A lean Six Sigma program instituted by Erie County, New York, has come under fire recently. The county's program is outlined in an article in Quality Digest Daily, "Analyzing Data Saves Millions for County Tax Payers," which describes how county executive Chris Collins implemented a lean Six Sigma program to help streamline county operations and save taxpayers money. The program is run by a director of Six Sigma that reportedly earns a $110,000 salary. Collins says the program saved the county more than $2 million in 2008.
Collins implemented a Six Sigma program last year with the full support of the Erie County Control Board, which oversees Erie County's finances, but a recent report in the New York State Association of Counties news magazine has stirred up questions about the accuracy of the total savings attributed to the methodology.
In the report, Collins points to the $2 million savings in the social services, probation, and mental health departments. But, Erie County legislator Robert Reynolds claims there's no evidence of it on a budget line.
“We have to look at the budget. When dealing with Six Sigma, sometimes the savings are quality [related], not budgetary,” he says. “If you implement an improvement initiative, you can improve a process, but you don’t always see that improvement [in real numbers].”
The legislator is requesting a verification of the reported savings to the Control Board, which approved about $1 million in state grant dollars to implement Six Sigma in 2008.
According to Reynolds, the Six Sigma implementation is changing processes and attitudes throughout the county's departments, but it's not really affecting savings in ways taxpayers can see, meaning, the bottom line.
“The cost of doing the program is more of a cultural change." explains Reynolds. "The budgetary savings are just a couple of thousand of dollars. We need to show it [the Six Sigma investment value] in the budget line”
Erie County spokesman Grant Loomis says that the county administration reports monthly to the Control Board with a detailed explanation of its spending and achievements.
“We make sure that the Control Board is comfortable, and that's obviously the case since it approved in May full funding for the Six Sigma program through 2010,” says Loomis. This year, Six Sigma is expected to bring Erie County about $1.5 million in savings, he adds.
Comments
Legislator's perspective
After skimming the referenced article, I think their program is fine, perhaps they just need better PR. The legislator's comment suggests a lack of cohesion which, if I lived in Erie County, I would find to be nearly as troubling as poor project management. Cost reductions alone are a very poor indicator of performance - imagine a police department that saved money by letting crimes go unsolved!
Financial Verification of Six Sigma Projects in Erie County
First, I applaud Erie County for taking the bold step to utilize an industry best practice in the interest of their customers, the taxpayers. Don't give up the ship! Get to the root cause of the problem and charge forward. You are not the first one to have this type of problem. As often is the case with new initiatives, startup issues can torpedo the best of intentions. In the evolution of Six Sigma, we realized early on that quantifying and connecting business requirements (ie Cost Savings, Profitability, Top line Growth, etc.) was a Critical Success Factor, especially in the early phases of an organization wide Six Sigma implementation. That is why most robust Six Sigm programs require that Six Sigma Project, Scope, Selection and Accounting Methods have the involvement of a Financial Controller or even a CFO, up front, before projects are implemented. It is important that they buy into the concepts (and participate throughout the project life cycle) and set the rules for ROI calculations. This involvement helps to align the business need with the program expenditures. Something in this process had to have been flawed. A quick assessment of this process, focusing on roles, responsibilities and accounting practices related SPECIFICALLY to project selection / prioritization and accounting methods should reveal the source of the issue. Reset this part of the process, clearly communicate the rules and goals of the program, and go back through the project selection process to get back on track.
Bruce J Hayes
Executive Advisor Group
bhayes@exec-advisors.com
http://www.exec-advisors.com
(781) 792-0800
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