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Lean Six Sigma for Government: An Introduction for Government Accountants and AuditorsByBetsy Neidel, CSSBB and Leita Hart-Fanta, CPA, CGFM, CGAP

Copyright 2016February 2016 [email protected]

Course CPE InformationCourse Expiration DateNASBA’s Statement on Standards for Continuing Professional Education requires all Self-Study courses to be completed, and the final exam submitted, within 1 year from the date of purchase as shown on your invoice. No extensions are allowed.

mailto:[email protected]

Field of StudyAuditing (Governmental) Some state boards may count credits under different categories—check with your state board for more information.

Course LevelBeginning

PrerequisitesThere are no prerequisites.

Advance PreparationNone.

© Copyright Leita Hart-Fanta 2016

Lean Six Sigma for Government: An Introduction for Government Accountants and Auditors

Even for those familiar with it, Lean Six Sigma can mean different things to different people depending on the situation. Sometimes, it indicates a manufacturing technique designed to reduce waste and improve yield. Sometimes it refers to a quality department tool set. Sometimes, it seems like just part of the latest “fix-it” hype, consulting mumbo-jumbo or management flavor of the month type stuff.

Fear of the unknown and not wanting to look stupid is enough to keep most people backing away from Lean Six Sigma. However, Lean Six Sigma is a very useful body of knowledge and we want to make it less daunting and intimidating for others. And Lean Six Sigma holds a wealth of techniques and approaches for squeezing the most out of any effort in the government environment.

This course is intended to provide insight, as well as a foundation for using Lean Six Sigma immediately within the accounting function of an organization–specifically, a government accounting organization. If you are a government auditor, you will find this book is full of fancy, impressive names (sometimes exotic-sounding Japanese names!) for things you already do, and you will find a few new techniques to add to your bag of tricks.

Course objectives include:

· Define Lean/Six Sigma· Distinguish between philosophy, attributes, toolsets, and methodologies of

Lean Six Sigma· Differentiate between value added and non-value added activities· Identify a family of performance and improvement measures for a function or

organization· Select an appropriate Lean Six Sigma tool for a task· Choose appropriate tools for each phase of the DMAIC model· Define qualities and common goals of Kaizen events· Distinguish between a Lean Six Sigma project and a Lean Six Sigma program· Classify reasons for resistance to changeProgram level: IntermediateInstructional method: Self-study text with online quizNASBA Category of Study: Auditing (Governmental), Accounting (Governmental)Advance preparation: NoneWho should attend: Governmental accountants working to improve processes and service delivery. Governmental auditors interested in adding new diagnostic techniques to their audit procedures.Recommended CPE credit: 7.5 hours

Instructional DesignThis Self-Study course is designed to lead you through a learning process using instructional methods that will help you achieve the stated learning objectives. You will be provided with course objectives and presented with comprehensive information and facts demonstrated in exhibits and/or case studies. Review questions at the end of each chapter will allow you to check your understanding of the material, and a final exam will test your mastery of the course.

Please familiarize yourself with the following instructional features to ensure your success in achieving the learning objectives.

Course CPE InformationThe preceding section, “Course CPE Information,” details important information regarding CPE. If you skipped over that section, please go back and review the information now to ensure you are prepared to complete this course successfully.

Table of ContentsThe table of contents allows you to quickly navigate to specific sections of the course.

Chapter Learning Objectives and ContentChapter learning objectives clearly define the knowledge, skills, or abilities you will gain by completing each section of the course. Throughout the course content, you will find various instructional methods to help you achieve the learning objectives, such as examples, case studies, charts, diagrams, and explanations. Please pay special attention to these instructional methods as they will help you achieve the stated learning objectives.

Review QuestionsThe review questions accompanying each chapter are designed to assist you in achieving the learning objectives stated at the beginning of each chapter. The review section is not graded; do not submit it in place of your final exam. While completing the review questions, it may be helpful to study any unfamiliar terms in the glossary in addition to chapter course content. After completing the review questions for each chapter, proceed to the review question answers and rationales.

Review Question Answers and RationalesReview question answer choices are accompanied by unique, logical reasoning (rationales) as to why an answer is correct or incorrect. Evaluative feedback to incorrect responses and reinforcement feedback to correct responses are both provided.

GlossaryThe glossary defines key terms. Please review the definition of any words of which you are not familiar.

Index

The index allows you to quickly locate key terms or concepts as you progress through the instructional material.

Final ExamFinal exams measure (1) the extent to which the learning objectives have been met and (2) that you have gained the knowledge, skills, or abilities clearly defined by the learning objectives for each section of the course. Unless otherwise noted, you are required to earn a minimum score of 70% to pass a course. You are allowed up to three attempts to pass the final exam. If you do not pass on your first attempt, please review the learning objectives, instructional materials, and review questions and answers before attempting to retake the final exam to ensure all learning objectives have been successfully completed.

EvaluationUpon successful completion of your online exam, we ask that you complete an online course evaluation. Your feedback is a vital component in our future course development. Thank you.

Yellowbook-CPE is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

Notice: This publication is designed to provide accurate information in regard to the subject matter covered. It is sold with the understanding that neither the author, the publisher, nor any other individual involved in its distribution is engaged in rendering legal, accounting, or other professional advice and assumes no liability in connection with its use. Because regulations, laws, and other professional guidance are constantly changing, a professional should be consulted should you require legal or other expert advice. Information is current at the time of printing.

TABLE OF CONTENTS

INTRODUCING AND DEMYSTIFYING LEAN SIX SIGMA.....................1PREFACE..........................................................................................................1

CHAPTER 1: LEAN SIX SIGMA FOR ACCOUNTANTS--INTRODUCTION...................................................................................................... 3

Introducing and Demystifying Lean Six Sigma.................................................3What Is It?........................................................................................................3The Accounting Focus......................................................................................5TOP TEN Factors That Make Accountants Ideal Users of Lean Six Sigma:........51.Accountants and auditors see more..............................................................52.Accountants and auditors have the data......................................................63.Accountants are often players in strategic planning … or should be............64.Accountants and auditors naturally value accuracy, timelines, and CONTROL!........................................................................................................65.Accountants and auditors are good at structure...........................................76.Accountants and auditors like the fact that Lean Six Sigma is bottom-line driven...............................................................................................................77.Accountants end up getting involved anyway..............................................78.Accountants and auditors will appreciate the holistic approach...................79.Accountants and auditors are increasingly held to non-financial performance metrics........................................................................................810. Accountants and auditors sometimes need an image makeover...............8Lean Six Sigma at Work...................................................................................8A University’s Experience................................................................................9Why Is It Called “Lean Six Sigma”?................................................................10What does Lean Six Sigma do?......................................................................11Is it really “breakthrough”?............................................................................11Motivation via a burning platform..................................................................11Is Your Platform Burning? – A Starting Point for Using Lean Six Sigma for Improving a Process.......................................................................................12How Strong Are Your Controls? (Or, “How good is your process?”): An example.........................................................................................................13Do You Want to Be a McDonald’s?.................................................................14Working with My Favorite Professor--Lean Six Sigma in Action......................14Lean Six Sigma and Breakthrough--Some More Examples.............................15The Internal Revenue Service........................................................................16Bank One.......................................................................................................18Lean Six Sigma and You.................................................................................19What’s in the Rest of This Book?....................................................................19

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Study Questions for Chapter 1.......................................................................21Answers to the Study Questions for Chapter 1..............................................22

CHAPTER 2: DEFINING LEAN SIX SIGMA.......................................24Some Background Context.............................................................................24Sibling Rivalry................................................................................................24Origins of Lean Six Sigma..............................................................................24Lean and Six Sigma--Comparative Attributes................................................26Standing on the Shoulders of Giants--the Pioneers........................................26Sometimes the Engineers Ran into Snags That Accountants Had Caused!....27How Can You Use Lean Six Sigma?................................................................27How Lean Six Sigma Makes a Difference, or at Least, a Good Story..............28The Taxonomy of Lean Six Sigma..................................................................29Drilling down Through Four Levels: Philosophy, Attributes, Toolset, Methodology..................................................................................................29Lean Six Sigma Defined: The Philosophy.......................................................29Lean Six Sigma Defined: The Attributes.........................................................30Lean Six Sigma Defined: The Toolset.............................................................31Lean Six Sigma Defined: The Methodology....................................................31PDCA and DMAIC Models Compared..............................................................33The OESH MODEL...........................................................................................34STEP 1: Organizing.........................................................................................34STEP 2: Executing..........................................................................................34STEP 3: Sustaining.........................................................................................35STEP 4: Honoring...........................................................................................35What Lies Ahead?...........................................................................................36Study Questions for Chapter 2.......................................................................37Answers to the Study Questions for Chapter 2..............................................39

CHAPTER 3: BASIC LEAN CONCEPTS............................................43Core Concept: Value-Added and Non-Value Added Activities.........................43Value..............................................................................................................43The Customer Determines Value...................................................................43Adding value..................................................................................................44Core Concept: Waste.....................................................................................46Core Concept: The Value Stream and Flow....................................................48

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The Shorter the Stream, the Better................................................................48Flow............................................................................................................... 49Study Questions for Chapter 3.......................................................................51Answers to the Study Questions for Chapter 3..............................................53

CHAPTER 4: BASIC SIX SIGMA CONCEPTS....................................57Core Concept: Variation.................................................................................57How Do You Control Variation?......................................................................57Core Concepts: Standardization and Consistency..........................................58Core Concepts: Capability and Stability.........................................................58Core Concepts: Common Cause and Special Cause.......................................59Core Concepts: Metrics and Measurement.....................................................59Study Questions for Chapter 4.......................................................................63Answers to the Study Questions for Chapter 4..............................................64

CHAPTER 5: THE TOP 13 LEAN SIX SIGMA TOOLS........................661. Brainstorming............................................................................................672. Benchmarking............................................................................................683.Process Map or Flow Chart..........................................................................764.Value Stream Map.......................................................................................805. Check Sheet...............................................................................................836. Pareto Charts.............................................................................................857. 5 Whys.......................................................................................................878. Cause and Effect Diagram--a.k.a. Fishbone Diagram.................................899. Impact/Effort Matrix...................................................................................9210. Spaghetti diagram...................................................................................9411.The 5 S’s...................................................................................................9812.FMEA (Risk Assessment Matrix)..............................................................10013. Documentation......................................................................................103Study Questions for Chapter 5.....................................................................109Answers to the Study Questions for Chapter 5............................................113

CHAPTER 6: THE DMAIC PROCESS.............................................121The DMAIC Phases.......................................................................................1211.DEFINE......................................................................................................1242.MEASURE..................................................................................................1253.ANALYZE...................................................................................................126

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4.IMPROVE...................................................................................................1275.CONTROL..................................................................................................127USING DMAIC--A Scenario............................................................................128Study Questions for Chapter 6.....................................................................131Answers to the Study Questions for Chapter 6............................................132

CHAPTER 7: UNDERSTANDING KAIZEN......................................135Development of Kaizen................................................................................135Rapid Improvement.....................................................................................135Benefits of Kaizen within Lean Six Sigma.....................................................136Cross-Functional..........................................................................................136The Timeline................................................................................................137KAIZEN EVENT--DEFINE................................................................................137Define the Project........................................................................................137Identify the Kaizen Leader and the Team--Team Preparation......................138Management Buy-in and Support.................................................................138Map the Process...........................................................................................138Compare Current and Future States............................................................138KAIZEN EVENT--MEASURE............................................................................138What to Measure..........................................................................................138Where It Comes From..................................................................................139KAIZEN EVENT--ANALYZE.............................................................................139Looking for Gaps and Non-value added (NVA).............................................139Midpoint Executive Review..........................................................................139KAIZEN EVENT--IMPROVE.............................................................................139Choose Improvements That Can Be Accomplished Immediately.................139Test and Implement.....................................................................................140KAIZEN EVENT--CONTROL............................................................................140Observe and Adjust......................................................................................140Establish standards......................................................................................140Maintaining Improvements..........................................................................140Celebrate and Recognize.............................................................................141Communicate...............................................................................................141Study Questions for Chapter 7.....................................................................143Answers to the Study Questions for Chapter 7............................................144

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CHAPTER 8: MAKING LEAN SIX SIGMA WORK.............................147Project or Program.......................................................................................147Select the RIGHT SPONSOR..........................................................................148Select the RIGHT PROJECT...........................................................................148Select the RIGHT TEAM................................................................................149Select the RIGHT METRICS...........................................................................149Why Change Fails.........................................................................................150There Are Even More Reasons Why Change Is Hard to Sustain...................155Recommendations for Overcoming Resistance to Change...........................157Your Role in Lean Six Sigma.........................................................................158It’s the Process, Not the People…................................................................159Study Questions for Chapter 8.....................................................................161Answers to the Study Questions for Chapter 8............................................163

AFTERWORD..............................................................................167REFERENCES..............................................................................171GLOSSARY..................................................................................173ABOUT THE AUTHORS................................................................179

Betsy Neidel, CSSBB, MBA...........................................................................179Leita Hart-Fanta, CPA, CGFM, CGAP.............................................................181

INDEX.........................................................................................183FINAL EXAM...............................................................................185

V

INTRODUCING AND DEMYSTIFYING LEAN SIX SIGMA

INTRODUCING AND DEMYSTIFYING LEAN SIX SIGMABy: Betsy Neidel, CSSBB and Leita Hart-Fanta, CPA, CGFM

PREFACEOK, we admit it... using the words “Lean Six Sigma” in the course of regular, daily conversation undoubtedly invokes one of the following reactions: a) an exaggerated rolling of the eyes, b) a pronounced swallowing and feigned attempt to look interested, c) a desperate gaze around for someone else to talk with, d) close inspection of one’s fingernails, or e) any combination of the above.

For most people, Lean Six Sigma is not an obvious topic for scintillating discourse; not like money, scandal, or the latest reality TV show. It’s a subject that most people don’t know much about, and therefore can’t relate to.

I guess you could say that is exactly why we are writing this book. Fear of the unknown and not wanting to look stupid is enough to keep most people backing away from Lean Six Sigma. However, we have found that it can be a very useful body of knowledge and want to make it less daunting and intimidating for others. And Lean Six Sigma holds a wealth of techniques and approaches for squeezing the most out of any effort in the government environment.

We (Leita and Betsy, the authors) have formal training and education in accounting and quality fields as well as experience in the practical application of this training, which is the basis of many of our examples. We do not work specifically as a CPA and Six Sigma Black Belt, respectively. We do work WITH this knowledge in order to help people improve processes, drive change, increase control, and feel better about what they are doing in the context of their organization and job function.

For Leita, a major focus is the use of Lean Six Sigma to improve internal controls, auditing practice, and business systems. Leita is a Certified Government Financial Manager, Certified Government Audit Professional, and a CPA. She is well versed in the GAO’s

INTRODUCING AND DEMYSTIFYING LEAN SIX SIGMA 1

INTRODUCING AND DEMYSTIFYING LEAN SIX SIGMA

Government Auditing Standards and regularly teaches courses for government auditors and monitors. For Betsy, the focus is on operational and practical uses of Lean Six Sigma in cross-border integration, especially for US-China business. Simply speaking, we like helping people and helping to “make sense” of this information: applying Lean Six Sigma as it makes sense in a particular environment or setting. In the case of this publication, that environment is “accounting”.

We hope you find this helpful and look forward to hearing from you with any comments, suggestions or ways that you have applied Lean Six Sigma in your workplace. Information on contacting us is contained in the reference section. One other note: we use “we” and “I” interchangeably throughout the text. It means both of us.

Leita Hart-Fanta and Betsy Neidel December 2011


CHAPTER 1: LEAN SIX SIGMA FOR ACCOUNTANTS--INTRODUCTION Objectives for this chapter:

· Define Lean Six Sigma· Determine how Lean Six Sigma fits into the accounting culture

Introducing and Demystifying Lean Six SigmaEven for those familiar with it, Lean Six Sigma can mean different things to different people depending on the situation. Sometimes, it indicates a manufacturing technique designed to reduce waste and improve yield. Sometimes it refers to a quality department tool set. Sometimes, it seems like just part of the latest “fix-it” hype, consulting mumbo-jumbo or management flavor of the month type stuff.

If you are reading this publication, we assume that you are looking for some sort of meaning in, with, or through Lean Six Sigma. This text is intended to provide that insight, as well as a foundation for using Lean Six Sigma immediately within the accounting function of an organization--specifically, a government accounting organization. If you are a government auditor, you will find this book is full of fancy, impressive names (sometimes exotic-sounding Japanese names!) for things you already do, but it may also add a few techniques to your bag of tricks.

What Is It?At the most basic level, Lean Six Sigma is a way of working and of viewing the world that allows all of us to DO THINGS BETTER. Lean Six Sigma provides a framework, a methodology and a wide array of tools and concepts to help people in large and small organizations alike find the value of, and increase the value of the activities in which they are engaged… and who is not interested in that?

In manufacturing, Lean Six Sigma CAN lead to reduced waste and improved yield. That means a better production process, with less scrap, less need for rework, and therefore a better cost picture. For the quality department it CAN represent a set of tools. These help determine what factors influence quality and how to control for them. To others, especially business managers, it CAN appear to be a “flavor-of-the-week” consulting offering--BUT IT WORKS--to drive process improvement and to make things better (that part of process improvement is increased control--something that often appeals to those skeptical program managers!).

Lean Six Sigma can apply to an assembly line function in a manufacturing environment, to a transactional environment (another way of describing a non-manufacturing environment) where the end product is service, or to a virtual environment where collaboration and knowledge transfer is the goal. As an


accountant, you may have contact with all of these functional areas or environments in the course of doing your job!

Much of Lean Six Sigma is just organized common sense--like minimizing activities that waste time and don’t lead to a desired outcome and like trying to do things right as often as possible to have a better overall result. In the course of everyday work, however, we sometimes lose sight of these basics. Deadlines, politics, conflicting priorities, and multiple demands on our time and energy can cause us to merely react and sometimes to deflect, instead of really thinking about what we are doing and how we are doing it…or better yet, to reflect on how we could be doing it better.

As it pertains to making things better, the list of areas where Lean Six Sigma can be applied is endless. Below is a sample of typical accounting-focused jobs or functional areas that can benefit from Lean Six Sigma practice. You may have more to add to this list!

AuditingBudgeting and forecastingCash managementCredit AnalysisContracts managementCompliance assuranceCost accounting General ledger accountingFinancial planning Fraud investigationsGrants managementInformation technology implementationInventory controlFinancial analysisFinancial reporting Performance managementProgram managementPurchasingRisk managementStrategic planningTax accountingTreasury management

Pardon the ad nauseam repetition--we really want you to remember this point. As said before, each of these functions or roles can benefit from Lean Six Sigma because Lean Six Sigma can help us do things better. Breaking it down a little more, Lean Six Sigma in accounting and elsewhere equates to:

Doing it faster (reducing cycle time)Doing it more accurately (minimizing errors and re-dos)Doing it to the customers’ satisfaction (meeting customer specs)Doing it more cheaply (do more with less)


Lean Six Sigma can help with all of those desires and can lead to any of those benefits. No, it isn’t a cure all, or silver bullet. You will have to work and use your brain… but hey, that’s why they pay you the big bucks, right?

The Accounting FocusThe focus of this book is on Lean Six Sigma within the accounting function, regardless of the type of overall enterprise. You may work in accounting within a manufacturing company like John Deere; within a distribution or retail company like Wal-Mart; within a service business like Mabel’s Plumbing or Al’s Restaurant; or within a small government organization such as a city or school district. You might work within a not-for-profit organization; within an environment with lots of daily transactions like USAA (insurance) or with just a few--think McMansion sales. Whatever your organizational focus and structure, be it government, corporate, private, or non-profit, the accounting function is ripe for introduction of Lean Six Sigma and the benefits it can bring.

When I was in college, an accounting professor at University of Texas (UT) gave a very simple lecture that made a big difference to me. The professor, Dr. Courtland Huber, said that accounting majors had a choice when entering the working world. They could be compliance and transaction-oriented police officers and paper pushers, or they could become part of the management team. He had studied the career paths of accountants over time and noticed a 40% pay differential for those who made the choice to lead and to see a broader picture. “Improvement pushers” triumph over paper pushers--and who doesn’t want more salary!?! Lean Six Sigma is an approach for doing this. Let’s see why…

TOP TEN Factors That Make Accountants Ideal Users of Lean Six Sigma:1. Accountants and auditors see more.

Accountants often have a bird’s eye view of operations. Other departments may have a more myopic viewpoint--only dealing with their part of the organization and with those that help them achieve their own immediate goals. In comparison, accountants often collect data on a variety of functions and are in a great position to see where change is most needed across a chain or network of operations. Auditors perform risk assessments of the entire organization and often understand its workings better than program managers. Accountants may be well positioned to initiate, drive, and implement the needed changes because they can or should be able to see things across business units and across functions.

2. Accountants and auditors have the data.A key part of Lean Six Sigma is having the ability to measure. “If you can’t measure it, you can’t improve it,” so the saying goes. Having the data gives the ability to measure and improve something.Having the data, or the access to the data, also allows accountants and auditors to measure the improvements in various meaningful ways. While


financially, this is ultimately in dollars, operational measures may answer questions like “how fast,” “how long,” and “how many.”Before an engineer implementing Lean Six Sigma in a manufacturing operation can declare success, he has to put a dollar figure with his efforts. Where does he get the dollar figure? Accountants may already have the information at their fingertips to calculate a valid return on investment of any Lean Six Sigma improvement process. They can also talk return on investment and money better than anybody else-- including the engineers!

3. Accountants are often players in strategic planning … or should be.Accountants’ ability to see the big picture allows them to link the results of Lean Six Sigma to results that have meaning for the organization.Participants who operate at the strategic level have a better ability to tie operational and tactical improvement projects to corporate goals and to bring in that oh-so-important element of aligning projects to strategy. And although auditors shouldn’t be part of the strategic planning process, they are intimate with it, as they often evaluate the results of the entity against its plans.Planning improvement projects (using Lean Six Sigma) should be part of the strategic planning process, in which accountants SHOULD participate.

4. Accountants and auditors naturally value accuracy, timelines, and CONTROL!While other departments may need convincing that good controls to create accurate, meaningful results are important, accountants and auditors are already sold! Part of a successful Lean Six Sigma project is having the ability to sustain and control improvements.Lean Six Sigma helps to clarify and improve business processes. This leads to more transparency and easier governance--increasingly important these days! A well-documented process makes an auditor’s life dreamy!Lean Six Sigma can help you understand when things get “out of whack” and provides tools for correcting systems, processes and procedures to increase compliance and decrease the chance of fraud.Programs that have undergone a process improvement project using Lean Six Sigma have thought about controls before the auditor gets there.

5. Accountants and auditors are good at structure.Accountants and auditors know how to define clear objectives and tasks and to create policies and procedures to achieve those objectives. The terminology of Lean Six Sigma may be new to many accountants and auditors, but the underlying concepts will be familiar and comfortable for them.Lean Six Sigma provides a framework for decision-making that is rational, orderly, and hard to argue with. People who like structure like Lean Six Sigma.


6. Accountants and auditors like the fact that Lean Six Sigma is bottom-line driven.Lean Six Sigma projects are often evaluated against whether they contribute to bottom line financial results--and who knows the bottom line better than accountants?After you use Lean Six Sigma to improve the bottom line, you can also use it to improve the top line--generating additional revenue through focusing on the Voice of the Customer (VOC) and designing processes that ultimately provide what the customer values. Accountants who cannot only control costs, but can also increase revenue are GODS! (They are paid more too, just like the professor said.) Sometimes they later get to be called “Controller.”Auditors sell their own department’s worth (and hence increase staffing and prestige) through quantifying audit recommendations and results.

7. Accountants end up getting involved anyway.Probably somewhere along the way, another team within the organization will try to implement Lean Six Sigma and when they do, they will have to involve accounting to get the data they need. How cool would it be to be able to beat these operations managers to the punch with your own Lean Six Sigma analysis of critical organizational processes? This again gets back to my professor’s comments about taking the lead instead of just taking a supporting role.Being involved in Lean Six Sigma helps with continuous learning about other areas of the organization. This is a good thing and can help generate good opportunities for advancement as well as for beefing up the resume.Government auditors are often expected to have the latest techniques and tools at their disposal--at least they don’t want to be caught by surprise when an innovative program manager implements Lean Six Sigma

8. Accountants and auditors will appreciate the holistic approach.

Because accountants and auditors are so aware of all the players in the organization and how each impacts the others, accountants will appreciate how Lean Six Sigma does its best to avoid turfs or silos when diagnosing and resolving problems. Accountants appreciate that Lean Six Sigma will integrate people, process, and technology.Lean Six Sigma is a good approach for bringing cross-functional teams together to support a holistic approach. Often some of the greatest good comes from just getting people out of their silos for a while.

9. Accountants and auditors are increasingly held to non-financial performance metrics.Are you under pressure to create more timely data or more accurate data or to shorten cycle time? Is the department concerned with reducing costs and maintaining a knowledgeable workforce? No matter what the organization


expects of you and your department, Lean Six Sigma can help you do what you are doing more efficiently and more effectively.By clarifying processes and discerning what is ultimately important to the customer, Lean Six Sigma pushes people to choose metrics that are relevant to the government and its citizens--not just the metrics that are easy to produce (but don’t help anybody to improve anything).

10. Accountants and auditors sometimes need an image makeover.

By bringing Lean Six Sigma techniques into your organization, you can demonstrate your ability to think in an innovative, bigger way. Would you prefer to stick with what you know making a smaller salary, or are you willing to involve yourself in issues of a broader significance to the organization?Have you ever taken the Myers-Briggs test for personality type? I have been through a lot of those trainings, and invariably there is an example that says people in accounting and auditing are “introverts” (or maybe I am just sensitive to that). In our society, being an introvert has a negative connotation. I find that what we usually call “introvert” is more like “relatively risk averse”. Lean Six Sigma doesn’t change personality types, but it can help people who are more careful in their decision making to meaningful changes with diminished risk. This is possible because there is a methodology and a system that makes sense.Lean Six Sigma gives people a platform to do things and to stand out. Sometimes you need a vehicle to use in order to bring attention to yourself. Accountants and auditors ROCK!

Lean Six Sigma at WorkAs an accountant and auditor, it seems clear that Lean Six Sigma should appeal to you at some level. Remember, the core of Lean Six Sigma is about doing things better. In Lean Six Sigma-speak, we call this “identifying and increasing value.” (As an aside, a friend who was reviewing this text told me that instead of “value” I should put “money” because Lean Six Sigma is used to improve the bottom line. He was right on one point--Lean Six Sigma is undertaken in business to improve the bottom line; however, the value we refer to above is more like “benefit”--a more broadly defined “value” that includes more than just monetary wealth. In government, value is often defined as service to our constituents. We will see how value within Lean Six Sigma is determined a bit later on.)

Throughout the rest of this chapter are some examples of how Lean Six Sigma methodology works in real organizations and business situations. This should give you a flavor for how it might work in your organization!

A University’s Experience During the 1990’s, many rural and small town universities in Texas were absorbed by either Texas A&M or the University of Texas. The Texas legislature wanted more consistent control over these smaller universities and the smaller universities wanted to share in the wealth of the two largest universities in the state. So, Pan


Am University became University of Texas at Brownsville, for example. As you can imagine, the usurped universities experienced a bit of a culture shock.

One small rural university called me after they had been audited by the University of Texas internal audit shop. The University of Texas auditors criticized the rural university’s accounting and purchasing department for having weak internal controls. The lead compliance officer at the rural university asked me to help her explain to her accounting managers and staff what ”internal control” meant. They were wounded from being so strongly criticized, but they had no idea what to do in response.

After explaining that internal controls are simply steps you take to make sure you achieve your goals, we talked about what their department was trying to achieve.

As part of that seminar, we created several flowcharts--one for each arm of the accounting and purchasing department--showing what happened when one of the departments made a routine purchase. We used athletics as our example. Each accounting and purchasing department worked for a few minutes to post a flowchart on the wall using post-it-notes.

After everyone had a chance to look over the Post-It-Note flowcharts, I reviewed what was on the wall, asking the managers and staff to identify any redundancies. Comments such as “I didn’t know you did that--I do that, too!” and, “Why are we doing that?” flew! Just the visual presentation of the process made a difference.

The most meaningful conversation started when one of the ladies commented on one of the flowcharted activities, “That little process works every day but Friday!” She was referring to the trip approval and cash advance process. Each person in the room knew that you threw the whole process away on Friday because various groups--like the football team and the band--waited until the students were loaded on the bus to process the paperwork necessary to start the trip.

Even though accounting had repeatedly asked the athletic and band directors to plan ahead, they consistently failed to do so. One of the accounting clerks--who wore very high-heeled shoes, by the way, because she was under five feet tall--walked the transaction all over campus. Everyone teased her about her tennis shoes--and resulting reduced stature--on Fridays. In addition to creating more manual effort, all controls were scrapped and the accounting department wasted major portions of their day doing the wrong thing.

“Ahs…” flowed abundantly around the room. Controls and the need for controls had hit home. Through creating and analyzing processes using a flow chart, the group had a technique for diagnosing their issues and for resolving them. Previously they had just done what needed to be done in the moment--“BAU” or the Business As Usual syndrome--and had gotten in the habit of doing the wrong thing. By using a Lean Six Sigma tool (the flow chart), they were able to make improvements and gain greater internal control.


Why Is It Called “Lean Six Sigma”?Lean Six Sigma is a combination of two separate disciplines or bodies of knowledge originally associated with quality improvement and manufacturing. Those two disciplines are Lean and Six Sigma (who would have guessed?). Today, both separately and combined, Lean and Six Sigma are viewed more broadly as systems of business process management and improvement, in addition to still being used and regarded as quality systems.

We address Lean Six Sigma here as a holistic topic--the synthesis of the two previously named systems. Lean Six Sigma is a breakthrough business methodology used to drive change within an organization. That’s our definition! We believe the two approaches to be better together than apart because of the complementary parts of each, especially in business process improvement. As such, Lean Six Sigma has evolved as a newer, better mousetrap--good news for those in the consulting business as well as for those seeking a new approach to driving business improvement and excellence!

To backtrack a little, though--if you are really into knowing why Lean is “Lean” and “Six Sigma” sounds like something out of an engineering textbook or a sci-fi movie, here’s the reason. “Lean” signifies a streamlined process--where there’s not a lot of excess… like “lean and mean.” “Lean” is already a word that is within most native English speakers’ vocabularies, so it is fairly easy to get an intuitive sense of the concept. “Six Sigma,” on the other hand, is a term with its origin in statistics--not highly intuitive for a lot of us.

Sigma is the Greek letter representing standard deviation of a process around its mean or average. The standard deviation shows how much variation there is in the process. (In the world of business process improvement, the goal is to reduce variation. Variation = defects = waste = bad!) In a process with a normal distribution (sorry--another statistics term), 99.73% of the measurements are within +/- three sigma. To you and me, this means that the result of what you are doing or measuring is only defective (not what you intended or “bad”) about 3 times out of 1000. For some accounting processes, this is already very good!

“Six Sigma” refers to a process that is essentially defect-free. From a strictly technical standpoint, it means that you will have a mistake or a defect only 3.4 times out of one million… just about as close to perfection as you can get. However, for our purposes, “Six Sigma” is used more generically to refer to a methodology for reducing errors and improving the chance of getting the intended results.

Lean Six Sigma as a whole is the drive for improvement and ultimately, for perfection. Lean was started by Toyota in the 1950’s and Six Sigma was started by Motorola in the late 1980’s, both building upon ideas about “how to do things better” that have been around for a long time.

What does Lean Six Sigma do?You can find Lean Six Sigma under many subject headings. I was using the university library catalog the other day and found Lean Six Sigma books and


articles listed under Operations Management, General Management, Business Planning, Strategic Planning, Manufacturing, Services, Product Design, Quality Control, and Self Help! From this list, you get the idea that Lean Six Sigma has wide applications and uses, and might even be able to produce miracles--but I was unable to find any reference to it under Religion...yet!

To keep things simple, let’s remember the definition of Lean Six Sigma as a breakthrough business methodology used to drive change within an organization. (It may go without saying, but we will say it anyway; the assumption throughout this publication is that we want to drive for POSITIVE change--i.e., improvement.)

So… to answer the question in the heading, Lean Six Sigma drives change. This change usually starts at the level of discrete improvements in how work gets done (individual projects for making things better). It also works at the macro level when it is used for long-term change in an intentional way. Lean Six Sigma creates change within the heart of an organization--it can change the culture of the business and how things are done, from the top down.

Is it really “breakthrough” ?The term “breakthrough” is linked to the idea of change--change in terms of singular improvements and change in terms of organizational culture or philosophy. Lean Six Sigma can be used to drive incremental change in the everyday way you do your job by focusing on specific areas that need to get better. It can also be used to drive far-reaching fundamental change in the way an organization views its responsibilities to customers, its employees, and all stakeholders.

Driving breakthrough change is not usually an easy decision. As you all know, it is usually easier to “stay the course.” The need for breakthrough change (and corresponding organizational and cultural change) happens when there is a burning platform.

Motivation via a burning platformChange is difficult to implement in any organization and most are reluctant to embrace new ideas. You have all seen management fads come and go… mostly go. Change is more likely to stick when everyone in the organization recognizes that they are in so much pain or are threatened with so much pain, that they must act… now!

I first heard the term “burning platform” during a presentation by a Caterpillar VP, who explained how Caterpillar had transformed itself by embracing Six Sigma (this was pre-Lean Six Sigma era) because it had “a burning platform.” In order for the business to survive at the time, it needed to take radical, breakthrough action to change the way it did things, and to improve. The reported result of the corporate-wide initiative was a doubling in CAT stock price over a three-year period.

The term “burning platform” supposedly came from a very unfortunate individual who was working on an oil platform, and had to make the radical decision to jump 150 feet down into the sea in order to survive a platform fire. He did survive.


