Six Sigma | Chapter 2 - Stakeholders Flashcards
Everything we need to know about the stakeholders
What are stakeholders?
Stakeholders: A stakeholder is an individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project.
Stakeholders may be actively involved in the project or have interests that may be positively or negatively affected by the performance or completion of the project.
Different stakeholders may have competing expectations that might create conflicts within the project.
Stakeholders may also exert influence over the project, its deliverables, and the project team in order to achieve a set of outcomes that satisfy strategic business objectives or other needs.
Who are stakeholders in a Six Sigma project?
- Project Manager
- Team members
- Project sponsor
- Customer
- End users
- Shareholders
What is the risk of focusing too much on decreasing costs if stakeholders are asking for this?
Too much emphasis on decreasing costs may mean short term increase in margins and profitability, but in the long term may result in lower quality.
Why do we need a balanced scorecard for stakeholders?
Usually stakeholders have conflicting needs and focusing too much on any particular group may be detrimental to the needs of all other stakeholders. Balanced scorecard is a tool used to measure different stakeholders’ goals quantitatively and translate these goals into metrics.
What is the risk of focusing too much on increasing shareholder value if stakeholders are asking for this?
Concentrating only on increasing shareholders value and share-price in the short term may result in the company losing sight of long-term goals e.g. loss of market share and customers.
What is the first step in creating a balanced scorecard for stakeholders?
Balanced scorecard begins with determining the vision and strategy for of the organization. This forms the basis for each balanced scorecard.
Who determines important metrics for each stakeholder in a balanced scorecard?
Experienced black belts and master black belts.
What is the general formula for balanced scorecards?
In mathematical parlance, this is referred to as Y = f(X) or the result Y is a function of several effects i.e. Xs
Let us consider Customer Satisfaction may be a metric on a top level dashboard which we want to aim for. So, this is a potential result (Y). Customer Satisfaction can be obtained through several effects (i.e. “Xs”) e.g. through decreasing defects, improving customer service, improving quality and better brand recognition.
Hence, Customer Satisfaction (results - Y) is achieved through a combination of effects - Xs.
What does VOC stand for?
Voice of Customer (or Client)
What are the benefits of a balanced scorecard?
- Very effective tool for getting inputs from different stakeholders, and ensuring that it aligns with the strategy and vision of the company.
- Helpful in project selection where inputs from all stakeholders ensure that no particular group gets undue advantage in the project selection process.
- Helps to quantify very high level objectives or results (i.e “Y’s”) in terms of measurable effects (i.e. “X’s”), thus enabling management to make a more informed decision in the project selection process.
What are “Vital X’s” in a balanced scorecard?
The critical effects are also referred to as “Vital X’s” in the balanced scorecard. These are the components which, if improved, will have a significant effect on the results i.e. the “Y variable.”
What are the 3 steps needed to understand VOC?
- Identify the customer
- Collect and analyze customer data
- Determine critical requirements
T/F | When identifying a customer they are classified in two ways: Internal and External.
TRUE.
For any Six Sigma project, the customers may be classified as:
1. Internal i.e. within the same organization (e.g. a technology group within the company that provides support to customer service representatives within the same organization)
2. External i.e. outside the organization (e.g. customers who finally buy a car produced by the company).
What are some facts to know about customers? What can this include?
- Age
- Gender
- Living habits
- Income Levels
- Education Levels
- Past buying history
Where do we begin with the identification and proper segmentation of the customer?
Begin analysis through existing customers. Companies keep details of customers who buy their product or service, which can be a starting point in identifying and segmenting customers.
To calculate the financial value of customer loyalty what should one consider?
To calculate the financial value of customer loyalty, one should consider the total sales that can be expected over a period of time.
Data can be broadly classified into what types of data?
Data can be broadly classified into two types: Discrete Data and Continuous Data
What is discrete data?
