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Selecting the right projects

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Company performance is usually improved one project at a time. Project selection is an integral part of transforming the business. Selecting a wrong project could result in poor results, wasted effort and since the organization is working on the wrong projects, it would prevent the organization from working on more important issues. Selection of poor projects could also result in the blame being shared by the project manager and/or the team, loss of interest in the methodology, and poor company performance. In this article, we describe a process you could use to select the right methodology and the right project(s) for execution.

Why is Project Selection Important?

Companies have a number of problems that need to be addressed or improvements that need to be made. Problems could arise because the benchmark standards are not being met or are being met inconsistently. Some projects would be suitable to be executed by the Six Sigma approach while other projects may require a totally different approach to solve them. Use of an incorrect approach often leads to a sub optimal way to solve the problem which can affect the duration of the project or even result in sub optimal results. Hence, it is very important that the right methodology be used to solve the problem. In addition, there may be multiple projects that need to be executed but due to limited resources within a company, it may be impossible to work on all of them. Hence, it becomes important that we prioritize these projects so that the most important projects are addressed first before other projects are considered.

How to Determine List of Potential Projects

Companies may already have a number of projects that they know need to be worked on. Some companies have an idea generation box or idea sessions, where projects are generated from the bottom-up. In other companies, the list of potential projects may not be as clear. If we don’t have a list of projects or problems to select from, this could point to an issue with management not having the commitment, vision, or motivation to help the organization with identifying potential projects. Ideally, projects should be developed using both a top-down approach and a bottom-up approach. To get a holistic view, we need to use a comprehensive approach to identify projects. Projects can be identified from 4 sources: The first source of projects could be customers. This is called the Voice of the Customer (VOC). In this process, we talk to the customers to determine what is working and what is not and then generate a list of potential projects from these conversations. You may already be conducting surveys or have other voice of the customer data collection methods. If not, you would have to setup an explicit process to gather this data at regular intervals – say once a year. We could use an external third party agency to collect this data as customers would give a more honest perception to a third party rather than directly to the company representatives. The second source of projects could be obtained by talking to the internal stakeholders – such as higher and middle managers to get their perspectives on problems and opportunities. We call this the Voice of the Business (VOB). The basic question we should be asking them is “What keeps you awake at night?” The third source of projects could be obtained from talking to the employees to see what issues they have – we could call this the Voice of the Employees (VOE). Enhancing employee morale is critical to have a high performance organization. Finally, the fourth source of projects could be obtained by listening to the process – also called the Voice of the Process (VOP). You could use the process maps, Value Stream Maps, KPI indicators, financial metrics, business balanced scorecards etc to get an idea of what areas need improvement. Once this exercise is completed, there would usually be several problems or projects that are identified from each of these four sources. A good project champion would select projects that would attack each of the following areas:
  • Projects related to improving customer satisfaction
  • Projects related to improving the internal company metrics (stakeholders)
  • Projects related to improve the employee morale and engagement
Once the list of potential projects is identified, the next step is to select the right methodology and select a subset of projects for execution.

