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Vishwadeep Khatri

Holding Black Belts Accountable for Positive Project Results

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I liked the following article. I would like to have a discussion on this.

This article is by William Rushing

As a Black Belt, I know it is easy to fall into the trap of working only non projects that cut costs. I also know that this type of "accounting" is a slippery slope that can cloud essential business goals by creating

unfounded visions of savings.

Don't get me wrong - cutting expenses is important. For a manager, having to explain, even with 50 well-prepared PowerPoint slides, why the group is over budget, is as painful as a root canal. Cost cutting, however, doesn't always equate to long-term profitability.

During a period of declining profits, it is common for companies to begin cost-cutting efforts to trim the fat. Spending caps are imposed and projected budget expenditures are reduced. Eventually, companies turn to process improvement efforts such as Six Sigma or Lean to dig deep into processes to reduce waste. It is at this point that faulty project selection and chartering can create a mismatch between estimated savings and actual positive impact on the bottom line.

To keep from heading down this path, Black Belts should ask themselves: "Who am I accountable to?" An unrealistic departmental budget? A manager who wants to shake up the department? A company that has hired a large contingency of Black Belts to cut costs and efficiencies?

It's understandable for a Black Belt to be confused by who the "customer" is, especially since they are working with both internal and external customers. Too often, a Black Belt services the internal customer - the person who hired the Belt or the person the Belt works for. These internal customers may be most concerned about their particular areas. The result: The activities of a Black Belt can be soiled into departmental goals that may or may not coincide with the overall goals and vision of the company.

Projects selected by the Black Belt should directly impact the external customer. It does not matter how much money projects save an organization - if the savings do not positively impact the customer, then they are worthless.

Getting buy-in to the idea that cutting costs is not the primary project benefit can be trying, though. One approach is for Black Belts to make sure they are setting realistic expectations for project benefits. No postulating. No grandstanding. Just show how the customer is being positively impacted.

Consider a project that resulted in a new process to recycle cardboard boxes. The process reduces both the amount of waste generated and the number of times the trash has to be dumped, saving $50,000 annually. Though the project did save money and made the company greener, did it really impact the customer? What if the company's president were to ask the Black Belt what impact this project truly had on customers? How would they answer? Here are two possible, but lame, answers:

1. "With a new green image of the company, our customers will feel that we are good stewards of the environment. Their loyalty to us will increase, which will cause sales - and profits - to increase."

Of course, the company may need to spend $85,000 on a marketing campaign to let customers know it is greener. Interpretation: no positive impact.

2. "We will be able to use that $50,000 and reinvest it in new technology to provide better products to our customers."

Most "savings" on projects are projections for the following 12 months. This means the company should have an extra $4,166.67 each month - a small amount to invest in new technology. Interpretation: no immediate positive impact.

The bottom line: Black Belts should be accountable in the accounting of their projects. They should select those projects that positively impact external customers, and should look beyond just cutting costs when determining project benefits. Maintaining and increasing the customer base by providing quality goods and services in a timely and efficient manner will help ensure the profitability of the company. Ultimately, this also will ensure the success of the Black Belt.

About the Author: William

Rushing is a Black Belt and operations manager for McKesson Corp.'s distribution center in St. Louis, Mo., USA. Previously, he was a lieutenant in the U.S. Navy.

What are your views about practicality of this approach?

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what impact this project truly had on customers?

Dear Sir,

IF due to this project, the company saved $50K, definitely the benefit of this should be passed on to the end-customers i.e. the cost of the recycled boxes should go down, since the pricing of a final product initially included waste generation & dumping.

Instead of promoting green image , the company should price their products lower than competition, thereby sidelining them on cost advantage factor.

To conclude, customers will be able to purchase the same product at a lower price, thereby giving the company a competitive advantage... a typical case of LEAN.

Hope it made sense

Rgds

Kapil

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At the end of the day for any business what matters is bottom line. We get in to business to earn money and nothing else. By saving $50,000 on boxes the company earns $50,000 a year. This is what matters to the company and nothing else. Why should they disclose it to anybody. They should be happy with their extra income.

The principles of Lean & Six Sigma are very well adopted by Toyota and actually they are the one who used these first. They are also benefited by it. But with this they are not the one who sells most economical cars in the World. Their target would surely be to earn more money with less expense. When they can earn extra from these then why not!

We talk about initiating a Six Sigma project by Voice of Business (VOC), Voice of Customer (VOC), Cost of Poor Quality (COPQ), Voice of Process (VOP), etc. Let this project be VOP here and everything would be fine.

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I was thinking on this situation since I woke up and would like to add one more thing. $50,000 which the company had earned should be given to the customer in implementing still better quality of boxes by putting some extra money in the material used to make boxes. The end customer would surely benefit from this. Also, this would create a differentiating thing between this box manufacturing company and other competitors and end customer would surely prefer to take boxes from the client who is providing better quality boxes.

I would like to describe similar situation here. I want mention the real name of the companies. There was a commercial vehicle tyre manufacturing company 'A' whose sale was very good in Southern region of the country but was not good in one of the northern region state of India. They had done a market research and came up with interesting results:

  • The mentality of Southern state truck drivers was to take the load as per the regulations on how much weight truck should carry
  • The state where the sale was not considerable there the truck drivers used to take load more than the required

Due to this there was more wear and tear in the tyre of the truck drivers carrying more load. Thus, they preferred tyre from Company B whose wear and tear was less compared to Company A

Company A then onwards started making tyre whose capacity was to take on more load as per the standard.

Coming back to our case we can say that end user do notice small things and will go where they are benefited more. Thus, investing in to getting better quality boxes by improving the material can be a good idea.

Other view points would be very much appreciated.

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Holding Black Belts Accountable for Positive Project Results: - Yes, in all right earnest that should happen, and that only will prevent the Belts from falling into departmental goal traps or swaying to organisational power groups. This will automatically result in more independence for the Belts in selection of projects and also be stand convinced about larger end benefits. Ofcourse, the project may be focussed on either 'short term tangible goals' or 'long term' intangible goals (or whose tangibility will be evidnet only on a longer time horizon). Short term cost saving objectives can act as motivator but should not make the long term picture look hazy.

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Black belts do cover many of the organizational functions as project managers in organizations. While the responsibility for completion of projects at the cross-functional level to see some tangible results is important for the BB, it is essential that higher management be responsible for the entire deployment. Because of higher management's conversion of the financials, cost of poor quality, voice of customer and voice of business aspects into critical to customer characteristics by the Balanced Scorecard, it is essential that the clarity at a higher management level and at the champion level be 100% in order to ensure best results from BB projects. Buy in with program managers, project engineers/executives across different departments is a requisite condition for project success.

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