Discrete Data: This is a whole number (or count) of attributes like: Number of people buying a product. Number of defects per 1000 events. Number of satisfied customers
What is continuous data?
Continuous Data: This is information that can be measured on a continuum or scale e.g. Weight of packages sent. Customer wait time for every customer service call. Average speed of cars traveling on a highway
Why is knowing the type of data important?
Why is understanding of data types important? One of the first steps that one has to perform with any data is to determine whether the data is discrete or continuous. Depending on whether the data is discrete or continuous, different Six Sigma tools should be used to get information from and perform analysis of the data.
What are the three high-level steps to survey making?
- Create & Validate the questionnaire
- Sent to respondents
- Collect and analyze the results.
What are question types to ask on a survey?
Determining types of questions. Some examples are:
- Demographic : Demographic information about the customer (e.g. gender, age, nationality etc.)
- Attitudinal : Attitude and views of the customer (e.g. likes/dislikes, expectations etc)
- Service/Product Attributes : How the customer perceives different parameters of the product or service
What is the Kano Model?
Determining Product Attributes Perceived to be Important by Customers
What are question response types on a survey?
Determining Response types:
- Open Ended questions : questions which request the customers to write down their views or opinions (e.g. What is your perfect holiday? ___________________)
- Rating questions: Request customers to select from possible values which are rated along a scale (e.g. How would you rate the customer service provided by XYZ company? - Very Good- Good- Satisfactory- Not Satisfactory- Poor- Very Poor)
What are question ranking types on a survey?
- Request customers to provide a rank or numerical value to a particular attribute (e.g. What is the rank between 1 through 5 you would give to the features available in XYZ product : 1 represents Very Satisfied with features and 5 represents Not At All satisfied)
- Yes/No questions: Request customers to provide either Yes or No answer to a question. (e.g. Do you earn more than $ 50,000 in a year?)
- Likert or Intensity Scale : Measure strength of an attitude or opinion.
Inputs from the Kano Model are very valuable for a design team to understand customer __________ and __________ .
REQUIREMENTS and ASPIRATIONS.
T/F | Customers will remain indifferent to threshold/basic attributes if they are unavailable in the Kano Model.
FALSE.
Customers would assume these attributes to be present in the product - so, non-availability of these attributes would be a dissatisfier. However, customers will continue to remain indifferent if these attributes are available.
What attributes are needed to acquire customer satisfaction and competitive advantage in the Kano Model?
Improving the performance and attractive attributes.
What are the three attribute categories classified in the Kano Model?
- Threshold/Basic
- Performance
- Attractive
T/F | Performance attributes are directly proportional to customer satisfaction in the Kano Model.
TRUE.
Attributes which are directly proportional to customer satisfaction. Increased availability of these features improves customer satisfaction; decreased availability results in greater dissatisfaction.
T/F | Customers at most times are aware of attractive attributes in the Kano Model.
FALSE.
At most times, customers would be unaware of these attractive attributes, since they may be driven by innovation, and cutting edge technology which customers may not be familiar with.
What attribute do customers assume is present in a product in the Kano Model?
Threshold/Basic Attributes: Attributes which are considered basic or intrinsic to the product. Customers would assume these attributes to be present in the product - so, non- availability of these attributes would be a dissatisfier.
However, customers will continue to remain indifferent if these attributes are available.
Y/N | Can an attribute classification change over time in the Kano Model?
YES.
It is important to note that customer expectations change over time - so, an attribute which was considered attractive earlier (e.g. air-bags in cars) may become a threshold/basic attribute over time.
Visually describe the Kano Model.
- What is on the X axis?
- What is on the Y axis?
- Are attributes listed, and if so where?
- X Axis - Low quality to high quality (left to right)
- Y Axis - Low satisfaction to high satisfaction (bottom to top)
3A. Attractive Attribute - Above midline, increases as quality increases.
3B. Performance Attribute - Below midline, linear graph passing through origin
3C. Threshold/Basic Attribute - Below midline, plateaus as quality improves but decrease as quality decreases.