Project Methodology

For each problem or improvement opportunity, different approaches can be used to attack the problem. Some of the well-known improvement methodologies are:
  • Just Do It: In this approach, the project is executed without any specific methodology. The project leader would collect all available data (if at all) and then uses his experience or judgment to pick the best solution(s). The results of this project depend on the prior experience of the project manager. Intuition plays a major role in the project outcome. If the problem magnitude and scope are relatively small and the results not very important to the company, this approach may suit just fine. But for more complex problems or where the results are materially important for the company, you would not want to gamble with the results by using this unstructured approach.
  • Six Sigma: This approach utilizes a structured approach to solve business problems. If there is already an existing process, then the DMAIC (Define, Measure, Analyze, Improve, and Control) methodology is used and for a new process, the DFSS (Design for Six Sigma) methodology is used. There are a number of statistical tools within Six Sigma that help the project leader to analyze the data and draw the right conclusions. This approach is suitable for complex problems where data analysis plays an integral role in solving the problem and hence the projects should have an unknown root cause and solution and availability of data to make the right decisions.
  • Lean (Kaizen, PDCA): This approach is patterned after the Toyota Production System way of continuously focusing the entire organization on eliminating waste in all processes and making work flow synchronized with pulling from real customer demand. One of the problem solving approaches within Lean utilizes a concept call Kaizen or small continuous improvements for the better. During a Kaizen event, a cross functional team is assigned to the problem to attack and solve within a short period of time (typically 3-5 days). The team uses lean concepts like value stream mapping, elimination of 7+1 wastes, 5S, etc. to improve the processes and report back to management the improvements made at the end of the event. Improvements typically follow the PDCA cycle – plan the improvement, do the improvement, check if it is working, and act to make any changes to the implementation as required. Kaizen is usually used on problems that are relatively easy to solve by the cross-functional team in a short period of time. Complex issues which require a lot of data analysis would not be suitable for a Kaizen event. In general, Lean is more about changing the culture and mindset of an organization to enable the organization to continuously improve over time.
  • Theory of Constraints: This approach was developed by Eli Goldratt. The primary focus of this approach is to maximize productivity by focusing on the constraints. The key metric is the throughput through the process. This methodology would be suitable if your existing process has capacity constraints and hence you are not able to meet customer demand. Once the constraint or bottleneck is identified, steps are taken to ensure that this bottleneck is performing the best it can. For example, inventory should always be available at the bottleneck so that it is never waiting for raw material. According to the Theory of Constraints, you should not blindly try to improve every process that is out there, but first identify the bottleneck and then improve the bottleneck process. Once the bottleneck process is fixed, then another step in the process may become the new bottleneck and the focus shifts to this process step and so on.
  • Project Management: Project Management concepts can be applied to those cases where the solutions is already known – however the solution is so large or complex (high risk) that if we don’t have a structured approach, then we could overshoot with respect to implementation time, costs etc. The objective of project management is to deliver projects on-cost, on-budget at accepted levels of quality while managing project risk.
The flow chart shown below provides a summary of the different approaches to solve a problem.

Project Selection 1

Project Prioritization

In order to select projects from a list of multiple projects, we need to rank each of these projects on three factors – expected benefits, expected duration, and expected risk. Each factor is rated on a scale of 0-10. An example rating scale is shown in the figure below.

Project Selection 2
The above rating scale may not be suitable for all projects and companies – hence you need to redefine the scale based on your needs. In addition to these factors, projects are also rated based on availability of sponsor support, team available for execution, the type of solution suitable for each project. Based on weights specified for each project, the overall score and recommended methodology is output for each project. An example for a list of 3 potential projects is shown below.

Project Selection 3

Project Selection 4
The figure above shows the relative placement of the project on a benefit-effort matrix. Based on this figure, we would first need to select projects that fall in the low effort-high benefit. The next set of projects would come probably from either high benefit-high effort or from low-benefit-low effort. Low benefit-low effort projects can be assigned to individuals that can be executed based on Kaizen or PDCA approach. High benefit-high effort projects require a more concerted effort. Projects from the high effort-low benefit should probably be discarded.

Depending on resource availability, the right number of projects should be selected for execution. If too many projects are launched at the same time with limited resources, then project execution suffers and projects take a lot longer to complete. Once the projects are selected for execution, they should be tracked rigorously and executed. After the projects are completed, additional projects can then be selected for execution in a subsequent phase.

Benefits & Limitations

The above structured approach to select projects enables the organization to work on the “right” projects and thus enhances the return on invested capital. It enables the key stakeholders in the company to see the “logic” of why certain projects are picked rather than others. This could avoid sub-optimization where projects are picked based on resource or the support of top management towards their “pet” projects. Of course, it would require more upfront work to determine the list of projects, rate them, and prioritize them for selection.

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