We finish our series with learning how to fill out a project charter in Six Sigma Project Charter Part 6. In this video, we discuss filling out the financial portion of your Six Sigma project. You can go to Part 1, Part 2, Part 3, Part 4, and Part 5 to view our other lessons on Six Sigma Project Charters.
Ok, last item, financial information. This is something that we suggest that you have the company finance department do. Have them do it once when the project is chartered. Have them do it again when the project is complete. First two topics, new revenue and cost reduction are hard dollars. That means hard money because you may not be dealing in dollars. These are things that are easily traceable to balance sheets and income statements. New revenue would be the margin. The gross margin on some new market that you were able to develop. The most common is cost reduction. That’s money that’s in somebody’s production budget or it’s in their customer satisfaction budget and its money that you’re paying out that you get to stop paying out. Productivity is a little different.
Let’s say that there’s a report that’s been taking 10-man days to prepare. Let’s say that we figure out a way to do it and in one-man day, liberating nine-man days for other tasks. Well we haven’t really, you know, reduced costs, we’ve just reassigned work and we’re getting more done and that’s good, but it’s hard to trace. We call that soft dollars. Same with cost and risk avoidance. Cost avoidance would be you don’t have to build a factory or you don’t have to buy a machine or risk avoidance is the other side of that. Now, for example maybe you can find some way to make it less likely for your company to get sued by a dissatisfied customer or have to pay a fine. Compliance very often there will be no dollars there. Compliance is things that we have to do to comply with the law or to maintain our industry certifications, things that we just have to do to stay in business.
Okay, over here under cost reduction, we put $918,800. Over here in projected benefit, we tell how that’s calculated. So we go through the arithmetic. We’re going to get five percent of our solutions more through the web. Cost is so much. Now, we’re going to save so much. Multiply that out and it comes out to $918,800 per year. Now, very often there will be something attached like what I’ve put here. In addition, customers will be more satisfied because the services faster and we’re not able to put a dollar value on it. Don’t get mired down in trying to report elusive, debatable savings. It’s much better to take the part that you can count and then just say about the rest of it, well this is big, it’s important, we don’t know exactly how to count it but we’ll call it to your attention and not put a dollar sign on it. So we’ve got our charter done. It’s not very hard and doing this right will help you a lot in completing a successful project.