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.
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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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