Thus, people refer to the burning platform as something that will force change and drastic action, even in the face of great resistance under normal circumstances.

Is Your Platform Burning? – A Starting Point for Using Lean Six Sigma for Improving a ProcessHow well is your operation running? Do your processes run smoothly with minimal error or are you just lucky that anything gets done? Can you even define what your processes are? Can you measure them?

In auditing, the concept of the control maturity model is often used to evaluate an organization or a department’s internal controls. Using Lean Six Sigma, you can evaluate the internal control process and whether the system or process that we have in place is consistently producing desired outputs or results.

Note that the words system and process are used interchangeably: to be more correct, a system is defined as a set of processes. For example, you may have an accounts receivable process, a cash flow process, a general ledger process and a couple of other processes that make up your accounting system.

A process is “a series of interdependent steps through which some end is attained.” (Definition courtesy of the on-line Random House Dictionary.) Lean Six Sigma works by focusing on improving a process to get a better result or outcome. That is why anyone doing work where there is a beginning (input), an activity, and a result can benefit from Lean Six Sigma. Virtually anything can be improved.

Now let’s get back to looking at process and systems in the context of internal controls--the weaker the control (or the poorer the control process), the more the need or usefulness of Lean Six Sigma.

How Strong Are Your Controls? (Or, “How good is your process?”): An example

Non-existent Initial Repeatable Defined Managed Optimized0 1 2 3 4 5

0--management processes are not applied at all1--processes are ad hoc and disorganized2--processes follow a regular pattern3--processes are documented and communicated4--processes are monitored and measured5--good practices are followed and automated

When I teach a class in downtown Austin, I leave my house early to avoid the traffic and to eat breakfast downtown. I have three choices of places to eat: Rosita’s Comida Deluxe (name changed… because I am about to talk trash about them), Taco Cabana--a Texas fast food chain, and McDonald’s. I am going to compare these three establishments using the process maturity model above.


Rosita’s is a super dive. The only reason I even step inside is that a local magazine gave it high marks. They were right--the refried beans are heavenly. But Rosita’s has some serious problems that will keep me from going back. The first time, they were able to pull off my order--mostly. The eggs weren’t what I ordered, but I was in a hurry, so I let that slide. The next time however, they took 30 minutes to get my food out. And even worse, the waiter had a huge gash on his nose and smelled like a sewer. He said he had been in a fight the night before. He needed stitches and it turned my stomach. Bacon just didn’t seem as appealing afterward.

I give Rosita’s a rating of 1: processes are ad hoc and disorganized. Lots of need for Lean Six Sigma.

My next choice is Taco Cabana. Taco Cabana is a Texas chain of fast food Mexican restaurants, and I love their huevos rancheros. But about every fifth visit, something stupid occurs. Maybe they don’t have the nice warm red sauce for my huevos rancheros and instead put cold pico de gallo on my eggs. Maybe they are out of napkins. Yes, they have run out of napkins twice! Or maybe someone put coffee in the tea dispenser. It is a little risky to have breakfast at Taco Cabana… but I like the food, so I put up with it.

One thing that is great for me as a customer, but worrisome for their owners and shareholders, is that I always get something free or for a reduced price because the cashiers like me. I NEVER get anything free at McDonald’s. NEVER.

I give Taco Cabana a 2.5 on the scale: processes follow a regular pattern. Taco Cabana could still use Lean Six Sigma to improve.

Then there is McDonald’s. If I am a little emotionally fragile on a given morning, and can’t take any surprises, I head to McDonald’s. McDonald’s always gets it right. They are the most controlled business I know of. Last time I was there, I noticed a soda conveyor belt that measured out just the right amount of ice and soda for the to-go window clerk. The only thing the clerk has to do is put on the lid. Now, that is control! We wouldn’t want the clerk to put too much soda in there, would we?

My Egg McMuffin and sweet tea are just like the last batch I ate. Not particularly tasty, not at all spicy, but darned consistent…and that is a key success factor to a franchise business like McDonald’s.

McDonald’s gets a scale rating of 5: good practices are followed and automated. Less immediate need for Lean Six Sigma though they could still benefit from improvement. Every organization can…

Do You Want to Be a McDonald’s?Achieving a maturity rating of 5 is very costly and may not be worth it for you. It isn’t worth it for my business. I am proud to consider myself a Taco Cabana type of operation. I have my simple little systems that work for me and allow me to pull my work off about 80% of the time without a hitch. Because I am a writer and a trainer, my clients don’t experience any severely negative effects if I forget to send


in my PowerPoint slides on time. My failures aren’t going to make anyone sick or kill anyone. On the other hand, hospitals should be like McDonalds! Unfortunately, we all know that they struggle, too.

Understanding where you are on the maturity scale, why you are there, and knowing where you want to be, can help you determine how Lean Six Sigma might be useful to you.

Working with My Favorite Professor--Lean Six Sigma in ActionOne of my favorite clients is named Howard. Howard is a professor at a large state university. Howard throws plenty of business my way and is very easy to work with. He is so relaxed; however, that it sometimes causes trouble.

Howard asked me to write an online training program for government investment officers for him. Students would register through the university, I would set them up with a password in the system, the university would send the student their books, and I would verify that they passed and graduate them.

I wrote up a laundry list of procedures--including checks and balances--to make sure that the student was well taken care of. Howard said, “Hey, we have done this kind of thing before, we don’t need that.” I created my student file checklist of key tasks and milestones anyway and did everything I could to keep things controlled on my end.

I make $100 every time a student signs up. Not much money, but it is fine money for spending just a few minutes of time setting up a password and sending a few emails. But--when things go wrong, I can spend hours trying to make corrections. The frustration I feel isn’t worth $1000. If this thing doesn’t run smoothly, I really want nothing to do with it. This is why controls are so important to me on this program. For this program, I need a process maturity scale of 4, at least. It needs to operate smoothly most of the time, or I don’t really make any money.

From the get go, we ran into a variety of stupid problems: students weren’t receiving the email with their password, students weren’t getting any books or the right books, the university was forgetting to bill the student… on and on and on. Because I only controlled a portion of the program and the university controlled the rest, some of the issues were out of my hands.

After I got Howard involved on a few mystery cases of missing books and bills, and he ended up sucking up a lot of his precious time running down a few dead- end bunny trails himself, he finally handed over the program to his wife, Marilyn. Marilyn is the force that keeps Howard running. Marilyn and I discussed what was going wrong and came up with ways to act as double checks on each other to make sure the students were taken care of.

We wrote down a list of simple procedures, roles and responsibilities, and I shared my student file checklist with her. We named an accountable party at the university (other than Howard and Marilyn, who travel extensively) to be responsible for mailing the books and mailing the password. She and I both keep


an eye on the program now and only occasionally do we run into problems. This is another simple case of Lean Six Sigma at work: building process, making improvements, and putting controls in place--whether we call it that or just do it. I hope this example underscores the point that Lean Six Sigma is accessible and is something you can do to make a difference in your organization.

Lean Six Sigma and Breakthrough--Some More Examples At an industry conference in 2008 there were numerous testimonials from companies using Lean Six Sigma to make significant improvement in their organizations. Though they used Lean Six Sigma to make incremental changes initially, their programs took on greater meaning in response to a need for breakthrough. This was the common thread. Over a period of years, companies went, respectively, from using Lean Six Sigma tools and methods on individual projects to instituting organization-wide programs.

The previous example shows how Lean Six Sigma can be used in response to a specific issue (i.e. the need for more control and standardization in a process to register students for on-line training). The following examples portray how it can also be used to drive fundamental change in the way a government serves its citizens

The Internal Revenue ServiceAt the conference, Betsy Kinter from the IRS made a presentation called “Embedding Quality in the IRS.” It was the story of how the IRS responded to a mandate by the Senate Finance Committee to modernize. This was in 1998. In hearings that year, various senators talked about what was wrong with the IRS and how it needed to improve service to taxpayers. Some of the senators said some pretty negative things, including Senator Gramm who said, “I have no confidence in the IRS… Let me tell you what I think is wrong. A good system rewards good behavior and punishes bad behavior, and yours does exactly the opposite.” These are harsh words and definitely constitute a burning platform for change.

As a result, the IRS was charged with changing from a geographically-based enforcement agency to a customer-focused service agency--big, big changes in how the Internal Revenue Service viewed itself and its operations. They created a simple mission and vision to follow.

MISSION: Top Quality ServiceVISION: Make Taxes Easier

The improvement focus was within the Wage and Investment Group, a division with over 50,000 employees and 130 million taxpayers. Imagine how hard it would be to change an organization of that size!

Three main problems were identified as the things to focus on:

Measures of performance and output were inward facing and not customer-focused


There was a weak connection between these measures and employee and organizational performanceImprovement efforts were not strategically aligned

To solve these issues, three broad-stroke solutions were focused on:

Global common measures: this meant benchmarking with private and public entities on a function-to-function basis. In defining measures, the IRS asked, “What is most important to the customer?” and came up with three areas of highest impact. These were timeliness, accuracy, and professionalism. This is what they would measure.

100% line of sight accountability: this meant developing measures that were tied to performance and motivated people to do things the right way--for the customer. Reporting was created that would flow up, from the employee to operations to the overall organization. This reporting would allow for communication of critical business information at all levels of the organization. Everyone could see how his or her efforts contributed to the success of the organization.

Strategic planning and improvement: this meant linking actions to long-term objectives, mission, and vision. Though the IRS started improvement efforts with individual project-level focus, the long-term success was based on implementation of a full Lean Six Sigma infrastructure and program integrated with strategic planning.

This sounds like a lot and it is… improvements took place over an eight-year period.

The speaker emphasized that success in the overall initiative was based on early wins that she referred to as being in “stealth mode.” This meant “just doing” some of the Lean Six Sigma projects without scaring people away with the prospect of a massive new program for change (Lean Six Sigma). Early success generated early adopters, upon which further success could be built. Within your organization, an early adopter could be you!

Some examples of specific projects to make discrete improvements included:

To Improve Taxpayer Service…

Streamline the returns processing at Submission Processing Centers Reduce waste in walk-in center processesImprove telephone response qualityReduce defects in publications and forms

To Enhance Enforcement of Tax Law…

Reduce lag time before detecting fraudImprove cycle time for the release of liensReduce erroneous tax assessments


Improve the selection process for exam case audits

Bigger initiatives focused on modernizing the IRS through people, processes, and technology improvements:

Automating non customer-focused activities to improve response timeStreamlining the amended return processEliminating barriers that impede employment opportunities for employees and applicants

You will see that all these project areas focus on cycle time and quality for full Lean Six Sigma impact.

The IRS began by focusing on the “what”--individual improvement projects--and then gradually developed their approach into the “how” by embedding Lean Six Sigma in every step of the organization. Remember, it took eight years of gradual and regular progress.

Bank OneAnother good example comes from Michael L. George’s book Lean Six Sigma for Services. In this publication, George provides a case study of Bank One and how it used Lean Six Sigma to drive major changes within its National Enterprise Operations division in response to major growth the bank experienced in the late 1990’s.

George cites a Bank One senior VP as explaining the initial driving force for improvement as “basic survival” and the need to get control over operations. The banking industry was consolidating and Bank One was getting bigger, fast. In terms of our process maturity scale, we might infer that Bank One saw the need to move to a higher maturity level to grow effectively. The text implies that this growth was their burning platform.

The early improvement efforts were focused on “measuring performance and identifying opportunities.” This meant using Lean Six Sigma as a common methodology and language for the division to address specific problems. In your world, this may be as simple as identifying roles, responsibilities, and expectations for certain results (especially important in a growing organization--where people are coming in from different jobs or even different companies and are an integral part of making certain things happen). This is similar to the example of the Texas university consolidation and the flow-charting exercise.

Back at Bank One… later implementation of Lean Six Sigma focused more on what we might think of as “proactive improvement.” Instead of just responding to operational problems (which is always important), the next stage was about making sure operational processes were aligned with strategic goals and that they produced intended results. Look at this as moving from focusing on “what” to focusing on “how.”

Another way to frame this difference is to look at the contrast between using Lean Six Sigma to solve a problem that we know quite a bit about, but lack the internal


coordination or visibility to solve it versus having a goal like “increase customer satisfaction by 10%.” In the latter case, we don’t know much about the issue or HOW to solve it. It’s not just a coordination or visibility matter. Instead of using Lean Six Sigma to show WHAT we need to do, we let the methodology guide us in action.

In any case, through long-term and widespread deployment of Lean Six Sigma within the National Enterprise Operations, Bank One recognized specific operational results as well as a new way of doing things. Net results came through conducting projects to reduce cycle time (one administrative process was reduced from 20 minutes to 12 minutes) and brought associated cost reductions. This is a “what.” Bank One also shared an example of how they used a Kaizen project to figure out how to cut down on the amount of “exceptions processing” in their overnight corporate-to-corporate payments system, thereby reducing cost and increasing customer satisfaction and revenue. This is a “how.”

Lean Six Sigma and YouThe path to improvement begins with small steps, and this training focuses on what you can do as an individual. It’s great to make sweeping proclamations with the best of intentions, like “I am going to start a regular exercise program.” “Doing Lean Six Sigma” can be similar. We have found, however, that it is much easier to start with small steps, like doing 10 minutes of exercise today and not stressing about how to fit a new program into your routine. It’s the same with Lean Six Sigma. We hope that you learn from this training some things that you can do today instead of waiting for the Lean Six Sigma department to be set up and give you guidance. It usually doesn’t happen that way! Take baby steps!

As we saw in the last two examples, more robust use of Lean Six Sigma may come with time. It involves early “proving out” of the concept--showing that Lean Six Sigma works on problems you are facing now.

You can start by asking, “What is my burning platform?” What is caving in under my feet? Ever since Enron, many of the standards-setting bodies have been very busy enhancing regulations and standards in an effort to make accounting and auditing information more useful and transparent. New technology has increased citizens’ expectations regarding the services government provides. For instance, most permits and forms for state and local governments can now be filled out and submitted online.

No matter the circumstance, it always feels better to be driving change instead of having change drive you. Lean Six Sigma can give you the tools you need to tackle some of the challenges on the horizon before they overtake you and your group. At a later stage, Lean Six Sigma may become your regular “modus operandi.”

What’s in the Rest of This Book?The text is organized to flow from general definitions and concepts to specific tools and methods and to end with three chapters on using Lean Six Sigma. An afterward section is meant to get you motivated and on your way! Finally, there is a reference and suggested reading section at the end.


The chapters are organized like this:

• Chapter 2: Defining Lean Six Sigma • Chapter 3: Basic Lean Concepts• Chapter 4: Basic Six Sigma Concepts• Chapter 5: The Top Thirteen Lean Six Sigma Tools• Chapter 6: The DMAIC Process• Chapter 7: Understanding Kaizen • Chapter 8: Making Lean Six Sigma Work• Afterward• References and Recommended Reading• Glossary• About the Authors


Study Questions for Chapter 1

OBJECTIVE: o Define Lean Six Sigma

1. Which of the following is not a desired result of using Lean Six Sigma principles and techniques?

Meeting customer demands.Achieving cost savings.Compiling technical documentation.Minimizing errors and redos.

2. Lean Six Sigma stems from two separate systems: one used by Toyota and the other used by Motorola. Which of the following systems would you apply if you were to combine two separate processes into one process to make your business more efficient by reducing process time by one hour each day?

Lean.Lean Six Sigma.Sigma.Six Sigma.

3. Which of the following businesses would most likely receive a 5 rating for the strength of its controls?

Company A where employees document processes and communicate said processes to other employees.Company B where employees examine and evaluate processes.Company C where management uses no processes.Company D where management and employees apply automated practices.

OBJECTIVE: o Determine how Lean Six Sigma fits into the accounting culture

4. Which of the following characteristics of the Lean Six Sigma approach will rub accountants the wrong way?

Lean Six Sigma is data driven.Lean Six Sigma is very structured and systematic.Lean Six Sigma is ripe with engineering terminology.Lean Six Sigma is control oriented.


Answers to the Study Questions for Chapter 1

OBJECTIVE: o Define Lean Six Sigma

1. Which of the following is not a desired result of using Lean Six Sigma principles and techniques?

Meeting customer demands. Incorrect. This is a desired result of implementing Lean Six Sigma techniques. One of the first steps of Lean Six Sigma is defining the customers’ needs and then keeping these needs in mind throughout the process. Achieving cost savings. Incorrect. This is a desired result of implementing Lean Six Sigma. When a process is analyzed using Lean Six Sigma techniques, unnecessary and costly steps are identified and can be eliminated.Compiling technical documentation. Correct. Although implementing Lean Six Sigma techniques can result in plenty of paper work, this is not a goal of the process.Minimizing errors and redos. Incorrect. This is one of the benefits of implementing Lean Six Sigma techniques. The quality of the transactions and products should be increased as error-causing steps are diagnosed and eliminated.

2. Lean Six Sigma stems from two separate systems: one used by Toyota and the other used by Motorola. Which of the following systems would you apply if you were to combine two separate processes into one process to make your business more efficient by reducing process time by one hour each day?

Lean. Correct. If you were to combine multiple processes into one process, thereby reducing process time, you would be applying Lean to your business. Lean eliminates excess from processes.Lean Six Sigma. Incorrect. Had you applied within your business a holistic system to improve your business, striving to make it perfect, you would have applied Lean Six Sigma.Sigma. Incorrect. Sigma is not a quality system used to improve business, organization, or manufacturing processes. Instead, Sigma is a Greek letter used to signify a process’s standard deviation around its mean.Six Sigma. Incorrect. Six Sigma would have been applied had you tried to reduce the business’s deficiencies and increase the likelihood of achieving outcomes that you had anticipated.


3. Which of the following businesses would most likely receive a 5 rating for the strength of its controls?Company A where employees document processes and communicate said processes to other employees. Incorrect. This business would likely receive a rating of 3 because the employees document and communicate the processes with one another.Company B where employees examine and evaluate processes. Incorrect. Company B would likely receive a rating of 4 for the strength of its controls since the processes this company uses are monitored and measured.Company C where management uses no processes. Incorrect. Using the process maturity model, Company C would likely receive a 0. The processes are nonexistent. Company D where management and employees apply automated practices. Correct. When a business automates a good deal of its processes and also applies “good practices,” the business will most likely receive a 5 rating for its processes. These processes, or controls, are optimized.

OBJECTIVE: o Determine how Lean Six Sigma fits into the accounting culture

4. Which of the following characteristics of the Lean Six Sigma approach will rub accountants the wrong way?

Lean Six Sigma is data driven. Incorrect. Accountants are also data driven and are skilled at quantifying results.Lean Six Sigma is very structured and systematic. Incorrect. Accountants are often criticized for being too structured and methodical. The Lean Six Sigma approach should appeal to an organized, logical, step-by-step methodical personality. Lean Six Sigma is ripe with engineering terminology. Correct. Most literature regarding Lean Six Sigma contains engineering terms (such as Six Sigma – a mathematical term) that are well known to engineers but infrequently used by accountants. The tools and techniques can be applied to any function in an organization, and the engineering terminology can be bypassed or easily converted to accounting terminology without losing the intent of Lean Six Sigma. Lean Six Sigma is control oriented. Incorrect. Accountants tend to like control as accountants are responsible for so many control-oriented functions in an organization, such as approving and processing transactions and budgeting.


CHAPTER 2 – DEFINING LEAN SIX SIGMA

CHAPTER 2: DEFINING LEAN SIX SIGMA Objectives for this chapter:

· Differentiate between Lean and Six Sigma · Distinguish between philosophy, attributes, toolsets, and methodologies of Lean Six Sigma

Some Background ContextYou learned in the previous chapter that Lean Six Sigma is a way of doing things better and that it is the combination of two originally separate bodies of knowledge or methodologies: Lean and Six Sigma.

United as Lean Six Sigma, some people still present the topic as two separate things--just packaged together--like adding a chapter on “lean” to their “Six Sigma” book, or vice versa. This can be confusing, because it is often not clear what Lean Six Sigma actually is. We strive to avoid this syndrome with minimal dissection of Lean and Six Sigma into two components, but provide some background on the differences, likenesses, and strengths of combining the two methods.

Sibling RivalryYou might think of it as a sibling rivalry. Lean and Six Sigma are originally from the same family. They have the same relatives, the same basic values, and the same general opportunities to “do good.” They are somewhat different in personality and temperament, and want to be recognized as unique individuals. They constantly vie for attention and want to be better than the other. If you have children or spend much time around any, this may sound quite familiar.

The reason for combining as “Lean Six Sigma” is the strength of the union of the two “siblings.” Lean and Six Sigma have different emphases and each alone can achieve good results. But together, they leverage each other and become easier to use. Lean Six Sigma leans on (pardon the expression) the best attributes of each of the siblings to create a better whole.

Origins of Lean Six SigmaAn early use of the word “lean” applied mainly to manufacturing and was introduced to a Western audience by James Womack and Daniel Jones in their 1990 book, The Machine that Changed the World. The Lean model is largely based on the Toyota production system of the 1950’s and is attributed to Mr. Taiichi Ohno, whose career originated in Toyoda Spinning (yes, this company was originally spelled with a “d”) and ended at the executive echelon of the Toyota automotive business.



The underlying principles of Lean are the elimination of waste and creation of value. Improvement is generated by making continuous and incremental changes to a process. Change is developed and made by the people who actually “do” the process, and is done in order to raise the quality of life for those people involved. One of the most widely recognized tools used in Lean is the Kaizen event--a short-term improvement activity that focuses on getting cross-functional input and management buy-in to solve a known problem.

Six Sigma is the name of an initiative that began at Motorola in the late 1980’s. It was introduced as a measure of quality by Motorola Vice President, Bill Smith, and developed as a corporate initiative by Dr. Mikel Harry. Six Sigma was originally a manufacturing-focused, problem-solving methodology. It focuses on transformation (breakthrough or major change, as opposed to Lean’s “incremental” change) and on driving improvement through reduction of defects, which comes through the reduction of variation. This contrasts with Lean’s focus on reduction of waste. Lean-based improvements typically make things better by making them faster (we say, “by reducing cycle time”); Six Sigma-based improvement translates more to error reduction, fewer compliance issues and that broad term, “quality improvement”.

As discussed in the previous chapter, Six Sigma--the term--is a reference to a desire to have a process capability of Six Sigma--only 3.4 defects per million. If it sounds very engineer-y to you, you are right. It is. But that doesn’t mean that we can’t use the majority of the tools and concepts in our accounting world. We know a defect in a report or service when we see one.

As the synthesis of two earlier stand-alone ideas and ideals, you can begin to form a mental model of Lean Six Sigma that combines attributes of both systems. To help you visualize this, we have put them into the chart on the next page which emphasizes the contrast between attributes of Lean and Six Sigma. Looking at attributes from this perspective allows us to see what Lean Six Sigma pulls from each discipline.



Lean and Six Sigma--Comparative Attributes

Another LookFor a basic image of how Lean and Six Sigma are related in Lean Six Sigma, refer to the graph below. Lean Six Sigma is a blend of two separate, but overlapping methodologies. They are pioneered or best known as being used by the companies indicated on the axes, and are themselves evolutions of earlier systems and techniques.

Lean

(Toy

ota)

Six Sigma (Motorola, GE)

LEAN SIX SIGMA

Lean

(Toy

ota)

Six Sigma (Motorola, GE)

LEAN SIX SIGMA

Standing on the Shoulders of Giants--the PioneersAlbert Einstein--in a characteristically humble fashion--dismissed praise for developing the theory of relativity and said that he had ”Stood on the shoulders of giants,“ to complete his work. This can apply to other disciplines, too.

Lean Six Sigma is heavily inspired by earlier contributions of many individuals in the fields of operations management and quality improvement. Their ideas and techniques were developed predominantly as applications to manufacturing, the industrial focus of the time.

Frederick Taylor (1856–1915)--time and motion studiesHenry Ford (1863–1947)--“father of mass production”Sakichi Toyoda (1867–1930)--“automation with a human touch”W. Edwards Deming (1900–1993)--quality and why it mattersJoseph Juran (1904–2008)--quality planning, control, improvementTaiichi Ohno (1912–1990)--Toyota Production SystemKaori Ishikawa (1915–1989)--company-wide quality controlArmand Feigenbaum (1920–Present)--Total Quality Management (TQM)

Many have put their stamp on Lean Six Sigma--as we expect you to! The list above doesn’t mention everyone who ever tweaked the concept. There is no ”right” way to implement Lean Six Sigma. If anyone tells you otherwise, become very suspicious! Who knows, maybe you will be on the next list.



Sometimes the Engineers Ran into Snags That Accountants Had Caused! For many years, the engineers and manufacturing folks kept Lean and Six Sigma to themselves, thinking it irrelevant for operations. But as you can imagine, snafus and inefficiencies in support services affected their ability to get their work done. And so… slowly, the technique has been applied to services such as accounting. If you leave out the standard deviation focus, the tools make perfect sense for us!

How Can You Use Lean Six Sigma? The list below categorizes results that can be generated using the Lean Six Sigma tools and techniques. All of these sound good, don’t they?

Cost reduction--Lean Six Sigma can be used to call attention to waste and redundancy, two main sources of unnecessary cost.Cycle time improvement--Wouldn’t it be great if you could get those reports out faster and process significant transactions less painfully?Error reduction--Errors in simple things, such as payments to vendors, can take hours to clear up!Productivity improvement--You might not have to hire additional help if you could increase the productivity of your technology, systems, or staff.Control of a process--Regulatory initiatives like Sarbanes-Oxley and multiple federal financial management regulations make it imperative that accounting processes be well controlled and transparent.Visibility and variation within a process--Understanding vendor ability to make timely deliveries can influence program outcomes, required inventory levels, and cash position.Improved bottom line--Every hour of effort saved can translate to the bottom line. Time can be saved through reduction of errors and increased cycle time.Improved revenue and cash flow--Improvements in working capital management can improve cash flow and revenues.Increased customer satisfaction--Internal customers want timely, relevant, and accurate financial information. External customers--such as citizens and vendors--want prompt services and accurate payment. Lean Six Sigma analysis can improve your output or abilities in both of these areas.Increased employee satisfaction--Employees lose heart when they are asked to do menial, meaningless, repetitive tasks. Involving employees in the redesign of their work will enhance their ownership of the process as well as make them feel heard and important. (And they often have the answers and insight that you need!)

How Lean Six Sigma Makes a Difference, or at Least, a Good StoryI received this email from a Six Sigma consultant in early 2008. You know how emails are… questionable accuracy, unknown ownership, and lack of any references. But, with that in mind (please don’t sue me if you wrote what follows--I will give you full credit in the second edition), I thought it would be fun to share in this context, so here goes:



“A Japanese company (Toyota) and an American company (General Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile. The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action. Their conclusion was the Japanese had eight people rowing and one person steering, while the American team had eight people steering and one person rowing.

Feeling a deeper study was in order; the American management hired a consulting company and paid them a large amount of money for a second opinion. They advised, of course, that too many people were steering the boat, while not enough people were rowing. Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to four steering supervisors, three area steering superintendents and one assistant superintendent steering manager. They also implemented a new performance system that would give the one person rowing the boat greater incentive to work harder. It was called the “Rowing Team Quality First Program,“ with meetings, dinners, free pens, and a certificate of completion for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices, and bonuses.

The next year the Japanese won by two miles. Humiliated, the American management laid off the rower (a reduction in workforce) for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the senior executives as bonuses and the next year's racing team was ”out-sourced” to India.

Sadly, THE END. Here's something else to think about:

My take on the moral of the story: Yes, Lean Six Sigma can become another fad. And you can hire a consultant to tell you what you already know and then you’ll end up doing the work anyway! But we think the tools and techniques are so practical, that you will immediately see the benefit. No need to “call” it anything in particular. You could just ”do it” and reap the positive results. The trick is knowing the “what” and “how” of doing it: what to do and how to do it. Thinking in these terms is just Lean Six Sigma in stealth mode!

The Taxonomy of Lean Six SigmaRemember the science concept of taxonomy? The way the family related to the genus and to the species? Lean Six Sigma can also be thought of in four levels like that.

The four levels are:

• Philosophy --the guiding principles of Lean Six Sigma • Attributes --the characteristics of a Lean Six Sigma project or system



• Toolset --the techniques you can pull out of your hat to diagnose process issues and more

• Methodology --the common steps that you follow in implementing Lean Six Sigma

Drilling down Through Four Levels: Philosophy, Attributes, Toolset, MethodologyLet’s begin breaking Lean Six Sigma down so we can work with it. We’ll start at the macro level--the philosophy--and then proceed through its attributes. After that we’ll examine the toolbox and the methodologies that you use to pull it off.

Lean Six Sigma Defined: The PhilosophyAt the highest level, Lean Six Sigma refers to a mentality of continuous improvement. In this sense, it is a management standard and strategy companies use to differentiate themselves from competitors. “Doing” Lean Six Sigma well implies a culture of excellence in linking strategy, quality, and execution; of high standards; and of being proactive and in control.

This is how C-level company officers--you know, the CEO, CFO, COO, etc.--generally relate to Lean Six Sigma. They know it at the 50,000-foot level. They aren’t usually practitioners unless the Lean Six Sigma culture is firmly embedded in the organization.

We have identified five fundamental tenets that underpin Lean Six Sigma philosophy. You don’t need to memorize these, but do stop and give some thought about what they really mean in the context of a well-run company. How could they be relevant to you? How can you help to make them more prevalent in your organization?

1. Organizations can and should focus on continuous improvement for the benefit of all stakeholders. Stakeholders include citizens, employees, partners, neighbors, oversight bodies, and those in charge of governance.

2. Continuous improvement should be undertaken in an organized and systematic fashion and should yield measurable results that clearly impact the bottom (or top) line. (If you can’t measure it, you can’t improve it!)

3. Real change occurs when improvement is sustained and serves as the basis of more improvement. It occurs when everyone in the organization is aware of and involved with the change process (this means Lean Six Sigma).

4. The needs of the customer should drive your improvement focus. You are ultimately in business to serve the customer, so figure out who they are and what they want.

5. People in your organization are the heart of your value. Especially as we continue to evolve into a knowledge-based economy, who we are as an organization will drive our growth and value. Strive to respect people and to improve society.

As you can see from these five core beliefs, your ultimate goal is to make the greatest use of the Lean Six Sigma approach across the organization--not just in isolated activities to get isolated outcomes.



Lean Six Sigma Defined: The AttributesIn defining Lean Six Sigma at the next level, we look at characteristics or attributes of Lean Six Sigma as a holistic discipline or body of knowledge. You will notice these attributes support the five tenets of the philosophy stated above.

Compared with the contrasting attributes of Lean Six Sigma that we looked at earlier in this chapter, this chart shows the common attributes.

The attribute level of the Lean Six Sigma definition resonates most with quality managers, business unit managers, and people who have had some previous experience with Lean or Six Sigma. Their knowledge of Lean Six Sigma is at a level of what makes it work and what is useful. This is the 10,000-foot level, compared with the exec’s 50,000-foot viewpoint.

The attributes shown in the chart are for the basis of Lean Six Sigma’s popularity as a business process improvement methodology. Let’s review them again. As you do, think about how these elements are useful, meaningful, or relevant in your environment:

Focus on the customerCross-functionalMeasurable resultsResults tie to the bottom lineStandard “toolbox”Continuous improvement focusProcess and internal control focusDrives standardizationEnables trouble-shootingHelps drive changeMakes things better


Evolution of Lean Six Sigma:

XXXMakes things better!XXHelps drive changeXXXXXXDrives standardizationXXXfocused

XHas a standard "toolbox"Drives continuous improvement

XXXXXResults are measurable

XXCross-functional in natureXXFocus on the customer

SIX SIGMALEANATTRIBUTE


Lean Six Sigma Defined: The Toolset Lean Six Sigma can also be defined by its toolset and methodology. These are usually the most important to people who are actively engaged in Lean Six Sigma work. Between the toolset and the methodology, we are now at about 5,000 feet!

The toolset is a set of quality, process, and management tools common to both the Lean and Six Sigma disciplines. We define and explain the top thirteen tools in depth in a later chapter, but we give you the list here so that you won’t worry about having to learn too much new stuff--you have absolutely used at least some of them before!

BrainstormingBenchmarkingProcess map or flow chartValue stream mapCheck sheetPareto chart (a type of histogram or bar chart)5 WhysCause and effect (fishbone) diagramImpact/effort matrixSpaghetti diagramThe 5 “S’s”FMEA Documentation

Lean Six Sigma Defined: The MethodologyThe methodology or the “how to” of Lean Six Sigma that we like to use follows four general steps:

OrganizingExecutingSustainingHonoring

These steps are basic building blocks and incorporate elements that are common to other process improvement models.

Two of the most commonly used models for process improvement that you may be familiar with are PDCA (Plan-Do-Check-Act) developed by quality pioneer Dr. Walter Shewhart; and DMAIC(Define, Measure, Analyze, Improve, Control), which is at the heart of Six Sigma and comes from the work of Mikel Harry and Bill Smith at Motorola.

These two legacy models and how the steps of each relate to each other are shown here.



ATTRIBUTE LEAN SIX SIGMA

Primary Interest reduce waste reduce variationWorld View flow and value added problems and defectsImpact on process/activity faster, more output consistent result, better qualityFormat Kaizen events DMAIC projectsFocus quick results in-depth study for eventual resultsProject tendency tactical strategicDuration short term (1-5 days) long term (3-6 months)

Important by-productencourages employee participation

encourages data-based decision-making

Participants "regular" employees Dedicated project team

LeaderProject facilitator - often an external consultant

Black Belt - usually an internal employee doing this full time

Training requirement minimal; done during project significant and specialized

Comparing Lean and Six Sigma

PDCA and DMAIC Models ComparedThese are very traditional and well-used models of process improvement, and we highlight DMAIC in a later chapter. However, we have created and will focus on the new, non-traditional acronym OESH to explain Lean Six Sigma. We choose to do this exactly because OESH IS new.

