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Portfolio Management and Six Sigma Projects

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Published: 13Sep2008
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Six Sigma projects are derived from organizational strategy, in the same way that organizational strategy drives the selection of all projects and programs in an organization's Portfolio. So, how do the business drivers that are at work result in some projects being Six Sigma projects, and others not?

Business Drivers and Project Selection
Business drivers are the starting point for any project selection process because of their close relationship to organization strategy. Business drivers form the foundation for strategy. Strategy forms the basis for organizational goals. The goals can be translated into specific metrics for purposes of establishing benchmarks. The result of all of this is a set of initiatives wrapped up in a portfolio of projects and programs. The type of metrics determines the type of project, such as Six Sigma.

3 Types of Metrics
There are 3 types of metrics that influence project type or approach.

1. Business Metrics - typically measure financial performance aspects
2. Operations metrics - measure various aspects of the operations for the enterprise at a macro level
3. Process Metrics - provide detailed information about the processes being employed in the day to day operations

All 3 of these metrics support and relate closely to one another, and ultimately to the organizational strategy. But Six Sigma supports the detailed process level activities, which are present throughout most functions within the organization. Thus any projects that will ultimately be measured by process metrics are candidates for Six Sigma projects.

Once a project is a candidate for a Six Sigma project, it needs to be determined if the project will be best served by a more "classical" approach to process improvement, or if the best path is a pure Six Sigma approach. The classical approach would go something like this:

1. Ientify the problems to be solved
2. Define the problems clearly
3. Investigate the defined problems
4. Analyze the problems
5. Solve the problems
6. Validate the results or solutions

If the project requires the greater rigor of Six Sigma, it will likely be best served by one of 2 main methodologies that are Six Sigma specific:

1. Design for Six Sigma (DFSS) - Processes that are compliant with Six Sigma methods and metrics are created within the project.
2. DMAIC - The Define-Measure-Analyze-Improve-Control method is the 5 step Six Sigma process improvement methodology.

The Identification of Metrics
Identifying the key driving metrics within the organization is the key to success in identifying strong candidates for Six Sigma projects. One of the most popular systems of organizational metrics today is the Balanced Scorecard. In the Balanced Scorecard, the management system that generates the metrics is aligned with the company's strategy and goals. Metrics are developed based not only on the financial perspective, but on 4 different perspectives for measuring organizational effectiveness:

1. Financial performance - traditional way of measuring performance within a business
2. Customer-centric view - measures alignment with customer needs, such as customer retention, satisfaction, loyalty, complaints, and related measures
3. Internal business processes - these relate to operational aspects such as throughput, work in progress, and project management effectiveness
4. Learning and growth - relates to metrics around the concept of knowledge workers continuously learning, expanding competency in the right areas, and knowledge sharing and collaboration

Whether by accessing Balanced Scorecard information or identifying some other source within the organization, it is critical to access definitive information on the organization's key metrics.

Prioritization of Six Sigma Projects
The assumption is that at this point, it has been concluded that a certain project lends itself to the Six Sigma approach. There are a number of positive and negative factors that need to be considered in prioritization. Aside from alignment with strategy, consideration must be made for urgency, size relative to resources, significance to the organization, impact, risk, ease of application or implementation, and degree of resistance within the organization.

Conclusion
Six Sigma projects are derived from the need to satisfy certain process metrics that support the business objectives and strategy of the organization. All projects need to be aligned with the business objectives and strategy, and Six Sigma projects are no exception. Six Sigma projects will typically account for a portion of the projects in the portfolio. The unique effectiveness of Six Sigma is most apparent where achievement of improved process metrics is the goal. Six Sigma is very data and metrics driven, so there must be a clear ability to gather or generate appropriate metrics before, during, and after conclusion of the project in order to drive success.

John Reiling, PMP, MBA is an experienced Project Manager and writer on Project Management and related topics. John's web site, Project Management Training Online, provides online training for PMP Prep and PDUs, including topics and certifications such as Six Sigma, ITIL, PRINCE2, and more. John writes regularly in his Project Management blog, PMcrunch.com .

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