What is Six Sigma Project Charter? Components

What is the Six Sigma Project Charter?

Project Charter is a simple yet highly useful tool used in the Six Sigma methodology. Managers are generally advised not to overlook this tool as it is one of the main tools that find use in the Define phase of the Six Sigma methodology. The Define phase is officially considered to be complete when all the fields in the Project Charter have been precisely filled up.

A Project Charter also known as Project Definition or Project Statement is an official document in Six Sigma that lays down the scope statement of the project. This document also contains the objectives of the project and details about the project participants.

The document delineates the roles and responsibilities of the team members, identifies the main stakeholders of the project, and determines the project manager’s roles and authorities related to the project. It is also a reference document for the future as it contains the Terms of Reference.

Characteristics of a good Project Charter are as follows:

• Reflects the gist of the project
  
• Provides an understanding of the project to all stakeholders.
  
• Functions as a contract between three parties, i.e. the project sponsor, key stakeholders, and the project team.

The inability to fill in all the details in the Project Charter properly may be an indication of a possible rethink of the project or may point to the necessity of more data collection to justify the starting of the project. Different companies may have their design template for the Project Charter. Two vital details that a Project Charter must incorporate are the project scope and project objective.

The project scope must be prepared before the start of the Six Sigma project. Besides other essential details, the project scope must also state clearly the start and end points of the project. A project whose scope is ill–defined in the Define phase often ends up in failure.

Too wide a project scope can also lead to project failure because project owners may wrongly believe that they will be in a position to solve all the big problems of the company with a single same project. Therefore, it is recommended to keep the project scope as tight as possible. However, a scope that is too narrow also does not contribute to project success.

The objectives of the project define the expected outcomes that are desired to be optimized by the project. A project may have single or multiple objectives. The Project Charter should list all objectives. Project objectives should be measurable, and if not, a measurement system should be designed in the project’s measurement phase. An organization cannot measure its improvement if it is unable to measure the output or the changes that result from improvement measures.

The Project Charter should contain the baseline, entitlement, and target for each objective. A baseline is defined as the current measurement of output. The baseline reflects the current process behavior. Managers should define a target that should specify the measurement of the output at the end of the project. The project should have Specific, Measurable, Attainable, Relevant, and Time-bound (SMART) goals.

The Six Sigma Project Charter should not be allowed to remain rigid. This is so because the information process and assumptions may change with the progress of the project.

Components of Project Charter

As stated earlier, creating the Project Charter is the first step of the Six Sigma methodology, which is done in the defined stage of the DMAIC process and is critical for the success of a project. Some important components of the Project Charter are as follows:

• Title of the Project
  
• Project Black Belt/Green Belt
  
• Mentor/Master Black Belt
  
• Expected Project Start Date
  
• Expected Project End Date
  
• Cost of Poor Quality
  
• Business Importance of the Process
  
• Identification of Process Issues
  
• Process Start and End Points
  
• Project Goals
  
• Measures of a Process
  
• Team Members
  
• Project Timeframe

Title of the Project

The Project Charter serves as a source of reference for managers in the future. Hence, it is important to give the project a title that is descriptive of its basic intent. This will help the concerned people quickly reference a project by searching it based on keywords and phrases. For example, if the claim files management is targeted to be improved in a project, the project may be titled as claim file cycle time or claim file variation reduction.

Project Black Belt/Green Belt

Black Belt and the Green Belt individuals lead a project. Early identification of project leaders (Black belt and Green belt holders) is important because the organization’s management needs to be familiar with the project leader. The management must know whom to call when any additional information is required.

Mentor/Master Black Belt

A Master Black Belt functions as an adviser who can be approached for problem resolution as and when required during the entire course of the project. This resource must be identified as a helping hand in the early stages of the project itself.

Expected Project Start Date

Setting project timelines helps the project team steer the resources at its command in the right direction. The project start date is essentially the date on which project activities are officially launched.

Expected Project End Date

Generally, the mentor (Master Black Belt) or the project leader advises on the expected date of project completion depending on the project’s complexity. It is anticipated that the project leader and the team shall be given adequate time to be able to complete the project within the given business circumstances, work requirements, holidays and leave schedules, etc. In many projects, a set of general guidelines is established regarding how long the project should take.

Cost of Poor Quality

Quantifying the cost of the quality of the process output may not always be an easy task. Poor outcomes such as scrap, excess hours spent by employees performing manual and redundant activities, fines levied for violations of product requirements, etc. – all need to be quantified. Quantification of waste gives an estimate of savings that can be made after the implementation of the Six Sigma project and also help take decisions as to whether it is a project on which the organization must focus.

Business Importance of the Process

A business is run through a collection of processes. Thus, it is important to assess the effect of process improvements on the business. For example, if an organization (a hospital) intends to improve its patient discharge process, it could identify how its current process compares with that of the other hospitals and how it is an important aspect of the organization.

Identification of Process Issues

Once the importance of a process to the business is established, its fragmentation can be discussed. Continuing with the hospital example, suppose there is no online communication between departments like pharmacy, pantry, etc. from where clearance is required before the discharge of a patient. As a result, patients do not get their discharge bills instantly which leads to frustration. Also, manual processes lead to errors.

Process Start and End Points

Though it may be an ideal situation to cover as many aspects of a process as possible in the project, it may not be practically feasible to do it. Hence the project leadership must determine the project’s start and end points.

Project Goals

The goals of the project must be documented in the beginning. The goals are the expectations from the project. Project leaders may establish objectives such as a reduction in Turn Around Time (TAT) by 50%, elimination of defects, or reduction of defects by 95%, etc.

Measures of a Process

Measures to determine the effectiveness of the project should also be defined in the Project Charter. Examples of these measures could be the dollar value per item or TAT in days.

Team Members

Members who shall be holding important roles in the team need to be identified. While the remaining team can be identified at later stages, three important people who will hold the following designations must be identified:

• Project Sponsor
  
• Project Leader
  
• Subject Matter Experts (In the case of cross-functional project teams, all team members may not be aware of each other’s positions and skill sets. Hence, SMEs should be identified and documented at this stage.)

Project Timeframe

After identifying the project start and end dates, it is also important to document important milestones that are expected to be achieved. These are best identified by project mentors and MBBs owing to their relevant experience.