PDCA is commonly associated with Lean Manufacturing; DMAIC is the primary Six Sigma model. We want something different to explain Lean Six Sigma--unique to Lean Six Sigma as a holistic system.



The new model also lets us highlight specific areas where we believe more attention must be focused, as compared with the earlier models. We will get to that when we explain the step “Honoring.”

ACT

DO

MEASURE

CHECK

DEFINE

ANALYZE

IMPROVE

CONTROL

PLANACT

DO

MEASURE

CHECK

DEFINE

ANALYZE

IMPROVE

CONTROL

PLAN

The Lean Six Sigma methodology we call OESH is pictured below. The steps ORGANIZING, EXECUTING, and SUSTAINING are sequential and shown by the three yellow boxes. The HONORING step--shown in blue--encompasses, or is present during the other three.

Organizing Executing Sustaining

Honoring

LEAN SIX SIGMA: METHODOLOGY


Honoring



Honoring




Following the OESH picture is a brief description of each of the four steps. More detail and examples follow in later chapters. This is just a start!

The OESH MODELSTEP 1: OrganizingThis is figuring out what your project is, planning it, and getting support to do it. This support comes in the form of having enough time, enough resources, and adequate executive buy-in. It is also very important to clearly scope and define your project or endeavor, and to have a way of measuring and showing your results. If you can’t show results that clearly relate to your project, re-organize until you can!

STEP 2: ExecutingThis is the stage where work on actual improvement takes place. The three main ways of driving improvement are: 1) to reduce non-value added activities; 2) to improve the flow between value-added activities; and 3) to improve the quality or output of a value-added activity.

1) Non-value added activities are steps or actions that don’t mean anything from the viewpoint of your customers. For example, having three approval signatures on a report adds no value to the customer--you know that because they would NOT pay extra for having these signatures if it was explained to them in those terms.

2) Improving the flow between value-added activities means to reduce bottlenecks between things that need to happen or to reduce those things that slow down progress. For example, having only one person who can supply a piece of information or service is an area for improvement. When that one person is out, everything stops. This is not optimal and would be identified as a Lean Six Sigma area for improvement: to improve the flow from one value-added activity to the next.

3) Improving the quality or output of a value-added activity means doing that activity better. Instead of having three different ways to fill out the same form, which can produce three different results, you would create a standard process that produces uniform results. This is an example of an improvement of, or within, an activity.

STEP 3: SustainingIn this step the emphasis is on knowing that the changes you made in the “executing” phase have the intended result and can be measured. Those results



then need to be maintained and further improved upon. Sustaining improvements has a lot to do with addressing people’s resistance to change.

This step is particularly relevant to you as accountants because it is generally a big part of your focus. It is where CONTROL is emphasized. The first two steps, organizing and executing, serve to identify and drive initial improvements. Keeping an improvement or new process in place is what sustaining is all about. If you are an auditor, you are paid to go directly to this sustaining or control phase. From an audit point of view, improvements in the earlier two phases are the responsibility of the business or process owner. (Though this is not to say that auditors cannot benefit from incorporating all OESH steps of Lean Six Sigma into their own processes!)

STEP 4: HonoringThis step is critical and doesn’t appear explicitly in other models. It is the emphasis on recognizing and rewarding individuals for their Lean Six Sigma work and on communicating the process and the results (what you are doing and what you are accomplishing) every step of the way. The honoring step is all about COMMUNICATION and RESPECT. Valuing the people in the organization throughout the whole OESH process will help make them champions for change and improvement.

Look again at the OESH model to see how “Honoring”, the blue block, encompasses the other three steps. The recognition of efforts and results, and communication of such that makes up this phase, must to be done constantly and consistently throughout the project. Not only will this drive a higher likelihood of lasting project level success, but it will also allow Lean Six Sigma to “catch on” as a useful tool or philosophy much more quickly--based on support from participants and management alike.

What Lies Ahead?Now that we have explained the basics of OESH and the ideas behind it, we will move on to provide some of the underpinnings of Lean Six Sigma and showcase basic concepts coming from Lean and Six Sigma, respectively.




OBJECTIVE: o Differentiate between Lean and Six Sigma

1. Which of the following is true of the Lean philosophy?Its primary motivation is the elimination of waste.It focuses on transformational breakthroughs.It focuses on long-term (3-6 month) improvement projects.It relies on specialists and dedicated project teams to be implemented.

OBJECTIVE: o Distinguish between philosophy, attributes, toolsets, and

methodologies of Lean Six Sigma

2. Lean Six Sigma is an amalgamation of ideologies and processes that were contributed by numerous individuals. Of the following, who most likely influenced Lean Six Sigma’s ability to improve a company’s productivity?

Armand Feigenbaum.Frederick Taylor.Henry Ford.Joseph Juran.

3. If you decide to apply Lean Six Sigma to your department to strive for continuous improvement, you will want to consider the five basic principles that support the philosophy of Lean Six Sigma. Based on these fundamental principles, what should guide your department’s efforts in making said improvements?

The measurable results.The executives.The customers.The stakeholders.

4. Which of the following would be classified as a tool in Lean Six Sigma?Results are measurable.5 Whys.DMAIC.People are the heart of value.



5. Which of the following describes the honoring phase of the Lean Six Sigma methodology OESH?

Results are maintained and further improved upon.Results are communicated throughout the organization.The scope of the project is defined.Value-added activities are identified.




OBJECTIVE: o Differentiate between Lean and Six Sigma

1. Which of the following is true of the Lean philosophy?Its primary motivation is the elimination of waste. Correct. Lean was initially created as a methodology and philosophy for reducing waste and adding value. It focuses on transformational breakthroughs. Incorrect. Lean is focused on incremental improvements rather than transformational breakthroughs. Six Sigma practitioners are seeking transformational breakthroughs.It focuses on long-term (3-6 month) improvement projects. Incorrect. Lean projects are short-term – sometimes only lasting a day – and are termed KAIZEN events.It relies on specialists and dedicated project teams to be implemented. Incorrect. Lean does its best to involve ‘regular’ employees and practitioners are not encouraged to seek certification.

OBJECTIVE: o Distinguish between philosophy, attributes, toolsets, and

methodologies of Lean Six Sigma

2. Lean Six Sigma is an amalgamation of ideologies and processes that were contributed by numerous individuals. Of the following, who most likely influenced Lean Six Sigma’s ability to improve a company’s productivity?

Armand Feigenbaum. Incorrect. Total quality management (TQM) was the contribution of Armand Feigenbaum. This concept focuses on the customers and aims to provide high quality goods or services at the lowest prices possible. Such uses of Lean Six Sigma that are affected by Feigenbaum’s contribution include the ability to see the full processes, including outcomes, and the variability of such processes. Frederick Taylor. Incorrect. Frederick Taylor’s time and motion studies is seen in Lean Six Sigma’s ability to improve cycle times of processes.Henry Ford. Correct. Henry Ford was the “father of mass production,” which indeed affects a company’s ability to improve its productivity. Automating processes typically speeds up and improves processes.Joseph Juran. Incorrect. Quality planning, control, and improvement were Joseph Juran’s focus. As such, we see his contribution to Lean Six Sigma when we see processes being controlled and made transparent.



3. If you decide to apply Lean Six Sigma to your department to strive for continuous improvement, you will want to consider the five basic principles that support the philosophy of Lean Six Sigma. Based on these fundamental principles, what should guide your department’s efforts in making said improvements?

The measurable results. Incorrect. Measurable results are an important aspect of the principles that underlie Lean Six Sigma philosophy: the improvement should produce measurable results. However, the measurable results that affect the bottom line are not what drive the improvement efforts.The executives. Incorrect. The executives, such as the CEO, CFO, and COO, will not guide your business efforts in making continuous improvements. They will likely make the final decisions on whether this system is to be applied to the department. Yet, they will probably not determine how it is applied. The customers. Correct. Customers are the number one reason for your department to make continuous improvements. If customers are not satisfied, they will go elsewhere. As a department manager, your job is to define your market(s) and your customers’ needs.The stakeholders. Incorrect. Based on one of the five underlying tenets of the Lean Six Sigma philosophy, stakeholders of all types, including citizens, employees, partners, oversight bodies, and more, should benefit from your department’s continuous improvements. However, these are not the main driving force for making such improvements.

4. Which of the following would be classified as a tool in Lean Six Sigma?Results are measurable. Incorrect. This is an attribute of Lean Six Sigma.5 Whys. Correct. This is a tool that Lean Six Sigma practitioners can use to diagnose a process. They ask “why?” five or more times to uncover the root cause of a problem.DMAIC. Incorrect. DMAIC is an acronym standing for a methodology of Six Sigma. A methodology is a how-to list of steps. People are the heart of value. Incorrect. This is a philosophy of Lean Six Sigma – a core belief that guides the use of tools and methodologies.



5. Which of the following describes the honoring phase of the Lean Six Sigma methodology OESH?

Results are maintained and further improved upon. Incorrect. This is the sustaining phase of the methodology where the group makes an effort to keep the improvements in place.Results are communicated throughout the organization. Correct. Honoring is about recognizing and rewarding individuals for their work and communicating results so that employees will be encouraged in their efforts to make improvements.The scope of the project is defined. Incorrect. This is the organizing phase of the methodology where you figure out what your project is, plan it, and get support for it.Value-added activities are identified. Incorrect. This is the execution phase of the OESH methodology. In this phase you distinguish between value-added and non-value added activities.


CHAPTER 3: BASIC LEAN CONCEPTSObjectives for this chapter:

· Differentiate between value-added and non-value added activities· Define core concepts of Lean—including waste and value stream flow

The concepts in this chapter are a core part of Lean Six Sigma and have their basis in the Lean side of the house. They have evolved from being predominantly manufacturing-based concepts to having a universal application that can easily be transferred to the government environment. In order to have a thorough understanding of Lean Six Sigma, we are going to discuss each component separately first--Lean in this chapter and Six Sigma in the next.

Core Concept: Value-Added and Non-Value Added ActivitiesValue Value is the relative worth, importance or merit of something. When we talk about value in Lean Six Sigma, it is “benefit” that ties to monetary value: i.e. how much money a customer would be willing to pay for what you are creating. Accountants totally understand putting a monetary value on something.

The Customer Determines ValueIn the definition of value above, value is linked to relative worth. Depending on who is making the evaluation, the value can differ; however, the person determining the value within the context of Lean Six Sigma is always the same--it is the customer.

At a high level, the customer is the end user paying for an organization’s ultimate product.

In a commercial environment, say in a consumer goods company, the ultimate customer is the person buying shampoo, for example. At an operational level, the customer is the person or the process receiving the output of a previous process. For example, the fulfillment department may be an internal customer of the sales department when sales places an order to ship shampoo to a certain grocery store.

In a government, the customer is often described as the “tax-paying public.” But I find that a little vague and impersonal. I prefer to remember that a customer for a low-income housing project is the toddler who lives in the project, that the customer for a school district is the student, that the customer for an ambulance service is the grandfather who suffers a heart attack. One of my favorite quotes from the Yellow Book (government auditing standards written by the GAO) is GAGAS 2011 1.16 A distinguishing mark of an auditor is acceptance to serve the public interest. And I like to make the public a little more emotional than just “the taxpaying public” so that I can truly remember the reason for my work.

Being crystal-clear about whom your customer is, is critical in determining value.


Adding valueEach activity, process step, and process in an organization either adds value or does not. In Lean Six Sigma every activity, process step, or process within an area of improvement must be analyzed for its contribution to value. We categorize activities into three areas:

Value-addedNon-value added but necessary Non-value added and unnecessary

Taiichi Ohno, the Lean pioneer who was behind the Toyota Production System, estimated that typical value-added and non-value added broke down this way. Incidental work is a non-value added activity that is necessary and cannot be eliminated. This includes things like transportation, compliance activities, legal, and accounting.

Value added work

Incidental work

Waste

Value and non-value added activity

Value added work

Incidental work

Waste

Value and non-value added activity

To determine if something is value-added you ask:

Is it something the customer will pay for?Does it transform the product or service in some way?Is it done correctly the first time?

Within Lean Six Sigma, the goal is to maximize value by increasing the proportion of value-added activities to non-value added activities. This is easy to understand.


A harder discussion is that of necessary and unnecessary non-value added activities.

Necessary non-value added activities (a.k.a. “incidental work,” on the previous picture) need to be optimized and streamlined so that they consume as little time and money as possible. Examples of necessary non-value added activities are getting new employees on-board, training, legal, accounting, travel planning, cleaning the bathrooms, and regulatory and compliance functions. These sound a lot like operating expenses or indirect expenses, right? Minimizing operating expenses while maximizing revenues is known in many industries as ”scaling.“ Unnecessary non-value added activities (Ohno’s “waste” from the diagram) need to be eliminated.

After deciding whether the step is value-added, you also have to ask if the step is necessary. To make this decision, you have to look at why the step is in place and what it ultimately achieves. You can also think about what would happen if you eliminated that activity.

To separate activities or processes it can help to use a table like the one below. We will use the processing of travel reimbursement requests for our example:

Looking for Value in activities/Process Steps

TASK VALUE-ADDED

NON-VALUE ADDED

KEEP, REDUCE, ELIMINATE

• Scan all original receipts into the computer

X Eliminate

• Verify that each charge is within per diem and allowability limits

X Keep

• Route expense reimbursement request and receipts to approving manager electronically

XReduce: keep routing of request, but eliminate the transfer of original receipts

• File original receipts to maintain for five years X

Reduce: Save and file only for one year to satisfy possible audit

• Route original through the accounting manager, purchasing manager, and director of administration

X Eliminate

In the example on the previous page, notice that none of the activities are categorized as “value add.” This is not a mistake. The reason is that even though


the tasks or activities may be necessary to complete a process, they do not add value for the ultimate customer. This is an internal, operational process that keeps the company going. It is not something the customer would want to pay “extra” to maintain. Most operating expenses are necessary non-value added at best. At worst, they are waste.

Core Concept: Waste Activities that do not add value are considered “waste.” The value of an activity is determined by how useful it is to the next process step or to the customer’s bottom line. In an overall sense, waste is something that does not add value for the final customer –something the final customer or end user is unwilling to pay for. An example of waste in a system would be an excessive number of approvals required to accomplish a task. While this may be viewed as a way to ultimately safeguard the customer, it is also a sign of waste in terms of time and resources. We in government can be quite skilled at adding frustrating bureaucratic layers to the simplest tasks. An efficient system does not require a lot of inspection, review or approvals.

A goal of Lean Six Sigma is to eliminate waste. Within a Lean Six Sigma environment, we categorize non-value added activities into waste types to see where improvement can be made.

Misaako Imai, another Lean pioneer, originally documented seven types of waste, “Muda” in Japanese, with an eighth being added later. These are:

1. Overproduction--This means producing more than what the customer requires at that time. This waste can be caused by poor forecasting, poor understanding of customer requirements, or poor control of a process.

2. Waiting--This means any delay, and can be caused by material shortages, unbalanced workloads, need for instruction, poor process control, or any number of factors.

3. Transport--This means physically moving materials between operations or process steps. This can be caused by poor layout of the workspace, disorganization, or lack of training.

4. Over-processing--This is any processing that does not add value for the customer. It can be a result of poor systems, poor technology, poor design, poor control, poor training--you name it!

5. Inventory--All inventory is non-valued added because inventory (though it may be necessary) consumes financial resources without adding value. Inventory takes up physical space and other management resources in tracking, measuring, and controlling. It can also indicate other problems, like poor planning, poor customer information, and poor supplier management.

6. Motion--This refers to any physical movement by employees during the course of their work that does not add any value to the process. This includes walking around, bending, reaching, searching, shuffling paper, hanging out at the coffee machine, etc.

7. Defects--This type of waste refers to anything that does not meet requirements and needs to be discarded or reworked. If it is not done right


the first time, it is waste. This can be caused by lack of training, lack of tools, lack of time, lack of standards and more.

8. Under-utilized employees--This form of waste was added to the list after the original seven muda were identified. This is a big one because not only does it represent poor use of resources, but it also leads to poor morale and a bad organizational culture.

Does this list of wastes make you think of areas in your organization that may be ripe for improvement? Think about it and make a list.

In your list, you may have come up with some of the items listed below, which are typical areas of waste within service-related (and accounting) environments. Remember--waste is defined as activity that adds no value to the customer.

•Misuse of resources•Counting things•Looking for data•Having multiple systems•Having multiple hand-offs•Unnecessary approvals•Performing audits or inspections•Maintaining extra copies of information•Extra handling due to lack of space•Software that doesn’t do what you need•Sending stuff to customers that they can’t or don’t use•Manual transactions instead of using electronic systems •Poor service•Long and/or unnecessary meetings•Repetition and duplication•Extra transactions (and each transaction is an opportunity for additional error)•Reconciliations•Reports

Your initial reaction to this list may be one of great protest… “We need to do this because…” you might say. Go back to the definition of value within Lean Six Sigma. Value is represented by whatever the customer is willing to pay for. Does the customer want to pay (or pay extra) for any of the above? I don’t think so… that’s what makes these activities or items “waste” or non-valued added.

It is not uncommon for an entity to have too many controls over some silly things--like petty cash--and not enough controls over significant things--like letting contracts. Maybe because an auditor scrutinized an area, the management of the area decided to layer a variety of non-value added activities to control it. Lean Six Sigma can help break down silly bureaucracies and cut through unnecessary red tape.

If wasteful activities are ABSOLUTELY necessary, try to minimize their occurrence or the time they take. Brainstorm about how you might do things differently. If they are not necessary, get rid of them!


Core Concept: The Value Stream and FlowWithin Lean Six Sigma, we look not just at value but also at the value stream. The benefit of reducing waste and increasing value can be magnified if we look at how activities or process steps are linked together. The linking of activities or process steps to form a process is how we get to the value stream.

The Shorter the Stream, the BetterThe value stream is the path that the “thing” (the product, service, information, etc.) takes in the path from customer requirement to customer delivery--the shorter the path, the better the value stream. We can view the value stream through a process flow chart or value stream map (more on both of these later).

The value stream typically starts at the customer or customer request and ends when the customer request or requirement is fulfilled. In analyzing the value stream, we can see areas where there is waste and where there are obstacles to the process.

A very high-level value stream is captured in the workflow diagram that follows.

VALUE STREAM for OFFICE SUPPLY WORKFLOW--HIGH LEVEL VIEW


FlowIn Lean Six Sigma, we are looking for a path with no obstacles. This is what we want in a value stream. It is referred to as optimal “flow.” Obstacles that can impede flow include:

•Batches•Re-work•Bottlenecks•Hand-offs•Inventory: causing delays or build up of time•Need for set up or change over•Physical layout•Approvals•Inspections

In a lean manufacturing environment, flow is the opposite of batch production, where activity happens in fits and starts; where sometimes something is happening and sometimes nothing is happening until the next batch shows up. Does this concept apply to your workflow, too? Think about it.

In Lean Six Sigma, the concept of flow applies to all goods and services. Optimally, the “thing” would flow continuously from the customer request, through value-added process steps, to the customer. Achieving flow is another goal of Lean.



OBJECTIVE: o Differentiate between value-added and non-value added activities

1. A value-added activity is something that:ensures compliance with regulations. controls behavior and thus expenditures.the customer is willing to pay for. consumes a lot of the organization’s resources.

2. In the following process regarding creating a training proposal, which step is a value-added step?

Step 1: Customer requests training courseStep 2: Consultant discusses customer needs with the customer on the

phoneStep 3: Consultant types up proposal based on a templateStep 4: Consultant sends proposal to editors for reviewStep 5: Consultant revises proposal and emails it to clientStep 6: Consultant calls client to ensure they got the proposalStep 7: Client signs proposal and mails it snail mail back to consultantStep 8: Consultant enters agreed upon dates into the training calendarStep 9: Consultant sends copies of the agreement to accounting, legal, training, and customer service

Step 2: Consultant discusses customer needs with the customer on the phone. Step 4: Consultant sends proposal to editors for review.Step 6: Consultant calls client to ensure that they got the proposal.Step 9: Consultant sends copies of the agreement to accounting, legal, training, and customer service.

OBJECTIVE: o Define core concepts of Lean—including waste and value stream flow

3. Which of the following is one of the seven types of waste?Transport.Forecasting.Design.Morale.


4. You are a manager at a local factory that puts together gun parts. Holster, Inc. purchases a determined number of your gun parts quarterly. You are in charge of supervising fifty employees. Your engineers and machinists worked together to design the gun parts and reduce cycle time. As a result, most processes are automated, and you have found many factory workers gathering together between machine cycles. Which type of waste could you reduce?

Under-utilized employees.Overproduction.Over-processing.Motion.

5. A path with no obstacles is referred to as having: work flow.optimal flow.value-added.necessary waste.



OBJECTIVE: o Differentiate between value-added and non-value added activities

1. A value-added activity is something that:ensures compliance with regulations. Incorrect. While compliance may be what drives a particular step, it does not necessarily add value to or transform the product. Compliance steps are often viewed as incidental activities in the process.controls behavior and thus expenditures. Incorrect. Reducing expenses can be a goal of a process improvement, but a step that is only designed to control activities or reduce expenses may not add value to the output of the process. the customer is willing to pay for. Correct. Value-added activities add something to the product that the customer would classify as valuable to them. consumes a lot of the organization’s resources. Incorrect. A value-added step may or may not consume a good amount of the entity’s resources. Value-added processes may be quick and inexpensive.


2. In the following process regarding creating a training proposal, which step is a value-added step?

Step 1: Customer requests training courseStep 2: Consultant discusses customer needs with the customer on the

phoneStep 3: Consultant types up proposal based on a templateStep 4: Consultant sends proposal to editors for reviewStep 5: Consultant revises proposal and emails it to clientStep 6: Consultant calls client to ensure they got the proposalStep 7: Client signs proposal and mails it snail mail back to consultantStep 8: Consultant enters agreed upon dates into the training calendarStep 9: Consultant sends copies of the agreement to accounting, legal, training, and customer service

Step 2: Consultant discusses customer needs with the customer on the phone. Correct. This is probably the customer’s favorite part of the process – where they define what they want. This is the core of the concept of value-added. Value-added activities help ensure that the customer gets what they want.Step 4: Consultant sends proposal to editors for review. Incorrect. This sounds more like an internal control than a step that the client would see as valuable or necessary. This step was probably added as a result of errors in proposals, and a few grammatical errors will not likely impact the ultimate training that the customer receives. Step 6: Consultant calls client to ensure that they got the proposal. Incorrect. Using updated technology, such as a responder program on email, could eliminate this step. Or the client could simply be asked to respond via email that they received the proposal. This is potentially a wasteful step. Step 9: Consultant sends copies of the agreement to accounting, legal, training, and customer service. Incorrect. This is a non-value added step. It may be necessary for compliance with some sort of internal policy, but it has nothing to do with meeting the customer’s needs.


OBJECTIVE: o Define core concepts of Lean—including waste and value stream flow

3. Which of the following is one of the seven types of waste?Transport. Correct. Any physical movement by employees or stuff is scrutinized in the Lean Six Sigma process and often is identified as wasteful. Redesigning the workspace or training employees can reduce transport.Forecasting. Incorrect. Proper forecasting (of materials or other resources) can reduce waste. Design. Incorrect. A well-designed process or product can help eliminate all kinds of waste. A well-designed workspace can reduce motion waste. A well-designed process can prevent overprocessing, etc. Morale. Incorrect. Employees who have good morale can actually help identify and reduce waste.

4. You are a manager at a local factory that puts together gun parts. Holster, Inc. purchases a determined number of your gun parts quarterly. You are in charge of supervising fifty employees. Your engineers and machinists worked together to design the gun parts and reduce cycle time. As a result, most processes are automated, and you have found many factory workers gathering together between machine cycles. Which type of waste could you reduce?

Under-utilized employees. Incorrect. You would have under-utilized employees at your factory if you had qualified engineers or machinists working as factory workers. However, it appears as though you have qualified individuals working in the appropriate work environment.Overproduction. Incorrect. Since Holster, Inc. orders a set number of gun parts quarterly, you most likely produce only the amounts you need to in order to satisfy their purchase order. You seem to have a good understanding of your customer’s requirements.Over-processing. Incorrect. Your engineers and machinists worked together to minimize wasteful practices and reduce cycle times. It can be assumed that the design for the gun parts is fairly good. Motion. Correct. The waste that you have in your factory is motion: your employees gather together between the machines’ cycle times. There is minimal “flow,” which means that you are paying for this wasted labor. When employees are moving about their physical environment during the course of their work, but they are not adding value to the gun parts, you have waste. You must reduce this waste!


5. A path with no obstacles is referred to as having:work flow. Incorrect. Work flow is a generic term indicating that work is flowing along a certain path. It does not refer to the quality of desirability of the flow – as is indicated by a process without any necessary obstacles.optimal flow. Correct. Flow is a path, and in a value stream, to have an optimal flow in a lean manufacturing environment, we want no obstacles interrupting this flow.value-added. Incorrect. A process may be lacking any obstacles but still be a worthless or non-value added process.necessary waste. Incorrect. Waste is defined as always being unnecessary. And a step with obstacles is likely to generate waste – in waiting or over-processing.


CHAPTER 4: BASIC SIX SIGMA CONCEPTSObjectives for this chapter:

· Define the core concepts of Six Sigma including variation, standardization, special and common causes

· Identify a family of performance and improvement measures for a function or organization

As you know, Six Sigma, like Lean, is a discipline unto itself and there are whole books on Six Sigma alone. In this chapter, we will look at some basic concepts that are useful to Lean Six Sigma at a basic level.

Core Concept: VariationIn Six Sigma, we talk about variation as difference from the norm. The norm is the average or the intended result. For example, if it takes an average of 2.25 minutes to enter a line item in a general ledger system at a 1% error level, variation refers to a error rate that is above or below 1% for the given 2.25 minute input time. While Lean would be focused on “how fast” or on reducing the 2.25 minute input time, Six Sigma would be more focused on how well the process is executed. (In this case, “how well” is reflected by error level.)

The main objective of a Six Sigma project is to reduce variation. Reducing variation is key to delivering products and services that are as close to perfect as possible. Think of it this way: variation is a type of error. In producing Burnt Orange-colored widgets, you want the color of Burnt Orange to be the same every time: not too red and not too yellow. It has to be the exact same color or it is wrong--the widget is not the same (quality) because it doesn’t match. This can also be applied to a service-related process

For instance, if you create a performance report for your supervisor each week, it should contain the same data and be for the same period of time. Otherwise, it would not be comparable or very useful to the manager as a tool because the difference in time period or data introduces variation. With a difference in time or data content, the supervisor may decide that the information is unreliable and unhelpful.

How Do You Control Variation? To give an example, in a data entry process, ways of controlling variation may include having the input data in the same format every time. It may include having data fields that will accept only certain types of data (like only 5 digits can be put into a ZIP Code field--anything with a different number of digits, or having any letters, will not be accepted) and it may include training employees on a standard work procedure. This all helps ensure that transactions are accurate and that data doesn’t get lost or end up as a reconciling item somewhere.


When trying to control variation, we look at output according to what the customer requires. In Six Sigma, as in Lean, there is a strong Voice of the Customer focus. Then, we work on controlling inputs and reducing variation in process steps that allow us to create the output in a standardized way and according to customer requirements.

In case you are wondering how you will ever be able to tell what causes variation if you are stuck on one of the projects… don’t worry. We discuss tools to help guide you in figuring this out, in chapter five entitled, The Top 13 Lean Six Sigma Tools.

Core Concepts: Standardization and ConsistencyWorking in a standardized way helps to deliver those high quality outputs consistently. This is also a key concept in Lean Six Sigma. We can see that standardization makes sense in a manufacturing environment--having an automated production line using standard machine settings and process steps will produce products that are highly consistent. One memory chip should be the same as any other memory chip--without its own unique personality or quirks.

Standardization can be even more important in a transactional environment--where there is a high degree of variation in human-based process steps. People tend to do things their own way. This can be based on habit, stubbornness, or on having no idea about how to do something differently. Have you ever experienced this in talking to the IRS? Some agents go the extra mile to answer your question and some refer you back to the IRS’s complex website!

Having standard ways of doing things and training people on these standards is a way of reducing variation in an outcome and making the result predictable. This is important for you accountants. For instance, a front line data entry clerk may not understand how his choice to not enter a certain transaction code affects the finance department’s ability to summarize information accurately. Unless he understands how he fits into the big picture and understands the relevance of every action he is asked to take, he may make poor choices that have unforeseen consequences. Training is often a key component of standardizing “people processes.”

For processes in general, standardization and consistency are just common sense ways of doing things better.

Core Concepts: Capability and Stability Capability and stability are words that normally refer to a process within the Six Sigma lexicon. Increased capability and stability are goals of most process improvement projects.

“Stable” means that the results are close to the desired result each time. “Capable” means that the process is able to pull off its desired outcomes except in certain special circumstances or because of special causes.

In terms of our variation example above, the general ledger entry process is stable if it is able to produce results that are centered on a 1% error rate at 2.25 minute


norm. It is capable if it is able to do so most of the time. Variation results in times above the 2.25 minute average might occur--like an unusually large transaction that requires supervisor approval before it can be finalized (remember, we are still focusing on the quality aspect of 1% error rate).

The Six Sigma focus is on the variation aspect. The beauty of Lean Six Sigma is that you could work on both the 2.25 minute time AND the 1% error rate for improvement because of the complementary Lean and Six Sigma components. I mention this because I know some of you were thinking it.

Core Concepts: Common Cause and Special CauseWhen we look for sources of variation in a process, we separate them by “common cause” and “special cause.”

Common cause variation is what we attack through Lean Six Sigma projects because it is a result of something wrong with the process itself. There is something in the way that the procedure is designed, in the tools used, in the training, etc. that produces outputs that you don’t want.

Special cause variation is addressed through “just do it” projects that don’t focus on changing the process. Say that the billing department always falls behind in December as a result of having more volume due to the holidays. This is not because of how the process works, but because of a unique event--the holiday season. Instead of trying to change the process and procedures in the billing department to reduce variation, you just need to hire more people to deal with the extra volume (and to train them on the standard procedures).

While both common cause and special cause variation is important to address in the overall Lean Six Sigma objective of making things better, they will be addressed in different ways. One needs to be eliminated and attacked for real process improvement to occur (the common cause), and the other one only needs to be mitigated or managed when the special situation occurs (special cause). That’s why they are categorized differently.

Core Concepts: Metrics and MeasurementThere is a saying, that “you can’t improve it until you can measure it”, and this is a major tenet of Six Sigma.

The idea of being able to measure a process is very important to Lean Six Sigma overall. The importance of metrics and measurement is what makes Lean Six Sigma “a data-based decision-making” methodology. It puts the science or reason behind why we advocate for changes as managers, and is hard to argue with.

In deciding what measurements or metrics to use, we try to pick a “family of measures,” especially for more complex projects. Say we choose to work on improving cycle time. We want to speed up a certain process AND simultaneously improve quality so that we don’t end up having a faster cycle time at the cost of a higher error rate. We would therefore measure both speed and error rate. Ideally,


we would also have a financial metric--so that we know what the cost of having a faster, quality-stable process would be.

Improvements need to have metrics that show the data based results of what has been done. They can be fairly simple and answer questions like the ones below.

•How many•How much (cost)•How often•How much (time does it take)•How well

Metrics measure performance and show the result of improvements by comparing “before” and “after.” The ones we choose to focus on as determinants of indicators are the “KPI’s” (for all you acronym fans)--the key performance indicators.

The metric table below was from a project to improve customer satisfaction with a call center process. Note that the different colored rows indicate different types of metrics. Blue was related to customer satisfaction (quality); white was related to cycle time and secondary customer issues; green was related to process metrics; and gray was related to metrics that were used to run the business and would serve as controls.

The FOM (“family of measure”) column shows what the metric reflected: Q for quality, P for process, T for time, and F for Financial. This should give you the idea of what a family of metrics might look like and the importance of measurement.


Different types of metricsWe in finance are very, very good at measuring financial results. I regularly teach a class on financial statement analysis where we cover more than 80 metrics in one day. (Sounds like a fun, fun day doesn’t it?)

Finance and accounting weenies can run and calculate financial metrics all day long because they have the data to support the ratios and metrics. They have a well-developed gathering and reporting system in accounting.

When they leave the realm of accounting and finance, the data is a little harder to come by and the metrics are a little more abstract (Yes, I acknowledge that for many of us, financial metrics are abstract… but you haven’t seen anything yet!)

For instance, let’s say you want to know how well your human resource department is performing. Hmmm. That is abstract and hard to measure.

Measurement is more nuanced than just counting stuffWhen I worked for the State of Texas, the State implemented a budgeting and measurement system they called the performance based budgeting system. They asked each agency to link their budget to a strategic plan and come up with metrics to measure how well they were achieving their strategic plans.

Invariably, the state agencies would come up with metrics that were very easy to count and of questionable meaningfulness. In other words, they took the easy way out hoping that the system would go away.

Amazingly, the State stuck with it and got better at instructing the agencies on what they wanted. The performance measurement gurus at the state realized that performance measurement was a little more nuanced than first believed and that there were four types of performance metrics.

The Four Types of MetricsImagine a simple process--let’s use a county clinic that gives flu shots to children. We can measure the inputs into the process. The vaccines, the number of children in the county, and the nursing staff are all measures of inputs.

We can also look at the process itself. We can measure the efficiency of the process--the length of time it takes to schedule a child, the waiting time for the family, the number of kids given shots per hour, etc.

Outputs of the process are often the easiest to gather. We can measure that 150 children are vaccinated per day.

So now we have three metrics on this county clinic flu vaccination process:

INPUT--number of children in the county = 7000 children


PROCESS/EFFICIENCY--average waiting time for family = 45 minutesOUTPUT--number of children vaccinated per day = 150 children

But here is the kicker question--what is the outcome of this activity--this whole process? We want children to be healthy. We don’t want them to have the flu. So we add another metric called the OUTCOME metric.

