Is the American Dream Over? a Critical Commentary on the Future of the United States
What is the American Dream and why was it so Good while it Lasted? For a long time, the United States was seen as the Land of Milk and Honey where anyone and everyone with some talent, lots of hard work, sheer grit, and dogged determination could make a career for themselves and raise a […]
Europe’s Controversial Common Agricultural Policy
European nations have been following a controversial policy called the common agricultural policy. Under this policy, European governments have been giving subsidies to their own farmers. These subsidies artificially lower the price of some crops leading to market distortions. This is the reason why Europe’s common agricultural policy has come under severe criticism many times. […]
Warehouse Operational Efficiency and Inventory Health
Any warehouse operations are measured by service levels, volume of transactions handled quality of transactions and most importantly inventory health maintained. By Inventory health in a warehouse, we are referring to Physical Inventory Accuracy, the way inventory is physically kept in locations and discipline maintained in transactions, inventory maintained in the system. Inventory Health, in […]
Overcoming the Challenges of Delivering Projects on Time and Without Cost Overruns
Why Do 80% of All Projects Fail to Deliver on Time and What can be done About Them Research shows that nearly 80% of the projects fail to maintain timely completion of deliverables at each stage of the project as well as fail to finish on time. Project Managers often complain that the Triple Constraint […]
Introduction to Flow Chart as BPI Tool
Business Process Improvement programs have become the major tools for Organizations to keep working on their internal operations to enhance the operational efficiencies, to implement new processes in line with business requirement and to eliminate redundancies and wastage. When the Organizations used to be managed and run based on hierarchy and centralized decision making, the […]
There has been considerable debate in the industry in the past as to whether Six Sigma projects are worth all the hoopla that has been surrounding it. For decades before this debate, Six Sigma was followed in a cult-like manner and organizations would never question the financial viability of the projects undertaken. However given the fact that many conmen type consultants have surfaced in the recent past promising unbelievable benefits from Six Sigma projects, checks are now imposed to ensure that the projects are financially viable. Here is a list of some prominent issues in Six Sigma financial evaluation as well as how these issues have been solved.
Projected Numbers Never Materialize: At the end of the Six Sigma project, the Finance Certifier gives the PNV of the project. This is the Projected Net Value of the project and markedly different from the Net Present Value (NPV). The difference stems from the fact that all the calculations mentioned are hypothetical in nature. This means that it is assumed that the process will continue behaving in a certain way and financial benefits will be realised over a period of time. However an analysis of the past projects has shown that the reality was very different. In many cases, the projected numbers were not realised.
Calculations are Off-base: A deeper evaluation of past Six Sigma projects shows that the reason gains were never realised was the fact there were no gains in the first place! The numbers used to show the financial viability of the project were off base. Many times it was assumed that market shares would increase because of efficient processes, however it did not materialise because competitors improved their processes too. It was clear that the consultants were accounting for gains that were beyond the control of the organization.
Bonuses are Paid on Projections: What intensified the debate further was the fact that bonuses were paid to executives on the basis of these fudged numbers. Executives therefore had an interest to inflate the financial viability of the project and show it off as a bigger success than it actually was misleading the strategic initiative of the organization involved.
As a result of this debate, many organizations have become vigilant on what they spend towards Six Sigma initiatives and what is the Return On Investment (ROI). Here are some of the initiatives that have been started:
Follow Up Review: A project is not considered an immediate success on completion. Reviews are set up every six months or so where the senior member of the project team meet with the senior management to check whether the project is on track and delivering what was promised to the organization, if not, why? And what can be done to ensure that the gains are in fact realised?
Standardized Calculation Policy: Many corporations have come up with explicit policies regarding how calculations pertaining to Six Sigma projects can be done. This has eliminated the problem of fudged numbers to a large extent.
Personal Accountability: A large part of the bonus of the executives is linked to the realization of gains. Bonus is announced at one go, but paid over a period of time if reviews show the project is one track.
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Step 3B: Choosing the Correct Control Chart (Continuous Data)
February 12, 2025