What does QFD mean?
Quality Function Deployment
What is another term for QFD?
House of Quality
Why is a QFD needed in Six Sigma?
QFD analysis includes inputs from all groups inside the organization, and forms the basis for determining the requirements of the project.
Who usually carries out the QFD?
QFD is usually carried out by a cross-functional group of individuals who are tasked with developing a new product or refining an existing one.
What is the result of a QFD analysis called?
It is called House of Quality
What is a House of Quality?
HOQ is a set of matrices which provide direction to the company about which features or attributes should be implemented in the product.
Why is QFD important?
It gives us:
- WHAT customers want
- HOW to accomplish this
- The relationship between the what’s and how’s
- A list of the various how’s to get it done
- Competitive evaluation planning the customer wants
- Target state of the company
- Cost to accomplish
- The weighting or importance of a feature
T/F | The QFD can be used to map the HOQ to internal company processes and also provide competitive evaluation.
FALSE.
It doesn’t map the HOQ, QFD maps the Voice of Customer (VOC). All other components of the statement are true.
The HOQ is the result of a QFD analysis.
What are the phases of benchmarking, as outlined by Robert Camp from Public Sector Management?
PAIA
- Planning
- Analysis
- Integration
- Action
What is benchmarking?
Benchmarking is the process of measuring the company’s performance against those of other best-in-class companies to determine the best practices to achieve those high performance goals.
It forms the basis for determining the company’s strategies, requirements and implementation plan.
Robert Camp has how many phases and steps for benchmarking?
4 Phases and 10 Steps
What are the steps of benchmarking, as outlined by Robert Camp from Public Sector Management?
- Identify essential practices that should be benchmarked
- Identify others with superior work practices for comparison
- Determine what data sources to use
- Determine current level of performance
- Develop future operation vision based on benchmark findings
- Report progress on an ongoing basis
- Establish functional goals
- Develop action plans
- Implement best practice findings
- Update knowledge on current work practice
T/F | In benchmarking Robert Camp emphasizes the importance of a “full understanding of internal business processes before attempting comparison with external organizations.”
TRUE.
Phase 2 (Analysis) in Step 4 Determine the current level of performance. This will enable the gap in performance to be identified.
How many steps are in phase 1, planning, of benchmarking (as outlined by Robert camp).
2 steps (1 & 2 of 10):
- Identify essential practices that should be benchmarked
- Identify others with superior work practices for comparison
How many steps are in phase 2, analysis, of benchmarking (as outlined by Robert camp).
2 steps (3 & 4 of 10):
- Determine what data sources to use
- Determine current level of performance
How many steps are in phase 3, integration, of benchmarking (as outlined by Robert camp).
2 steps (5 & 6 of 10):
- Develop future operation vision based on benchmark findings
- Report progress on an ongoing basis
How does Robert Camp define “Defect”
As defined by Crosby, “Defect is a failure to conform to requirements.”
How many steps are in phase 4, action, of benchmarking (as outlined by Robert camp).
4 steps (7 through 10 of 10):
- Establish functional goals
- Develop action plans
- Implement best practice findings
- Update knowledge on current work practice
How does Robert Camp define “Opportunities”
Opportunity is any area within a process where a defect could be produced or where one fails to achieve the ideal product in the eyes of the customer. Opportunities are the things which must go right to satisfy a customer.
What does DPU stand for?
Defects Per Unit
How do you calculate DPU?
DPU (Defects per unit):
Number of defects / Number of products
e.g. If 1000 units and 25 defects, the DPU = 25/1000 = .025
What does RTY stand for?
Rolled Throughput Yield. Probability that a single unit can pass through all the processes without any defects.
How do you calculate RTY?
e.g. there are 3 processes required for manufacturing a unit. Process A has a success rate of 90%, Process B has a success rate of 80% and Process C has a success rate of 90%. What is the Rolled Throughput Yield for the unit?