OUTCOME = percent of children avoiding flu illness = 92%

So now we have four metrics--three that deal with the process, and one that asks whether it was a good idea to even bother with the process.

Invariably, if given the freedom to measure the easiest thing, most folks will measure outputs. They will just count things. But what you really want to know is the outcome--you want to know if your actions were effective. Outcome metrics are the hardest to gather and sometimes the most difficult to define.


OBJECTIVE: o Define the core concepts of Six Sigma including variation,

standardization, special and common causes1. When a process can pull off the same results consistently, it is said to be:

Stable.Capable.Quality.Improved.

2. You work for a university and are responsible for giving coaches cash advances before they take teams on trips to play against other schools in the district. This year, three of your teams are in the playoffs and your workload on Thursday afternoon is overwhelming. Last week a coach decided to travel with his team without a cash advance and he complained to the Dean, who has complained to you, about your shoddy processes. Which of the following is true?

Your process is flawed and needs to be reworked.Your process is probably fine under normal circumstances, but the volume of work due to the playoffs has caused a variation.Your process should be examined for common causes to this and other problems.The variation is acceptable and should be expected occasionally.

OBJECTIVE: o Identify a family of measures for a function or organization

3. You work for a university and are responsible for making sure that your coaches have the resources they need to take their teams to away games. Which of the following would be considered an input metric for this process?


Increase in the number of coaches reporting that they have the resources they need.Average investment of accounting hours to process request.How many resource requests are made each week.How many resource requests are filled each week.



OBJECTIVE: o Define the core concepts of Six Sigma including variation,

standardization, special and common causes1. When a process can pull off the same results consistently, it is said to be:

Stable. Incorrect. Stability asks whether the results are close to the desired results each time.Capable. Correct. Capability indicates that the process is able to pull off its desired outcomes except in certain circumstances. Quality. Incorrect. Quality is a broad term that encompasses the ability to do the same task over and over and according to specification with a low error rate.Improved. Incorrect. A process may be consistent, but if it does not yield the desired results, results that meet customer expectations, then it cannot be said to be improved. You could be doing the same silly thing consistently.

2. You work for a university and are responsible for giving coaches cash advances before they take teams on trips to play against other schools in the district. This year, three of your teams are in the playoffs and your workload on Thursday afternoon is overwhelming. Last week a coach decided to travel with his team without a cash advance and he complained to the Dean, who has complained to you, about your shoddy processes. Which of the following is true?

Your process is flawed and needs to be reworked. Incorrect. The whole process may or may not deserve attention. It could be wasteful to call for a full rework of the process if it is normally stable and capable.Your process is probably fine under normal circumstances, but the volume of work due to the playoffs has caused a variation. Correct. Lean Six Sigma calls this variation a special cause variation as it is triggered by special events that do not occur frequently. Your process should be examined for common causes to this and other problems. Incorrect. Common causes exist under times when your system is under stress or when your system is not under stress. In this case, your system is under stress and you may not find any common or frequently occurring flaws in your process if you look for them. The variation is acceptable and should be expected occasionally. Incorrect. This problem with your system is obviously not acceptable to your customer or to your boss, the dean. Something should be done to bolster the effectiveness of your system when it is stressed. You may need to pull resources from another team or come up with a shortened process with compensating controls to handle times of high volume.


OBJECTIVE: o Identify a family of measures for a function or organization

3. You work for a university and are responsible for making sure that your coaches have the resources they need to take their teams to away games. Which of the following would be considered an input metric for this process?

Increase in the number of coaches reporting that they have the resources they need. Incorrect. This is an outcome metric. Outcome metrics are the ultimate goal of a process and tell the user of the metrics whether the process is worth the effort. Average investment of accounting hours to process request. Incorrect. This is a process metric. Process metrics help the users of the metrics to understand the investment that the organization must make to pull off the process. They help the reader interpret the outcome and output metrics more objectively.How many resource requests are made each week. Correct. Input metrics give us a sense of how many resources go into a process or give us an idea of the scope of the process. Input metrics are also known as whiner metrics as they describe the scope of the situation that the people trying to achieve the goals of the process have to endure.How many resource requests are filled each week. Incorrect. This is an output. An output measures how many products/services came out of the process. It simply counts production.


CHAPTER 5 – THE TOP 13 LEAN SIX SIGMA TOOLS

CHAPTER 5: THE TOP 13 LEAN SIX SIGMA TOOLSObjectives for this chapter:

Discriminate between Lean Six Sigma toolsSelect an appropriate Lean Six Sigma tool for a task

In this chapter, we will discuss 13 basic tools in the Lean Six Sigma arsenal. Why 13, you may ask… well, this seemed to be the minimum number that would serve as a good foundation and be most useful at any Lean Six Sigma maturity level! There are many additional tools and variations, but this will get you started. Check the reference list for additional sources where you can find more tools.

There was no logical way to break this chapter into various parts, so it is a LOOOOONNNNNNNGGGG one. I suggest you plan to read it in at least a couple of different sittings. To get the most from it, you should also think of how you could use each particular tool in your own organization. Each tool explanation includes at least one example to help you get started.

The last bullet point under each tool tells where in the “DMAIC” process the tool is often used. I know we haven’t gotten to the DMAIC chapter yet. These bullet points are included so that when you later refer back to this chapter (and already know “DMAIC”) you will have all the information together. Don’t worry--there is a tool summary chart in the DMAIC chapter, too!

Now to the TOP Thirteen. They include:BrainstormingBenchmarkingProcess map or flow chartValue Stream mapCheck sheetPareto chart (a type of histogram or bar chart)5 WhysCause and effect (fishbone) diagramImpact/effort matrixSpaghetti diagramThe 5 “S’s”FMEA Documentation



1. BrainstormingBrainstorming is a technique for generating ideas about a certain topic or problem. It requires participation from individuals with varying perspectives to contribute based on their views. Brainstorming is a very basic and valuable tool that can be used at any stage in a Lean Six Sigma endeavor.

How•Identify the problem or topic to brainstorm•Choose a group of participants who are familiar with the topic•Clarify brainstorming goals to participants•Encourage creativity and idea “quantity” so participants aren’t inhibited•Allow participants time to think •Gather every idea by going round robin until the last input is contributed•Consolidate and group the ideas by category

Use it•To promote involvement in a project or process•To identify potential causes, solutions, ideas•To encourage “out of the box” thinking•To create cause and effect diagrams•At any stage of the DMAIC process and as a way of gathering basic input for

many of the other Lean Six Sigma tools

Try not to use a “list” format to record the ideas that your group throws at you. When you make a list, the first thing on the list naturally begins to look like the best or most significant idea, and oftentimes that idea isn’t the most significant. Try instead to make your brainstorming look a bit more messy and un-prioritized. That way everyone’s ideas will have equal footing.

Here is an example of what a messy brainstorm result might look like, if you are examining the reasons behind and significance of cash reconciliations:



Something to keep in mind during brainstorming is to not judge ideas as they are shared. The brainstorming process has two steps. Step one is to generate and share ALL thoughts and ideas, as wild as they may be. Step two is to categorize the ideas into what will seem like natural groupings, and to evaluate them (i.e. decide whether the idea is relevant, meaningful, and/or useful in that context).

If you evaluate or judge the participant’s ideas as they share them, they are likely to clam up and stop sharing.

2. BenchmarkingBenchmarking means comparing your process, method, product, or project to something that has already been achieved--something that may be considered a best practice. With this comparison, we can drive improvement. Benchmarks allow us to understand what is possible and to introduce new ideas.

How • Determine or define the current process or practice within your organization

that you want to benchmark.



• Decide what kind of comparison you want to make. Benchmark standards can be developed against internal norms (think “baseline” or target); against direct competition; against industry norms; or against best in class, regardless of industry.

• Analyze the best practice to learn what you might be able to adopt or use• Incorporate the best practice and repeat the benchmarking cycle

Use it To identify what is possible, in order to help with goal-settingTo identify ideas on how to do things betterTo evaluate your performance against another measure or standardTo help in the Define, Improve, and Control phases of Lean Six Sigma

For an example on benchmarking, let’s look at optimizing cash flow and examine the practices of two companies that are masters at turning their cash into even more cash: Dell and Wal-Mart. The example is quite lengthy, but whether or not you are in a similar industry, these companies have some best-in-class practices that you can likely learn from.

For the sake of comparison, let’s say that, like Dell, you also manufacture computers--and let’s say that the way you run your cash conversion cycle is pretty traditional:

The first thing you do as a traditional manufacturer is to buy raw inventory on credit from your suppliers. Next, you assemble or manufacture the computer.Next, you store the finished computers as they wait to be sold.Next, you pay your vendors… you pay the folks that give you credit.After that, you sell and ship the product to the customer.After shipping, you eventually collect from the customer.

If we drew it as a diagram, it would look like this:

Traditional Cash Conversion Cycle



You put a dollar into the cycle at the beginning and you allow the dollar to work for you until the end when you collect from the customer. Then, chi-ching!--20 extra cents pops out… or 50 extra cents… or 49 extra dollars--for a total of $1.20 or $1.50 or $50.00. What we are looking for here is an extra. This extra is your profit. If you end the cycle with less than a dollar in your hand--say 90 cents--what you have is a hobby (and a loss).

Dell earns about 4 cents each time the cycle is turned. Wal-Mart earns 2 cents.

Notice the little wobbly smile on the diagram. That is because this is not the best way to manage your cash flow. Let’s look at who is using whose money.

When you purchase the inventory on credit, this does not affect your cash. We are fine so far. However, when you manufacture the product, it costs you to pay your people and run the factory. Storing the product takes cash--you have to pay to rent the facility, air-condition it, possibly hire guards, and so on. Paying the vendor obviously consumes cash and selling does, too. When you sell, you have to pay for long distance telephone calls, travel, and possibly even commissions! Shipping consumes cash. And then, finally, at the end of the cycle, you get your money back when the customer pays you.You are hemorrhaging cash until the very last moment of your sales cycle. This is not so good… you are using your own money.

The cash cycle benchmark--How Dell does itNOW, if you could turn these events around and change the sequence of each little step, what would you put first and what would you put last?

Definitely, you would want “pay vendor” last. And you would want “collect from customer” as early as possible.

Looking at a new diagram--a happy application of the first principle--you will see that selling comes first. Then, you create the product and ship it right out to the customer. After the customer receives it, they are obligated to pay for it and the very last step is paying the vendor.



Benchmark Cash Conversion Cycle

Notice that because you know exactly what the customer is going to buy and in what quantity, you don’t have to store a bunch of finished goods in hopes that someone may buy them. Nice, huh?In many industries, storing goods in hopes of selling them is dangerous. Remember how all inventory is WASTE in Lean Six Sigma? Things change so fast, you can’t predict what the customer might want, and you might misfire on your estimates of what will sell. This is true in the computer industry for sure. New products are regularly coming out. A manufacturer using the traditional method might be stuck with a bunch of inventory they--and the customer--don’t want.

Concepts and metrics that you can benchmark against In addition to putting these events of the cash conversion cycle in the best possible order, Dell also measures how long it takes to make the cycle turn. At Dell the cycle turns several times a day--a thousand times a year. Based on just this principle, where would you rather have your dollar hanging out? DUH.

Benchmark targets--Metrics to measure your successThree metrics can help you determine how many days it takes to turn the cycle: DSO, DSI, and DPO. These are great metrics for measuring how well you are managing cash. Let’s talk about each one in turn.

First metric to benchmark--DSODSO stands for “Days Sales Outstanding.” This measures the time it takes to collect from your customers. You want this to be as little time as possible.

Looking at the cycle, see that DSO measures the number of days between the event of shipping and the event of collecting from the customer. In general, when you give credit, you allow your customers 30 days to pay. Some of your customers are going to pay much more slowly.



Looking at DSO metric

Now, Dell wasn’t always so smart. Prior to 1996 they used the traditional manufacturing model. Under this model, their DSO number was 42. More recently, it has hovered around 32. That is a nice change.

How do you collect faster? Another metric to benchmarkThis is another aspect of operations that can be used to benchmark against the competition. If you can figure out how Dell got their number down, you might be able to implement some of those same methods yourself.

If you wanted to collect from your customers faster, what would you do? There is always your cousin Guido, the strong-arm, who is very persuasive when it comes to collecting.

Other things you can do are:

Hire more people to call customers to follow-up on late paymentsUse credit cards--credit cards pay in three daysInvoice customers as quickly and accurately as possibleOffer discounts for early payment Tighten credit policies--only allow customers who are likely to pay, the opportunity to do business with you

Think of Wal-Mart here. When I first started shopping at Wal-Mart, they would only take cash or check. No credit cards--because the three days it took them to collect on credit cards was too long.



Third metric to benchmark--DSI and DTBDSI stands for “Days Supply of Inventory.” This measures how many days worth of raw, in process, and finished goods inventory you have in stock. (If you are in a service industry, this metric is replaced by Days to Bill (DTB) which measures how many days you let elapse before you send your client the bill.)

Now, again, you want this number to be as short as possible. A large number may indicate that you are holding too much inventory in a phase of your manufacturing process. For DTB, a high number means that your billing and collection cycle is too slow.

Dell has done an incredible job with this number. Before they implemented their “direct model,” their DSI was 31--in 2004, it was 3. Wow!

How can you reduce your inventory?How can you do this, too? (You want to, because inventory = waste!)

Change your sequence of events so that you make only what the customer wants, and so you can ship it directly after manufacturing. No storage. This increases the proportion of your value-added activity.Increase the speed of your manufacturing process so that you hold less. Cycle time is a Lean Six Sigma concept covered in previous chapters, remember?If you are a retailer, keep a close eye on which inventory items that move and don’t move. The items that don’t move can be returned to the vendor or sold at a discount to get them off the shelves. (If you had a better idea of “voice of the customer,” you may not have a lot of extra inventory in the first place). Lean Six Sigma, again.



The last metric--DPO DPO stands for “Days Payables Outstanding.” This metric measures how long it takes to pay your suppliers. We want the number to be big. The bigger the number, the longer you hold on to your money.

Some businesses make the mistake of paying payables as soon as they get the bill in the mail. We will see in a moment why this is not a best practice.

Dell typically negotiates with its vendors to pay in 45 days and then pays a little later. The standard length of time most businesses extend for credit purchases is 30 days.

Dell’s DPO in 1996 was near the standard at 33 days. In 2004, the number was 64. Quite an increase.

Why would a vendor put up with this? (It is the vendor’s cash at stake here. They are footing the bill and often have to get loans to finance the extra waiting time). They put up with this because of volume. If you are a company that makes computer memory and Dell is the number one user of computer memory, you may decide you have to sell to Dell.

This does not mean you are getting the raw end of the deal as the vendor, but you do need to be careful to structure your relationship wisely.

How the metrics add upNow that you have the three “D” metrics defined, you need to add them up.

DSO + DSI – DPO = TOTAL NUMBER OF DAYS IN THE CASH CONVERSION CYCLE



The sum indicates how long it takes a company to turn an investment of $1 into $1 plus a little profit. Another way to say it is, “the number of days in the cycle of converting cash into more cash”, hence the title “cash conversion cycle. ”

Here is a chat comparing Dell cash conversion cycles of 1996 and 2004, showing how the numbers are calculated.

1996 2004add DSO--Days Sales Outstanding 42 32plus DSI--Days Supply of Inventory 31 3less DPO--Days Payables Outstanding 33 64equals Total Number of Days in the Cash Conversion Cycle +40 -29

Wow, this number for Dell went from a positive 40 in 1996 to negative 29 in 2004. Quite a difference! But what does that mean?

Consider what a positive number 1 would mean. It would mean that the company would have to keep one day’s worth of cash on hand at all times and that the sales cycle turns once a day or 360 times a year. So 360 times a year it cranks out its 20-cent profit.

Then, what would positive 40 mean? That means that the company would need 40 days of cash on hand and the cycle would spin around 9 times a year (360 divided by 40). Only 9 times would you get your profit out the back end of the process. And you know what? That isn’t that bad. Thirty to forty days is a normal sales cycle.

But what does negative 29 mean? Yep, it means that Dell has other people’s money for 29 days. It means the cycle spins several times a day, hundreds of times a year. It means that Dell has so much extra money that it never has to reach into its own pocket for cash. Pretty sweet, right?

What does Dell do with all this extra cash? It invests it. In addition to making profits from selling computers, Dell also makes profits from investing billions of dollars of extra cash. It also uses the extra cash to grow and to run the business on a day-to-day basis.

By benchmarking your organization against Dell (or other companies), you may be able to motivate your team to move and achieve. You might also find an innovative solution to a troublesome problem in your organization: in this case, cash flow shortage.



3. Process Map or Flow ChartA process map (or flow chart) is a picture of the steps needed to accomplish an activity. It is a basic tool that can be used at a general, strategic level as well as at a highly detailed operational level to show inputs, outputs and other factors affecting a process. (Note that it is important to be only as detailed as is useful to your overall objective. Too much detail will slow down and derail your mission; too little will neither provide much insight nor will it be useful.)

Process maps come in different forms such as basic “here to there” flow charts, charts with “swim lanes” to depict different functional areas, and charts with data about process metrics to make value stream maps. Regardless of format, however, process maps are about showing what happens between what goes in, and what comes out. We explain how to construct a basic process map below.

HowDefine the process that you are mapping and decide on the level of detail required. A starting point and ending point are required.Brainstorm the process steps with a team of individuals engaged in or familiar with the process. Write these steps on sticky notes.Place the process steps sequentially in linear order… usually starting in the top-left part of your workspace.Draw arrows to show direction of process flow. If there are multiple choices of steps, use a diamond to indicate that the flow can go in several directions.The best way to get an accurate map is to compose it in the place where the activity being mapped is actually occurring. Check the final map against actual operations.Don’t worry too much about how the map looks. You can do it by hand. The objective is to understand what the process is, and how well it is working.

Use itTo understand what steps or actions go into a certain processTo identify areas of waste, or where “flow” isn’t happeningAs the basis for identifying areas for improvementAt the strategic level, in the form of a Value Stream MapParticularly in the Define stage of Lean Six Sigma

Here is an example of a process for contracting out professional services. It is at a high level and shows the flow of activities. Each of these process steps could be broken down into individual process maps (or flow charts--same thing).



Simple Process map: Contracting for Professional Services

The next process map shows the same information, but uses what we call “swim lanes.” This divides the process by functional areas. It can be very useful in showing ownership for process steps and activities, as well as flows, waste, and disconnects.

Process map with “swim lanes”: Contracting for professional services

Next is a third example of a flow chart or process map. This one has swim lanes, shows the functional groups vertically instead of horizontally, (like the last examples) and uses some of the traditional process map symbols for different activity types, as shown in the legend in the bottom right-hand corner.



Another process map with swim lanes--vertical

4. Value Stream MapA value stream map is an enhanced process map. It is a high-level picture of what it is that creates value for the customer. Think of the value stream map as a flow chart or process map with metrics. A value stream map can show flows of information, people, and materials as defined by process steps, and often pulls in related time and quality data. Let’s look at an example.

Source: http://www.ids-healthcare.com/Common/Paper/Paper_51/z1.jpg

This value stream map shows a process flow for insurance claims processing. Look at the numbers at the bottom. The values recorded in minutes are the processing times for each process step. The values recorded in days are the lead times BETWEEN the process steps.

The questions “valuable?”, “capable?”, “available?”, and “adequate?” listed beneath each process step ask about the quality of the activity and how well it is done. This is good to have, but the main things we want you to observe are the cycle time metrics and how they are presented. Totals are on the right. The total



processing time is 19 minutes. The total lead-time is 28 days! What conclusions might you draw from this?

Evaluating activities or process stepsUnderstanding these flows helps us to sort process steps or activities into three categories; those that add value (as defined by the customer); those that do not add value, but are necessary; and those that do not add value and can be eliminated immediately. Let’s look at this table again as a reminder.

Reviewing the value stream map above, how would you evaluate each process step? You might have to make some assumptions about what happens in each process step. This is just for practice.

Another key point of the value stream map is to allow us to see obstacles to the flow. As explained earlier, the flow is the way a product or information (we call it “the thing”) moves through the process, advancing process step by process step. If there is an obstacle to the thing’s flow, it will take longer to move from one process step to the next.

Obstacles are equivalent to waste. Examples of obstacles deterring the thing’s flow are:

• The need for someone’s signature (takes time, no value added)• An error (need time for correction, no value added)• The need for information that is missing (takes time, no value added)

The value of Value Stream MappingWithin Lean Six Sigma, value stream mapping is often the starting point for identifying opportunities to make process improvements, particularly in cycle time. It can be a very powerful diagnostic tool for identifying barriers to flow and areas of waste.

Value stream mapping trains us to focus on how the business or organization is performing on a system level. Often, we are caught up in “result silos,” where one department’s activities may cause another’s to be sub-optimized. To use a common rowing example, it’s like having members on the same crew team rowing out of sync or in different directions. While the boat may still be moving forward, it’s not at maximum performance. A high-level value stream map will allow us to see if we are all rowing in the same direction or could use some improvement!


Looking for Value in Activities/Process Steps

KEEP, REDUCE, ELIMINATENON-VALUE ADDED?VALUE ADDED?TASK


Value Stream Mapping can be used at both the strategic and operational levelsFrom a strategic standpoint, the value stream map is a roadmap for change. Constructing the map with the appropriate people can constitute a strategic planning activity that helps set direction for a 6 to 12-month period. Value stream mapping at this level promotes a holistic view of the organization and focuses attention on how the business would be perceived from a customer perspective. The starting point of the map would be what the customer wants or requests; the ending point is when the customer request is fulfilled.

Value stream mapping at the operational level involves a smaller scope and requires more detail than at the strategic level. Imagine that the strategic value stream map is at 60,000 feet and the operational or process level map is more like 10,000 feet. In between may be the value stream map of a specific service or good.

Each level of observation can be very instructive, though the perspective and questions asked will obviously be different. Deciding what level or process family to analyze depends on your objective.

BenefitsThe benefits of using value stream maps are similar to the benefits of Lean Six Sigma overall. These are:

Focus on the customerProvides data-based decision making capabilityFocus on process improvement, not blaming employeesIdentification of waste and sub-optimized processFocus on creating value through sustained change

Steps for doing value stream mapping (VSM) and making use of the end productDoing a value stream map is similar to constructing a process map.

Define the level and scope for the VSM effortEngage a team to brainstorm the main process steps for the current state map. It is optimal to be able to “walk the flow” or to physically step through the process being mapped, if possible. You can use icons or different colors to represent different flows--material, information, etc.--or do the flows separately.Capture the process steps for these flows in the form of a process map. Add lead-time, process time, and quality metrics to each step. Don’t have quality data? You can use anecdotal information about how often errors or reworks occur. If errors happen 30% of the time, your quality level is 70%.Identify steps that are value-added, non-value added (but necessary), and non-value added and unnecessary



Based on identifying steps that can be eliminated or improved, brainstorm and create a future state value stream map and allow this to guide improvement efforts.

Taking the simple process map we made back in the tools chapter, we can turn it into a value stream map by adding some numbers, like the example below. With the addition of the metrics, we get a totally different impression of the process. For example, contracting for professional services only requires 7.5 hours of labor. Can we fix the process so it doesn’t take a month of lead time to get this done?

Value Stream Map showing Process Time and Lead Time

As a strategy tool, value stream mapping can complement SWOT analysis, strategy mapping, Hoshin Kanri (Hoshin planning), and/or any number of strategic analysis tools in guiding an organization in the creation of a strategic improvement plan. Used in this way, a value stream map can indicate improvement activities that may be driven as Kaizen events, as DMAIC projects, or as “just do it” events--depending on how much is known about “what to fix”, and the time and resources available.

At a tactical level, the value stream maps can be used within a Kaizen event to show the current and future state. In this case, the map would be constructed by the Kaizen team. It would be similar to using a process map, but would incorporate more information about cycle times and times needed to complete various process steps.

5. Check SheetA check sheet is a simple, structured form used for collecting and analyzing data. The data is captured at the place and time it is being generated. In its most simple form a check sheet is a list of items or events you expect to see. A check mark is made next to that line item each time it occurs.

HowIdentify the data you want to collect and the time period over which it will be collected.Develop a form for data collection.



Explain use to those who will collect the data.Check after the first collection period that you are getting the type and quantity of information you expected. Modify the form if needed.Tabulate data at the end of the collection time period.

Use itAs a simple and quick way to collect factual data, particularly about “frequency” of occurrenceTo allow for project participation from front line employeesTo understand patterns, problems, and issue frequencyTo get data for building a Pareto chart (the next tool!)Especially in the Measure and Analyze phases of a Lean Six Sigma project

For instance, you might decide that your staff is spending way too much time responding to vendors’ complaints, calls, and emails. Something is broken. You decide that for two weeks, you will keep track of the issues that are causing vendors to complain. With the team that responds to these calls, you brainstorm a list of five broad categories of causes for complaints that the team expects to see--based on their experience--along with a sixth category for “other.” The categories are:

Payment does not include vendor’s invoice/reference numberPayment to vendor is late because of batch payment cycle timing Payment is sent to the wrong addressPayment not made because W-9 form is missingPayment is late because internal approval process resulted in payment reroutingOther

Each member of your staff has the checklist and over the two-week data collection period, they mark the appropriate line item each time an issue occurs. At the end of the two weeks, you tally the results.

Out of a total 70 complaints from vendors in the two-week period, the check sheet with combined results from all team members looks like this.

Check sheet of complaint causes

See how the issues are listed in order of frequency, from greatest to smallest? This helps us to focus on top issues. Doing this--and collecting supporting data--is



the goal of the check sheet. Data from check sheets is often used to create Pareto charts. We will see that in the next tool example.

Another thing to notice is that “other” had more occurrence than two of the other separate categories. When this happens, it means that we may need to better define the issue categories. Ideally, “other” will be the smallest.

6. Pareto ChartsPareto analysis (which we use to prepare the Pareto chart or diagram) is named for the 18th century Italian economist, Wilfredo Pareto and flows from the Pareto Principle, also referred to as the 80/20 rule--that is, 80% of the effect comes from 20% of the cause. (Pareto’s actual observation was that 80% of the Italian economy was controlled by 20% of the population, for you trivia buffs.)

The Pareto chart is essentially a histogram or bar chart that puts the columns in order of size, with the largest bar on the right, cascading down by size. The purpose of this tool is to focus attention on the most critical factors of an analysis. It also helps in prioritizing actions.

HowCollect data, often by check sheet.Calculate total for each category as well as the total number of occurrences for the data setOrder the categories by size or number of occurrences, by largest to smallest.Construct a bar chart with number of occurrences as the left-hand vertical axis and the type of occurrence along the bottom horizontal axis.Build a right-hand vertical access with cumulative percentage and add a line representing this.

Use itTo focus attention on problems in the order of their frequency To understand which problems can yield the largest gain if solvedTo prioritize resources on a projectTo organize data from a check sheet in a more graphic form

The Pareto chart in the example below uses the data from the check sheet in the previous example. Note that the columns should be placed in the order of largest (on the left) to smallest (on the right). I have also added columns for percentage of total and cumulative percentage, based on the 70 total responses.



We use this data to make the Pareto chart shown below.

The main points to this chart are the noted by the green circle, which indicates the 80% “vital few” that we need to focus on in terms of what issues to work on. The red line is intended to indicate the cumulative percentage, so we know where 80% is. The issues are listed from large to small and could be individually clearly labeled, but you get the idea. They match the items above.

30

26

1218

2

Cumulative %

Cum

ulat

ive

%

Issue Frequency

ISSUES

Cumulative %

30

26

1218

2

Cumulative %

Cum

ulat

ive

%

Issue Frequency

ISSUES

30

26

1218

2

Cumulative %

Cum

ulat

ive

%

Issue Frequency

ISSUES

Cumulative %

Pareto chart

7. 5 WhysThis basic Lean Six Sigma tool is a variation of brainstorming. It is intended to ferret out root cause(s) to a problem or issue, or to get to the heart of a question. That leads us to the discussion on what root cause actually is.

It usually helps to think of root cause in terms of finding something that needs to be (and can be) fixed. That item needs to be actionable and should generally be a choice with a high return on investment (ROI). There are lots of things we can fix,



but we need to pick the most worthwhile--like taking the top 80% in the Pareto analysis.

This is a very easy tool to use. The trick for some people is knowing when to stop.

How•Define the problem or issue in the form of a statement. This is the “effect” on a

cause and effect diagram. •Ask the question “Why does this happen?” or just “Why?” This is the FIRST

WHY.•Ask the same question again, of the FIRST WHY answer. That answer

constitutes the SECOND WHY.•Continue asking the “why” question until you believe that a root cause has

been established. The root cause must be something that is actionable. (Also, the number of “why” questions can be more or less than five.)

Use it•To encourage participants to get down to basic root causes of a problem•To identify causes that will result in long term improvement as opposed to

superficial fix•To promote analytical thought•Typically used in the Analyze phase of a Lean Six Sigma project

Let’s look at the vendor complaint issue that we used in the last two tool examples from an auditing perspective. In auditing, it is important for us not to just figure out that a problem has occurred, but also to uncover the root cause of the issue. We can use the 5 Whys technique to do this.

The example drills down on what we discovered as the most frequent reason for vendors to complain:

1. Payment did not include vendor’s invoice or reference number. NOW ASK”WHY?”

2. Answer: Because the payables staff didn’t have the number. NOW ASK “WHY?”

3. Answer: Because they are directed to make payments to vendors even if they are lacking backup documentation. NOW ASK, “WHY?”

4. Answer: Because the invoices are routed through the managers for approval and sometime they don’t return the invoices before payment is due. They simply send an email saying the payment is approved and send the invoices to the CFO. NOW ASK, “WHY?”

5. Answer: Because the CFO is who the managers think needs them, but they get stuck in the CFO’s inbox… etc., etc., etc.

WE CAN STOP WHEN WE HAVE AN ACTIONABLE ROOT CAUSE THAT IS IN OUR REALM OF INFLUENCE--i.e., is it something we can act on or do something about.



Knowing root cause--some insight from auditingWhen an auditor finds something wacky going on, they often ponder why the wacky event happened. Many times, the auditor might determine that the issue appeared because the client didn’t know they were supposed to be doing something (cluelessness) or they just didn’t feel it was necessary (laziness/questionable judgment). But we can’t say that the client is clueless or lazy in our audit report! That would be insulting and unproductive.

The 5 Whys is one technique for drilling down to the true root cause. When you can comfortably say that you have gathered enough information about this issue to confidently identify the deficiency you have drilled far enough…you hit oil.

Why do you want to drill down that far? Because you want to know what the root cause is. You want to look at as many different angles on this finding to make sure you are actually resolving the root cause. You don’t want to write up symptoms of the problem--you want to write up the real problem.

If you just write up a symptom of the problem, you may have to write them up again, and again, and again for a bunch of related issues. You are writing up the symptoms and not curing the disease. This wastes everyone’s time.

For instance let’s look at the problem (or as auditors call it, the condition) and cause in this finding:

CONDITION: Cash reconciliations not performed.

CAUSE: No one is assigned to the task.

Now ask WHY #1 “Why is no one assigned to the task?” In other words, turn the condition into the effect and find a cause. This is the whole point of the 5 Whys tool.

CONDITION REDUX: No one is assigned to do cash reconciliations.

CAUSE REDUX: Cash reconciliations are not included in any job description, including the one that exists for the accounting clerk.

Now ask WHY #2, “Why is there no job description for the accounting clerk?”

Then the director of accounting says, “What is a job description?”

Ah… cluelessness. We only had to use two whys!

Would the lack of job descriptions for everyone in the accounting department cause a variety of different issues? Of course it would. If you recommend that they create job descriptions, you might head off lots of problems.



This tactic works best when you are dealing with issues caused by people.

8. Cause and Effect Diagram--a.k.a. Fishbone DiagramThis is yet another brainstorming tool that helps in identifying and grouping root causes. It is also called a “fishbone” diagram (based on its shape) or an “Ishikawa” diagram (based on its development by Kaoru Ishikawa).

HowCreate the problem statement or the “effect” that you want to investigate. This is the head of the fish.Decide on the major cause categories of the problem or effect and create the fishbone-shaped diagram. Typical cause categories include the:

Six M’s: machine, method, materials, measurement, man, mother nature (most often used for manufacturing issues) The Eight P’s: price, promotion, people, processes, place/plant, policies, procedures, and products (typically for administration and service industries) The Four S’s: surroundings, suppliers, systems, and skills (service industries) A combination of any of the cause categories that are relevant to the issue and industry

From the head of the fish (the effect), draw a horizontal line with a diagonal spine coming off of it for each of the major cause categories. Label each spine.Brainstorm for causes to the major cause categories and draw these as smaller lines coming off of the cause category spines.When the diagram is finished, identify the causes that seem to be the most critical and actionable for follow-up. Circle them.

Use itTo help identify possible causes contributing to a problemTo group similar problem causes that may have similar solutionsTo provide a balanced framework for looking at root causesMost often used in the Analyze step of Lean Six Sigma

For this example, we’ll put our budgeting hats on. Let’s say that each month managers are called out during a Monday morning meeting by the new ED for significant variances from their budget projections. You know that the managers never took the budgeting process or their projections very seriously until the new ED came on board.

You, as the controller, want to make sure that the next budget is sound and that the managers will stick with it. The ED’s insistence that all budget variances over 10% be explained has been running your staff and the management group ragged.



As a result, you call a meeting of your key budgeting personnel and a handful of cooperative, non-defensive managers and ask them to help you figure out what is going wrong. The effect of the shoddy budgeting process is that the budget variances are significant and often unjustifiable. No one wants these uncomfortable meetings to continue.

