ISACA COBIT 5 – Define (BOK IV) Part 4

9. Project Charter – Writing Business Case (BOK IV.B.1)

Hey, welcome back. In Six Sigma when we say we have five phases of a project DMAC define, Measure, Analyze, improve and control. The first phase is defined and in define. The most important item to be delivered in that is to have a project charter. So your project charter is a sort of a contract. To go ahead you need to finalize your project charter in the define stage. So that’s the first step in a Six Sigma project. So there are a number of elements of a charter. Charter has business case, problem statement, project scope, goals and objectives, performance measures and charter review.

So in addition to these you need to have a plan on the charter with a plan date to start and finish each phase of DMAC approach. So when does defined phase start and when does defined stage finishes? Measurement starts and measurement finishes. So all these dates and target dates need to be in the project charter. And in addition to that you need to have a team members who are the team members in this project and what is the level of commitment they have for the project? Is that person full time, part time, 25% of the time? All these things need to be part of the charter.

So what we will do in next few lectures is going through each of these elements of project charter in more detail starting with business case. So let’s move on to the next slide and look at what does business case means and what do we put in the charter. But before that let’s look at how charter looks like and then we will go into the detail of business case. So let’s move on to the next slide. So here I have a sample of project charter. This sample I have taken from a Six Sigma software known as SigmaXL. So you can go to Sigmaxl. com and download this software. Why I’m using this software in this course is because this is much cheaper compared to Minitab. So if your company can afford Minitab that’s fine because that’s a good software.

But if you want to go for small thing, if you don’t need that much comprehensive power which Minitab offers you, it’s always a good option to use software such as Sigma Excel. You can download 30 day trial version of that to complete this course. So let’s look at the elements here. So here I have a project charter starting with item number one which is business case. So here you put your business case, then you put the problem statement as point number two. Then point number three will be what is the scope of the project? Then you’ll be looking at the goals and objectives of the project, then you will be looking at the performance measurements and then you will be looking at the project charter review. So these are the six topics which I will be covering in detail in next six videos. And in addition to that, you can have a plan when does each phase of the project starts and finishes and the team members involvement. And this is a Sigma Excel copyright material.

So before we look at business case, let’s quickly look at Sigma Excel software and where do you find this project charter in the software. And then once we have done that, then we will move to our topic which is business case. So let’s look at Sigma Excel here and see where you get project charter in Sigma XL. So I have opened Sigma Excel here. So once I open Sigma Excel, this opens as a Microsoft Excel Worksheet. And in the Microsoft Excel worksheet if you look somewhere here on the right, there’s a Sigma Excel tab here. So you press on Sigma Excel. So I click here and that opens the menu related to Sigma Excel. In Sigma Excel we have number of features. We are not going into those at this time. We just need to look at the project charter.

Where do I get that? Project charter template. So all templates are included here in templates and calculations. So you click on that and in that you have a DMAC and DFSS templates. Click on that and here you have at the top team or project charter. So here it opens the project charter in the Excel worksheet. And here you can put all the information which you want. Let’s say the project name is Defect Rate Reduction in Welding. So that’s the name of the project. And you can put all this information here. And in this topic we were talking about business case. And you can put that business case here. In this box here you can type the business case that in the welding shop and that’s what we said in the welding shop, et cetera, et cetera. You can put all that information your business case here. So that’s how you open your project charter template in Sigma Excel. So let’s go back to our discussion on the business case.

So after looking at project charter using Sigma Excel, now let’s look at each of those six elements which we talked and the first element of that is business case. Business case tells you why this project is being done, why this project is important for the organization. Why should organizations spend money and time to do this project? So that makes a business case. Management is interested in the business case. That why management should approve the expenses or the cost of doing this project. So that’s the reason you need to make your business case as an important part of project charter. And what this business case tells you. Business case tells you that how this particular project, the specific six Sigma project which you are doing is linked to company strategy. Company strategy by providing the product to customer, which is cheaper, which is better, which is safer, which is faster, whatever organizational strategy you might have.

But majority of companies you will be looking at these elements, delivering product which is cheaper, which is quicker, which is better and faster. And this gives your organization a competitive advantage. So that’s what you will be looking in the business case, how does your project help in these sort of elements? Here at the bottom I have an example of a business case. So let’s look at that. This is a simple case of a welding shop where the repair rate has gone high and since the repair rate has gone up, that is leading to loss. Loss. Because you need to repair those defects and then you need to recheck or radigraph or you need to do additional testing, nondestructive testing on those welds so here is a business case that in our welding shop.

So it tells that where we are not meeting the goal of maximum 1% repair rate. So maximum 1% repair rate could be from your own organization or this goal could have come from your client. If you’re doing a big power project refinery, then client might have a limit that you should not exceed this particular level of defector rate. So going back to the business case that in welding shop we are not meeting the goal of maximum 1% repair rate and welding repairs and retesting is costing us $300,000 per year. Now, once management looks at that, this immediately rings a bell in the mind of management that doing this project is important because we are losing this much money every year, year after year. So better we need to improve on this process. So once you improve on this process, the company would be saving 300,000 per year on a recurring basis. So that’s the business case. So let’s move on to the next slide to look at the second element of the project charter.

10. Project Charter – Writing Problem Statement (BOK IV.B.2)

So in the previous topic we talked about business case. We talked about how to open a project charter template in Sigma XL. So we covered this part, which was business case. In this lecture we will be looking at problem statement. How do we define the problem statement? Let’s look at that. So, going back again, that’s a project charter and we have already covered this part, which is business case. And now we are here, which is problem statement. How do we define problem statement? So problem statement is what is the problem? The statement of that. It’s as simple as that. The magnitude of the problem, when, where, ETCA. Related to the problem.

That’s what is the problem statement. In the business case our emphasis was on numbers, on financials to convince management that this project is important here. In this case, our focus is on the problem. So, going back to the same example, problem statement would be in our welding shop, the average weld repair rate for the last three months has been 4. 5% as against the maximum target of 1%. In the business case, we didn’t put that much detail. But here we are talking about the problem. So we are putting details related to the problem. So 4. 5% is the rate. Last three months the target was 1%. And this is adding to the cost and delay in production. So that’s the problem statement here the same problem statement I have put in three different ways. The first one is putting the same problem statement as poor, poor welding quality leading to losses. Is this a good problem statement? No, because this is too general in nature.

This doesn’t tell any specific thing. So that’s the reason the problem statement is not accepted, because this doesn’t tell you much. The second example here is in the welding shop, the average weld repair rate for the last three months has been 4. 5 as against the maximum target of 1%. It’s the same thing as we talked earlier. But the next sentence here is that poor quality welders are adding to the cost and delaying production. So what we are doing here is we sort of a concluding on what is the cause of the problem. Here we are concluding that the cause of the problem is the poor welders, poor quality welders which are creating this problem.

So if we know the cause of the problem, if we know the root cause of the problem, then basically there’s no need to do Six Sigma project. You could just go and correct that issue. You do Six Sigma project because the thing is complex and you need to find out the root cause of that. So in your Six Sigma project problem statement, you are not putting any blame on anyone blaming the welders, blaming operators. No, you are not blaming anyone and you are not putting any conclusion, any cause of the problem. So those things are not put in the problem statement because you are still in defined stage you need to look at the problem only. Forget about solution at this stage. Forget about the reasons, forget about the causes at this stage. Just focus on the problem, what the problem is. And the third problem statement at the bottom is what we put on the previous slide which is that weld repair rate has increased from 1% to 4% in last three months and this is adding to the cost and the delay in production. So that’s how you put a problem statement in the project charter.

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