Answer: RTY (Rolled Throughput Yield)
= Probability that a single unit can pass through all processes without defects
= Success probability of process A * Success Probability of process B * Success of process C
= 0.90 * 0.80 * 0.90
= 0.648
What does DPMO stand for?
Defects per Million Opportunities
How do you calculate DPMO?
DPMO = (# of defects * 1,000,000) / (total # of opportunities)
What does NPV stand for?
Net Present Value
How do you calculate NPV?
Net present value (NPV) = (present value* of all cash inflows) - (present value* of all cash outflows)
Select the project with the __________ NPV. Why?
Select the project with the MAXIMUM NPV.
The time value of money is already taken into account while calculating NPV.
How do you calculate PV?
PV = FV / (1+r/100)^n
FV = Future Value
r = Discount Rate, interest rate
n = number of time periods
What does PV stand for?
Present Value (PV)
How does FV stand for?
Future Value (FV)
T/F | The higher the discount rate the higher the present value of the future cash flows.
FALSE.
The higher the discount rate the lower the present value of the future cash flows.
What is the Discount Rate and the symbol for it?
The interest rate used to calculate present value of expected yearly benefits and costs. The symbol is “r”
How do you calculate IRR?
The IRR on an investment or project is the Discount rate on an investment which makes present value of cash inflows = present value of cash outflows.
The IRR of an investment is the interest rate at which the net present value of costs (outflows) of the investment equals the net present value of the benefits (future inflows) of the investment.
What is an IRR commonly used for?
To evaluate the desirability of investments or projects.
What does IRR stand for?
Internal Rate of Return
Select the project with the __________ IRR. Why?
Select the project with the HIGHER IRR.
The time value is already taken into account while calculating IRR
What is Payback Period?
Payback period: Number of years required for an organization to recapture an initial investment.
T/F | Discount rate is taken into account in calculations for payback period.
FALSE.
Discount rate is NOT taken into account.
How do you calculate Payback Period?
Payback Period = Initial Investment / Cash Inflow Per Year
What is a severe drawback of Payback Period calculation?
Time value of money is not taken into account while calculating Payback Period since it can lead to incorrect decisions.
Select the project with the __________ Payback Period. Why?
Select the project with the LOWER Payback Period.
The time value is not taken into account while calculating Payback Period but it is preferred to recapture the initial investment sooner than later.
What is Lifecycle Cost?
Life Cycle Cost: The overall estimated cost for a particular program alternative over the time period corresponding to the life of the program.
What is included in the types of costs in the Lifecycle cost calculation?
- Direct and Indirect Costs
- Periodic or continuing costs of operation and maintenance
Select the project with the __________ Lifecycle Cost. Why?
Select the project with the LOWER Lifecycle Cost.
It is preferred to select the lower overall cost of a program over the time period.
What does BCR stand for?
Benefit Cost Ratio
How do you calculate BCR?
BCR = Benefits (payback or revenue) / Costs
When benefit/payback/revenue = cost + (profit incurred OR cost - loss incurred)
Select the project with the __________ BCR. Why?
Select the project with the HIGHER BCR. It is preferred to select the lower overall cost of a program over the time period.
BCR of > 1 means that benefits (i.e. Expected revenue) is greater than the cost. Hence it is beneficial to do the project.
What is Opportunity Cost?
This is the cost of passing up the next best choice when making a decision. The value of the next best foregone alternative
How do you calculate Opportunity Cost?
Once the best option is decided, the opportunity cost of not doing the other next option is determined - this is used to calculate opportunity cost. The value of the next best alternative is the Opportunity Cost.
What is Sunk Cost?
This is the cost that has already been incurred - therefore cannot be avoided.
Select the project with the __________ Sunk Cost. Why?
Select the project with the N/A SUNK COST.
Project Selection Criteria: When deciding the best option, ignore the sunk costs, because they have already been incurred and cannot be avoided.