The brainstorming session results in the following possible root causes behind the variances:

Managers are using historic figures as the basis for their projections--although the business has grown by 11% or more over the past five years

Managers are not backing up their projections with solid evidence

Managers are not documenting how they came up with the budget figures, making it impossible to answer tough questions

The budget department has never documented the budgeting process so managers feel like they are submitting their budgets into a mysterious black hole.

The budgeting department often ”massages” the manager’s budgets, changing them without the permission of the managers.

Many expenses and revenues are projected for the year and then divided by 12, which does not take into account seasonality or infrequent activity.

Feedback systems for managers are often so slow that managers are unaware they’ve busted open the budget until two months after the fact. This is due, in part, to all transactions having to be cleared through the general ledger accountants before they are input into the budget system.

The budget line items are either too detailed and specific (paper usage is its own line item) or so rolled up (although the company has 11 discrete sources of revenue--there are only three revenue categories on the budget) that the variances are misleading.

We would put them in a cause and effect diagram like this:



Reason for budget

variances

Man (People)Machine

(Equipment)Method

(Process)

Environment (Policy and procedures)

Materials Measurement

(Data)

Historic figures, old data

Managers randomly change budget figures

Slow feedback

No documented Policy and Proc.

Budgets not backed up with evidence of how they got them

Annual expenses divided by 12 – no season fluctuation

Require clearance thru general ledger system

Budget items have poor category choices

Reason for budget

variances

Man (People)Machine

(Equipment)Method

(Process)



(Data)



Slow feedback






Cause and Effect (Fishbone) Diagram

From the list of brainstorming “reasons,” we can clearly see from the diagram that the main root causes are within the process. This should be our focus in addressing the problem.

9. Impact/Effort MatrixThis tool is used to assess the relative impact or benefit versus the effort required to complete an activity. Though the thought process behind this is very simple and may be second nature to some, putting the process into a basic matrix can greatly aid in prioritization and communication of the plans.

HowCreate a diagram with “effort” on the bottom axis and “impact” on the vertical axis. The measurement on each axis should go from low to high.Create four quadrants:

1: low impact/low effort 2: low impact/high effort 3: high impact/high effort 4: high impact/low effort

Decide on how possible activities should be placed per quadrantUse this as a guide to deciding how to go forward or to prioritize activities and resources



Use itTo help prioritize actions in order to give the most “bang for the buck”To decide where to allocate resources in an improvement effortTo quantify relative impact of activitiesMost often used in the Improve phase of Lean Six Sigma, once possible actions (to correct root causes) have been identified.

As an example of this tool, let’s continue with the budget variance problem. After looking at why the budget variances were so significant, you asked the managers and the budget analysts to think about what could be done to rectify these problems.

To get good bang for our buck, or best ROI, we prefer to take on ideas that have a high impact, but don’t cost us much in time, money, or other effort. That is the quadrant where the star is located: high impact/low effort.

impact

high/low high/high

low/low low/high

effortImpact/Effort Matrix

To come up with possible solutions to the main root causes we want to address, we brainstorm yet again. We identify and organize the “vital few” or the best ideas to work on. We arrange the ideas into the impact/effort quadrants based on group input.



Low impact/low effort: easy to do, but relatively little impact or benefit

• Have the budgeting department send out an email asking managers to let them know if they need any help.

• Have managers read an article on good budgeting from Governing Magazine

Low impact/high effort: definitely not worth doing in initial stages

• Have the managers submit their budget projection documentation (their evidence and calculations) to the budgeting department for review and approval.

• Have the budgeting department employees schedule an hour-long meeting with each manager and his or her staff to see if they have any questions about the budgeting process.

• Ask managers to create their ideal budget, their moderate budget, their most conservative budget.

• Have managers justify each line item of their budget with written narrative.• Have managers go on a retreat and work through each manager’s detailed

budget as a team.

High impact/high effort: the high impact is good, but comes at greater cost in terms of time and resources

• The budget department develops a two-hour training session for managers explaining how to project budget figures, document their calculations, and back up the budget with evidence.

• Hire a consultant to develop a training session for all managers and run all managers through the program.

• Train managers on how different line items on the budget behave when the company grows.

• Create a strategy map and link the budget to the strategy map.• Have the budgeting department document the steps of the budgeting

department and share the steps with managers.• Decrease the cycle time on general ledger entries so that budget feedback is

timelier.

High impact/low effort: this is what you want to do first• Share financial and other growth information for the past five years with

managers.• Create a format for submitting the budget and hold a 30-minute meeting

with managers explaining how to fill it out.• Do not allow budget managers to change budget figures without discussing

changes with the managers first.• Ask managers to break their projections up into months instead of taking an

annual number and dividing it by twelve. Build this monthly breakout into the template.



• Come up with a more consistently detailed chart of accounts and share it with managers on the budget template.

As you can see, the impact/effort matrix helps us prioritize action steps in a relative “bang for the buck” way. You want to find those HIGH IMPACT/LOW EFFORT activities and do those first. After that, it is a question of reprioritizing the remaining steps based on available resources.

10. Spaghetti diagramThis tool is also called a workflow diagram or transportation diagram--when we are trying to sound very adult! However, it could also be called “headless chicken” diagram for those familiar with the phrase “running around like a chicken with its head cut off.” (This does not translate well into foreign languages so stick with “workflow diagram!”)

The output of this tool is an understanding of the flow of information, people, or products involved in accomplishing something. It is basic, but highly insightful to see where waste is occurring in the form of extra running around, multiple handoffs (crossed lines), backtracking, etc.

How• Obtain or create a layout of the workspace or area that you are working on.

You need to be able to draw on it.• Use a process flow chart of the steps to accomplish the activity being

analyzed, or make a list by brainstorming.• Link the process steps to the workspace area by putting a mark at the

physical place on the diagram where the process starts. Draw a line to where the next step happens and continue to the end of the process.

• When the diagram is complete, discuss the diagram and possible improvements with the aim of reducing the excess travel and waste.

• You can do this exercise with either information flow or physical movement of people.

• To show how much savings you accrue by simplifying the spaghetti diagram, use 1.5 mph times walking distance in the workplace. Figure out how much walking time is saved and multiply by appropriate salary or wage level as a basic calculation.

Use itTo improve the physical layout of a workspace or process flowTo focus on eliminating “transportation waste” and to increase efficiencyTypically, as an easy Analyze/Improve step in Lean Six Sigma

As an example, let’s suppose that you are in treasury management. You work for a moderate-sized city that has an excess of cash during several months of the year. The city council has legislated that a good chunk of cash be set aside for future equipment and infrastructure purchases.



You, the accounting department, and the budgeting department work closely together to ensure that cash is not sitting around idle. You carefully time the maturity of investments to make sure that you have enough cash on hand to implement executive management’s strategy.

Right now, the majority of your cash is tied up in longer-term investments--the shortest maturity is 6 month CD’s--because the executive and council team assured you and the budgeting department that they were going to wait until next year to make any major moves. Liquidating these CD’s and other investments will cost the city in penalties and will likely result in capital losses because the market has been doing very poorly lately due to several negative global economic forces.

When your position was created 10 years ago, you had plenty of leeway to decide when to liquidate and move securities. However, one of your newer city councilmen considers himself an expert on investing and has questioned your judgment on several purchases. He had the board approve a policy that requires any moves or liquidations of investments exceeding $30,000 to be approved by a subcommittee of the council. The policy also states that no investments can be liquidated at a loss without three members of the executive team and a majority of the council in agreement. This agreement must be in writing and based on an analysis of the investment’s performance that includes answers to seven tough questions. Several of your council members are financially illiterate and usually get confused by your reports.

You feel hamstrung by this policy and want to have it reversed. You have held on to several questionable investments because you didn’t want to have to deal with the hassle of getting approvals. You feel like the overall return of the portfolio has been negatively impacted.

You were patient. Now the perfect opportunity to prove your point has presented itself. The economy is weaker, and contractors are willing to work on the cheap. You could implement some of the city’s longer-term construction projects now--you could strengthen a commuter bridge and start investment in a new water treatment plant. You think you could make a lot of headway with these projects with only $260,000. The public works department has been comparison-shopping on these projects for the new equipment for the past few months and estimates that the city could save close to $80,000 over last year’s prices.

This request means that you will have to suffer penalties for early withdrawals of CD’s and take a hit on several investments. But, because the city manager agrees with the public works director that it would be best to act soon, you must act fast.

Here are your tasks--which take you 9 days to complete:

Evaluate the investment portfolio to determine which investments will be liquidated.



Create a recommendation that the committee to liquidate these investments.

Answer the seven questions regarding the investments, according to policy.

Send the report through the city manager to make sure he agrees with your approach.

Make corrections based on the city manager’s feedback.

Email the report to the rest of the executive team for their feedback.

Make corrections or alterations to the report based on their feedback.

Send the report--via email--to the council.

Have a phone conversation with the council members who need additional explanation.

Schedule a teleconference with a quorum of the council and members of the executive team.

Hold the teleconference.

Win approval from the council.

Have the council send in a written approval of the liquidation, and ask executive management to formally approve the liquidation.

Liquidate the investments by calling the banks holding the investments.

Wait for the cash to hit the bank.

You think of documenting these steps in a spaghetti diagram to demonstrate how involved and wasteful the process is, but then realize that a process map would be more useful. You ask that the policy be revised accordingly and dredge up a random spaghetti diagram from the internet to show as an example here.

The spaghetti diagram below is completely unrelated to the story above. It indicates the flows of metals among a sample of metals processors in New England. It is here to give you an idea of what a spaghetti diagram looks like.



ref: http://phe.rockefeller.edu/ie_agenda/ie2.html

Spaghetti Diagram

11. The 5 S’sThe 5 S’s (5S) tool is one of the simplest in the Lean toolbox and can do great things in the fight against waste. It provides a basic framework for “good housekeeping”--the creation and maintenance of an organized and high-performance workspace.

Though you may take this idea for granted as common sense, how many of you ever move piles of work papers around in order just to make space for other piles of work papers, or search for files and documents that you can’t seem to locate when needed?

A cluttered and poorly functioning work environment can be a great source of waste and a killer of efficiency, effectiveness, and morale. The fact that there are now “Clutter Consultants” who, for a healthy fee, will clean up and reorganize your closet or garage, is a testimonial to the value to this activity… if you can use it at home; you can probably use it at work, too.

The 5 S’s were originally transliterations of Japanese words beginning with “s” (in the parentheses) conveniently tied to English concepts that also start with “s”! Look at them more closely below.

HowA five-step process to CLEAN UP!


http://phe.rockefeller.edu/ie_agenda/ie2.html


Sort (Seiri)--To start, separate useful and necessary items (or information) from that which is unnecessary, and get rid of what you don’t need. This may include deleting unneeded files, moving old files to a storage area or external hard drive, or getting rid of articles or memos that you have already read or processed.Straighten up (Seito)--This step is also referred to as “simplify” or “set in order.” It means that once you have only the necessary/useful items remaining, arrange them in an order and place that you can easily reach or retrieve from. One easy example of this is rearranging computer desktop icons to make more sense.Shine (Seiso)--This step involves thoroughly cleaning the work area once things are properly straightened and stored. In an information-heavy environment, this may include dusting and cleaning off coffee splashes, hiding power cords, repairing anything that is broken, or having a tune up of your laptop.Standardize (Seiketsu)--This step kicks in after the first three steps are completed. Here you create a system to make sure that “sort, straighten, and shine” becomes routine. This may be as simple as making a checklist of things to do before you leave each day. For example, throw away extra papers, put files away properly, put all “to do’s” on one list, and record new phone numbers or contacts in the appropriate place. Sustain (Shitsuke)--This is the hardest step because it requires change. It means that once you have cleaned up your work area and standardized the process for continuing the action, you really have to do it! This normally requires self-discipline (sometimes the fifth “S” is actually called “self discipline” instead of “sustain”) and accountability. If you are instituting a 5S program in your area, it must become a requirement of the job, until individuals are conditioned to do it automatically.

Use itTo clean up or organize a work areaWhen people spend too much time tracking down information or materials to complete a process step or taskAs a way to standardize or control workflowMost often in the Improve phase of Lean Six Sigma

In this example, after eight months of redesign and hard work, you have managed to go paperless! If it can be done via email or electronic funds transfer, your team has made it happen! You have been putting off cleaning out the storage room until you were sure the new processes and techniques were going to work. One of your IT guys said he could really use some extra space to store his equipment and the storage room would be ideal because it is right near his office.

You put together a team of your most organized and meticulous staff and set aside a Friday to get the job done. Everyone on the team wears jeans to work and you make sure you have plenty of recycling bins, trashcans, and boxes to clean the storage room up.



Sort (Seiri)--Your team begins by using Post-It Notes to tag items they definitely think need to be kept. You find out that about 60% of what is in the storage room is now passé. Old dot matrix printers, forms, and carbon paper should have been thrown away years ago. You fill the boxes, bags, and recycling bins with useless stuff and haul it to the shipping dock for later disposal.Straighten up (Seito)--With what you have left, you ask your more organized team members to sort the things on shelves and in bins. During this process, you free up four shelving units, which the IT manager was more than happy to claim.Shine (Seiso)--Now the super meticulous among you get out the cleaning supplies and go to town. The rest of the team is thanked for their hard work and sent back to their real jobs. Standardize (Seiketsu)--Two of your staff members are showing a real enthusiasm for this task. You ask them to be in charge of keeping the supply room straight. You ask them to review the content of the supply room every Friday to make sure nothing new and useless has crept in. For now, you give them carte blanche to throw anything away that they deem useless. You also call the janitorial staff and tell them that you realize that your messy supply room made cleaning it impossible in the past, but that you are now trying to keep it tidy. You request that they add the supply room to their cleaning tasks.Sustain (Shitsuke)--After a few months, you notice that the supply room is getting a little messy--not horribly messy--but not as clean as you would expect. You ask the two staff members, who had been so enthusiastic during clean up if they are running into any snags. They say they are sorry, but they keep forgetting to check on the supply room each week and that the task of cleaning it up had gotten so big that they couldn’t justify pulling away from their normal jobs to take care of it. You tell them that they officially have three hours to allocate to the task every month and that you want to see it on their timesheets. Within a few months, the supply room is looking great. Now if you could just get the IT guy to be a little neater…

For those of you with children, the 5 S’s have also been effectively used to keep the playroom tidy!

12. FMEA (Risk Assessment Matrix)The fact that this acronym stands for “failure modes and effects analysis” is usually a big turn-off for people (most folks don’t like to talk in terms of ”failure”). While this tool was originally used in engineering work to identify types, probability of, and effect of failures in a process or product we will use it more generically. In broad terms, this tool is a structured approach to identifying and prioritizing risks. From that, we can drive controls.

This technique is commonly used in auditing to decide which areas deserve attention. Auditors do not have the time or the will to examine every aspect of an



operation, so they have to be choosy. Using a risk assessment matrix will help to decide where to spend time by looking at severity of a risk, the possibility that it will occur and the ability to detect it. The higher the risk number, the more attention it deserves and more need to have effective controls in place.

HowMake a list of process steps or risks (in Lean Six Sigma these are often possible improvement activities). Put these in one column of an excel spreadsheet (these come from team brainstorming).In the second column, list the corresponding potential “failure mode” of thing(s) that can go wrong. One line for each failure mode, but make sure it stays linked to the original process step or activity.In a third column, make a note of the impact of this failure mode on customer value (in words).In a fourth column, rate the relative impact of this type of failure to the customer value. You may pick a scale of 1 to 3 or 1 to 5. The higher number equals a more severe (bad) impact. Label this column “severity.”In a fifth column, list key potential causes of the failure mode (in words).In column six, labeled “Occurrence,” rate the relative frequency of occurrence or the possibility of it happening--use a scale of 1 to 3 or 1 to 5, with a high possibility of occurrence being the higher number.In column seven, identify any controls or procedures that are in place that would prevent the failure mode to happen. List these (in words).In column eight, based on the controls, or absence thereof, rate the possibility of detection of this failure mode before it happens--based on having controls or not. Use the same scale as above, with the high number being LEAST likelihood of detection based on current controls. This column is labeled “detection.”Column 9 is called RPN, or “risk priority number.” This is the product of Severity (column 4) x Occurrence (column 6) x Detection (column 8). The higher the number, the bigger the risk and the more you will want to take steps to mitigate the risk (if this is a process step) or to not undertake the activity (if this is an action)--unless you have great ability to control the likelihood of success.

Use itTo identify relative likelihood of success of various action plansTo identify risk in process steps, impact, and/or lack of controlsTo prioritize improvement steps and allocate resourcesTypically, in the Improve phase of a Lean Six Sigma project to understand the impact of possible improvement activities to the process and to the overall organization; also used in Control

The example below applies to examining cash receipts at a health clinic. The higher the risk priority rating, the more important it is that the auditor gives that issue attention. Low risk priority ratings are skimmed over:



FMEAactivity open mail and record

receiptsdeposit all cash received at clinic

what can go wrong staff can divert receipts staff can divert receiptsimpact on customer lost cash $4K received

each weeklost cash $10K received in person each week

severity rating (1-5) 4 4causes of failure customers send in money

orders. Some send cash. Paying customers are low income and don’t have credit cards or bank accounts

any member of staff can accept payment. Many doctors provide services for negotiated rates and collect directly from customers. Doctors are volunteering their time at the clinic and are not expected to follow any procedure.

occurrence rating (1-5)

4 5

controls to prevent failure

two staff open mail at once

head nurse counts number of patients. Doctors are encouraged to send customers to front desk. Front desk creates log of receipts each afternoon.no reconciliation of this data is performed

detection rating (1-5) 2 5risk priority rating 32 100


In this brief FMEA or Risk Assessment Matrix example, we would give the most attention to the second step--depositing the cash--as it has a much higher risk priority rating (100 vs. 32).

13. DocumentationPeople don’t usually think of documentation as a tool, but no matter what you call it, documentation is a critical part of making things better--the goal of Lean Six Sigma. Documentation comes in many forms; here are some of the most common and useful.

PoliciesProceduresWork instructionsTraining requirement checklistsRoles and responsibilitiesJob descriptionsPerformance metrics

HowIdentify the problem or issue you are addressing in creating the documentation. When creating any form of documentation, make sure you have identified and included ALL OF the relevant stakeholders for input. The most often overlooked groups are human resources, training, and finance.The document should have a title, version, and date.Identify a time cycle or event that would lead to a review and necessary updating of the document.Make sure that the existence, purpose, and content of the document are well communicated.

Use itTo communicate standards and expectations about how a process step or job is performedTo standardize how work is done for better resultsTo ensure that minimum requirements for performance and compliance are being metTo have a better idea of how to allocate resourcesTo develop and guide performance expectations and resultsTypically, in the Improvement and Control phases of Lean Six Sigma

In case you need it, here is my documentation example!

A boutique hotel in Austin decided to open a restaurant on the property. The owner of the hotel called me in to help them, as she said, “Do things right, this time.” The hotel had grown organically, completely driven by the owner’s vision. She was a very creative and innovative woman and hired creative and innovative employees. Most of her employees had music or art backgrounds and knew nothing about running a business.

I met with the new management of the restaurant and we decided that one of the key ways to ensure success would be to create policies and procedures that would guide the employees and management.


We began by brainstorming the key functions of the restaurant. We used sticky notes to share our ideas. Then, we sifted and organized the post-it notes on the wall into natural categories. I then asked each participant to vote for three categories that they felt needed to be dealt with immediately. Conveniently, we were able to winnow the procedures down to about five that needed attention, pronto.

One of the policies and procedures that needed attention was inventory control and ordering. If the restaurant staff didn’t get this under control, they would likely double order inventory or under order inventory and run out of food!

We began by asking, "What is the key objective of inventory ordering?" What did they want to achieve? Then we asked who should be involved in this.

Next, we did another sticky note map on the wall that detailed the procedure for ordering step-by-step. Sticky notes are useful for this sort of work because you can move them around to make space for additional steps you want to add.

After everyone approved the process, I took the sticky notes away and typed them up in the following form:

Ordering/Stocking Procedure--Team LeadersObjective Don’t run out of inventory… yet minimize

inventory

OVERVIEW The Steps to Managing Inventory

1. Take a physical inventory & figure out what you need

2. Assemble & calculate dollar amount for order3. See if you have the cash to pay for the order4. Revise the order5. Order from the vendor6. Receive inventory from the vendor7. Restock and organize

Periodically check sales against purchases (or is this a separate procedure?)

STEP #1Figure out what you need

Steps:Compare inventory on hand to the inventory checklist (see ordering/stocking tools)Fill out the inventory checklistQuestion the staff about their inventory needs as described on the checklist

When should you do this?

Every morning


Who should do it?The store manager

What tools are available?

·Inventory checklist

Step #2Assemble order and calculate total

Steps:1. For each item of inventory that is depleted per

the inventory checklist:a. Determine the quantity desiredb. Multiply the unit pricing by the total

number of units to come up with a dollar total per inventory item

2. Total all individual inventory amounts to a total dollar amount for the order on the inventory checklist


Every morning



Inventory checklist complete with updated pricing of each inventory item

STEP #3See if you have the cash to pay for the order

Verify that you have enough cash to pay off the vendor for the order this week by looking at the latest financial data located at…


Every time you place an order.

Who should do it?The store manager.


QuickBooks reports?Cash flow report?

STEP #4Revise the order

If you are unable to pay for the order this week, revise the order quantities and recalculate the totals.

Check in with other executive team members about their cash outflows and inflows this week.



Every time you place an order.

Who should do it?The store manager.


Inventory checklist complete with updated pricing on each item.

STEP #5Order goods from the vendor

Steps:1. Choose the appropriate vendor from the vendor list2. Read the vendor’s list for any special vendor

requirements--such as timing of order, timing of delivery, etc.

3. Call the vendor, making sure to cover items on the “How to talk to a Vendor” checklist. (see ordering/stocking tools)

4. Write down the items that the vendor agreed to deliver on an order sheet (see ordering/stocking tools)

5. Place the sheet in the basket hanging by the back door


Every morning



· Vendor list· “How to Talk to a Vendor” checklist· Order form

STEP #6Receive goods

Steps:1. Check delivery against original order; use the receiving checklist hanging by the back door on a hook2. Verify that:

· The goods received are listed on the vendor’s invoice

· The vendor’s invoice includes all of the things ordered on the order sheet (that is in the basket by the back door)

· The goods received are fresh and not damaged· The weight of items received matches the weight

ordered


What do you do if the order is wrong or damaged?

·1. Write down the items that are in error on the vendor’s bill of lading (name?) and make a photo-copy (?)

2. Call the vendor to complain and follow their procedures for correcting the order and billing

3. Staple it to the order sheet and place it in the basket by the back door.


As goods are delivered

Who should do this?The assistant store manager


Receiving checklistOrder sheet

STEP #7Restock

Steps:1. Place the orders received in the appropriate area--

kitchen, cleaning closet, etc.2. If the item is perishable: make sure to arrange the

items so that the oldest items will be used first (FIFO--first in/first out)

3. Throw away damaged or unusable inventory


As goods are delivered

Who should do this?The assistant store manager

Though many of these steps are simple common sense and employees performed most of them without this document, having written documentation allowed for standardization and control--key components of Lean Six Sigma and in building good systems.

The Top Thirteen ToolsBelieve it or not, you have finished the tools chapter! We recommend that you review this chapter from time to time, even if most of the tools were already familiar to you. As you become more comfortable with Lean Six Sigma, we predict that you will continuously discover new ways to use the tools or variations of them, to make improvements within your organization.



OBJECTIVE: o Discriminate between Lean Six Sigma tools

1. Which of the following is a tool for identifying the data you want to collect?Process map.Pareto chart.Check sheet.Spaghetti diagram.

2. You operate a business that specializes in customizing software for companies. Which benchmark metric would you be measuring if you were to measure the time it takes for the customer to pay for the software from the time you deliver it to the company?

DSO (Days Sales Outstanding).DSI (Days Supply of Inventory).DPO (Days Payables Outstanding).DTB (Days to Bill).

3. What is the main difference between a value stream map and a process map?A value stream map incorporates cycle times.A process map identifies waste.A value stream map encourages result silos.A process map is created at an operational level.


4. Which of the following depicts a workflow diagram?

Reason for budget

variances

Man (People)Machine

(Equipment)Method

(Process)



(Data)



Slow feedback






Reason for budget

variances

Man (People)Machine

(Equipment)Method

(Process)



(Data)



Slow feedback






OBJECTIVE: o Select an appropriate Lean Six Sigma tool for a task

5. Which of the following tools is best used when you are trying to determine the likelihood of success of various action plans?

FMEA risk assessment matrix.The 5 S’s.5 Whys.Spaghetti diagram.


6. Bob has been with the company for 15 years and he does a fine job running your accounts payable department. However, he is a little set in his ways and you have had a hard time convincing him that he should make a few changes to help the organization improve its cash flow situation. Which of the following Lean Six Sigma tools might help you in your efforts?

Check sheet.Brainstorming.The 5 S’s.Benchmarking.

7. You sell steering wheel parts to auto manufacturers. Your Days Sales Outstanding (DSO) is 47 days, your Days Supply Inventory (DSI) is 20, and your Days Payable Outstanding (DPO) is 40. What is your total number of days in the cash conversion cycle?

13.27.67.107.

8. The finance department always struggles with creating the year-end financial statements and they have a variety of triggers for their difficulties that most of the employees are aware of. This year, they have asked you to help them tackle just a few of their more significant problems but don’t have the time or resources to tackle all of their issues until the spring. Which tool would help you prioritize your work?

Spaghetti diagram.Benchmarking.Pareto diagram.Documentation.

9. You have decided that the best Six Sigma Tool to use to identify areas for improving the police department’s filings of criminal reports is the value stream map. Which of the following steps will you apply first in value stream mapping (VSM)?

Generate ideas about how a future map for filing criminal reports will look.Pinpoint which steps in the filing process add value, don’t add value but are necessary, or are wasteful.Identify time and quality metrics of the steps involved in filing criminal reports.Name each main step in the process of filing a criminal report.

10. Which of the following would you make the head of the fish in a fishbone diagram?

Each manager has his or her own company credit card.The former CFO did not require managers to document spending.The cause for excessive personal spending by all of management.The former CFO preferred not to reimburse employees for purchases.

11. When creating a cause and effect diagram for the administration of the University of Idaho, which cause categories will you most likely use?


The 2 T’s.The 4 S’s.The 6 M’s.The 8 P’s.

12. Your workspace has become extremely cluttered and dirty. It has become tiresome each time you start a new project since you have to dig through your piles and stacks and weed through your emails to find crucial materials. In response, you begin to apply the 5 S’s to get organized. What is the first step in the 5 S’s?

Clean.Place items in order.Discard unnecessary materials.Establish a routine.

13. Besides answering all calls and opening and directing all mail to appropriate recipients, the Housing Authority’s secretary is responsible for receiving rent payments from low-income housing tenants. She does a remarkable job performing the everyday tasks but has difficulty maintaining concise records of tenants’ rent payments. Which tool might you use to help standardize and control this activity?

Documentation.The risk assessment matrix.The workflow diagram.The impact/effect matrix.



OBJECTIVE: o Discriminate between Lean Six Sigma tools

1. Which of the following is a tool for identifying the data you want to collect?Process map. Incorrect. A process map (or flow chart) is a picture of the steps needed to accomplish an activity. A process map is created after data is collected and does not help a practitioner collect data. Pareto chart. Incorrect. The Pareto chart is essentially a histogram or bar chart that puts the columns in order of size, with the largest bar on the right, cascading down by size. A Pareto chart, then, is a summary of data – not a way to collect data.Check sheet. Correct. A check sheet is a simple, structured form used for collecting and analyzing data. The data is captured at the place and time it is being generated. In its most simple form, a check sheet is a list of items or events you expect to see. A check mark is made next to that line item each time it occurs.Spaghetti diagram. Incorrect. A spaghetti diagram is a summary of information already collected. The output of this tool is an understanding of the flow of information, people, or products involved in accomplishing something. It is basic, but highly insightful, to see where waste is occurring in the form of extra running around, multiple handoffs (crossed lines), backtracking, etc.

2. You operate a business that specializes in customizing software for companies. Which benchmark metric would you be measuring if you were to measure the time it takes for the customer to pay for the software from the time you deliver it to the company?

DSO (Days Sales Outstanding). Correct. When you look at the Days Sales Outstanding in this business, you measure the number of days between delivering the software and receiving payment from the customer. You want this number to be LOW!DSI (Days Supply of Inventory). Incorrect. Days Supply of Inventory measures the number of days a company holds raw, in-process, or finished goods before it sells it to customers. Because you sell customized software, you will not have this inventory.DPO (Days Payables Outstanding). Incorrect. If you were to look at the Days Payables Outstanding in your business, you would measure the number of days between the time you receive items from suppliers to the time you pay them. In this business though, you will not likely have many suppliers.DTB (Days to Bill). Incorrect. Your software company will want to take a look at this metric! Days to Bill measures the time period between delivering the software (or other product) to a company and sending out an invoice. To minimize this measurement, you should send an invoice at the time of delivery.


3. What is the main difference between a value stream map and a process map?A value stream map incorporates cycle times. Correct. A value stream map is an enhanced version of a process map in that it has more data on it, including cycle times.A process map identifies waste. Incorrect. A process map doesn’t necessarily identify steps of the process as wasteful. A process map is simple and identifies steps of the process.A value stream map encourages result silos. Incorrect. A value stream works against silos or activities that are selfishly concerned with only one department and could be performed at the detriment of another department.A process map is created at an operational level. Incorrect. Both value stream maps and process maps can be created at the operational and strategic levels.


4. Which of the following depicts a workflow diagram?

Correct. This diagram depicts a workflow, or spaghetti, diagram. It shows the movement of either a person or a “thing.”

Incorrect. This is an example of a fishbone diagram. It shows an “effect” and the main causes of the effect.

Incorrect. This depicts a value stream map.

Incorrect. This Lean Six Sigma tool is a process map with swim lanes.


OBJECTIVE: o Select an appropriate Lean Six Sigma tool for a task

5. Which of the following tools is best used when you are trying to determine the likelihood of success of various action plans?

FMEA risk assessment matrix. Correct. Using a risk assessment matrix will help to decide where to spend time by looking at severity of a risk, the possibility that it will occur, and the ability to detect it. The higher the risk number, the more attention it deserves and the more it needs to have effective controls in place.The 5 S’s. Incorrect. The 5 S technique includes sort, straighten up, shine, standardize, and sustain. It is most often used to clean up or organize a work area or to make improvements when people spend too much time tracking down information or materials to complete a process step or task.5 Whys. Incorrect. The 5 Whys are used to uncover the root cause of a problem.Spaghetti diagram. Incorrect. A spaghetti diagram is a visual depiction of how silly a process has become. It demonstrates a lack of flow.

6. Bob has been with the company for 15 years, and he does a fine job running your accounts payable department. However, he is a little set in his ways and you have had a hard time convincing him that he should make a few changes to help the organization improve its cash flow situation. Which of the following Lean Six Sigma tools might help you in your efforts?

Check sheet. Incorrect. Check sheets are used as you are gathering information about a situation. A check sheet is not likely to convince Bob of anything in particular. A summary of checklist data might be convincing… maybe. Brainstorming. Incorrect. Brainstorming in this instance would involve asking Bob’s group to come up with ideas to resolve the problem. Since Bob is not convinced that he has a problem, having a meeting to brainstorm a solution would probably be frustrating and futile.The 5 S’s. Incorrect. The 5 S’s are steps that an individual or group goes through to tidy up a physical space. Cleaning up Bob’s work area will probably not contribute to an improvement in corporate cash flow.Benchmarking. Correct. Showing Bob what competitors are doing regarding cash flow and accounts payable might motivate him to action. Setting targets for Bob’s group using information from competitors or industry standards could also drive improvements.


7. You sell steering wheel parts to auto manufacturers. Your Days Sales Outstanding (DSO) is 47 days, your Days Supply Inventory (DSI) is 20, and your Days Payable Outstanding (DPO) is 40. What is your total number of days in the cash conversion cycle?

13. Incorrect. This answer was derived by adding together the DSI and the DPO (20 + 40 = 60) and then subtracting the DSO (60 – 47 = 13).27. Correct. The total number of days in the cash conversion cycle is calculated by adding the DSO and DSI together (47 + 20 = 67) and then subtracting the DPO (67 – 40 = 27). You should work on reducing this number!67. Incorrect. To get this answer, you added together the DSO and the DPO (47 + 40 = 87) and then subtracted the DSI from this total (87 – 20 = 67). You could have also gotten this answer if you did not complete the calculation and only added together the DSO and the DSI.107. Incorrect. The answer of 107 could be derived by adding together all metrics: DSO, DSI, and DPO (47 + 20 + 40).

8. The finance department always struggles with creating the year-end financial statements, and they have a variety of triggers for their difficulties that most of the employees are aware of. This year, they have asked you to help them tackle just a few of their more significant problems but don’t have the time or resources to tackle all of their issues until the spring. Which tool would help you prioritize your work?

Spaghetti diagram. Incorrect. A spaghetti diagram is not a tool that allows you to prioritize actions. It simply diagrams what is – and it usually depicts a mess!Benchmarking. Incorrect. Benchmarking is used to evaluate the actions of others, such as competitors or industry leaders. Benchmarking will not help you prioritize your tasks, and you do not need it to convince the employees that improvements need to be made.Pareto diagram. Correct. A Pareto diagram will rank the errors and issues in order of frequency and can help you determine which issues trigger the most problems. Pareto argued that 80% of problems are caused by 20% of the errors. Maybe your efforts on just a few issues – per their request – will solve 80% of their problems.Documentation. Incorrect. Documentation is important to help you remember what you did and why – and also to evidence your efforts to others. But documentation in itself does prompt prioritization of issues.


9. You have decided that the best Six Sigma Tool to use to identify areas for improving the police department’s filings of criminal reports is the value stream map. Which of the following steps will you apply first in value stream mapping (VSM)?

