There exists a concept that cost savings is the measure that must be met for a project to qualify as a Six Sigma green belt project or a Six Sigma black belt project.
That concept is wrong, says William Wes Waldo, COO of consulting firm BMGI, who shared his observation during a recent online training event "Performance Metrics: How to Select Them, Adjust Them, and Tie Them Into Your Strategy."
Waldo voiced his objection first by outlining a typical conversation surrounding the selection of a black belt project: The conversation begins with a black belt project proposal, which is met by the question, "How much is the project worth?" Told that it is worth $50,000, the response becomes, "That cant possibly be your project. All black belt projects must be worth at least $300,000. Thats what makes it a black belt project."
Where did that $300,000 figure (or similar high figure) come from? It dates back to the measurement system that existed when Six Sigma programs first launched, explains Waldo. The programs often were kicked off in engineering-driven organizations, which looked at the typical allocated cost of an engineer, recognizing all the training necessary to turn that person into a dedicated black belt. The organization then determined it required a 3X return on that engineer's time, for example, and calculated that cost. Carrying out their calculations further, the organization determined a black belt could complete two projects per year, therefore requiring each project be worth $300,000 for a total of $600,000 per year in cost savings, or a 4x return on that black belt's time.
So they backed into the math, Waldo points out. "Thats a very activity-driven approach and what we look at are results."
Aren't the numbers the results? No, says the BMGI chief operating officer. "The conversation should be about matching the skill necessary to the problem. So, if I have a problem that requires a ton of linear regression and a DOE [design of experiments] and all these types of analyses that clearly are the skill set of a black belt or a master black belt, then I should assign them to that regardless of the dollar amount, especially if I dont have a million-dollar project sitting out there," he says. "What we want to do is match skill on problem as opposed to dollar amounts, which is a fictitious type of program management metric that's out there."
"If you are putting the right people on the right problems, that have the right skill sets, the money eventually will flow out of that, and thats something important for people to realize."