Ask yourself, do you want to deliver faster Six Sigma projects that don’t overstep your budgeting parameters? Then it’s essential for you to outline a detailed plan in your project charter. Your plan will act as your guide through the rough waters of process improvement.

Key performance indicators are highly useful tools here, enabling you to identify precisely which actions benefit you as a company. As such, there are numerous KPIs to help you on your Six Sigma journey, one of which we look at today: Project Cost Variance (PCV). Join us and learn how you can use PCV to deliver Six Sigma projects on time and on budget.

Stay Focused with Project Cost Variance

It’s important to know that Six Sigma relies on the measurement and analysis of process issues. Controlling problems allows you to create solutions that prevent them from recurring, benefitting the business in the long- and short-term. Without a strong plan to follow, you’re likely to lose sight of your goals and business needs. Losing track of your priorities will only send you veering off budget towards slow delivery times. Moreover, this doesn’t just impact you, but also your customers, who depend on you for quality products and services. If customers don’t see any value in your services, or if they see you as unreliable, they’ll take their business elsewhere. For you, this is detrimental, but Six Sigma can help. First, however, we must define cost variance.

What is a Cost Variance?

A cost variance is the amount by which your project exceeds or falls under your maximum budget. Cost variance is one of two key areas that you should monitor throughout your project, the other being schedule variance, i.e., how early or late you are to meet project deadlines. You can use the following equations to calculate both cost and schedule variance:

• Cost Variance = BCWP (budgeted cost of work performed) – ACWP (actual cost of work performed)
• Schedule Variance = BCWP – BCWS (budgeted cost of work scheduled)

What is Project Cost Variance?

PCV is the process of evaluating your project’s financial performance. You should compare the budget you agreed before starting the project with the actual amount you spend. You can calculate PCV by finding the difference between BCWP and ACWP. Your ideal project cost variance should be when your BCWP equals the same as your ACWP. Your project cost variance provides otherwise unavailable insight into your finances throughout the scope of your project. Using it to your advantage allows you to monitor when and where you breach your budget. When you use PCV together with DMAIC, you can actively control your finances, targeting areas for improvement, like overspending. The result is a more focused, efficient, and successful project.

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The construction industry has been mired in an environment that has been siloed and antiquated for years. The view has been that things have always been done a certain way and there is no reason to change. Meanwhile, numerous industries have embraced lean methodologies and have significantly reduced waste, improved efficiency and delivered higher quality products which meet or exceed customer expectations. Surveys show that at least 50% of processes involved in planning and construction are wasteful. The industry has adopted lean construction methods, which are starting to change an industry that lagged behind others.

Learn more here about lean construction!

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Since the beginning of time, man has had to protect his possessions and valuables against damage and theft. With the advance of technology, protecting what is valuable to us is becoming easier. However, just like the old saying goes, if man can build it, man can break it. Look at today’s digital technology. It just barely stays one step ahead of hackers who are bent on accessing our most valuable data and goods. Nothing is foolproof, and there will always be a way to ‘get the goods.’ We thought it would be interesting to explore the 10 most heavily guarded places and earth and see how they do it.

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The concept of Hoshin Kanri provides clarity and focus to an organization, by aligning strategic goals through all levels of an organization. It creates an organic flow of information which runs through an organization, where goals run down from management, through the mid-level operation to the production floor. In return, the flow reverses and the production floors provides resulting actionable data flowing up through mid-level operations to management, thus providing alignment.

Taking the first step of implementing Hoshin Kanri begins with developing long-range strategic goals for the organization. A good rule of thumb is to limit the strategic goals applied to five or less to be truly effective. It also allows the focus of energy and resources on what efforts are most important to the organization. Remember, if everything is important, then nothing is important. They should also be either evolutionary or revolutionary. Evolutionary is incremental achievements through continuous improvement. Revolutionary is all about taking big strides, making breakthrough changes with dramatic scope. Both types of goals are crucial to the life of an organization.

The next step would be to develop the tactics for implementing the goals identified. This step is the purview of middle management operations. They are the experts at implementing and allocating resources. There should be a respectable period of thoughtful back and forth between management and mid-level management to ensure goals are clearly understood and that there is a strong alignment between tactics and goals. Over time, tactics can be adjusted and should be, as things changes. Results must be measured and calibrated.