Generate ideas about how a future map for filing criminal reports will look. Incorrect. The final step in the process of creating a value stream map is to envision a value stream map of the future. This value stream map should eliminate non-value added and unnecessary steps and will be an improvement goal.Pinpoint which steps in the filing process add value, don’t add value but are necessary, or are wasteful. Incorrect. The fourth step of value stream mapping is to clarify which step is crucial to the customers’ bottom line. This means you will identify which steps are value-added, non-value added but crucial, and non-value added and unnecessary.Identify time and quality metrics of the steps involved in filing criminal reports. Incorrect. The third step in the process of developing a VSM is to identify any time or quality metrics to each step of filing a criminal report.Name each main step in the process of filing a criminal report. Correct. The first of the five steps in doing a VSM is to identify the level and the scope of your effort, which you have identified as the process of filing criminal reports for the police department. Afterwards, you need to identify the main steps involved in filing a criminal complaint.

10. Which of the following would you make the head of the fish in a fishbone diagram?

Each manager has his or her own company credit card. Incorrect. This major cause of the managers’ excessive spending would be drawn as a diagonal spine off of the horizontal line stemming from the head of the fish. Because the former CFO failed to require managers to document their spending, the managers felt less constrained to make personal purchases. Thus, this is a major cause of the managers’ excessive spending.The former CFO did not require managers to document spending. Incorrect. Because the former CFO failed to require managers to document their spending, the managers felt less constrained to make personal purchases. Thus, this is a major cause of the managers’ excessive spending.The cause for excessive personal spending by all of management. Correct. The head of the fish is the cause or the reason for the problem; it is the effect to be examined. Thus, in this scenario, the effect that you are examining is the reason that managers are spending company funds on personal items. The former CFO preferred not to reimburse employees for purchases. Incorrect. Because the former CFO preferred not to reimburse employees for company purchases, he authorized the distribution of company credit cards to all managers. This would be drawn as a line off of the main cause.


11. When creating a cause and effect diagram for the administration of the University of Idaho, which cause categories will you most likely use?

The 2 T’s. Incorrect. The course material identifies three typical cause categories of an “effect”: the 4 S’s, the 6 M’s, and the 8 P’s. The 2 T’s are not identified as a cause category for these purposes. The 4 S’s. Incorrect. Service industries may have the 4 S’s as its main cause categories of the problem. The 4 S’s include surroundings, suppliers, systems, and skills. Service industries might also have the 8 P’s as its cause categories for a cause and effect diagram.The 6 M’s. Incorrect. The 6 M’s, which include machine, method, materials, measurement, man, and mother nature, are most often used for manufacturing purposes, not for administrative purposes.The 8 P’s. Correct. A university’s administration would most likely use the 8 P’s, which are price, promotion, people, processes, place/plant, policies, procedures, and products.

12. Your workspace has become extremely cluttered and dirty. It has become tiresome each time you start a new project since you have to dig through your piles and stacks and weed through your emails to find crucial materials. In response, you begin to apply the 5 S’s to get organized. What is the first step in the 5 S’s?

Clean. Incorrect. The third step is to “shine” or clean the workspace. This cannot be done easily when the workspace is cluttered.Place items in order. Incorrect. In the second step, you will “straighten up” or place papers, files, or emails in an order that makes them easily retrievable. Discard unnecessary materials. Correct. As the first step in the 5 S’s, you will “sort” papers, files, and emails and discard unnecessary materials. Establish a routine. Incorrect. The fourth step in the 5 S’s is to “standardize” or create a routine of applying the first three steps.


13. Besides answering all calls and opening and directing all mail to appropriate recipients, the Housing Authority’s secretary is responsible for receiving rent payments from low-income housing tenants. She does a remarkable job performing the everyday tasks but has difficulty maintaining concise records of tenants’ rent payments. Which tool might you use to help standardize and control this activity?

Documentation. Correct. Documenting for the secretary the procedures to follow when receiving rents will give her a guide on how this activity should be performed. While she may perform some of it without such a guide, the documentation will allow her to complete the tasks in the same order each time. The risk assessment matrix. Incorrect. The risk assessment matrix is not typically used for standardization or control purposes. Instead, you might have used this tool to identify the lack of controls for this activity in comparison to other activities. Such a tool could show you that you need to improve the accounts receivable process.The workflow diagram. Incorrect. The workflow diagram would not be used as a standardization or control tool. Rather, you might use the workflow diagram to show the current movement of either the secretary or the rent payments once they enter the Housing Authority. The impact/effect matrix. Incorrect. You might have used the impact/effect matrix to identify the impact and effort required by the secretary to complete your job responsibilities. And, in this circumstance, the activity involving the greatest impact and least effort to focus on turned out to be the task of maintaining concise records of rent payments.


CHAPTER 6: THE DMAIC PROCESSObjectives for this chapter:

· Define the phases of the DMAIC model · Choose appropriate tools for each phase of the DMAIC model· Classify activities of process improvement into the phases of the

DMAIC process

As we said in an earlier chapter, there are various process improvement models in existence and DMAIC is one of the most widely used. Pronounced “duh-MAY-ik,” this process is the key framework for more in depth Lean Six Sigma projects and is used widely in business problem solving.

The DMAIC Phases

Define * Measure * Analyze * Improve * Control

This sequence can also be used to structure a Kaizen even, which is a much shorter and more focused activity than DMAIC. We detail Kaizen in the next chapter, but provide some comparison here to help define what DMAIC is and is not.

DMAIC and KaizenDMAIC and Kaizen are two approaches to doing Lean Six Sigma. Though there is overlap, like when the DMAIC sequence is used to organize a Kaizen event, the overall intent of each is very different. Let’s look at what makes them different below.

· What do they do? DMAIC projects are best used when significant organizational, cultural, or process changes will result from implementation of the solution… particularly if the solution involves something like the restructuring of a department or major realignment of job functions. The DMAIC framework allows ample time to investigate the risk inherent to larger change initiatives. Kaizen events are for “quick hits” that involve relatively less risk and can be accomplished in a day. Solutions implemented after a Kaizen event would be things like changing documentation or conducting simple training.

· What is the scope and complexity of the project? DMAIC projects focus on questions and problems where the root cause is not obvious. Cross-functional teams must be assembled for longer periods of time, say three months, in order to gather extensive data, analyze, and implement a full-scale solution. Kaizen events normally take one week or less, have much smaller scope, and the problem solution is much simpler.


· What resources are allocated? DMAIC projects use specially trained Black Belts to work on projects as their full-time jobs. Team members work on the project part-time and continue with their “normal” jobs. In a Kaizen event, all members of the team focus ONLY on the project for its duration. An outside consultant may be used for facilitation.

· What is the focus of the team? In a DMAIC project, the team initially helps to define the problem statement and the measures (the “D” and “M”), as well as to later participate in the “AIC” phases if it relates to their respective job function. For large projects, identifying stakeholders and setting up the definition and family of measures can take more time than analyzing root cause and possible solutions. Within a Kaizen event, the problem definition and measures are usually set up prior to the actual work on the project by the team. The group focuses on the improvement phase.

If this is still confusing to you, re-read this after you have read the following chapter on Kaizen.

DMAIC and OESHTo add to the confusion, (or hopefully to reduce it) let’s briefly compare the DMAIC and OESH models. In a nutshell, DMAIC is roughly the same as the…

Organizing * Executing * Sustaining * Honoring

…phases in OESH in that some of the same overall activities take place.

The main differences are that OESH includes the Honoring phase, which is present during all the other OESH phases. Also, OESH has three specific steps--including focusing on valueadded analysis--within the Executing phase, which DMAIC does not have.

Let’s look at the figure below that compares the models side by side.


OESH and DMAIC MODELS compared


Honoring

Reduce non-VA

Improve cycle time

Reduce variation

Define Measure Analyze Improve Control

OE

SH

DM

AIC



Honoring

Reduce non-VA

Improve cycle time

Reduce variation

Define Measure Analyze Improve Control

OE

SH



Honoring

Reduce non-VA

Improve cycle time

Reduce variation

Define Measure Analyze Improve ControlDefineDefine MeasureMeasure AnalyzeAnalyze ImproveImprove ControlControl

OE

SH

DM

AIC

We now return to the DMAIC explanation!

How the DMAIC process worksWhen conducting a DMAIC project, a project team follows these five phases or steps beginning with problem definition and concluding with the implementation of a solution to solve the underlying root causes. At the end, establishing standards, reviews, and best practices will help ensure that problem solutions stay in place and changes are sustained.

The team’s goal is to look at the current state or “as-is” situation, formulate a desired future state or “should be” situation, figure out the gaps between these, and address the gaps.

The use of tools in DMAIC is also important. Here is a summary of the tools we discussed in an earlier chapter, along with the DMAIC phase(s) where they are most often used.


With these tools in mind, we now look at the DMAIC process, step-by-step and in detail.

1. DEFINEThe purpose of the define step is to have the team and its executive sponsor decide upon the scope, goals, and performance targets for the Lean Six Sigma project. These are the basic elements of a project charter--the document that sets up the project and formalizes it.

While projects may differ depending on scope and expected outcome, the following are basic components or activities within the define phase.

• Clearly define the problem without speculating on a solution. An example of a problem statement might be “to improve our external customer satisfaction ratings by 35%, from a basis of an average of a 4 out of 5 approval rating, within six months.” The problem statement should include the “thing” to be improved, the amount of expected improvement from a baseline, and the timeframe for improvement. Some of this information is not obvious and has to be gathered within the define phase.

• Determine key stakeholders for the project and process. These can often be conflicting forces. For example, in improving the customer satisfaction there is the external customer who wants better service and the internal customer, who wants to cut the cost of customer service. Both customer sets need to be included as stakeholders if the project is to be successful in the long run.

• Understand what customer problem you are solving. Customer research such as focus groups, surveys, and interviews may be undertaken at this stage. It is important to define the problem in customer terms so that you are solving the right problem.

• Understand what is “critical to quality.” That is, what elements have to be included in or addressed in the project to make it successful in the eyes of the stakeholders? These can start as high-level things like “good service,” “easy to


contact,” or “provides information that is useful,” and will flow down to specific metrics in the measure phase.

In the early example about the IRS, the critical to quality elements were timeliness, accuracy, and professionalism.

• Make projections on financial impact. Create a cost-benefit analysis (CBA) using existing data, showing expected impact of a successful project to the bottom line. Confirm that management is in agreement with the projections and timeline for results to be shown. Remember that full implementation of process improvements often takes several months after the actual project is completed. Be realistic about when benefits will be seen.

• Understand the process in question by using detailed process maps. Be careful to construct an “as is” flow versus a “should be” flow. You want to know only how things are done currently, as a basis for finding root cause.

• Make sure you have the right people on the team and that they are committed to the project. Team members need to have similar expectations about what is to be accomplished and about their role and level of participation. Because the ability of the team to function well together is so important to the success of the project, some time may be spent on team-building exercises--particularly if team members are not all in the same location.

2. MEASUREA key component of a full-blown DMAIC project is the requirement for extensive data. This is a big difference from a Kaizen event, where the data requirement is much less.

The following are components of the measure phase.

• Determine what you need to measure. This can be a complex activity of drilling down through the “critical to quality” elements from the define phase, to attach relevant metrics. You want to set up a balanced family of metrics and will often need to have both “results metrics” that show the outcome of a process or process step and “operational or process metrics” that show aspects of how well a process is operating. You saw an example of a balanced family of metrics in the chapter on Six Sigma Concepts.

• Figure out how to get the data you need. Often the data sets on what you want to measure do not exist or are not accessible. Creating and validating data sets can be very time-consuming work. (This includes getting enough data for data sets to be statistically sound. There are bodies of work just around how to set up and evaluate measurement systems!) One easy way of collecting data is the check sheet--as discussed in the Tools chapter.

• Compile data for baseline metrics. This means putting metrics to the “as is” state of the process you seek to improve. These measures can be for cycle time, quality, errors--anything that is meaningful to the process and stakeholders!


• Test for capability and stability of the “as is” process. This can be done through fairly complex statistical work or as simply as plotting the plotting sets of data to see what patterns show. Because these tests are important in eventually reducing variation, they are included in this list. For a simpler start with DMAIC, however, you should not be held up by this (i.e. don’t have to do it).

• Validate the appropriateness of your chosen metrics. This can be one of the most fun parts of the measure phase, because it means that you get to do a physical “walk through” of the process to get an idea of whether you are measuring the right things. Watch how the process actually works by seeing how people to their jobs. Think about what you are measuring and what the measures show about the process (or not). You might want to make some changes.

3. ANALYZEThe objective in the analyze phase is to figure out root causes of things that are standing in between your current state or “as is” process, and the goals identified in your initial problem statement.

One area of differentiation between “analyze” in a more formal DMAIC project versus a Kaizen event is the extensive use of data in full DMAIC projects. In a Kaizen event, this phase is more dependent on anecdotal data or experience. In a DMAIC project, the data drives you to conclusions about root causes--even though the root causes can be quite different from what you expected.

Basic parts of the analyze phase include:

• Use of tools to find root cause. The starting point to finding problems in a process is usually the “as-is” process map. As you now know from earlier chapters, some of these tools are the cause and effect diagram, 5 Whys, Pareto analysis, etc.

• Looking at cycle time. If increasing efficiency by speeding up a process is part of the project goal, you can turn the process map into a value stream map by adding and analyzing the lead-time and process time. This is often referred to as process analysis. Value stream mapping will be discussed in detail in a later chapter.

• Prioritize root causes of unwanted waste and variation. Link these to the outputs you most want to change. This will help show what areas you will be addressing in the next phase.

• Realign team if necessary. Depending on where the main root causes lie, you may need different expertise on the team before moving into the improvement phase.

4. IMPROVEThe goal of the Improve phase is to develop and deliver changes that will address and fix the root causes identified in the ANALYZE phase, which will get you to the


“should be” state. The improvements need to be measured by and against the metrics set up in the baseline and must be sustainable.

Typical elements of the improve stage include:

• Generate ideas on how to address prioritized root causes. This is often done through brainstorming and benchmarking. Even more than in the other phases, it is important for the team to include individuals who are engaged first hand in the process, to be part of the solution.

• Evaluate and prioritize these ideas. Use impact/effort matrix and operational modeling/scenario building to get an idea of how ideas might affect the process. Use FMEA analysis to see if potential improvements create other risks or problems that will need to be controlled.

• Select best ideas or solutions and build them into a “should be” process map. This is the basis of communications to everyone involved in the process improvements, as well as to management sponsors.

• Pilot new ideas to validate them. While a pilot will not give you identical results to “real life,” when done well, it can give good directional information about full rollout or implementation. Make sure to run the pilot for long enough to attain a meaningful data sample. Pilot results should be compared to baseline metrics and show positive results; otherwise, start again after refining the process.

• Develop a deployment plan for full implementation. Based on results of pilot(s), develop a plan for full execution of improvements. Due to the often large nature of the deployment and change, it can be good to do a rolling deployment--one area, section, or region at a time--and to use newly trained individuals from one deployment to help gear up for and manage the next.

5. CONTROLThe final DMAIC phase is a critical safeguard for the new process once it is rolled out. In this stage, standards are set and communicated. Implementation of a new process is usually ongoing through the control phase. The project team transitions ownership of the new process to a sustaining team once improvements and metrics are stabilized.

Within the control phase, the following generally takes place:

• Create and document the new standard(s). New process, along with roles, responsibilities, and metrics need to be documented and disseminated. This is the documentation “tool!”

• Continue to work through implementation deployment. Make tweaks to the process as needed while the process moves from “lab” to “production” or real-time use. Update standards as needed.

• Create plans to make sure the new process is being followed correctly. This can involve audits, inspections, or dual accountability for tasks and processes until


it is certain that the new process or activities are being done. Creating and following a robust audit plan (for example) for a period of three to six months can save on future headaches.

• Refine process and standards. As lessons are learned through the deployment, continue to make improvements and document them--and include them in the on-going rollout.

• Review results with management. Though this is done throughout the DMAIC process, in this phase, the real results begin to accrue. Keep executive sponsorship updated on changes and any extra resource requirements needed to get through the deployment.

• Determine criteria for hand-off. Decide at what point the new process is stable enough and when the metrics for the new process (against baseline) show adequate improvement. When this point is reached, the project team disengages and regular process owners take over the sustaining role, though transition should be gradual.

• Validate the initial cost benefit analysis. Once the new process has stabilized and is in the “sustaining” phase, show savings. Hopefully, this is not much different from the original cost-benefit projections made in the define phase.

• Celebrate and publicize project results. A typical DMAIC project can take up to a year for full implementation. Be sure to celebrate successes and to publicize project results. Doing so will provide the basis for support and success when other projects are initiated.

USING DMAIC--A ScenarioThis chapter on DMAIC is fairly intense and may seem complicated. The example below is intended to show that DMAIC can be used fairly simply as a sensible problem-solving flow. Here’s the scene:

A manufacturer of oilrig drill bits and equipment wanted to make sure that all managers and decision makers had access to the most current performance data regarding sales, profit, and manufacturing output. Like many organizations, the company was focused on achieving the forecasts it had promised to Wall Street.

In order to achieve those forecast goals--gross margin, operating margin, units sold, return on investment, and the like--the company divided their annual projections into quarterly internal projections and their quarterly projections into weekly projections and their weekly projections into daily projections.

One perceptive director noticed that divisions often worked against each other instead of together toward a common goal. For instance, the marketing department once offered a free lifetime warranty on all products. The marketing and sales departments easily met their weekly sales targets, but four months later, the customer care/warranty department suffered a blow to their metrics when their warranty budget was consumed in the first half of the year.


In another example, the sales force, in order to increase the profit margins they were reporting, pushed high margin products and ignored low margin products. The manufacturing departments were unable to fulfill the demand for the high margin products because they had not geared their production toward these products. Customers ended up waiting too long for many of their products and cancelled orders. This adversely affected both the manufacturing department (who was criticized for taking too long to get the products to the customer) and the sales department (who suffered damaged relationships with the client and who never received their commissions for cancelled orders).

The perceptive director decided that one reason this was happening was that the financial information and other key metrics were silo-ed. Because the finance division was splintered and served each division individually, no one could see the big picture impact of their decisions. He called for an increased sharing of information and for more timely information. At that time, many of the mistakes that were made were not caught until a month or more after the fact--and by then, more damage had been done and was continuing to be done.

This director’s idea was to create a master, daily report of key business metrics that would be accessible to all stakeholders and decision makers within the company. In order to pull this off, a Lean Six Sigma project team expert took on the task of pulling all of the data together and creating a system for delivering the data consistently and promptly. After eight months, the final product was a daily metrics report that included key data including:

· Profit margins per product line and in total

· Warranty expense per product line and in total

· Number of units shipped

· Number of units in process

· Number of units backordered

· How quickly products were manufactured and shipped

· How were sales being made? (Through relationships/salespeople, by phone, by internet, by retailers, etc.)

· Delivery time to customers

In this example, the DMAIC steps or thought process would be something like this:

DEFINE phase: Financial and operating data is not available in the right format to the right groups, which is affecting performance. A better way of doing things is needed.

MEASURE phase: Determine the magnitude or effect this problem is causing in financial terms. Show where the pain is being felt.


ANALYZE phase. Figure out why this problem is happening: why the data is not in the right format and why it is not going to the right groups. What are the gaps between where we are and where we SHOULD be? The main problem is that financial info is silo-ed and not centralized.

IMPROVE phase: Of the problem causes we came up with in ANALYZE, which one(s) are going to be easiest and most effective to implement. It looks like we need to create a centralized reporting mechanism from which reports can be tailored to meet the needs of all key stakeholders. And, like in the IRS example, the metrics need to tie to performance and to be timely and accurate.

CONTROL phase: In order to make sure the information flow is regular and standardized, IT created an automated system for managing, delivering, and continuously improving the quality of reports. The creation, testing, and implementation of the IT reporting to work in conjunction with business processes took most of the eight months.

That wasn’t too complicated, right?



OBJECTIVE: o Define the phases of the DMAIC model

1. What is the significant difference between DMAIC structured projects and Kaizen projects?

Kaizen projects must be led by Six Sigma black belts.DMAIC projects allow ample time for investigation. Kaizen projects are complete restructurings. DMAIC projects require the complete focus of the team for the duration.

OBJECTIVE:o Choose appropriate tools for each phase of the DMAIC model

2. Which of the following Lean Six Sigma tools is usable in every phase of the DMAIC process?

Pareto charts.Benchmarking.Brainstorming.Cause and effect diagram.

OBJECTIVE:o Classify activities of process improvement into the phases of the

DMAIC process

3. Which of the following activities occurs during the improvement phase of the DMAIC process?

Build best ideas into a ‘should be’ process map. Use tools to uncover the root cause.Figure out how to get the data needed.Make projections of financial impact.



OBJECTIVE: o Define the phases of the DMAIC model

1. What is the significant difference between DMAIC structured projects and Kaizen projects?

Kaizen projects must be led by Six Sigma black belts. Incorrect. Kaizen projects are usually led by team members who do not have to be certified.DMAIC projects allow ample time for investigation. Correct. DMAIC projects are longer term – often three months or longer.Kaizen projects are complete restructurings. Incorrect. Kaizen projects are usually done in short bursts and are designed to be accomplished quickly. They often involve lower risk problems. DMAIC projects require the complete focus of the team for the duration. Incorrect. Kaizen events are designed to involve the whole team’s attention until the issue is resolved.

OBJECTIVE:o Choose appropriate tools for each phase of the DMAIC model

2. Which of the following Lean Six Sigma tools is usable in every phase of the DMAIC process?

Pareto charts. Incorrect. Pareto charts are best used in the measurement phase of a DMAIC project.Benchmarking. Incorrect. Benchmarking is best used in the definition and improvement phase. Brainstorming. Correct. Brainstorming is a generic technique that allows you to generate ideas in any phase.Cause and effect diagram. Incorrect. A cause and effect diagram is best used to analyze a situation.


OBJECTIVE:o Classify activities of process improvement into the phases of the

DMAIC process3. Which of the following activities occurs during the improvement phase of the DMAIC process?

Build best ideas into a ‘should be’ process map. Correct. A ‘should be’ process map can be used to communicate the needed improvements to those involved.Use tools to uncover the root cause. Incorrect. This is an activity best done during the analysis phase of the DMAIC process.Figure out how to get the data needed. Incorrect. This is an activity of the measurement process where you are endeavoring to decide what you need to measure to determine the success of your efforts.Make projections of financial impact. Incorrect. This is done during the definition phase in order to make sure that the project is worth doing and that you have management buy-in regarding potential results.


CHAPTER 7: UNDERSTANDING KAIZEN Objectives for this chapter:

· Define key Kaizen terms · Define qualities and common goals of Kaizen events

Kaizen is a Japanese term that means “to change for the better” or “to improve.” The way we will talk about it here is as a method for jump-starting or accelerating improvement in a work environment. This is in contrast to how we use DMAIC to make improvements. DMAIC, as a project structure, is much more involved and analytical whereas Kaizen is about “getting it done.” However, we can use the DMAIC steps during a Kaizen event to organize the work and the way we do the event.

Development of KaizenMore than just a workplace quality strategy or technique, Kaizen is the philosophy that every process and action can, and should be, continually improved--whether at home, at work, in society, or at leisure. As practiced in Japan, Kaizen is a fundamental business strategy that values the individual above all and focuses on improving the quality of the workplace. At the core, it represents a way of life that seeks to provide benefit to society through continuous, incremental change. It is a key element of Lean.

Kaizen evolved with the Lean manufacturing applications at Toyota and was popularized in the West by Masaaki Imai’s 1986 book, Kaizen: The Key to Japan’s Competitive Success. The practical view of Kaizen meant having work teams come together to make improvements in their own processes and environment and to increase productivity through reducing waste.

The general view of Kaizen, as a philosophy, is quite different from the Western axiom “if it ain’t broke, don’t fix it.” Instead, it tells us to “always find ways to make it better.” Sounds like Lean Six Sigma, right?

In the Western business world, Kaizen is typically practiced as a short-term improvement exercise or workshop that serves a specific purpose. (It is seen as a way to drive specific results in a very short period of time.)

Rapid ImprovementWhen talking about Kaizen in the context of Lean Six Sigma we are referring to specific events to drive rapid improvement--usually referred to as Kaizen Events or Kaizen Workshops. The characteristics of these events include

Participation by people who actually “do the work”--frontline employees involved in the process or activities that are being improvedProject duration of 3–5 days, where the team is fully sequestered and free of normal daily responsibilitiesProject is very well defined from the onset Project has measurable objectives


Root cause or source of waste is known (this is a sharp contrast to a DMAIC project, which is used to discover root cause)Basic data for the project already exists or is easily obtained during the course of the eventImplementation of change during the event is possibleThe project is tied to a strategic improvement planManagement supports the event and is available during the event for periodic reviews and decisions

Benefits of Kaizen within Lean Six SigmaKaizen events generally result in reduced cycle time, or increased productivity. This happens by focusing on making processes more efficient by taking out non-value added steps. These steps are things that do not add value for the customer.

There are usually many more of these non-value added items than we realize prior to doing a Kaizen event. They include things like moving material or information around without “doing anything” with it (no value added); handing material/information back and forth for inspection, sign-off, approval without adding value; and/or redundant databases and data flows.

Cross-FunctionalA Kaizen event requires cross-functional participation, with a team consisting of six to eight people total. They represent management, the process being improved, support functions, an objective player (unrelated to the issue at hand), and a facilitator. If the event or project is not cross-functional, a Kaizen event should not be held. Sometimes the main benefit in a Kaizen event comes from just getting people from different areas together and working on a common issue!

In Lean Six Sigma contextAs previously stated, Kaizen originally grew out of the Toyota production system and was associated with Lean; however, as Lean and Six Sigma have come together, the structure of a Kaizen event is often described by the Six Sigma DMAIC framework. This helps to introduce and/or reinforce the DMAIC problem-solving method for participants and management, while working through the immediate issue or focus of the Kaizen event. We will use this format below to describe what happens in a Kaizen event.

The TimelineA Kaizen event is no more than 5 days in length, with some pre- and post-event preparation and follow-up. Remember that during the event, participants are taken away from their jobs, and ideally will not be responsible for any of their regular activities during this period. Kaizen events may be as short as 2 days, so adapt the chart below accordingly. This is how the DMAIC cycle might be used within a Kaizen event.


Now, we will look at the activities that belong to each phase of the Kaizen event.

KAIZEN EVENT--DEFINEDefine the ProjectDuring the DEFINE phase, the event objective or problem statement is clearly defined and measurable. Some examples of problem statements are:

To reduce accounts receivable processing time by 20%To cut three days from the time it takes to create quarterly financial reportsTo streamline the budgeting process so that a final budget can be delivered to the board in the second quarterTo develop the ability to report financial, sales, and manufacturing results from the previous day to all managers by 10 a.m. in the morning.

These problem statements should support objectives identified through earlier strategic planning sessions, Lean Six Sigma projects, and/or value stream mapping. Keep in mind that the objective has to be very clearly scoped and achievable within the five-day period. If, during the DEFINE stage, the problem statement is too broad, scope it down. For example, if “reducing accounts receivable processing time” is too big a chunk, focus on a smaller component, like “shorten A/R data input cycle.”

Identify the Kaizen Leader and the Team--Team PreparationThis is where the cross-functional team of six to eight people are chosen and cleared by their managers to fully participate in the event. If your company is not used to doing these events, having a professional facilitator is strongly recommended.

After the team is chosen and approved, hold a team meeting to communicate the goals and timeline for the project. At this point, the team is also trained or brought up to speed on anything they will need to complete the project, including what Kaizen is about, how to do process mapping, the meaning of “value” and “waste,” and similar Lean Six Sigma basics.


Management Buy-in and SupportAt this stage, also make sure that executive sponsors still support the project and are available for midpoint and final reviews as well as decision-making during the event week. Also, confirm they are ready for change, as this is the objective of the event.

Map the Process During the first day of the workshop, the team should make a process map of the process or process area they are trying to improve. This flow chart is the “as is” process and is usually quite tedious to construct. However, spending adequate time on this step is critical for the project’s success.

Compare Current and Future StatesThis “as-is” process map should be compared to the “future state”--making a process map of the future state is optimal. The difference in these two maps is what you will be working on in the Analyze and Improve stages.

The future state map should incorporate the program objectives--in general, this could be to reduce lead-time (see below for definitions), to reduce processing time, or to improve quality.

KAIZEN EVENT--MEASURE What to MeasureThe team will add any measures to the current process map (as-is), as time allows. Because Kaizen events are generally about reducing cycle time, any data about how long a process step takes is important. We want to look at two aspects of time:

Processing time: how much time is required for the activity to take place (i.e. 3 minutes to type in a data record).Lead-time: how much time is needed between the start of this process step and the next one (i.e. File sits in the inbox for two days--then 3 minutes to type in the data record). The lead-time is the two-day period.

In the next chapter on Value Stream Mapping, we will see how processing time and lead-time can be incorporated with a flow chart.

Where It Comes FromIf there is no data, you can compile it during the course of the project by using check sheets and/or anecdotal information. While there may be exceptions to every process, use what “usually” happens. This information will also help you begin to pinpoint where waste is occurring.


KAIZEN EVENT--ANALYZE Looking for Gaps and Non-value added (NVA)This is when you look for waste and its sources. Use the current and future state process maps to identify gaps and brainstorm about the causes. Separate out the non-value added process steps and determine which are non-essential and may be eliminated. You can use form from the Lean Concepts chapter to do this.

Some examples of waste in non-value add activities you might find are duplicate roles, too much rework, too much wait time, bad physical layout, too many hand offs, manual process, non-standard process, not enough training, and too many mistakes.

Other tools to use in this stage include the cause and effect diagram, Pareto chart, spaghetti diagram, and 5 Whys.

Midpoint Executive ReviewDuring the Analyze/Improve phase, you need to have a mid-point review with your executive sponsor. This brings them up to speed on findings and ensures that changes you are planning to make are not contradictory to other initiatives you may be unaware of. This is also the time to let them know how possible improvement activities may affect the group during the next day and to ask for help or decisions on any obstacles.

KAIZEN EVENT--IMPROVE Choose Improvements That Can Be Accomplished ImmediatelyDue to the short nature of a Kaizen event, you must be thinking about improvements at about the same time as you are doing analysis. Because the improve phase has to be completed within the course of the event, you will need to consider which areas of waste (from ANALYZE) are you able to address immediately? Which have the most impact? (Use the impact/effort matrix or FMEA tools).

Examples of improvement efforts that may be completed during the Kaizen event include:

• Documentation of policy and procedure (you must also have time to distribute and communicate these)

• The 5 S’s to improve work flow• Training on new procedure (has to be done during the event)• Better physical layout of the workspace• Elimination of duplicate process and related communication/training• Combining/reallocating roles and responsibilities in a better way


Test and ImplementDuring the Improve stage, the team needs to be “doing” the improvements and testing to see that what they initially thought was needed, really works. This can include a mini-pilot or test run of the changes in the work place. To the extent possible, data from the “as-is” process and the pilot process should be compared to make sure that directionally, there is some improvement occurring.

KAIZEN EVENT--CONTROL Observe and AdjustDuring the control phase, observe your improvements and make any adjustments that will refine the process for long-term viability. This is still taking place within the window of the Kaizen event, so no drastic last minute changes please!

Establish standardsMake sure everything you have done in terms of improvements, new methods, and changes is documented. Don’t forget the date and revision of the document. In the spirit of continuing improvement, you need to review and update these documents on a regular basis as part of the post-event work. Remember that the date and revision number are important!

Maintaining ImprovementsAs with any Lean Six Sigma event, or change in general, maintaining the change is usually the hardest part. In the control phase of a Kaizen event, you create procedures to sustain improvement. This can include visual inspection, audit, and documentation--however, you don’t want to add more non-value added steps than you have eliminated.

Within the control phase, you also make a final presentation to the sponsoring executive and confirm any decisions made during mid-point review.

In the post-event period, the Kaizen leader and process owners will ensure that larger scale change is planned and carried out and that long-term monitoring or review of Kaizen results occurs. Monitoring improvement for a period of three months, at suggested intervals of 7 days, 30 days, 60 days, and 90 days, is ideal. If changes are not maintained within this period of time, the scope of the project may have been too great or there was inadequate executive support for the initiative.

Celebrate and RecognizePart of finalizing the Kaizen event is to celebrate successes with the team and to recognize each person’s contribution. Working on a Kaizen team takes a lot of time, focus, and energy. Valuing the people involved goes a long way. Thinking HONORING and the importance of this step in the OESH model.


Communicate …and while we are looking at HONORING, part of the value of the Kaizen event, beyond the results achieved, is the fact that the project was completed and that it accomplished something. Message this externally--the process with the result. As people start to hear more about Kaizen and Lean Six Sigma, momentum for these initiatives will build, making it easier to continue to drive for improvement and the creation of value.

Here is an example of how a Kaizen Event might be used to produce results.

Picture this….

The state just elected a new governor, so your department got a new executive director. Thankfully, your team has been left intact. The new executive director worked in the energy business and is making a lot of noise about how slow things work in government. He wants the annual report out of accounting far ahead of the legislative deadline this year. You shoot for getting your annual report done in 100 days, and you have even named it the “100 day report.”

The new executive director asks you to finish your annual report in 50 days--half the time that you are used to. After you sit down and catch your breath, you promise to have it to him in 50 days.

Luckily, your team is familiar with Lean Six Sigma process improvement and you decide that you need to get everyone together and fast! You tell the team that starting next Tuesday--one month before the end of the fiscal year--you are going to pull them together for a Kaizen event. You tell them that all other work will cease and that they are going to work on figuring out a way to deliver the annual financial results to the new executive team within 45 days.

On Tuesday, you start by examining what you are doing now to generate the report. Here are some easily correctable issues and solutions that become apparent from mapping out the “as-is” process. Remember that the solutions are generated and implemented during the course of the Kaizen event.

