I was hired at in July of 2002 to “create the ability to implement firm fixed priced projects profitably.”
My company is primarily a cost-plus government contractor with a solid core of research and development engineering capabilities. We are very good at meeting and exceeding customer expectations in a cost-plus environment as witnessed by our track record of excellent award and incentive fee scores. We were quite confounded when working in a fixed requirements/fixed price environment, as witnessed by our unpredictable fixed-price contract performance, often resulting in unacceptable return on sales, surprised management and unhappy customers. Quite a contrast!
I immediately began searching for a process to use in attacking this challenge. Our Quality and Six Sigma Team came to my rescue. Following the Define, Measure, Analyze, Improve and Control methodology, we were able to “get our arms around” the problem and recommend some palatable solutions. These solutions involved people, process, tools and metrics, as well as the dreaded “discipline.”
We have not reached nirvana yet. But we are creating an environment where project managers can convince company leadership to accept fixed price contracts and expect a profitable return.
Program Management Excellence (PME) Defined
What is PME? We defined it as the ability to provide processes, procedures and tools to facilitate successful Firm Fixed Price (FFP) Contracting within the Engineering Services Directorate. Contracting begins at opportunity realization and continues through pre-proposal, proposal, contract negotiations, project planning, implementation and close out. It includes the Project Manager's toolset and procedures for planning, managing and reporting on FFP projects. It also includes insight into functional accountability (plans and actual performance at the performing element).
Our vision is to delight our customers, meet Return on Sales (ROS) goals, and conform to schedules on FFP contracts.
Process to Achieve PME Defined
As I approached the task at hand, my engineering training surfaced and I began to apply principles of a methodological problem solving process. The first step was to define the problem. I interviewed my Primary Stakeholder, my superior, and began to formulate a statement of the problem.
Problem Defined
ROS on FFP contracts is unpredictable; Management is often surprised with late notice of overruns and loss of profit. Scope creep is real and has a negative impact on ROS, achieving contract milestones and Positive Voice of the Customer (VOC).
Project Management and reporting is largely ad hoc and project-specific as each Project Manager invents and refines their own home-grown approach. This results in inconsistencies across programs and lack of predictable visibility by Management and our Customers. Existing functional interfaces can be slow and difficult, e.g., quick turn around proposals on follow on work, quick turn around authorization (contract modifications), and expedited procurement process for items needed quickly. Accountability to the performing element is difficult to achieve.
Now What?
If this problem statement was true, it appeared to me that process (or lack thereof) was either the culprit or a significant contributor to the problem. So I set out to validate the problem statement.
At my employer, Six Sigma Plus is the preferred method to analyze and execute process improvement. In fact, we call our program Six Sigma Plus because it encompasses Lean along with what are considered “traditional” Six Sigma tools (http://mu.motorola.com/sixsigma.shtml). Six Sigma focuses on variation reduction. Lean focuses on cycle time reduction and elimination of waste. We needed both to achieve our objectives.
A Commercial Message from Our Sponsor
Our intranet includes the following question directed to our Six Sigma Team. I think it helps set the foundation for the process I used in attacking the problem of achieving PME:
Question: I recently talked to some employees who are taking MBA classes. Their professor said that “Six Sigma is an industry joke” and that people are “creating” careers out of following a “pipe dream.” How will this differ from every other reorganization, realignment, process improvement, initiatives, etc., we have had in the past?
Answer: Six Sigma is different from failed initiatives of the past because of its emphasis on fundamentally changing the way we work based on data. When we first introduced Six Sigma to our company, we emphasized the need to change the culture so people stopped acting on impulse and gut feeling and instead started acting on facts. The results have been proven over a relatively long time period. Since the mid-1990s, our company has documented savings in the multibillion-dollar range as a result of Six Sigma, and we are well on our way to $1.3 billion in savings this year.
As Six Sigma projects are completed, the results undergo a rigorous process of financial validation to ensure that improvements fall to the bottom line. Admittedly, some companies have had their share of problems in making improvements that improve the bottom line. We've done a pretty good job.
