Monday, April 13, 2009

save money means save money

the following blog post from Mark Woeppel "Is Your Continuous Improvement Organization a Profit Center?" summarize one of the major misunderstanding of continuous improvement in many companies. not too much to add, beside that i can agree to the suggestion within the post based on personal experience.

same statements must be made for any (IT) project claim to improve existing processes. while working with the stakeholders to identify the scope, requirements and more important the rational for those i often hear the statement that a particular requirement / process change / feature improves the process and therefore saves money.

after the project is finished and in operation, the same amount of people with at least the same amount of budget working on the "improved process" and the upfront investment already gone. based on simple calculation, the company just loose money with such a project (even if the cause - see below - might be different).
that leads to continues and increasing management distrust in changes stated as "money saver" and subsequent projects are more likely to rejected from senior management.

  1. project scope or requirement's simple wasn't target oriented. means they do not really help to improve the overall process they more or less leads to "doing the same in a different way".
    that is a common project failure and can be avoided if project / requirement / system management skills are improved or more simple by doing a better job. the project teams fails to address the goals.
  2. other process parameters are changed as well. for example the process throughput increase, additional process outputs are created or budget / people now assigned to other activities within the same department to resolve bottlenecks in this areas, ....
the second one is the more important one, because this means that the change has an impact but the company isn't able to express / see this in terms of cash. means budget is simple moved from one service item to others.

how to avoid this?

divide the individual rationals for a project in measurable and independent topics and for each of them assign responsible person from senior management. means if a certain amount of requirement state to save money, the budget schedule for the period the result of the project is in operation must be reduced. if on the other hand upcoming new demands must be addressed those must be implemented in budget schedule as dedicated position.

sounds trivial, but believe me that does not happen very often in real world situations. the reason for this is simple -- it is a pretty hard work and sometimes not easy to define the saved money. This not only helps to get project agreed, provide traceability for senior management but also tries to get the bottom of the stated effect (which sometimes simple is not right which leads to effect described in 1. reason).


the different goals and results can be traced and measured and if a project or few parts of a improvement projects intent to save money, you have to save money means you have to have reduced budget if the project succeed.


save money must mean saved money at the end. All other "statements" and explanations are not valid especially in todays business context....

No comments: