Finance Process

1
Finance Process
22 May 2006
2
Agenda
What Duration

• Objectives 5 Minutes
• The Role of the Finance Rep. 5 Minutes
• Valuation Guidelines 5 Minutes
• Classifications of Benefits 10 Minutes
• Validating Results 10 Minutes
• Finance Timeline 5 Minutes
• Case Studies 5 Minutes

3
Objectives

• Finances Contribution to a Successful Deployment
• Second only to Senior Management commitment
• Allows project prioritization through estimates
  of benefits opportunities
• Provides validation of all claims relating to
  financial improvement
• Allows administration of accountability toward
  the Process Excellence effort
• Supports a rewards and recognition program for
  project teams
• Finance Core Team Deliverables
• Define Finances role and responsibility in
  supporting the Deployment
• Define the project support timeline and valuation
  guidelines
• Provide QA to topics supporting Lean Six Sigma
  financial analysis
• Define rules for validation of savings and
  examples through Case Study
• Create a universal Financial Worksheet for
  conducting project analysis
• Utilize the power of ProjX for tracking financial
  benefits

4
The Role of the Finance Rep

• Provide the project team support by
• Establish the forecast value of a project with
  Project Champion
• Serve as project team consultant
• Validate the forecast of a project throughout the
  all project phases
• Track and report the financial results of a
  project
• Principle Responsibilities
• Act as a resource to Project Champions in support
  of their efforts to define and prioritize
  projects
• Work with the Project Leaders (Project Mgr.,
  Black Belt, Green Belt) to
• Identify financial metrics and project impact
• Validate financial results
• Track benefits after project complete
• Not a full-time position, but a key role within
  each project
• Anticipated to be 8-12 hours per project over 3-4
  months
• Finance Reps maintain current positions /
  reporting relationships

5
Valuation Guidelines

• Measurement
• Project Leader defines process metric that will
  be used to determine that defects have been
  eliminated and documents method used to track
• Finance Rep defines associated financial
  metric(s) and uses them to quantify costs of
  defect and validate benefits from eliminating
  defects
• Finance Rep Meeting Guidelines
• Meet with Project Champion to create a high level
  original forecast
• Meet with Project Leader as necessary to discuss
  project updates
• Meet with Project Team, Project Champion or
  Project Leader as requested
• Project reviews, brainstorming, control plan
• Reporting and Documentation Tools
• Financial Worksheet
• Financial Tracker within Project Tracking Tool

6
Classification of Benefits

• Each project must classify its benefits into one
  of the
• following categories
• Hard Benefits
• Realizable and quantifiable savings that can be
  attributed directly to the project
• Soft Benefits
• Intangible benefits that could not be measured
  and tracked directly to the project
• Project can be successful without realizing any
  soft savings
• Unrealized Hard Benefits
• Benefits that will require an action on the part
  of management to be realized.
• Will remain Unrealized until appropriate action
  is taken
• Example 1 A capital improvement will increase
  sales, but is deferred until a later time
• Example 2 An improvement creates available
  capacity (labor, equipment, etc), but no action
  is taken to remove the resource.

7
Validating Results
Original Forecast
Initial Validation
Revised Validations Including Final Validation
Realization

• Begin during scoping and complete when project is
  loaded
• Obtain supporting documentation from Project
  Champion, Sub Process Owners and SMEs
• Enter in Project Tracking Tool
• Explain issues to Project Champion and Project
  Leader

• Revises as many times as necessary.
• Review with Project Leader prior to
  implementation
• Revisit supporting Documentation
• Enter in Project Tracking Tool
• Explain issues to Project Champion and Project
  Leader

• For 1st 3 months of Realization, review with
  Project Leader
• Next 9 months of Realization, review with
  Sub-Process Owner
• Enter in Project Tracking Tool
• Audit that process changes remain controlled
  after 18 months into Realization

• Review with Project Leader early in project
• Obtain Supporting Documentation from Project
  Leader
• Enter in Project Tracking Tool
• Explain issues to Project Champion and Project
  Leader