What is the source of value for your improvement project?

When possible and applicable, determine ROI from improvement activities.

Practitioners: tactical, integrative, and strategic

Identifying the source of value is not always an easy task. It is much more difficult if you wait until the improvement project is complete. Teams should be establishing and validating the assumptions of value throughout the entire project, from the problem statement to the post evaluations. Some organizations also look for value in three distinct areas namely direct saving, indirect savings, and avoidance.

In one project the challenge to explain and justify assumptions of value took three phases. The first between the plant manager and the project manager, the second between the plant manager and the project manager and the continuous improvement manager, and finally between this group and the executive vice president. The team asked frequently if their assumptions were correct. My response was consistent. We’ll only know if our assumptions are correct when the EVP either challenges us or gives our project the blessing.

Source of Value

The sponsor’s role is to bring the final verdict. We address the focus of the sponsor, and we deliver value according to the sponsors perspective. We should recruit the best subject matter experts throughout the project so that we are able to build the strongest case for our ROI assumptions. I would suggest that you have an accounting representative present in every project for this very purpose. They can either help us validate our assumptions from the official scorecard, or they can point us in the right direction when we are off in terms of our interpretations of the accounting data.