Project Charter and

Goal Statement
 Where do ideas for an improvement project come from?

Source for an improvement project is the appearance of any kind of
waste as well as quality issue in any process, manufacturing or
transactional

The aim is to

Eliminate waste, and

Reduce variation within a process/product

The project may be generated from the

Operating Agenda - Annual operational plans

Improvement potential as output of a Lean Assessment

Deteriorating quality

Customer complaint Identified through balanced scorecard

…

Continuous Improvement Page 2 The Project Charter

 Who Develops the Project Charter?

The Project Sponsor is accountable for developing a draft Project
Charter, with assistance from:

CICs, who may start the process of filling out the Project Charter

Controller/Finance

Validate financial estimates

Generate Buy-in

BU/Plant Leaders (level as necessary)

Generate Buy-in

Black Belt, potential team members

Utilize process expertise

BB – It is your RESPONSIBILITY to make sure a well defined

Charter is developed and shared with the team ON TIME
Continuous Improvement Page 3 The Project Charter
 Life Lead of a Project Charter
Project
Birth Scoping Project Charter DMAIC
Complete
Creation

Business Impact Problem Statement Business Impact Problem Statement

Business Impact Problem Statement 6 1 6 1
6 1

Key Metrics Project Scope Key Metrics Project Scope

Key Metrics
2 Project Scope
3 2 3 2 3

Project Plan Team Selection Project Plan Team Selection

Project Plan
4 Team Selection
5 4 5 4 5

• Ideas Generated • Idea could be • Data collected to • Data Collected • Share as Best
a project support a project • Analysis Done Practice
• Solutions Generated

• It’s a couple • It’s a bunch of folders, • It’s a cleaned-up

• It’s a phrase • It’s 1-2 pages
sentences files, notes, etc. set of files & data
• 10 seconds • 2-5 hours
• 5 minutes • Weeks of effort • 2 days of clean-up

• Value unknown • “Ballpark” value • Value established (+/-) • Value, costs, timing • Value is Fixed
estimated are refined (D & M) • Metrics monitored
& value captured

Screening Prioritization according

to Operating Agenda
Continuous Improvement Page 4 The Project Charter
 Project Chartering

The charter defines the team mandate

The Project Charter does NOT solve the problem

It is a living document, that will change over time in agreement with
Sponsor… even up to analyze phase

“Catch Ball” Process between

Sponsor, OPEX Director/CIC, MBB & BB

Continuous Improvement Page 5 The Project Charter

 Project Charter Elements

Business Impact 6 Opportunity / Problem Statement 1

• Why should we do this project? • What is happening (describe in detail)? What “Pain” are we
• Benefit: What is the quantified value creation of the or our customers experiencing?
project according to ALCAN CI financial guidelines?
• Where is the problem occurring?
• Benefit: What EHS First risks are we aiming to • When did the problem start?
minimize? (exposure, frequency)
• Effort: What are the expected CAPEX and direct
expenses? (cash out)
• Which Operating Agenda item is supported by this
project? What program is this project in support of
(e.g. AOS)?

Key Metrics 2 Project Scope 3

• Define Y = f(x) • Scope in - What are the boundaries of the project (start
and end steps of the process)?
• SIPOC – who is the Supplier, what are the Inputs, what is
the Process, what are the Outputs and who are the • Scope out – Areas not addressed.
Customers?
• What are our improvement objectives and targets?

4 Team Selection 5
Project Plan
• What is the estimated completion date or the duration • What areas should be represented on the team?
for the project? • What is the overall time committed by the team in man -
months?

Continuous Improvement Page 6 The Project Charter

 Project Charter Development Is an Iterative Process

Scoping can
Scope must Scope must change what
address the bulk address the bulk measurements Creating high level
of the problem of the problem needed to be Project Plan may
identified identified tracked affect scope

Opportunity/
Business Project Project
Problem Key Metrics
Impact Scope Plan
Statement

Continuous Improvement Page 7 The Project Charter

 Business Impact 6 Problem Statement 1

Key Metrics 2 Project Scope 3

Project Plan 4 Team Selection 5

Opportunity/ Problem
Statement
 How to Formulate Problem Statements
A CLEAR CONCISE STATEMENT WHICH EXPLAINS:
THE NATURE OF THE PROBLEM (WHAT)
THE LOCATION OF THE PROBLEM (WHERE)
THE TIME WHEN THE PROBLEM OCCURRED (WHEN)
THE IMPACT OF THE PROBLEM (WHY IT MATTERS)

AND DOES NOT:

ASSUME CAUSES
SUGGEST SOLUTIONS
FOCUS BLAME

Continuous Improvement Page 9 The Project Charter

 Opportunity/Problem Statement
Example of a Bad Opportunity / Problem Statement:

The Order Delivery process needs to be improved. XYZ Plant has
received numerous customer complaints. XYZ associates also
confirm there is a problem. Improving the process will increase
Customer Satisfaction scores and EVA.

Example of a Good Opportunity / Problem Statement:

The XYZ Plant shipped $5.6 million of products in July, many of which
were late (what). Data collected from customers for the last 6
months (when) indicates that an average of 56% of West Coast
customers (where) experienced problems but only 9% of other
customers experienced problems. During the month of July, XYZ had
30 late shipments (extent) to the West Coast worth $790,000.

Continuous Improvement Page 10 The Project Charter

 Business Impact 6 Problem Statement 1

Key Metrics 2 Project Scope 3

Project Plan 4 Team Selection 5

Key Metrics
 Key Metrics Objectives

Specifically, what are we going to do and deliver?

What are our improvement objectives and targets?

How will success be measured? What specific parameters will be
measured?

Define Y = f(x) as we currently understand it

Refer as much as possible to the Balanced Scorecard KPI

Continuous Improvement Page 12 The Project Charter

 Key Measures and Y = f(x)

Measures give us the context for understanding the impact of the problem,
help us value projects relative to each other, and provide a “scorecard” to
assess success

Financial and customer metrics will be the basis for valuing projects (the
big “Y”)

Process and input variables are key drivers of these metrics (the “X” s)

Thus, we will be measuring output, process and input measures

Financial/Customer Output measures (Y in Y=f(x))

Example: Revenue, Cost, Customer Satisfaction, On Time Delivery

Process measures (X in Y=f(x))

Example: Efficiency, System Availability, Lead Time, Defects in the
process, Scrap

Input Measures (X in Y=f(x))

Example: Volume, # of customers, Quality of orders, Quality of
Information

Continuous Improvement Page 13 The Project Charter

 What Is the Y?
How to Establish the Project Goal, the ‘Y’

Meeting or exceeding customer requirements, established through

the VOC process

Meeting or exceeding business requirements, established through the
VOB process (i.e. requirements of the Process Owner)

Meeting or exceeding process performance, established through the
VOP process

Benchmarking the performance of direct competitors

Benchmarking ‘best practice’ performance from companies in non-
competitive industries (e.g., assembly line process cycle efficiency at
Toyota)

A portion of the process ‘entitlement’, typically 70%

Continuous Improvement Page 14 The Project Charter

 Steps to Creating the Y = f(x) Equation

Complete a SIPOC map of the process

For each of Quality, Speed and Cost categories, establish the Output
Metrics in relation to the project, I.e. requirements, for the process, the ‘Y’

Gather Voice of the Customer (VOC) information to establish customer
requirements, typically Quality requirements

Gather Voice of the Business (VOB) and Process (VOP) information from
the Process Owner, typically Speed and Cost requirements

Evaluate the process to establish Process Metrics, the ‘X’

Using process expertise, consider Quality, Speed and Cost metrics which
describe the process and help the evaluation of what is driving the ‘Y’

Evaluate the inputs to establish Input Metrics, the ‘X’

Using process expertise, consider Quality, Speed and Cost metrics, as
well as quantitative characteristics of the inputs (ex. Transaction volume
and variability) which describe the inputs and help the evaluation of what
is driving the ‘Y’

Continuous Improvement Page 15 The Project Charter

 Key Metrics Development
Creating the SIPOC Map and Developing Metrics (Example):
Suppliers Inputs Process Outputs Customers
Billing Process
• Billing Dept. staff • Delivered
• Customer invoice
database
• Shipping
information
• Order information

Input Metrics Process Metrics Output Metrics

• Accuracy of • System responsiveness • Rework % at each step • Invoice accuracy
database info. • Accuracy of order info. Quality
• Staff expertise • Accuracy of shipping info.
• System up-time
• Time to receive order info. • # of process steps • Invoice lead time
• Time to receive shipping • Time to complete invoice
information • Time to deliver invoice Speed
• Delay time between steps

• # of billing staff • # of process steps • Cost per invoice

• Invoices processed/month Cost
and variability
Continuous Improvement Page 16 The Project Charter
 Example of a “Good” Charter:

Business Impact Opportunity / Problem Statement

Product L Revenue: 20% $5.6M = $1.12M / month 6 Data collected from customers for the last 6 months (when) 1
Revenue loss potential: 75% of Product L = $0.8M/month indicates that an average of 56% of West Coast customers
BGP Loss potential: 15% of Revenue = $1080k/year (where) experienced late deliveries on Product L (what) but
Capital: none expected only 9% of others customers experienced problems. The XYZ
Expenses: $50k for project team and improvements Plant shipped $5.6 million of products in July (avg month),
EVA from project*: $0.81M/year 20% of this was Product L. During the month of July, XYZ
VC = $4.963M (looking out 10 years) had 30 late shipments (extent) to the West Coast worth
$790,000, all of them from Product Line L. 5 of the 7 key
Risk: HIGH – if we don’t do this project we will lose
customers (75% of the revenue) have said that “they WILL
significant revenue take their L business elsewhere if the problem is not solved”
*Mgmt Team has agreed to this based upon budget
Key Metrics Project Scope
2 Scope In: The project will address deliveries made of 3
The goal of this project is reduce late shipments of Product Product L to customers on the West Coast from XYZ
L to West Coast customers from plant XYZ to 10% of the plant, and encompass the following processes:
total shipments (achieve 90% on-time delivery) - Order entry and management
- Production (L line only)
Y=on-time delivery of Product L - Shipping
x=plant capacity, shipping method, order promise date, Scope Out: The project will not address other customers /
order accuracy regions. The project will not address suppliers or the
sales process, or improvements to other product lines.
Project Plan: Team Selection
D = 2 weeks (charter solid, customers ready) 4 Project Lead: Joe BlackBelt (50% time commitment) 5
M = 2 weeks (data is available, process already mapped)
A = 4 weeks (root causes could be tough to find) Process Experts: Order Management x1, Production x1,
I = 4 weeks (plant at capacity, improvements will have to be Shipping x1, Customers x2 – one must from ABC Inc. (all
done “off-line” 20% time commitment – approx 1 day/week)
C = 2 weeks (team members heavily involved, sponsor 100% Project Sponsor: Jane PlantManager (30% time commitment)
committed)
Total duration: 3.5 months Total man-months: 3.5 months * (1x.5+5x.20+1x.3) = 6.3
This project needs to be run immediately to reap the benefit.

Continuous Improvement Page 17 The Project Charter

 No data, numbers that
Example of a “Bad” Charter: support the stated
problems, % delayed?

Business Impact Opportunity / Problem Statement

6 1
$1M more revenue/month The Order Delivery process needs to be improved. XYZ
VC=? Plant has received numerous customer complaints. XYZ
Capital and expenses = $0 associates also confirm there is a problem. Improving
Risk=? the process will increase customer satisfaction scores and
EVA.
What is the value?
Key Metrics Project Scope
2 3
Improve on-time delivery All deliveries
Y=on-time delivery
x=?
X missing, guidance for critical factors Scope seems very broad
needed as starting point of BB
Project Plan: Team Selection
Project needs to be done IMMEDIATELY 4 Project Lead: BB 5
Team Members: 4 resources
Project Sponsor: Jim Supr (from Shipping)

Continuous Improvement Page 18 The Project Charter

 Consequences of Writing a “Bad” Project Charter

Business Unit leadership may not support the project

Black Belt and team spend too much time in “Define”

Scope too large or project teams working outside of intended
scope – avoid trying to “boil the ocean”

Quality of the solution compromised

Risk not having proper team membership or process owners not
seeing value in providing team members

Project benefits not well understood

The end result of a “bad” charter is extended project cycle times

and compromised quality of project results.

Continuous Improvement Page 19 The Project Charter

 Summary: Project Charter Evaluation

Another way to evaluate a Charters’
completeness is though an evaluation
methodology called “SMART.” Specific
• Does it address a real business

This acronym is a checklist to ensure problem?
that the charter is effective and
thorough. Measurable
• Are we able to measure the problem,
establish a baseline, and set targets
for improvement?

Attainable
• Is the goal achievable? Is the project
completion date realistic?

Relevant
• Does it relate to a business objective?

Time Bound
• Have we set a date for completion?

Continuous Improvement Page 20 The Project Charter