What's It Worth To You?
©2020, George J. Irwin. All rights reserved.
Who’s heard this before:
“I need a Black Belt project done. How much money will you save me?”
This may quickly lead to a circular problem: you might not know the benefits of the project until you start it, but you can’t start the project until you can describe the benefits.
We’ll hold the question of “hard versus soft” benefits for another post, but sorry, folks, and fellow Belts, it IS necessary to have some idea of the impact of a project before starting it. This is for two simple reasons. First, Lean Six Sigma resources are relatively expensive, and that doesn’t include the effort time of others needed to execute the project. Second is the concept of “opportunity cost”—if you do this project, you’re passing up the chance to do another project that might afford greater overall benefits for the enterprise. This second point is why Portfolio Management, which I did for a while for a thirty-plus person Six Sigma operation, can be useful to reduce (but not necessarily eliminate!) the probability of virtual fistfights between leaders who both want their projects prioritized ahead of everyone elses.
But let’s go back to the single project justification. I like to work with the Rough Order of Magnitude concept here, which can be described as “How many digits is the answer” or better, “How many commas does the benefit look like it will have”. (For those of you in the EU: “how many periods,” I know.) There should be some sense of this.
For example, if you’re trying to avoid “leaking” defects of a system all the way into production, you can estimate the benefit through understanding how much it costs when this happens. For starters, that includes the costs of the actual fix—often way more than during coding or testing—plus the costs of correcting any data that was affected, and then the costs of calming down your users and customers, and possibly even certain governmental entities. (Sources online can help with this.) Multiply that by how many defects appear to get all the way into production, and there’s your Rough Order of Magnitude.
If there’s not even enough data to compute something like this, then, well, that in itself is a data point which fits into the category of Process Maturity. And it’s likely time for a Hard Conversation with the person who wants the project done. And possibly that person’s manager. And that person’s manager. Without at least a rudimentary understanding of benefits, the chance of project success is significantly lower—trust my experience on this.
One other thing: note that I used the word “described” the benefits in my “circular reference” and not “quantified.” While most formal Lean Six Sigma organizations understandably set a floor for benefits in order to consider a project, that shouldn’t be equated with trying to calculate this down to the exact dollar level. Such estimates early on in a project are time-consuming, and have a one hundred percent probability of being wrong. This is one example of many where Roughly Right is better than Precisely Incorrect.