To address the rest of what the professor said, Six Sigma isn't a career. Individuals cannot progress up a “Black Belt career ladder.” Instead, we see Six Sigma as a series of roles that a trained individual will assume within different parts of the organization. The typical Black Belt may spend 18 to 24 months on a given project before moving on to something else. When we train Black Belts – and Green Belts, for that matter – we expect those individuals to take these skills back to their parts of the organization, where they can make a difference in improving operations, better serving customers and ultimately adding to our company's financial performance.
Now on with the Story
The Six Sigma process has five distinct steps, referred to collectively as “DMAIC.”
- Define opportunities
Purpose: To define customers and those elements that are Critical to Quality (CTQ‘s, defined below). To develop a team charter and map the process.
- Measure performance
Purpose: To establish current process performance and develop measures that will improve performance.
- Analyze opportunity
Purpose: To analyze the data and process map to determine root causes and opportunities for improvement.
- Improve performance
Purpose: To generate, select, design, test, and implement improvements.
- Control performance
Purpose: To institutionalize the improvement and implement ongoing monitoring.
The following is a description of what we did and where we arrived. Not every process step is described because of space limitations.
The process is referred to as a problem solving methodology and is shown in Exhibit 1: This process map was used as our Action Plan that we developed at the end of the Define Phase and was entered in the Intranet eProjects database and tracked by my management.
Exhibit 1 Problem Solving Methodology/ Process Map
Define
The steps taken during the Define phase of the process are defined in Exhibit 1. The Charter was critical to success, as it defined goals, sponsors, what was in scope and out of scope. I attended Six Sigma Training and was assigned to lead a team from various organizations within my company to address the problem. Thankfully, a Six Sigma expert was assigned to my team to keep us on the process track. We also had representatives from Business Development, Contracts, Engineering, Human Resources, Finance and Information Technology.
During my training, the Charter was created as well as the Critical to Quality (CTQ‘s) elements. These are the elements considered critical to meet customer expectations and are shown in Exhibit 2.
Exhibit 2 Customers and Critical to Quality Elements
As a part of the define phase we also began the creation of several goals for the resulting solution:
- Consistent Planning
- Consistent Reporting
- Sufficient, flexible toolset
- Trained and certified Program Managers
- Track record of success
- Identify and optimize Critical Interfaces
Later in the process we confirmed these goals. I‘ll explain the details of how these goals drove specific implementation requirements later.
Measure
We created a Measurement Plan with metrics to gage the success of our PME Project. The metrics included:
- Dollars in the Business Development pipeline
- Number of proposals submitted
- Number of proposals won
- Return on Sales for various contract types
- Growth in Contract Value (fee bearing)
We are currently tracking these metrics against baseline values established prior to the team's recommendations being accepted. But I‘m getting ahead of myself.
The other critical activity we preformed was to analytically validate our problem statement. We had our Finance Department provide contract profitability for every contract that was active in the past 5 years. The variability of profit performance made it clear that we had pockets of heroes and pockets of “not-so heroes.” Due to the proprietary nature of this data, the exact numbers are not included. But our presumption was validated.
In the measurement phase of the project, we felt the need to identify the existing capabilities, that is, our baseline. Our team was able to perform a baseline analysis from within the team because of our cross-functional makeup. The results were somewhat eye opening as shown in Exhibit 3.
Exhibit 3 Baseline Capabilities
Exhibit 3 made it very clear that there were root causes within people, process, tools and metrics that were driving the problem we had identified.
Analyze
Our initial measurements of profitability and capabilities required additional analysis before we were willing to “hang our hat” on them and charge forward. We utilized Six Sigma tools to analyze data and help us begin the creation of a solution set. Refer to Exhibit 1 for a list of the activities we accomplished during this phase.
The cause and effect diagram, also called a fishbone diagram, was used to identify root causes for the unpredictable contract performance. A segment of this analysis is shown as Exhibit 4.
