Answer – “use the Pareto Principle…”
Not always easy. Unless you have a quantitative mechanism of assessment. Enter the process modelling tool….
The use of quantitative cost savings / cycle time reductions benefits and their associated delivery costs should be the definitive yardstick for prioritising process improvement initiatives. Instead of perceptions and ‘air-time’ traditionally driving attention, the above approach allows all stakeholders to understand the relative priority of their issues, and how and where the best return on their investment in business improvement will come from.
The tradition of ‘the squeaky wheel getting the oil’ need no longer be the method for prioritisation.
Prioritising the business benefits
“Focus your Six Sigma project by using a ‘telescope’ before using a ‘microscope’ “
Prioritising which processes need detailed analysis and which don’t is key to a successful project. Knowing upfront the metrics that describe each process minimises speculation and guess work about the priorities.
A good example of this application is Six Sigma, where it’s necessary to analyse processes in great depth looking for significant variance to standard. Without knowing where to focus effort, this approach can be a lengthy and expensive exercise. Our preferred approach applies prioritisation to identify a subset of processes worthy of detailed Six Sigma analysis.
So how does one focus the analysis effort? Traditionally, processes are often measured and prioritised on one, or more, of the following;
- complexity – which processes have the most pathways, ie, processing options created by decisions
- by work time – which processes consume the most effort
- by unit cost – which processes cost the most to execute
There are issues with these simplistic approaches.
– Process complexity alone is not enough; a process with many pathways caused by multiple decisions need not necessarily be the longest or most expensive to run.
– The most work time alone is also not enough; the labour resource costs within the process may be very low.
– Process cost (or cycle time) alone are not enough; if the process is costly or lengthy but only occurs occasionally, its relative importance may be quite low.
In fact, the best way to prioritise business processes (either from a ‘cost to serve’ perspective, or from a cycle time / customer service perspective), is to take a volume-based view that combines the time and the frequency.
This approach is illustrated in the example below. Not that in the example shown, the driver of priority was cost, but could equally have been cycle time, which affects customer service;
Focus on the 20% of the activities that will return 80% of the total benefits
The final prioritisation ranking shows that the first 6 processes alone account for nearly 80% of the cost to the business, and strongly suggest the areas for further detailed analysis using the Six Sigma technique.