institute today to learn more about how Acuity Institute can help your organization achieve your programs goals.