Exhibit 4 Portion of Cause and Effect Diagram
This segment is associated with a Poorly Written Contract contributing to Unpredictable Contract Performance. There are four other major “bones” on the diagram:
- Inadequate Risk Management
- Lack of Anticipated On-Contract Growth
- Bid Low Profit Margin
- Cost Overruns
Each of these elements are expanded to include other “trees” that work their way down to root causes. The diagram helped us identify the areas of process that needed attention.
At this point, we wanted to validate the aforementioned analyses, so we performed a Capability and Gap Analysis. This analysis identified elements of project management necessary for success and performed a survey asking if these elements were important for project management and if we possessed a capability in these areas. We surveyed 36 employees from various disciplines (no managers, only front line employees) and tabulated the results.
Exhibit 5 Capability and Gap Analysis
This analysis confirmed our suspicion that we were looking at a process problem. The areas that scored highest in the gap (difference between importance and capability) were process related as shown in Exhibit 5.
Our next activity was to create a proposed Solution Set to address the challenges identified so far. This Solution Set was described in the form of a Detailed Process Map partially shown in Exhibit 6. The Process Owner is shown on the left, the process, document, activity (with shadow identifying training needs), stored data and tool with interfaces are identified in the body of the exhibit. The depth boxes at the lower left reflect mandates we are employing from our mother company.
This was the most comprehensive view of where we needed to go and will be a living document, updated as we progress.
Exhibit 6 Solution Set
We also performed a Cost/Benefit Analysis, but that contains monetary data that is not appropriate for a public forum. Suffice it to say that the benefits of getting organized and structured to execute programs in an orderly fashion offered a significant payoff in profits, on contract growth and new business (based upon successful past performance).
Improve
The first step in our improvement phase was to create an Implementation Plan (see Exhibit 7).
Exhibit 7 Implementation Plan
This plan includes several specific recommendations:
- Create Program Management Center of Excellence (PM COE) crossing all business segments
- Goal of consistency in planning and reporting across all projects and programs
- Led by a Program Management Executive position
- Implement “the details” as identified by the Green Belt Team including Corporate “Tailored Mandates”
- Chair a PME Council
If you recall, earlier in the Define phase, we created several goals for the PM COE. At this point, we confirmed these goals and provided further definition:
- Consistent Planning
- Resource loaded schedules providing time-phased expenditure profiles
- “Auto drive” financial data such as Sales and Manpower Forecasts from “real data”
- Consistent Reporting
- “One set of books” for all program reporting driven by the planning mentioned above
- Tailored Program Review templates with “auto populated” financial data
- Digital Dashboard providing “stoplight” program status for all programs as shown in Exhibit 8
Exhibit 8 Digital Dashboard
- Sufficient, flexible toolset
• Cost planning tool like custom Excel™ spreadsheets or M*PM™
• Scheduling tool like Microsoft Project™ or Primavera™
• Data depository like eProjects™
• Reporting front end with drill down capability like the Digital Dashboard shown above
- Trained and certified Program Managers
• Project Management Institute™ Program Management Professional™ certification
• Company specific training in processes and tools
- Track record of success
• Establish program status reporting metrics
• Accumulate and use for the management of programs
- Identify and optimize Critical Interfaces
• Engineering Center of Excellence re: design processes
• Business Development process interaction
Control
The control phase of the Program Management Center of Excellence is yet to be executed. In this phase we will instantiate process and tools, accumulate metrics, gather feedback (see the CTQ‘s in the Define section), revise process and go through the loop again for continuous improvement.
Summary
Program Management Excellence is a continual pursuit. The target is moving up the scale as more and better techniques are discovered and the body of knowledge is expanded. We must keep moving towards the goal, even though we can never reach it.
When we get right down to it, the bottom line of all excellence in program management is discipline. Yes, we need the right people, proven processes and tools, but the best collection of certified program managers with excellent process and a full toolbox will fail without the discipline of compliance. So our job is to implement the recommendations, which have received full authorization by our leadership team, and begin to enforce the discipline necessary to achieve our goals.