By Celia B. Banks, Ph.D.
A first step in defining the measurement system must be establishing formalized processes for resource planning. Practitioners should gather and analyze the business requirements within the process to determine deficiency input points. This can be done using process flow diagrams of both current, or “as is,” and modified, or “to be,” processes.
Next, practitioners should determine critical-to-quality (CTQ) requirements for project task deliverables. Metrics for evaluating resource planning processes consider these CTQs. Once CTQ characteristics are identified, the cost of poor quality (COPQ) can be determined. A project skills matrix and a failure mode and effects analysis (FMEA) for resource planning can be used to capture data for measurement. Then practitioners can identify the defects per million opportunities (DPMO), a number that can be converted to a sigma level. The sigma level will focus on measuring and eliminating defects in core resource planning processes.
Six Sigma can be used to define process capability in order to identify metrics for evaluating the outcome of CTQ requirements.
Identifying CTQ Variables
Within the variance model framework, a resource manager should construct a CTQ FMEA template that is applicable to staffing requirements outlined in the Define phase. The CTQ specifications should be stated, and measures devised. Variables can be associated with defect opportunities (Table 1).
| Table 1: Example of CTQ Requirements | ||
| Requirement | Variable | Defect Threshold |
| Set up server hardware | Resource skill | Hardware malfunctions due to incorrect setup four times |
| Install and configure Oracle on server | Resource skill in specialty area | Incorrect settings in system global area four times |
| Post go-live application support | Resource training relevant to skill | Incorrectly diagnose problem as user training issue when in actuality it is an application bug three times |
The conversion of actual defects in task delivery to DPMO will derive a sigma value denoting either organizational excellence, satisfactory performance or unfavorable results. Practitioners can compare sigma values at the start and end of the project to determine improvement gains. A sample of a CTQ measurement is illustrated in Table 2.
| Table 2: Sample CTQ Measurement | ||||
| Define | Measure | Analyze | Improve | Control |
| CTQ: The customer will tolerate up to four hardware malfunctions due to incorrect setup | Defects: Hardware malfunctions four times Units: 196 (47 file servers x 4 setup errors) Opportunities: 1 per file server DPMO: 85,100 Process sigma: 2.81 |
Two system engineer resources, A and B, are assigned to task: Resource A sets up 23 file servers over a period extending beyond the planned 10 workdays (13 workdays actual). Resource B sets up the remaining 24 file servers under the planned 10 workdays (9 workdays actual). Six file servers that Resource A sets up experience malfunctions due to incorrect setup. | Resource A caused a cost and schedule variance and failed to meet CTQ requirements six times. Defects: Hardware malfunctions six times Units: 138 (23 file servers x 6 setup errors) Opportunities: 1 per file server DPMO: 260,900 Process sigma: 2.14 |
Identify opportunities for Resource A to improve server set up ability through training or journeying. |
Quantifying COPQ in Resource Planning Processes
| Table 3: Poor Quality Causes in Resource Planning | |
| Poor Quality Cause | Description |
| 1 | Underutilization of resources is also termed spoilage in Six Sigma. It occurs when there is inconsistence or inefficient processes. |
| 2 | Reworking a deliverable due to wrong resources skill applied involves the labor to repqir the defect. |
| 3 | Additional resources includes any burden of consumption of resources in order to accommodate an unforseen step in project deliverables. |
| 4 | Lost opportunity is the loss in business of a failure. Included are the loss of margin and the capital to be invested for regaining lost revenue to offset the cumulative revenue loss. |
| 5 | Lost revenue due to poor quality considers the loss of new business due to defective quality in a deliverable. |
| 6 | Poor customer satisfaction is the sum total of all COPQ. Cost is compounded by losses customers suffer due to defective quality in a deliverable. |
The calculation of COPQ uses weighted risk for potential failures. It considers an estimation of four components:
- Probability of occurrence for each failure
- Potential severity of each failure
- Current detection provisions
- Resolution cost of a single failure
| Table 4: Sample COPQ Measurement | ||||||
| Goal: Reduce Customer Dissatisfaction Incidents Due to Resource Related Project Failures by 75 | ||||||
| No. | Potential Resource Deficiency | Risk Priority Number | Effort Hours to Resolve | Average Cost Per Hour | Average Cost to Resolve | RPN x ACR |
| 1 | Right skilled but underutilized in project task | 30 | 10 | $90.00 | $900.00 | $27,000.00 |
| 2 | Wrong skill to repair defect | 27 | 40 | $48.00 | $1,920.00 | $51,840.00 |
| 3 | Added resource due to scope creep | 27 | 56 | $240.00 | $13,440.00 | $362,880.00 |
| 4 | Loss of business opportunity due to downtime (daily revenue = $10,000) | 18 | 40 | $416.67 | $16,666.80 | $300,002.40 |
| 5 | Lost revenue due to resource incorrectly working project task | 21 | 10 | $4,166.70 | $41,667.00 | $875,007.00 |
| Total: | 123 | $1,616,729.40 | ||||
| Formula 1: Weighted average cost to resolve = (RPN x ACR)/RPN = 1,616,729.40/123 = $13,144.14 | ||||||
| Formula 2: COPQ (annualized) = Weigted average cost to resolve x annual reduction in resource related project failures 13,144.14 x 75 = $985,810.50 |
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The connection of COPQ to DPMO means that poor quality costs are proportional to sigma levels. The yield should be compared to the cost of quality in the finished project deliverable. The sigma level correlation to DPMO and cost of quality is stated as percentage of revenue (Table 5).
| Table 5: Sigma Level, Value, DPMO and Cost of Quality Percentage | ||||
| Sigma Level | Range Value | Yield | DPMO | Cost of Quality Percentage |
| 2 | Unfavorable | – | 298,000 | More than 40% |
| 3 | Satisfactory | 93.3% | 66,870 | 25%-40% |
| 4 | Satisfactory | 99.8% | 6,210 | 15%-25% |
| 5 | Organization excellence | 99.977% | 233 | 5%-15% |
| 6 | Organization excellence | 99.99966% | 3.4 | Less than 1% |
Control System Benefits
Six Sigma…
[...] Defects: Hardware malfunctions six times Units: 138 (23 file servers x 6 setup errors) Opportunities: 1 per file server DPMO: 260900 Process sigma: 2.14, Identify opportunities for Resource A to improve server set up ability through … [...]…
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