• Only five members of your staff have the responsibility for pulling together the report and they are overwhelmed. Assign new roles and responsibilities for additional help.

• Collection of critical data doesn’t begin until a month into the process--much of this collection could be done ahead of time. Write a standard procedure for this and do training on it during the Kaizen event.


• One member of the team refuses to use Excel and argues that the report is generated in Word so we should use that all along. This refusal to communicate using the same software as the rest of the team creates several bottlenecks and stalls. Override this preference and use Excel. Include this in policies and procedures documentation.

• The approval process for revisions to drafts of the financial statements is too involved. You need to simplify this, but it will require the specialized focus of another Kaizen even. Plan for the next event.

• Much of the number crunching could easily be handled by lower level staff, leaving the more experienced staff to deal with issues that involve judgment. Define key tasks and rank them in terms of difficulty. Assign tasks accordingly. Draft and communicate new roles and responsibilities.

• Closing the general ledger takes way too long--up to 4 weeks--because of a backlog in processing receivables and payables. Make a plan to immediately hire and train temporary staff to clear backlog so you can get this annual report out. Another project will be needed to resolve the backlog issues long-term.


OBJECTIVE: o Define key Kaizen terms

1. Which of the following accurately describes lead time? How much time is required for the activity to take place.How much time is between the start of the process step and the next.How much time it takes to wait for resources to be received.How much time it takes to complete a Kaizen project.

OBJECTIVE: o Define qualities and common goals of Kaizen events

2. At the local level, the Correctional Facilities Administration (CFA) manages the operations of prison facilities. The local prison has had some difficulties with having enough food supplies to feed all of the prisoners. As a result CFA has organized a Kaizen workshop to drive rapid improvement in this area. Which of the following best describes this workshop?


The members will measure current and projected inventory and food supplies.The members will try to identify the root cause of the problem.Each member will be from management.The members will look at the overall food service system.

3. As one of many methods used to figure out how to cut department expenses, your boss has put together a Kaizen team to look more specifically at making the budgeting process flow more smoothly. You identify several areas of waste, including unnecessary approvals by co-workers. In which stage of the Kaizen event does this identification occur?

Analyze.Control.Improve.Measure.

4. One quality of a Kaizen event is that all improvement efforts must be tested during the event. Which of the following is an example of such an improvement effort?

Making an amendment to the online Policy and Procedures Handbook. Reducing technical errors in the monthly reports by 30%. Reviewing with management the team’s findings.Training an employee on how to use a specialized feature of Word.



OBJECTIVE: o Define key Kaizen terms

1. Which of the following accurately describes lead time? How much time is required for the activity to take place. Incorrect. This is one of the components of cycle time, but this defines process time, not lead time.How much time is between the start of the process step and the next. Correct. This is a component of cycle time and is added to process time to measure total cycle time.How much time it takes to wait for resources to be received. Incorrect. This is a delay in the cycle time of a project – and does add to the time involved in a process. But lead time and process time are the two formal components of cycle time.How much time it takes to complete a Kaizen project. Incorrect. Lead time is an aspect of the cycle time of the project under examination, not an aspect of time regarding the Kaizen project.

OBJECTIVE: o Define qualities and common goals of Kaizen events

2. At the local level, the Correctional Facilities Administration (CFA) manages the operations of prison facilities. The local prison has had some difficulties with having enough food supplies to feed all of the prisoners. As a result CFA has organized a Kaizen workshop to drive rapid improvement in this area. Which of the following best describes this workshop?

The members will measure current and projected inventory and food supplies. Correct. Since the intent of this workshop is to quickly improve the food supply shortage, they must measure their objectives.The members will try to identify the root cause of the problem. Incorrect. The root cause of the food shortage must be identified before the workshop. Each member will be from management. Incorrect. Management must support the workshop, and management should be represented. However, the team should be cross-functional, not representative of one area of the workforce.The members will look at the overall food service system. Incorrect. Because the intention is to quickly resolve this problem, the members will not broaden their scope to look at the overall system. They will only focus on the problem at hand: the food shortage.


3. As one of many methods used to figure out how to cut department expenses, your boss has put together a Kaizen team to look more specifically at making the budgeting process flow more smoothly. You identify several areas of waste, including unnecessary approvals by co-workers. In which stage of the Kaizen event does this identification occur?

Analyze. Correct. For this specific Kaizen event, in the analyze stage, the Kaizen team will look for any waste or non-value added and unnecessary steps in the flow of the budgeting process. Control. Incorrect. In this stage, you will assess the improvements that you test and then refine these improvements for long-term use by documenting the standards and establishing ways to maintain the improvements. Thus, in the control stage of this Kaizen event, you might decide that the budget approval by the assistant director is crucial. However, you might also find that the director doesn’t even look at the budget. As a result, you eliminate the final approval step and document it in policy handbooks.Improve. Incorrect. In the improve stage of this Kaizen event, you will look at and test the implementation of specific ways to improve the flow of the budgeting process. For example, during the Kaizen event, you might try eliminating the need for an approval by the assistant director and the director.Measure. Incorrect. To improve the flow of the budgeting process, the Kaizen team will add to the process map processing time and the lead-time during the measure stage. In this stage, the team might discover that, to get the assistant director’s approval of the budget, the lead time is 2 days and the processing time is 2 days, whereas the lead time for the director’s budget approval is 5 days and the processing time is less than one minute.

4. One quality of a Kaizen event is that all improvement efforts must be tested during the event. Which of the following is an example of such an improvement effort?

Making an amendment to the online Policy and Procedures Handbook. Incorrect. Documenting improvements in the handbook is an example of establishing standards.Reducing technical errors in the monthly reports by 30%. Incorrect. This is an example of a problem statement that is defined and measurable. This is what you must “fix.” Your improvement effort should help you solve this problem statement.Reviewing with management the team’s findings. Incorrect. This review with management is critical to the analyze step of a Kaizen project. It is a way to assess whether the team’s work up to this point matches management’s objectives.Training an employee on how to use a specialized feature of Word. Correct. You’re not trying to train the employee how to use the entire Word program. Instead, you should easily be able to train a worker, during the Kaizen event, on a feature of Word that will simplify his work and reduce waste.


CHAPTER 8: MAKING LEAN SIX SIGMA WORKObjectives for this chapter:

· Distinguish between a Lean Six Sigma project and a Lean Six Sigma program

· Define the four key factors for success—the four “rights” · Classify reasons for resistance to change· Define solutions for resistance to change

Regardless of the size of the organization, there are certain factors that increase the chance of success for a Lean Six Sigma project or program. We will first define project versus program.

Project or ProgramBy project, we mean a stand-alone, “quick-hit” type activity that can be the result of individual initiative. It would often be undertaken in addition to, or in support of, someone’s regular job role and responsibilities. A project may be something you decide to do as a result of taking this training! It could be something as simple as using the 5 S’s to bring some order to your workspace or doing a quick, 2-day Kaizen event to improve the accounts receivable tracking system.

In contrast, by program we mean a larger-scale effort that is more comprehensive (company-wide or, at least, department-wide) and is intended to drive Lean Six Sigma as an organizational initiative. This would be more along the lines of setting up a new Lean Six Sigma group within the company to streamline back office processes or developing a database for sharing Lean Six Sigma projects, tools, and best practices across the organization.

As an individual, you are more likely to find success in starting Lean Six Sigma at a project level, or “in stealth mode” as one recent industry speaker noted. What she meant was that it can be a tough battle to try to pitch the idea that your organization needs to build a new structure for Lean Six Sigma. An effort of this magnitude can take a lot of time and energy, and most companies won’t undertake such a large program unless there is a very compelling reason to do so--like the stock price is tanking and the board needs a mechanism for turning things around.

However, if you go into “stealth mode” on your local departmental level you can use Lean Six Sigma to show some fast and measurable results, and build the program project-by-project. This is one way of beginning to make Lean Six Sigma work and is our recommended starting point.

The next thing you need to get off to a good start are these key success factors or what we call the “FOUR RIGHTS”.

Select the RIGHT SPONSORIn our experience, the MOST important factor for success in Lean Six Sigma is having the backing and support of senior leadership. This means someone at a highly visible level in the organization who understands the project or program in


terms of what it is and what it means from a cost-benefit perspective. He or she will be your executive champion or sponsor.

Selecting the right sponsor is a major early component of the “Honoring” phase is the OESH model. You need to have visibility through the Organizing-Executing, Executing–Sustaining phases of work. Visibility through sponsorship will help in getting the resources you need to keep moving forward.

In addition to having the right sponsor, you need active support from senior management. This allows several key things to happen.

1. Secure needed time and resources: Make sure senior management knows what you are doing and supports your time and effort in the project. This support should enable you to request and receive sufficient resources to complete the project.

2. Enable communications: Throughout your project, as well as at the end, senior management support can help you to get a forum or channel to communicate your success. You need to publicize the results of what you have accomplished in very clear terms that make sense to your audience. Again, keep that HONORING phase in mind.

3. Connection to strategic objectives: For on-going project viability, you need to be able to make a case for your project. This generally involves showing how your actions will further the goals of your manager, departments, or even the overall organization. Active sponsorship and support helps to tie this all together.

Select the RIGHT PROJECTAnother key aspect of success is the selection of the right project or initiative. Characteristics of an appropriate project include:

Being tied to a strategic objective at some level (per above)Being achievable and well-definedHaving a clear goal and objectives that make sense to stakeholders: this can be management, employees, customers, etc.Having a compelling reason behind itHaving something that can be measured to show resultsNot having a net negative impact somewhere else in the organization

If this is an early attempt at Lean Six Sigma in your organization, pick something that is easy to accomplish in a short amount of time, and which shows good, clear results. We call this a “quick hit,” or “low hanging fruit.” This can allow you to slowly build awareness of what Lean Six Sigma can accomplish without making it seem like a Program-of-the-Month or the latest improvement fad.

In selecting the right project, you need to be able to answer and articulate these points, which also help with project definition.

Who is my customer?


What matters? What is critical to quality (CTQ)?What is the scope?What am I trying to accomplish (and magnitude of change)?What is the current cost of poor quality?What benefits will we produce if we reach our goal?

Select the RIGHT TEAMThough at early stages you may be something of a lone wolf in doing Lean Six Sigma, engaging willing and appropriate people to help is important. These could include:

• Executive or management sponsor (per above)• People working in the area you are trying to improve• Someone who can help you validate your results in financial terms--this may

be you or a finance person from the area where improvement is taking place. For full credibility, you need an objective opinion on this.

• People who are committed to using a disciplined, Lean Six Sigma approach to making things better. (Remember, they may need to learn new things or be open to new perspectives!)

• The HR and training department(s)--these groups are often overlooked, but when you make improvements that will impact on employees’ roles, responsibilities, job scope, etc., you are better off having their engagement to help make initial and sustainable change

Select the RIGHT METRICSWe touched on this earlier--having the right measurements to show the impact of your efforts is critical. Especially in the early stages of a Lean Six Sigma project or initiative, the measurements or metrics must be:

• Directly and clearly tied to your project• Easy to understand• Easy to measure• Tied to the ultimate customer in some way• Timely and relevant• Understood in terms of other key metrics

As an example, if you are improving a process that will result in quicker turn-around time, you may decide on reducing the number of signoffs for an invoice payment to be approved. For “number of sign-offs”, to be a measure of success you would need to:

• Show how number of sign-offs impacts turn-around time• Define “sign-off” • Make sure you can count the number of sign-offs in the process--maybe use

a ticket sheet or a tracking form• Show that sign-offs impact turn-around time--Reducing their number will

make customers happy because they won’t have to wait as long for whatever it is you are doing


• Make sure you can count the sign-offs that take place in your process at the time they take place

• Show that having fewer sign-offs does not impact the quality of the end product (i.e. you don’t want in increase in errors)

In selecting the right metrics, it is helpful to answer these questions:

• What is my process? How does it function?• Which outputs affect CTQ most?• Which inputs seem to affect outputs most?• Is my ability to measure or detect “good enough?”• How is my process doing today?• How good could the current process be at its best level?

The four right selections and failureThrough careful consideration of these four key elements or success factors: executive sponsorship, project, team, and metrics--you have a high probability of succeeding with Lean Six Sigma and will be off to a good start.

However, one final word on key success factors--it is possible that you can focus on these things and still not have a complete success--in whatever terms you define success. THAT IS OK! A key element of success is tolerating failure, if the effort made was genuine.

You will still be focusing attention on something that needs to be changed and by highlighting that need you are already driving improvement. Each project or project attempt includes lessons learned. As long as you learn what can be done better the next time around, and do it, you have not failed.

Why Change Fails

Overcoming resistance to changeMany of you will say that Lean Six Sigma is a nice concept but there is no way my organization is going to do that! It will take too much time and money, although it is interesting, it just isn’t going to work for us.

You may be right. Yes, the concepts we will be discussing may feel a bit radical to you. But you wouldn’t be the first to implement these ideas--or the last. Change is actually possible. You just have to feed it, embrace it, and break down the barriers that can stop it.

I ran into a great article in Harvard Business Review by John P. Kotter called “Why Change Fails.” I am using his list of the eight factors that can halt change and then adding my own personal examples regarding budgeting--a topic near and dear to an accountant’s heart. Obviously, to make change happen, you have to fight these eight forces.

Not creating a great enough sense of urgency--We prefer the status quo over change and, in order for us to change, we have to experience some kind of


pain or discomfort that makes our current path intolerable or unacceptable. In other words, it sometimes takes a serious whack on the head to get us moving.

It is nearly impossible to convince people that they should look toward the future and invest time in creating a meaningful budget system if they are not currently experiencing any financial pain. In periods of economic distress, in hard times, budgets become an easier sale and managers actually pay attention to them. No one wants to talk about budgets when times are good. There is no perceived need to tighten belts. “Make hay while the sun shines!” as we say in Texas.

I notice a resurgence of interest in budgeting as the economy bottoms out. Pain often leads to progress, in a weird sort of way.

Not creating a powerful guiding coalition--You need a powerful champion for the new budget approach. If top management does not support and uphold the change, the whole system will fail--no matter how much you want it or how sensible an idea is.

Jackson, a new city manager of a wealthy California town, wanted to implement the balanced scorecard and a form of performance-based budgeting citywide. He met with all city employees and told them of his intention. Jackson gave them a few weeks to think about whether they could get on board with the idea. He then went around and had a chat with each manager. If a manager said that they were not on-board with the change, Jackson suggested that they look for a job elsewhere--because he was going ahead with this plan regardless of their opinion and didn’t want them making his job harder. “No hard feelings.” he said, “I just have to get on with it.” Now that is strong leadership!

There is a new book out called “The No-Asshole Rule”. The author’s concept makes perfect sense to me. It may seem cruel--but as Nick Lowe sings, “You have to be cruel to be kind, in the right measure.” Why have everyone sitting around suffering through something they don’t agree with. There are too many other places to work and things to do to let that happen. Help them see the light and help find a new home.

Here’s another example of how leadership can help or hinder a change. I was the treasurer for a local chapter of the National Speakers Association--an association, as you might have guessed, of public speakers--folks who make their living speaking at conferences and doing training. These are huggy, friendly folks who don’t give a darn about finance or budgeting. They were never interested in talking about the chapter’s money. Some felt that if we had the right intention (or rubbed their magic karma crystals in the right way) that the finances would take care of themselves.


Naively, I took on the role of treasurer one year because the only other CPA in the group had had enough of being treasurer. He warned me not to do it… but I thought I was special and could make the leaders of the chapter see the light. What a rube! It was very evident at our first board meeting that no one was going to listen to me, and no one wanted to talk money. So, throughout the year we slowly went bankrupt.

I warned and warned and warned, but only when we were unable to pay for our meeting space on Saturday for lack of funds did anyone care. Just as I was taking all of this personally, a stalwart member of the chapter volunteered to help us get our act together. His name was Jim and we elected him president. Jim was an ex-Marine and he was famous for teaching leadership skills to Wal-Mart executives. At our first board meeting under his direction, he made it clear that he wasn’t going to allow the chapter to fold. He asked me to stand up next to him (he and I are both well over six feet tall) and he told the group that I was going to create a strict budget and we were all going to follow it. If they didn’t comply with the budget, they would have to talk to Jim and me about it! I was so pleased with my newfound power and authority I almost burst at the seams.

And, he meant it! We dug ourselves out of the hole and ended the year with a healthy budget surplus. But Jim completely exhausted himself herding those crazy cats on the board, so he virtually disappeared after his one and only term and left Tom in charge.

Tom is a marriage counselor who teaches Japanese relaxation techniques to schoolteachers and social workers. Tom is a wonderful man and a dear friend, but he is not a financial tough guy. The board quickly fell into their old habits and started depleting the surplus. After three years of this yo-yo stupidity, I decided it was time to step down and let someone else fight these battles. As a finance professional, I had no authority anyway--it came from the president of the chapter.

A few years later, they predictably bottomed out and went broke, again. The leadership asked me to be treasurer, again. I told them that if they got Jim back, I’d be happy to come back as treasurer. Otherwise, no way! Lacking a vision--So you have a sense of urgency and strong management support, now you need to be clear about where you want to take everyone. You need to choose the planning and budgeting format you desire, come up with a plan to develop it, monitor it, and report on it--and make this super clear to all involved. The vision will change slightly over time as you refine it, so you must do your best to communicate frequently… and that leads to the next point.

Undercommunicating the vision--Having a sense of where you want to go isn’t enough, the key players in the organization need to understand the vision and internalize it. In order to do that, you have to communicate, communicate, communicate. One little meeting introducing the concept


isn’t going to do it. First you have to figure out how the key people like to receive new information--via training, short meetings, one-on-one meetings, emails, podcasts, reports, whatever! Then, you have to engage in this sort of communication over and over and over until they cry mercy. Until every one of them cries, “ I get it already! Leave me alone!” then you haven’t done enough.

Not removing obstacles to the new vision--I don’t know what your organizations particular hang-up is, but I do know that you have one, and it will be as obvious to everyone trying to implement the new budgeting program as an elephant sitting on the receptionist’s desk. Go ahead and ask the team to throw out every tangible and intangible barrier to implementation and then figure out a way--as a team--to either eliminate it or work around it.

Not planning for and celebrating short-term wins--Implementing a performance-based budget is going to be an arduous and time consuming task. You may never be able to declare that you are done because it will constantly evolve. So in order to make sure the team doesn’t lose heart, you need to figure out a way to celebrate milestones. Good project managers lay out the steps involved in implementing a new system and each of these steps has a deliverable or a product.

For instance, one milestone will be the creation of an initial strategic plan or balanced scorecard for each department. This is a great time to have a party and a discussion. Each manager can share his structure with the other managers to brag and discuss best practices. You can even make it competitive by selecting the most robust and well-thought-out model and award the team that created it with something special--like an afternoon off or a gift certificate. These little tidbits of appreciation mean everything to your team. Most employees say they prefer recognition over salary.

Declaring victory too soon--I can’t help but think about George Bush’s declaration that we had won the war in Iraq. We are still there as of this writing--and it doesn’t look like we are going to ”win” anything. That was one of his first jumbo political fumbles--and we, of course, don’t want to make the same mistake. Again, the change will not come on us all at once or be finished in one fell swoop. It will occur gradually and truly never be over.

Big milestones can be reached, but we can fall back into our old stinky budgeting habits at any time. Today, I read in the paper that Oprah has gained a good amount of weight because she stopped exercising. You may or may not feel for her or may or may not like her, but you can totally understand what happened, can’t you?

In Japanese Kaizen means continuous small improvements. We can commit to that, right?


Not anchoring changes in the corporate culture--My speaker/trainer/author friend Anna markets herself as a corporate change agent. She believes that cultures rule organizations and that an organization’s culture can be changed.

I agree that culture dictates many decisions, but I disagree with Anna that culture is something that is fixed with a few training seminars.

Southwest Airlines has a very defined culture. When another of my buddies, Suzyn, went through a rigorous interviewing and training process with Southwest Airlines, they tested her ability to withstand pressure while maintaining a good sense of humor, they measured her ability to work with others in a team, and when she was hired they sent her through a month-long training where she had to memorize a 30 minute standup routine so that she would be ready at any moment with a cute quip in case of deflating customer morale.

Southwest brags about its customer oriented culture and offers customer service schools to outsiders. But they tell a story that shows the limits of culture change initiatives. A group of British bankers attended the customer service training wearing three-piece suits. These bankers had heard of the miracle of Southwest’s culture, but after one day, everyone realized this was too far a leap for them to make, so they turned tail and went home!

So how do you root something in a culture? You methodically work--baby step by baby step-- through people to reward them for culture enhancing behaviors. Work to make sure that employees give you positive responses to the following questions:

Do I know what is expected of me at work?

Do I have the materials and equipment I need to do my work right?

At work, do I have the opportunity to do what I do best every day?

In the last seven days, have I received recognition or praise for doing good work?

Does my supervisor, or someone at work, seem to care about me as a person?

Is there someone at work who encourages my development?

At work, do my opinions seem to count?

Does the mission/purpose of my company make me feel my work is important?


Are my coworkers committed to doing quality work?

Do I have a best friend at work?

In the last six months, has someone at work talked to me about my progress?

This last year, have I had opportunities at work to learn and grow?

As you know, it doesn’t take much to push a person or an organization off course. So, you might be right that Lean Six Sigma will never get off the ground in your organization. But maybe… just maybe if you rub your crystal …

There Are Even More Reasons Why Change Is Hard to SustainIt would be easy to say, “OK, we’ll just do the Lean Six Sigma project and then message clearly to everyone what they need to do for the new process and that should take care of it, right?” Communication, as we have learned, is an important part of implementing. However, we need to look at the reasons why the change might not still “stick,” even though the communication may be clear and the improvement is good and necessary.

When using the OESH model, these considerations are key points to recognize (and overcome) in structuring a robust “Sustaining” phase.

1. Comfort with the status quo: People may resist new ways of doing things because they have a stake in keeping things as they are. This can be based on fear of change, fear of losing a power base within the organization, or lack of motivation to make the change.

Resistance to change affects sustainability when people responsible for the “control” or sustainability phase just don’t do it. It also leads auditors to root causes like “cluelessness.”

You can deal with this by moving capable or committed people into the organizational area slated for change to be the champions for the cause of sustaining the improvements. This can also be avoided by having team members working on the project who are from the area where change will occur and ensuring that by the end, they will have some level of buy-in to making it work.

2.Lack of time and money: In our experience, these reasons are often cited as ones for not spending time on making a plan for sustaining change: The project is over, the enthusiasm is ebbing, and people are going back to their normal routines.

Building a good sustaining plan means that the overall project length is longer and will have more associated cost. Think of the case where outside consultants are used to help implement change--they require more time and $$ if you want a sustaining plan. Too often, the control part is short-changed. BIG MISTAKE.


Organizationally, you can deal with these issues allocating specific time and money to sustainability activities. It means acknowledging that there is an upfront cost to making sure your changes will last, just as there is an upfront cost when you are in the implementation stage. Build that into your cost benefit analysis on the cost side. It will be worth it. Be ready to argue this point with your executive sponsor. You definitely need buy-in and support for this. Otherwise, you will not show the expected results to reach the “benefit” number in your projection.

3. Fear, Uncertainty, and Doubt (FUD): This is HUGE and perhaps should be listed first, as it is underlying most of the reasons for fear of change. People may not want to make changes that will sustain your improvements because they:

Fear that their job will “go away”Fear that they can’t learn a new methodUncertainty about what is expected of themUncertainty about the impact of the changes on themDoubt about the viability of the changesDoubt that anyone really cares about improvementDoubt that there is management commitment to making things better

I am sure you can list other FUD factors that influence people’s behavior. The trick is to recognize these possible factors and to address them upfront (another reason why HONORING is co-existent here).

Recommendations for Overcoming Resistance to ChangeIf you believe that Lean Six Sigma concepts will ultimately work for your organization, you can consciously and consistently work toward implementation.

Start at the project levelWe recommend that you start using Lean Six Sigma at the project level. If you are initiating a larger-scale program there are more complex infrastructure and organizational requirements not covered here. Suffice it to say, if you are starting a program from scratch, you need (at minimum) someone who has done this before and/or outside consulting assistance until the program is up and running.

Starting at the project level means using tools and concepts to show tangible results of improvements. At this point in your reading, you should be familiar with them. So, finish reading this training document (over a relatively short period)! Then put it down.

The next thing to do is to get away from the workspace and think about Lean Six Sigma when your mind is less actively engaged--take a walk around the parking lot; jog on the treadmill; take a shower; drive on the highway without kids or bad traffic. Personally, I do some of my best creative thinking when I am not totally focused on the topic. Let your mind wander over some of the things you have


(hopefully) taken away from this training and rest on possibilities for using it. Draw from some of the examples or from identifying pain points of your own.

Look for pain pointsPain points are things that can drive you wild in the office place--things that you know could be done differently (or better); things that have a negative impact on results and morale; areas that stand out as weaknesses or “areas for improvement.” They are the places where you should initiate a Lean Six Sigma effort--low hanging fruit! There is little to lose--the attention is warranted and your chance of success will be greater.

Some common pain points in an office environment include:

Lack of system for office equipment maintenance or repairsToo many meetingsIneffective teleconferencingPoor system of internal communicationInadequate systems to gauge and address employee satisfactionInadequate systems to gauge and address customer satisfactionBottlenecks in processes that delay everyone’s workManual processes that only one person can do (if he or she is absent, too bad)

Some of these may be small problems, others quite large. It depends on your organization. They can all be addressed at some level by using the Lean Six Sigma tools and methods. You will have your own organizational pain points that are obvious. Everyone does!

Begin the ORGANIZING and HONORING PHASES of the OESH modelOnce you identify a pain point or other area for initial focus, use this checklist of activities:

Define the projectDefine the metricsScope the project (Kaizen, DMAIC, or other)Choose the right sponsorChoose the right teamDetermine your rolePosition your project with managementMake a external and internal communication planStart the communications before going to next phase

Your Role in Lean Six SigmaYour role will depend on the maturity and support of the organization, your time and ability, and the availability of other resources. You can drive Lean Six Sigma just by talking about it and sharing what you have learned with others. You may take a more active position in identifying pain points and doing a project. You may decide to try to incorporate Lean Six Sigma starting at a higher level in the


organization, though this usually involves long-term culture change. Define your role and start somewhere.

Move to the EXECUTING (and HONORING) phase of the OESH modelUse this checklist of activities:

Make a process map or value stream map of the process you are improvingLook for value-added and non-value added stepsReduce non-value added stepsReduce cycle time between process stepsReduce variation within the processKeep your project within original scopeMeasure results and communicate success

Moving on to the SUSTAINING (and HONORING) phaseOne of the core principles of Lean Six Sigma is continuous improvement and this is built upon making and sustaining changes.

Think about how important the “sustaining change” part is. If you have gone to the time and effort to make improvements in your budgeting system or to speed up vendor payments, the time and effort is wasted if everyone goes back to the same old way of doing things after a month… or six months.

It’s the Process, Not the People…Communication--In dealing with processes that have a human component (and all processes in the workplace have a human component, even if the work is done completely by robots!) appropriate and effective communication is the key to success. Some components of effective communication include:

•Telling people what to expect before it happens, as it is happening, and after it happens. The fewer surprises there are, the more prepared they will be to accept and support the possibility of change. HONORING, HONORING, HONORING.

•Use the appropriate level of communication. Tailor your presentations and comments to your audience. The board of directors is going to want to hear a different version of the change story than a data entry associate. Communicate using vocabulary and concepts that apply to your listeners.

•Provide context. Instead of saying, “we are making changes to how you do your job and this is what the changes are,” explain some of the background or context to the change. This may include why the change is taking place, what it will accomplish, how it was developed, etc.

•Use the right medium. Communication can take many forms. Think of the differences between verbal, written, audio (podcast), video, and pantomime. Understanding what you want to convey and who the audience is will help


guide you in deciding how to communicate. Using a variety of mediums can be effective. This is particularly relevant if your audience is global.

•Frame it in their terms. When communicating change, always preview what you want to say from the eyes of the beholder. Consider the impact of your words on the listener(s) and speak in terms that will make sense and appeal to them. If you are talking to employees about changes in the software they will use, for example, it makes more sense to emphasize the ease of use and new features that they had asked for instead of talking about how much money the company will save (though this is certainly relevant, too). If the new software could imply that fewer employees are needed to do that work, you must absolutely address that as well. That is something that would be MOST relevant.

An easy rule to get the framing right is to make sure you answer the questions “why should I care?” and “what does this mean for me?” in the minds of your audience.

•Encourage input. Communication should be two-way. An inflow of questions can help in making sure concerns are heard and addressed (if the questions are answered appropriately). More than this, however, communication from people involved in sustaining change can help generate ideas for further improvement. The key is to allow for and capture this dialogue--and to use it.

More on HONORINGPart of successful HONORING is making sure Lean Six Sigma is right for your organization. How do you know LSS is right for your organization? Organizations that successfully use Lean Six Sigma:

• Recognize the need for change and continuous improvement • Recognize the need for measurement and its role in business success• Understand the role of questions in the context of management leadership

(instead of being comfortable with status quo)• Understand the need to identify and measure those things that are critical to

the customer, business, and process! Remember, you are working for the customer(s), so they need to come first.

If your organization has these characteristics or the potential--try it! If it doesn’t, you might want to change jobs.



OBJECTIVE: o Distinguish between a Lean Six Sigma project and a Lean Six Sigma

program1. Company Y intends to implement a Lean Six Sigma “program.” What does this mean?

It will implement the program department-by-department.It will implement the program throughout the company in one undertaking.It will implement the program by selecting the right sponsor.It will implement the program by selecting the right team and the right metrics.

OBJECTIVE: o Define the four key factors for success—the four “rights”

2. Which of the following is one of the four rights on a project?Right team.Right definition.Right program.Right management.

OBJECTIVE: o Classify reasons for resistance to change

3. Which of the following is a reason that change fails?Obstacles are identified and removed. Final victory is declared at significant milestones.The vision is communicated clearly and frequently.A powerful guiding coalition is formed to support the change.


OBJECTIVE: o Define solutions for resistance to change

4. While your department has many pain points, the most frustrating for you is the incessant number of meetings you are required to attend. Which of the following might you do in the organizing phase of the OESH model?

Show how much time is wasted on meetings.Determine how to measure meetings.Follow a similar agenda at each meeting. Review with management every quarter to assess the improvements.



OBJECTIVES: o Distinguish between a Lean Six Sigma project and a Lean Six Sigma

program1. Company Y intends to implement a Lean Six Sigma “program.” What does this mean?

It will implement the program department-by-department. Incorrect. If Company Y were to implement a Lean Six Sigma project, it would first start in one department. Then the company would move on to another department. The Lean Six Sigma program would be built project-by-project.It will implement the program throughout the company in one undertaking. Correct. Company Y will establish a Lean Six Sigma program as an organization-wide initiative. Programs are more comprehensive and on a larger scale than projects. It will implement the program by selecting the right sponsor. Incorrect. A program is not defined by selecting the right sponsor. Whether Company Y chooses to implement a program or a project, in order to be successful with its initiative, it must have the assistance of senior management. It will implement the program by selecting the right team and the right metrics. Incorrect. Whether the company chooses to implement a Lean Six Sigma program or a Lean Six Sigma project, it will need to select the right team and the right metrics since these will impact the efforts. Selecting the team and metrics are not exclusive to implementing a Lean Six Sigma program.


OBJECTIVE: o Define the four key factors for success—the four “rights”

2. Which of the following is one of the four rights on a project?Right team. Correct. The right team is one of the four rights, which also includes the right project, right metrics, and right sponsor.Right definition. Incorrect. This is not one of the four rights although choosing the right project to work on is. Defining the project is usually undertaken in detail once a project is chosen. DMAIC includes define as its first phase.Right program. Incorrect. A program is a larger-scale effort that is more comprehensive (company-wide or, at least, department-wide) and is intended to drive Lean Six Sigma as an organizational initiative. This would be more along the lines of setting up a new Lean Six Sigma group within the company to streamline back office processes or developing a database for sharing Lean Six Sigma projects, tools, and best practices across the organization.Right management. Incorrect. One of the four rights is the right sponsor, which may or may not be management. The sponsor may not necessarily be involved in the project – they may simply be a champion for it.

OBJECTIVE: o Classify reasons for resistance to change

3. Which of the following is a reason that change fails?Obstacles are identified and removed. Incorrect. Identifying and removing obstacles to change is an important step in getting employees to embrace change. If they hit even one barrier, they can become discouraged.Final victory is declared at significant milestones. Correct. Ultimate victory should only be declared after the entire process has been completed and is successful. This does not imply that short-term wins should not be celebrated, but declaring that you have finished can cause folks to fall back into old habits.The vision is communicated clearly and frequently. Incorrect. Having a clear plan and end goal for the improvement process is key to its success. It is also important to communicate the vision as frequently as possible. Most folks need to hear a message multiple times (I’ve heard as many as 7) before they integrate new information. A powerful guiding coalition is formed to support the change. Incorrect. Not having a powerful guiding coalition or leadership can prevent change from occurring.


OBJECTIVE: o Define solutions for resistance to change

4. While your department has many pain points, the most frustrating for you is the incessant number of meetings you are required to attend. Which of the following might you do in the organizing phase of the OESH model?

Show how much time is wasted on meetings. Incorrect. An activity that you should do during the executing stage of the OESH model is identify which meetings do not add value to the customer’s end product and then eliminate or reduce the time of those meetings.Determine how to measure meetings. Correct. Part of the organizing phase of the model is to define the metrics used to measure the project. For instance, you might want to compare length of meetings at your company with those at other companies in your industry. Follow a similar agenda at each meeting. Incorrect. If you were to follow a similar agenda at each meeting, you would be limiting the variation of the activity. This would be done during the executing phase.Review with management every quarter to assess the improvements. Incorrect. Even though this does add to the number of meetings you have, it is a good way to sustain the improvement. Thus, this would be an activity that you would do in the sustaining phase of the model.


