Capturing Cash

Most Six Sigma applications pertain to increasing the efficiency of a key process by focusing on decreasing operating expenses and consequently increasing the bottom line. Few applications address the organization’s top line, or revenue-generation function.

Improving the disposition of business opportunities, however, is strongly tied to an organization’s top line.
For a consulting firm, business opportunities—or leads—are the lifeblood of existence and sustainment. It is, therefore, imperative that opportunities be routinely and accurately identified, documented, followed up on and handled properly.

When the idea for this Six Sigma project was first introduced to the consulting firm’s manager, the initial reaction wasn’t warm. That was primarily due to two reasons: First, the manager believed opportunities were already captured through the existing system. Second, there were other, more pressing priorities. Nevertheless, the manager eventually signed on to the project after being convinced it would not interfere with employees’ operational work.

Following the define, measure, analyze, improve and control process, the first step was to define the problem. It was quickly realized this important step was not possible before first clarifying and agreeing on four key terms:

1. Opportunity. An opportunity is any instance of potential sale that is initiated by a staff member, client or any other external person. It is important to note that an opportunity can be specific or general. A specific opportunity pertains to a particular client order opportunity, whereas a general opportunity creates potential for one or more client order opportunities. Examples of a general opportunity are qualifying the firm as a provider at a major potential client or partnering with an associate to deliver one or more services.

2. Disposition. A disposition is the final fate of the opportunity. This ideally could be an actual order request, proposal acceptance, proposal rejection, qualification registration or partnership with an associate. Such dispositions are deemed appropriate.

3. Appropriate. Often, however, an opportunity can get hung up for a long time by a potential client, associate or even inadvertently by a staff member. This leads to its leak—disposition short of appropriate—because involved parties are preoccupied with more urgent, yet not necessarily more important, tasks.

4. Leak. Some potential clients might not notify the firm when a competitor is chosen for an order. An opportunity is considered lost if it did not get appropriately disposed of, meaning it did not have a clear final fate.

How it all started
In this small firm, it was not unusual for employees to avoid complex solutions, especially to seemingly simple problems. Consultants, especially senior ones, relied on the executive secretary to keep track of their agendas, mixing opportunities with other unimportant commitments and activities.

Business opportunities unduly received the same level of attention. The executive secretary registered the tasks and opportunities in an electronic calendar if they pertained to a specific date. Otherwise, she jotted them down in her notebook. The executive secretary reminded the consultants of their tasks, trusting they would award opportunities due importance. Engineers did the same as the executive secretary, but each relied on his or her own system.

One of the firm’s consultants recalled situations in which he, after being distracted with other chores, remembered a certain opportunity he had thought of or been contacted about. He would ask the executive secretary about it, and the executive secretary, in turn, took time trying to figure out what happened to it. Sometimes, the opportunity was recovered, but in many instances, it was found to be lost or, at best, delayed.

Performance measure
The opportunities appropriate disposition rate (OADR) was developed to measure performance with regard to business opportunities. OADR is calculated as follows:

To measure the current OADR performance, about 30 opportunities were examined from 2013. Some of these opportunities were recorded by the executive secretary, while others were identified through a group recall exercise. The current OADR was calculated to be about 67% at best, meaning only 20 of the 30 opportunities had appropriate disposition. A higher OADR would provide the firm greater business opportunity and thus increased revenue generation.

In a meeting with management, it was agreed that the target OADR should not be less than 95%. In other words, at least 95% of opportunities should be appropriately disposed of.

Analysis and improvement

A brainstorming meeting was held to identify the causes of improperly disposed of opportunities, or leaks. An initial list was generated and organized in a draft cause and effect diagram. The diagram was explained to employees, who were asked to review the diagram and provide their input by a given deadline.

Figure 1 shows the final resulting diagram. Close examination of the diagram revealed a formal process or system for recording opportunities would solve the majority of the problems—at least 10 of the 16 causes.

Next, the current process of opportunities disposition was diagrammed to help us visualize the improved process. A draft process was developed through interviews with selected employees and fine-tuned based on the feedback received from the executive secretary (Figure 2).

Basically, the process worked like this: The initiator of the opportunity undertook three options—register the opportunity or ask the executive secretary to register it, pass it to a colleague or directly initiate action on it. The opportunity may involve further processing, but all of this took place without formal guidelines.

The team was surprised at the chaotic nature of the process. After further investigation, team members learned expensive follow-up software had been procured a couple of years prior, but it wasn’t used because of its complexity. Many of the required follow-up entries were not relevant to the simple nature of the firm’s business, and employees decided it was too cumbersome.
After analyzing the current process and cause and effect diagrams, the following design guidelines were developed for the new opportunity disposition process:
• Use a quick-and-simple way to register opportunities, with an option for a verbal initial registration.
• Use a quick-and-simple way to follow up on opportunities until appropriate disposition.
• Use a centralized and universally accessible opportunities database.
• Apply a general rule requiring opportunities not go more than one week without action, unless specified otherwise. For example, if there is a more pressing opportunity that must be taken care of or the client delayed response to a clarification inquiry.
• To ensure integrity of the opportunities database, assign an administrator to manage it.
• Use color coding to denote opportunity owners (those responsible for follow-up) and past deadline opportunities.

A new process was drawn, shown in Figure 3. The opportunity moves from initiation to registration, where identification of an initiator, initiation date, contact person, organization, subject and owner is required (Figure 4).

The executive secretary monitors the registration and consults with the initiator during the first period of implementation if there is a question on the registration section. Microsoft Excel is used to register data, and the cloud application Dropbox is used to ensure universal access.

After registered, the opportunity is followed up on by the owner, who must observe the preset deadline. If the deadline for an opportunity passes, the corresponding cell in the N_date column turns yellow.
At the end of the working day, the executive secretary reviews the N_date column, and if any cell is yellow, the secretary sends a reminder message telling the owner to take action.

After an opportunity is appropriately disposed of, it is moved into the "properly disposed of opportunities" sheet.
Assuring permanence
After developing the solution, the authors of this article closely followed up on implementation.
The objectives were to identify opportunities to fine-tune the solution based on employees’ experiences and to ensure that the solution was being used properly.
The control period lasted about six weeks, while the solution went through several enhancements. Incorrect use of the solution by some employees was observed and appropriately corrected.
After six weeks, we had a meeting with the consultants, engineers and secretary to receive final feedback before closing the project and to measure the new OADR value.

The participants agreed opportunities were being properly registered and disposed of. They also agreed they liked recording all opportunities directly into the opportunities database. During the meeting, none of the participants could think of an opportunity that was leaked, which led to the conclusion that the targeted performance was achieved.

This project demonstrated the robustness of the Six Sigma approach as a tool to address problems related to revenue generation.
Another important lesson learned was that small firms should not rush into buying complex software. Let the clear definition and analysis of a problem drive the buying decision, if necessary.

Finally, in the majority of real-life Six Sigma applications, there are three required quality tools: a flowchart, cause-and-effect diagram and brainstorming. The real challenge is effectively integrating and leveraging these tools in the context of the problem.

Article Reference: QP