In the final stage, production operations at the supervisory and team levels work out the details on strategy and clearly understand the strategic goals. This is where the action takes place and success will be measured. Management and leaders must stay connected with actions being implemented, mainly through Gemba walks and monitoring of production data flowing up from the production floor.

The flow created with Hoshin Kanri closes loops and ensures focus, clarity and highly efficient operations. It allows organizations to be agile and flex to changing situations in an efficient manner.

Learn more about Hoshin Kanri and download a template

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Key performance indicators (KPIs) are among the most common tools used in business to help manage more effectively and guide the progress of the organization. They provide clarity to murky issues and put the spotlight on potential opportunities. Key performance indicators can help an organization predicate an impending storm and avoid potential downfalls.

Leaders often misunderstand or overuse the term. They tend to relate key performance indicators to any type of business data measurement. To be effective, key performance indicators need to be metrics that matter to the business of the organization. KPIs need to be linked to the overall strategy of the organization, which means to first identify what matters the most and what provides the proper measurement. Leaders and key stakeholders can monitor these indicators over time and adjust plans and programs as needed to improve the KPIs in support of the organization’s strategic goals. The ideal process for identifying and implementing key performance indicators involves the leaders and contributors regularly revisiting and revising the measures. This is a fine-tuning process, which takes time and diligence by all parties.

Key performance indicators can shape strategy and fact-based decision making inside organizations. It doesn’t matter how brilliantly you’ve aligned your KPIs to your strategy, or even how brilliantly you have captured and presented the relevant KPIs. If leaders aren’t using your KPIs to inform their decisions and drive performance, then they are wasting time and effort. A well-designed set of KPIs should provide a clear indication of current levels of performance and help leaders make better decisions that brings the organization closer to achieving its strategic objectives. By avoiding the pitfalls, leaders can ensure KPIs are designed, implemented and used exactly as they were intended – to help the organization succeed and avoid the inevitable storm.

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In taking a cue from manufacturing, marketing departments are embracing the principles of lean agile practices. Research shows that over the past five years, 77% of marketing departments have embraced lean agile principles, and 67% of those have shown increases in both revenue and profits. Needless to say, lean agile principles are making an impact in the marketing community.

Please take some time and watch this informative video on the topic!

https://youtu.be/j-r5W_Eq4G4

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When first learning about TPS and lean, most become focused on the tools. They tend to be flashy and lend to endless discussion about technique and application. But as you gain experience and understanding of lean and TPS, an epiphany occurs. The true essence and spirit of the applications are about continuous improvement and respect for people. The are truly the two pillars of lean and TPS. Waste reduction and management tools are not pillars of the methodology.

The essence of methodology is that each individual employee is given the opportunity to find problems in his own way of working, to solve them and to make improvements.

Wakamatsu and Kondo, Toyota experts

The essence of lean thinking and TPS is simply put. Keep the focus on building people, then building products, which includes creating an environment of challenging the status quo. The true brilliance and strength of the TPS and lean thinking is the ability to harness the intellectual power of the average employee. This concept is lost on many organizations who get themselves lost in the tools and miss the obvious simplicity of the concepts.

The concept of respect for people not just about the customer or end user. It refers to everyone inside and outside of the organization who has contact with the process. This means line workers, support personnel, vendors and supply personnel. If you follow through with this principle, you will continually analyze the process and seek perfection with involving the customer. This will nurture the ability of the organization to self-identify problems and lead to continuous improvement, or Kaizen. Ultimately, the organization will start to challenge everything and embrace change with ease. More important than the actual improvements, the true value of continuous improvement is in creating an atmosphere of continuous learning and an environment that not only accepts, but actually embraces change.

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Leading in turbulent times requires a deliberate shift from command-and-control towards a collaborative style of leadership. This may be easier for some than others. It requires a shift in mindset! The idea of collaborative leadership requires individuals at all levels take initiative and act in ways that supports the achievement of the vision, purpose and objectives of the enterprise. The freedom to take risk, to fail, to engage in constructive conflict, to participate in decision making and to experiment, learn and innovate. This is collaborative leadership.

Take the time to watch this informative video!

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The true concept of lean and TPS has two main pillars. These two pillars are respect for people and continuous improvement. Many organizations who try and embrace lean thinking and TPS are often distracted by the tools, instead of focusing on the true strength of lean thinking. Accepting the concepts of the two pillars will allow organizations to challenge everything and embrace the mindset of change.