AFTERWORD

AFTERWORD

My whole professional and personal world opened up--and my frustration was eased--when my audit manager said two things:

• Someone has gone here before you

• Models help you think

I had gone to Linda, my audit manager, because I was frustrated with a performance audit that I was leading. I was swimming in information and couldn’t figure out what to do next. Linda kindly reminded me that I was not the first person in the history of the world to be confronted with such a dilemma.

Innovation always involves a bit of chaos. If you are trying to change something, do something new, or create something from scratch, you are going to have a few moments of doubt and confusion--I was not the first or the last. Great artists experience chaos, doubt, and frustration, as do corporate barons, new mothers, and every auditor worth his or her salt.

The same statement made by my mother-in-law when I was pregnant did not come off as well. When I was describing how frightened I was to give birth, she said, “Mothers have been doing it for centuries.” While I felt her lack of empathy (she had given birth five times while her husband was at war), I had to recognize the truth of her statement. Although it was the first time it had happened to ME, it wasn’t the first time it had been done.

Other organizations, some much like yours, have given birth before. Yours won’t be the first or the last. Yes, you have a slightly different combination of challenges than other organizations, but overall, you are in the same boat that they are and were. Sometimes you just have to grit your teeth and push and know that it won’t last forever.

The second thing Linda told me--models help you think--is closely related. Oftentimes, the poor souls who have traveled down the path before you have created a model, a systematic process, or some other tool to help guide you. Just like explorers of new lands, they map out how to find the gold again and again and again.

In the auditing world, one of the key models that helps us move from chaos to action is a risk assessment matrix. We take all of the information we gathered about the audit subject and rank it in terms of its importance using several different factors, such as impact, likelihood, etc. It is very much like the FMEA technique in the tools chapter. After Linda walked me through this tool, I felt much better and much more grounded. I could lean on the work of those that went before me--it saved me time and may have saved me from making a poor choice of what to audit next.


AFTERWORD

In this book, we have endeavored to give you models and tools that will help you think yourself out of chaos. Earlier practitioners have built up a wealth of experience that you can use to improve your processes and get more done as an organization. You don’t have to reinvent the wheel; you only need to choose the model or tool that will work best for you in your situation.

As you begin to work with Lean Six Sigma you will get smarter about what is best to use and where to use it. You will probably choose a few favorite tools that you turn to over and over again--like pulling out that perfect screwdriver to take the battery out of that pesky travel alarm clock.

I hope that you come away from this reading with some ideas and some level of comfort with this topic. Whether your organization is like a McDonald’s in terms of efficiency and consistency or is a little messier and looser, you can benefit from having Lean Six Sigma in your professional toolbox. The next time you become frustrated with a broken process or a defective end product, you can reach into your toolbox and pull out a tool that will guide and comfort you.

As this book is only an introduction to the topic, there is much more to know and learn. If this sort of work floats your boat and you want to become an expert in the topic, I suggest you affiliate yourself with organizations that are on the cutting edge of Lean and Six Sigma.

Who is in charge of defining or administering Lean Six Sigma? At this time, there is no exact, overarching definition of Lean Six Sigma or governing body that “owns” the definition. There are many organizations that offer Lean Six Sigma training, consulting, and coursework, but each has a somewhat different “take.” Those that began as Six Sigma specialists tend to have a stronger emphasis on Six Sigma (naturally) with Lean concepts and activities inserted intermittently. The Lean practitioners have a stronger emphasis on Lean (naturally) with Lean overlaid on a Six Sigma framework, sometimes more as an afterthought.

As Lean Six Sigma develops over time into its own discipline, there will likely be more generally accepted standards as Lean and Six Sigma synthesize. In the meantime, organizations tend to pick and choose pieces of the two bodies of knowledge that appeal to them and use them as Lean Six Sigma. That is the current state of the industry and that’s OK. The point is that there is no overall governing body like FASB or GAO or AICPA in charge of setting up standards for what exactly constitutes Lean Six Sigma or how you do it.

The original industry certification is the CSSBB - the Certified Six Sigma Black Belt, from the American Society for Quality (ASQ); heavier on Six Sigma and leaner on lean. The CSSBB certification is similar to that of CPA or CFA in that it requires industry experience, mastery of specific information as evaluated by a test, and continuing education. More recently LSSBB designations have popped up through university courses or independent consulting companies.

If you choose to seek out a consultant or training firm, do appropriate due diligence in assessing capability. The CSSBB or LSSBB certification is not


AFTERWORD

necessary, but the outfit or individual should have verifiable and relevant experience in terms of what you or your organization want to accomplish. You will find some references in the next section to guide you in your search.

You can also contact Betsy or Leita with any questions.


REFERENCES AND RECOMMENDED READING

REFERENCES

Accounting Demystified by Leita Hart. New York: McGraw-Hill Publishers, 2003.

A Comparison between Lean & Six Sigma by Gary Jing. PowerPoint presentation dated February 11, 2008, presented at the 2008 American Society for Quality Six Sigma Conference.

American Society for Quality

Certified Six Sigma Black Belt Primer by Wortman, B.L., et.al., Terre Haute, IN: Quality Council of Indiana. 2001.

Codification of Auditing Standards, AICPA, 2007, AICPA

Developing Procedures, Policies, and Documentation course manual by Information Mapping, Incorporated, June 1998

Embedding Quality in the IRS a PowerPoint presentation by Betsy Kinter at the February 2008 American Society for Quality Six Sigma Conference.

Four Principles of Happy Cash Flow by Leita Hart. FantaSea Press, 2001

Internal Control and Corporate Governance Processes by Alex E-Solutions. Austin, TX, 2004

KAIZEN: The Key to Japan’s Competitive Success by Masaaki Imai. New York: McGraw-Hill, 1986.

Lean Accounting: Best Practices for Sustainable Integration by Joe Stenzel editor. New York: Wiley Publishers, 2007.

Lean Enterprise Institute

Lean Six Sigma for Service by Michael George. New York: McGraw-Hill, 2003.

Lean Six Sigma Primer by Wortman, et al. Terre Haute, IN: Quality Council of Indiana, 2007

Lean Thinking by James P. Womack and Daniel T. Jones. New York: Free Press, 2003.

Learning to See by Mike Rother, John Shook and Jim Womack, Mellon’s Books, 1999.

Six Sigma Institute

The Change Handbook (2nd Ed) by Peggy Holman, Tom Devane, Steven Cady. San Francisco: Berrett-Koehler Publishers, Inc., 2007.


REFERENCES AND RECOMMENDED READING

The Fast Forward MBA in Finance by John A. Tracey, Wiley Publishers 1996

The Lean Six Sigma Pocket Toolbook by Michael George, David Rowlands, Mark Price, John Maxey. New York: McGraw-Hill, 2005.

The Kaizen Event Planner by Karen Martin and Mike Osterling, Productivity Press, 2007 (includes neat CD with tools!)

The Machine that Changed the World by Womack, James P., Daniel T. Jones, and Daniel Roos., New York: Harper Perinneal, 1991.

The Toyota Production System by Ohno, Taiichi. New York: Productivity Press, 1988.

Value Stream Mapping--an Introduction by Tony Manos. Quality Progress, June 2006, p 64–68.


GLOSSARY

GLOSSARY

5 Whys--a Lean Six Sigma tool. A variation of brainstorming, it is intended to ferret out root cause(s) of a problem or issue, or to get to the heart of a question. That leads us to the discussion on what root cause actually is.

Attributes--the characteristics of a Lean Six Sigma project or system.

Benchmarking--comparing your process, method, product, or project to something that has already been achieved--something that may be considered a best practice. With this comparison, we can drive improvement. Benchmarks allow us to understand what is possible and to introduce new ideas.

Brainstorming--a technique for generating ideas about a certain topic or problem. It requires participation from individuals with varying perspectives to contribute based on their views. Brainstorming is a very basic and valuable tool that can be used at any stage in a Lean Six Sigma endeavor.

Burning platform--something that will force change and drastic action, even in the face of great resistance under normal circumstances.

Capable--the process is able to pull off its desired outcomes except in certain special circumstances or because of special causes.

Cause and effect diagram (a.k.a. Fishbone Diagram)-- another brainstorming tool that helps in identifying and grouping root causes. It is also called a “fishbone” diagram (based on its shape) or an “Ishikawa” diagram (based on its development by Kaoru Ishikawa).

Check sheet--a simple, structured form used for collecting and analyzing data. The data is captured at the place and time it is being generated. In its most simple form a check sheet is a list of items or events you expect to see. A check mark is made next to that line item each time it occurs.

Common cause variation--what we attack through Lean Six Sigma projects because it is a result of something wrong with the process itself

Cycle time--the length of time it takes to complete a process. Includes lead time and processing time.

DMAIC--a Six Sigma methodology. An acronym standing for Define, Measure, Analyze, Improve, Control.

Fishbone Diagram--see cause and effect diagramINTRODUCING AND DEMYSTIFYING LEAN SIX SIGMA

165

GLOSSARY

The 5 S’s--The 5 S’s (5S) tool is one of the simplest in the lean toolbox and can do great things in the fight against waste. It provides a basic framework for “good housekeeping”--the creation and maintenance of an organized and high-performance work space.

Flow--a path with no obstacles. This is what we want in a value stream. It is referred to as optimal “flow.” In a lean manufacturing environment, flow is the opposite of batch production, where activity happens in fits and starts; where sometimes something is happening and sometimes nothing is happening until the next batch shows up.

Flow chart--see process map

FMEA (Risk Assessment Matrix)--acronym that stands for “failure modes and effects analysis.” Originally used in engineering work to identify types, probability of, and effect of failures in a process or product we will use it more generically. In broad terms, this tool is a structured approach to identifying and prioritizing risks. From that, we can drive controls.

Honoring--the final component of the OESH methodology. The honoring step is all about communication and respect. Valuing the people in the organization throughout the whole OESH process will help make them champions for change and improvement.

Impact/effort matrix--a tool used to assess the relative impact or benefit versus the effort required to complete an activity.

Kaizen--a Japanese term that means “to change for the better” or “to improve.” The way we will talk about it here is as a method for jump-starting or accelerating improvement in a work environment. Kaizen is about “getting it done.”

Kaizen event--a short (5 days or less) process improvement event involving a teams entire focus and energy until the improvement is implemented.

Lean--a term that signifies a streamlined process--where there’s not a lot of excess… like “lean and mean.” A drive for improvement started by Toyota in the 1950s.

Lean Six Sigma--a combination of two separate disciplines or bodies of knowledge originally associated with quality improvement and manufacturing. A breakthrough business methodology used to drive change within an organization. Provides a framework, a methodology and a wide array of tools and concepts to help people in large and small organizations alike find the value of, and increase the value of the activities in which they are engaged.

Methodology--the common steps that you follow in implementing Lean Six Sigma.

Metric--a measure of the process.


GLOSSARY

Non-value added activities--steps or actions that don’t mean anything from the viewpoint of your customers. Also known as incidental work.

OESH--the basic methodology of Lean Six Sigma. An acronym that stands for Organizing, Executing, Sustaining, Honoring

Pareto chart--a histogram or bar chart that puts the columns in order of size, with the largest bar on the right, cascading down by size. The purpose of this tool is to focus attention on the most critical factors of an analysis. It also helps in prioritizing actions. Named for the 18th century Italian economist, Wilfredo Pareto and flows from the Pareto Principle, also referred to as the 80/20 rule--that is, 80% of the effect comes from 20% of the cause. (Pareto’s actual observation was that 80% of the Italian economy was controlled by 20% of the population, for you trivia buffs.)

PDCA--a quality methodology. An acronym that stands for Plan, Do, Check, Act.

Philosophy--the guiding principles of Lean Six Sigma.

Process map--(or flow chart) a picture of the steps needed to accomplish an activity. It is a basic tool that can be used at a general, strategic level as well as at a highly detailed operational level to show inputs, outputs and other factors affecting a process.

Project--a stand-alone, “quick-hit” type activity that can be the result of individual initiative. It would often be undertaken in addition to, or in support of, someone’s regular job role and responsibilities. A project could be something as simple as using the 5 S’s to bring some order to your workspace or doing a quick, 2-day Kaizen event to improve the accounts receivable tracking system.

Program--a larger-scale effort that is more comprehensive (company-wide or, at least, department-wide) than a project. It is intended to drive Lean Six Sigma as an organizational initiative. This would be more along the lines of setting up a new Lean Six Sigma group within the company to streamline back office processes or developing a database for sharing Lean Six Sigma projects, tools, and best practices across the organization.

Risk Assessment Matrix--see FMEA

Scaling--minimizing operating expenses while maximizing revenues.

Six Sigma--a term with its origin in statistics. Sigma is the Greek letter representing standard deviation of a process around its mean or average. The standard deviation shows how much variation there is in the process. Six Sigma refers to a process that is essentially defect-free. This drive for improvement was started by Motorola in the late 1980s.


GLOSSARY

Spaghetti diagram--This tool is also called a workflow diagram or transportation diagram. The output of this tool is an understanding of the flow of information, people, or products involved in accomplishing something. It is basic, but highly insightful to see where waste is occurring in the form of extra running around, multiple handoffs (crossed lines), backtracking, etc.

Special cause variation--a variation that occurs because of a unique event. Best addressed through “just do it” projects that don’t focus on changing the process.

Sponsor--the MOST important of factor for success in Lean Six Sigma is having the backing and support of senior leadership. This means someone at a highly visible level in the organization who understands the project or program in terms of what it is and what it means from a cost-benefit perspective. He or she will be your executive champion or sponsor.

Stable--the results are close to the desired result each time.

Standardization--having standard ways of doing things and training people on these standards is a way of reducing variation in an outcome and making the result predicable.

Toolset--the techniques you can pull out of your hat to diagnose process issues and more.

Value--the relative worth, importance or merit of something. When we talk about value in Lean Six Sigma, it is “benefit” that ties to monetary value: i.e. how much money a customer would be willing to pay for what we are creating. Value is linked to relative worth. Depending on who is making the evaluation, the value can differ; however, the person determining the value within the context of Lean Six Sigma is always the same--it is the customer.

Value stream--path that the “thing” (the product, service, information, etc.) takes from customer requirement to customer delivery--the shorter the path, the better the value stream. The value stream typically starts at the customer or customer request and ends when the customer request or requirement is fulfilled.

Value stream map--an enhanced process map. It is a high-level picture of what it is that creates value for the customer. Think of the value stream map as a flow chart or process map with metrics. A value stream map can show flows of information, people, and materials as defined by process steps, and often pulls in related time and quality data.

Variation--difference from the norm. The norm is the average or the intended result. The main objective of a Six Sigma project is to reduce variation. Reducing variation is key to delivering products and services that are as close to perfect as possible. Think of it this way: variation is a type of error.

Waste--activities that do not add value.


GLOSSARY


ABOUT THE AUTHORS

ABOUT THE AUTHORSBetsy Neidel, CSSBB, MBA

Betsy Neidel is the founder and managing director of Blue Heron Holdings LLC, a business advisory firm providing strategic consulting and coaching services to organizations and individuals with China business interests. She has served public and private institutions, from small businesses to Fortune 500 leaders and universities, in various capacities for twenty years. Her areas of expertise include strategic and organizational alignment, operational efficiency, and cross-border leadership effectiveness.

Prior to founding Blue Heron Holdings LLC, Neidel held several senior operational positions at Dell, Inc. in Austin, Texas. Neidel also served as China' Deputy General Manager and Metals Department Product Manager for Commercial Metals Company in Beijing and New York City and as Industrial Market Specialist for Global Sources Media Group in Hong Kong and Taiwan.

Neidel holds a BS in Economics from the Wharton School of the University of Pennsylvania and an MBA in International Management from Thunderbird. She has lived and worked in Greater China for nearly a decade and is a fluent speaker of Mandarin Chinese. Neidel is a Certified Six Sigma Black Belt, a senior member of the American Society for Quality, and is an adjunct professor at the School of Management and Business at St. Edward’s University in Austin, Texas.

In her spare time, Betsy spends time with her family and skates on a roller derby team.

For more information or to contact Betsy, go to www.BlueHeron8.com


ABOUT THE AUTHORS

Leita Hart-Fanta, CPA, CGFM, CGAP

Leita Hart-Fanta makes finance and auditing fun and easy. She converts the complex topics of accounting, finance, auditing, and budgeting into information that professionals can absorb and use.

Leita is the author of• Accounting Demystified--a McGraw-Hill book explaining basic accounting

concepts• The Four Principles of Happy Cash Flow--which explains how all businesses

can implement the cash flow maximizing techniques of Dell and Wal-Mart• Continuing professional education self-study manuals on:

o The Risk Assessment Suite of SASso The Yellow Book--Government Auditing Standardso Cash Flowo Governmental Accountingo Lean/Six Sigma for Accountants

• The Public Funds Investment Act on-line course for Texas State University• Auditing guides including:

o Basic Audit Skillso Yellow Book Government Auditing Standardso Interviewing Skills for Auditors

Leita has owned and operated AuditSkills, a training and professional development company, since 1995. She has conducted and developed courses on balanced scorecard management, audit supervision, financial analysis, budgeting, business writing, finance for non-financial managers, cash flow, presentation skills, government auditing standards, and performance measurement.

Leita’s clients include Walmart, Schluberge, CED Corporation, USAA, Temple-Inland, The Los Angeles Unified School District, The LBJ School of Public Affairs, EDS, Dell Computer, First Data Corporation, Joseph Eves CPAs, The Texas Society of CPAs, The National Association of State Auditor’s, Comptrollers, and Treasurers, The Texas Municipal League, Holt, Rinehart & Winston, The Texas State Auditor’s Office, Broadwing, Inc., The Association of Government Accountants, The Texas Natural Resource Conservation Commission, The Alaska State Auditor, Western CPE, The Montana Society of CPAs, The Reznick Group, The North Dakota Office of the State Auditor , The Texas Department of Human Services, Great West Insurance, Valero Energy, Western CPE, The University of Texas, Texas Children’s Hospital, Southwest Texas State University, The Minnesota Society of CPAs, The Arizona Society of CPAs, and The Albuquerque, Phoenix, San Antonio, and El Paso Chapters of the IIA.

Leita is an experienced facilitator, having led over 800 full or multi-day seminars. She has also keynoted numerous conferences and developed over 25 distinct courses and speeches.

During her five years with the Texas State Auditor’s Office, she acted as both an auditor and a communications specialist. Leita led the team that produced a national-award-winning report summarizing the financial condition of the State.


ABOUT THE AUTHORS

Leita is a graduate of the University of Texas at Austin with a bachelors in business administration. She is a Certified Public Accountant and a Certified Government Financial Manager. She serves on the conference planning committees of the local chapters of the Texas Society of CPAs. She is an executive board member of the Austin chapter of the Association of Government Accountants. She is a technical reviewer for the AGA’s Certificate of Achievement in Service Efforts and Accomplishments Reporting.

To learn more about Leita, view her websites at:www.leitahart.comwww.yellowbook-cpe.com

INDEX5

5 S’s, 985 Whys, 87, 88

Aaudit, 2

Bbenchmarking, 68, 69, 70, 71, 72, 73, 76brainstorming, 67, 68breakthrough, 11, 15burning platform, 18, 19

Ccash conversion cycle, 69, 70, 71, 75cause and effect diagram, 87, 89, 91check sheet, 83, 84, 85CPE, 2, 5

DDMAIC, 32, 33, 121, 122, 123, 124, 128

analyze step, 126control step, 127define step, 124improve step, 127measure step, 125

documentation, 103DPO, 74DSI, 73DSO, 72DTB, 73

Ffamily of measures, 60flow, 48, 49flow chart. See process mapFMEA, 100, 101

Iimpact/effort matrix, 92, 93, 94

KKaizen, 135, 136

analyze step, 139control step, 140define step, 137improve step, 139measure step, 138

LLean, 10, 26Lean Six Sigma

attributes, 30defined, 3, 168methodology, 31origins of, 24philosophy, 29taxonomy, 29toolset, 31

Nnon-value added activities, 34, 45


http://www.leitahart.com/

ABOUT THE AUTHORS

OOESH, 33, 34, 122

executing, 34, 158honoring, 35, 158, 160organizing, 34, 158sustaining, 35, 155, 156

PPareto analysis, 85Pareto chart, 85PDCA, 32, 33process map, 76program, 147project, 147

SSix Sigma, 10, 26

capability, 58common cause, 59consistency, 58measurement, 59, 61metrics, 59, 62special cause, 59stability, 58standardization, 58variation, 57

spaghetti diagram, 94, 97

Vvalue, 43value stream, 48value stream map, 80, 81, 82, 83value-added activities, 35

Wwaste, 46, 47


ABOUT THE AUTHORS


FINAL EXAM

FINAL EXAMCHAPTER 1: LEAN SIX SIGMA FOR ACCOUNTANTS – INTRODUCTION

Objective:Define Lean Six Sigma

1. What is meant by ‘burning platform’?A. A fiery passion for process improvement.B. A strong belief in a particular platform or philosophy.C. An immediate motivation to change. D. An unpleasant result of failing to act.

2. Which of the following is the definition of a system?A. A series of processes. B. A series of independent steps.C. An input into the process.D. A strategic process.

3. What is the difference between the terms ‘lean’ and ‘six sigma’?A. ‘Lean’ is a term used when discussing quality of a process, and ‘six

sigma’ is a term used for to reduce the dollar costs of processes.B. ‘Lean’ is a term used when improving a process, and ‘six sigma’ is a

term used when discussing quality or errors in a process. C. ‘Lean’ is a term used to indicate how fast a process is performed, and

‘six sigma’ is a term used to represent the final value of a process.D. ‘Lean’ is a term used to indicate quality, and ‘six sigma’ is a term

used to represent speed of a process.

Objective:Describe how Lean Six Sigma fits into the accounting culture

4. Accountants are natural parts of most Lean Six Sigma improvement projects because they:

A. have the data needed to quantify results. B. are part of most manufacturing reengineering projects.C. avoid getting involved in organizational strategy.D. are naturally inclined to bypass compliance requirements.


FINAL EXAM

CHAPTER 2: DEFINING LEAN SIX SIGMA

Objective:Differentiate between Lean and Six Sigma

5. Which of the following is a significant difference between Lean and Six Sigma approaches?

A. Six Sigma focuses on training and certification. B. Six Sigma endeavors to make small incremental improvements

quickly.C. Lean is implemented by dedicated project teams.D. Six Sigma focuses on creating a faster and greater quantity of

output.

Objective:Distinguish between philosophy, attributes, toolsets, and methodologies of Lean Six Sigma

6. Which of the following is a methodology of Lean Six Sigma?A. Brainstorming.B. Impact/effort matrix.C. FMEA.D. PDCA.

7. Which of the following activities occurs during the execution phase of the OESH methodology?

A. Creating a standardized process that produces uniform results. B. Measuring results to ensure the process is controlled.C. Rewarding employees for results of the improvement.D. Defining how to measure the success of the improvement.

8. Which of the following steps comes first in implementing a Six Sigma Lean methodology?

A. Measuring and communicating intended results. B. Reducing bottle necks that slow down processes.C. Identifying actions that do not mean anything to the customer. D. Allocating resources to the project.

9. Which is a likely first step of a process improvement model like PDCA or DMAIC?

A. Implement the improvement.B. Analyze the process to uncover needed improvements.C. Verify that the improvement is sustained.D. Define the subject of the project.


FINAL EXAM

CHAPTER 3: BASIC LEAN CONCEPTS

Objective:Differentiate between value-added and non-value added activities

10. Which of the following describes a wasteful activity?A. An activity that consumes a large amount of resources.B. An activity that is non-value added but necessary.C. An activity that is non-value added and unnecessary. D. An activity that needs to be reduced in scope.

11. Which of the following steps in a tax preparation process is value-added?

Step 1: Send the client a list of the recent changes to the tax codeStep 2: Have the client fill out a detailed questionnaire regarding their financial situation in the past yearStep 3: Send a letter to all clients telling them that bills must be paid within three weeks of the tax return being completedStep 4: Elicit records from client two months before tax deadlineStep 5: Prepare the tax return using a tax softwareStep 6: Send the tax return to another CPA in a reciprocal arrangement to review each other’s workStep 7: Bind all return information in a folderStep 8: Prepare billing statement for the customerStep 9: Copy all documents and store in a filing cabinetStep 10: Meet with the client to discuss their returnStep 11: Create a follow-up invoice for client if necessaryStep 12: Deposit payment and enter into accounting system

A. Step 3: Send a letter to all clients telling them that bills must be paid within three weeks of the tax return being completed.B. Step 9: Copy all documents and store in a filing cabinet.C. Step 10: Meet with the client to discuss their return.D. Step 11: Create a follow-up invoice for client if necessary.


FINAL EXAM

12. Which of the following steps of an operational or performance audit of a drug rehab center is non-value added?

Step 1: Review prior audit reportsStep 2: Discuss risks and concerns with the granting agencyStep 3: Send an engagement letter to the granting agency and the clientStep 4: Bind the engagement letter inside the planning documentation folderStep 5: Create a risk assessment matrix on excelStep 6: Choose risky areas for further work during a team meetingStep 7: Refine objectives and subobjectives

A. Step 1: Review prior audit reports.B. Step 2: Discuss risks and concerns with the granting agency.C. Step 4: Bind the engagement letter inside the planning

documentation folder. D. Step 6: Choose risky areas for further work during a team meeting.

Objective:Define core concepts of Lean – including waste and value stream flow

13. Which of the following is true about inventory?A. Maintaining it is a value-added activity.B. It consumes management resources. C. It is necessary for flow in manufacturing.D. It creates a shorter value stream.

14. Which of the following is an example of an obstacle in a process?A. Approvals. B. Delivery.C. Manufacturing.D. Customer request.


FINAL EXAM

CHAPTER 4: BASIC SIX SIGMA CONCEPTS

Objective:• Define the core concepts of Six Sigma including variation,

standardization, special and common causes

15. As the Director of the Housing Operations Department, you must present to the Board of Directors a monthly report on the operations of your department and the Agency’s Community Services Division. Your aim is to create a report that has limited variability so that the board can compare the monthly reports. In which of the following ways might you limit the report’s variability?

A. Require that assistant directors include their input in the reports.B. Present the information in the identical format each month. C. Include data even if it is released at changeable times.D. Utilize different family of measures when necessary.

16. An accounts payable process consistently creates minimal errors that are acceptable when compared to the norm. The account payable system is then considered:

A. to function based on common causes. B. to be stable and standardized. C. to be measurable with metrics.D. to be controlled.

Objective:• Identify a family of measures for a function or organization

17. What sort of metric is this: “Increase in the board’s satisfaction with quarterly budget reports”?

A. An input metric.B. An output metric.C. An outcome metric. D. A process metric.


FINAL EXAM

CHAPTER 5: THE TOP TWELVE LEAN SIX SIGMA TOOLS

Objective: • Discriminate between Lean Six Sigma tools

18. This morning you are meeting with your staff at the Agency for International Development (USAID) to generate ideas on revising rules and regulations to minimize non-value added processes. What will you do first in this idea-generating process?

A. Critique the ideas.B. Write down each idea. C. Group like ideas together.D. Prioritize ideas.

19. You are able to make a deal with Wal-Mart to sell your new invention. However, after your first shipment to Wal-Mart, you find that they paid you almost two months after you shipped the items. What is the most probable reason that you allow Wal-Mart to have such a high DPO, Days Payables Outstanding?

A. Wal-Mart has a good reputation.B. Wal-Mart purchased thousands of items from you. C. Your market is the same as Wal-Mart’s clientele. D. You know Wal-Mart will pay eventually.

20. Which Lean Six Sigma tool helps keep you from doing something that is easy to do but not very important?

A. The 5 Why’s.B. An impact effort matrix. C. A fish bone diagram.D. A Pareto chart.

21. A value stream map is a powerful diagnostic tool for identifying:A. barriers to flow. B. strategic activities.C. operational activities.D. quality data.

22. You noticed a reporting error on an audit that one of your new hires performed. You ask the new employee why she made the mistake. She responds that there was too little time to prepare the report. If you apply the 5 Why’s to this problem, what should you do next?

A. Give her more time to complete future reports.B. Ask her how much time she will need in the future.C. Ask her why she took the job if she could not meet the deadlines.D. Ask her why she did not have enough time to prepare the report.

23. Time is of the essence. You have four projects with the same deadline. To help you decide which project should take priority you use an impact/effort matrix. You create four quadrants and then place each


FINAL EXAM

project in the most fitting quadrant. Which project will you want to tackle first?

A. The project in the low impact/low effort quadrant.B. The project in the low impact/high effort quadrant.C. The project in the high impact/low effort quadrant. D. The project in the high impact/high effort quadrant.

24. Your New Year’s resolution is to clean up your desk at work. It’s a daunting task, but you know that you and your coworkers will benefit from this change. Which step will you have the most difficulty performing?

A. Sorting.B. Standardizing.C. Straightening up.D. Sustaining.

25. You use the risk assessment matrix to determine how to allocate resources for new music programs in your school district. After you make a list of activities in Excel, what should you place in the second column?

A. Controls or procedures.B. Causes of errors.C. Failure mode. D. Risk priority number.

26. If, for the improvement activity of reassigning accounts receivable to the administrative assistant, the severity rating is 3, the occurrence rating is 4, and the detection rating is 2, what is the risk priority number?

A. 6B. 9C. 12D. 24

Objective: • Select an appropriate Lean Six Sigma tool for a task

27. Which Lean Six Sigma tool would you use to document the steps the budgeting department takes to create weekly variance reports?

A. A cause and effect diagram.B. An impact/effort matrix.C. A process map.

D. FMEA.


FINAL EXAM

E. 28. Which Lean Six Sigma tool would you use to solicit ideas from a team during a meeting?

A. An impact effort matrix.B. The 5 S’s.C. A process map.D. Brainstorming.

29. At the Job Service Workforce Center, you are trying to find out why applicants continue to apply for jobs that are already filled. Because you are aware of several possible problems within the application process, you decide to do a Pareto analysis. What tool will you use to help you gather data for this purpose?

A. Brainstorming.B. A flow chart.C. A check sheet. D. The 5 Why’s.

30. Since your business has grown so rapidly within the last year, you had to rent out an additional floor of the building you lease. The processes have changed dramatically with the hiring of 50 new employees. Now that your growth has reached a plateau, it is time to minimize motion on the work floor. Which Lean Six Sigma tool will you use to show the actual motion occurring on the work floor?

A. Ishikawa diagram.B. The 80/20 diagram.C. A flow chart.D. A transportation diagram.

CHAPTER 6: THE DMAIC PROCESS

Objective:· Define the phases of the DMAIC model

31. Which of the following is true of a DMAIC team?A. They are lead by uncertified employees.B. They are involved in defining the problem statement. C. They must commit all of their time to the project until it is finished.D. They delegate responsibility for implementation.


FINAL EXAM

Objective:· Choose appropriate tools for each phase of the DMAIC model

32. Which of the following Lean Six Sigma tools is most appropriate for use in the control phase of a DMAIC process?

A. FMEA. B. The 5 S’s.C. The 5 Why’s.D. Pareto Charts.

Objective:· Classify activities of process improvement into the phases of the

DMAIC process

33. Which of the following activities occurs during the defining phase?A. Determine key stakeholders for the project. B. Test for capability of the ‘as is’ process.C. Pilot new ideas to validate them.D. Determine criteria for hand off.

CHAPTER 7: UNDERSTANDING KAIZEN

Objective:· Define key Kaizen terms

34. The Department of Transportation has a Strategic Transportation Improvement Program (STIP) that shows the project goals for 2010. However, the DOT must amend the latest report due to budget deficiencies. To begin to resolve this problem, management determines that a team should hold a Kaizen event. After limiting the scope of the problem, what should result from the Kaizen event?

A. Increased productivity of construction workers. B. Reduced errors in construction projects. C. Increased customer satisfaction of construction projects.D. Improved control of the construction projects.

Objective:· Define qualities and common goals of Kaizen events

35. A Kaizen event is no longer than ______A. three months long.B. five days long. C. two days long.D. one year long.


FINAL EXAM

36. What should be done first in a Kaizen event?A. Map the ‘as is’ process. B. Identify non-value added events.C. Establish standards.D. Decide what to measure.

37. Management at the Office of the Attorney General had to lay off two workers in the Economic Development and Oversight Bureau. As a result, the responsibilities that once belonged to these individuals must be divvied up among the remaining employees. As a part of this change, management wants you to form a Kaizen workshop, and you are assigned with preparing the team. How many individuals should be a part of this team?

A. 2 to 4B. 4 to 6C. 6 to 8 D. 8 to 10

CHAPTER 8: MAKING LEAN SIX SIGMA WORK

Objective:• Understand the difference between a Lean Six Sigma project and

Lean Six Sigma program

38. A Six Sigma improvement effort is most easily started at a:A. program level.B. project level. C. management level.D. comprehensive level.

Objective:• Define the four key factors for success – the four “rights”

39. Which of the following is an activity that a sponsor can do to help a Six Sigma improvement effort along?

A. Secure needed resources. B. Define the cost of poor quality.C. Use checklists to develop process maps.D. Discipline team members.


FINAL EXAM

Objective:• Classify reasons for resistance to change

40. Why might employees feel hesitant about implementing Lean Six Sigma?

A. They fear that their jobs will “go away” as processes are improvedB. They fear that their competitors won’t adopt the new methods.C. They feel that their fellow employees will resist necessary changes

and halt progress.D. They feel that management is going through another management

fad and is not committed to the changes.

Objective:• Define solutions for resistance to change

41. Components of effective communication include:A. using a consistent medium for communication.B. framing information in strategic terms.C. reducing surprises by setting expectations for what will happen.D. telling management what the results mean.


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