Check out this informative video on the Two Pillars of TPS and lean!

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The concept of collaborative leadership seems foreign to some professionals new to a leadership role. Most newly anointed leaders anticipate an environment where they are streaming orders down the line and their staff are jumping into action. Things are getting done as long as they seem to be in control, barking orders and expecting complete subordination of their authority.  It is an idealistic world that truly only can be successful in the most limited environments or in times of life-or-death situations. The practice of collaborative leadership can be crucial in times of uncertainty or turbulence, but is also a driving element in the lean manufacturing environment. Simply put, it creates a collaborative environment where people can unite with purpose, with clear vision and a solid set of values.

Leaders practicing in an environment of collaborative leadership have a purpose and vision, with character and values that are unwavering.  These elements blend together and create passion, but that passion must begin with the leader. Others will not follow a leader that lacks passion, simply because they lead by example. This element of passion in leadership creates the spark that drives others to initiate actions independently and step up to the challenge.They are will to take on ambitious responsibilities and accept the risks associated without  fear.

The elements of purpose, character and values brings a leader forward in the work environment. One of the hardest lessons learned in that environment is that they are really never in control. It is understood that people comply with authority when the leader is present. The real key to success is what they do in the absence of authority. Collaborative leadership principles demand leaders that can lead without the safety net of a title, position or authority of a superior. This doesn’t mean that you cut deals or accept substandard performance. It simply means that your drive, passion and commitment inspire others to follow your lead. 

Finally, collaborative leadership focuses on developing people and other leaders at all levels. It instills the concept that everyone is a leader.  Everyone has voice that is respected and that they are expected to take the responsibility for their actions. This means that mistakes are no longer there to be documented and considered as punishable infractions. They become opportunities for learning and development. You must take your people outside of their comfort zones and encourage them to succeed.

There are many elements involved in collaborative leadership. They require a leader to give up their authoritative tendencies, get out of their office and join the work environment they are responsible for. It requires character, passion and the establishment of trust. It is truly the foundation of a successful team and the collaborative process. It is all about the people. 

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It is said that somewhere between Point A and Point B lies the truth. Finding that elusive point of fact is one of the most challenging opportunities in quality management. Everyone has their view of how things are and their opinion is what they perceive to be the truth. If you ask ten different employees why they all complete the same task, you will get ten differing opinions. Each opinion will be fully supported by what they perceive to be the facts. Unfortunately, in most cases, you get ten different opinions that are just slightly different than the fact you are seeking. Nobody will be intentionally deceiving you, and they are confident that their facts are the truth. It is simply human nature. However, for businesses to be successful, they must operate on facts and not perception of fact. Getting to the facts is the goal of using the RCA.

Root Cause Analysis (RCA) is a valuable tool in quality improvement for identifying the underlying causes or facts of a issue or incident so proper solutions can be identified and implemented. It is a tool designed to identify not only what happened and how it happened, but also why. When you truly able to determine the facts of why an event happened, then you be be able to apply workable corrective actions to prevent future events. Some organizations mistakenly interpret the term root cause’ to mean there is one root cause of an issue. Nothing could be further from the elusive truth. Focusing on one cause can easily allow you to implement a solution that misses the problem all together. The root’ of a plant is not singular, so the root cause of a problem typically is not singular. 

RCA Cause Mapping Method

Define – What is the problem? Define the issue or event by the impact on the goals.

Analyze – Why did it happen? Use a cause map to visually represent the issues.

Solve – What will be done? Make effective solutions that change how the work is executed.

The most effective cause map is a simple one, which illustrates the how and why an incident or event occurred. Begin the exploration of the 5 Why’s and expand that into as much detail as necessary. The more complex and challenging an issue, the more times you ask why. The RCA cause map will allow you to understand the issue and create a visual dialog. It will show where there needs to be a bit more exploration of the roots to find the truth.

An effective RCA process moves past the typically excuses of human error’ and procedure not followed’ that many organizations tend to use as excuses. It is a deep dive that can result in true quality improvement for the organization.      

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PDCA is all about innovation! By using a methodical approach to problem solving, PDCA is one of the most valued tools available to Lean Manufacturing. When applied properly, PDCA creates a culture of innovation throughout the manufacturing process. It prevents decision paralysis, and methodically moves improvement forward through measured trial and error.

 Watch this educational video on PDCA!

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