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Abstract:
Oftentimes we are sent to attend classes on various topics where the material is
applicable to our work situation. However, we know deep inside that even though
we know this material is applicable and can make our lives easier, our
management will never allow us the latitude to implement it. This article will
strive to convey our experience with how to effectively convince management that
RCA is a worthwhile process.
Let?s
face it, management of any organization is typically the entity chartered with
fiscal responsibility when it comes to the company funds. They are deluged with
potential projects that promise the world in terms of returns are extremely
important to the originators of the project. The best way to sell your
management on any concept is to put yourself in their shoes.
If
we are in management?s shoes, we have certain corporate objectives in terms of
Key Performance Indicators (KPI) to meet. We are budgeted a certain amount of
funds in an effort to return a certain Return On Investment (ROI) of these
funds. Therefore, while management may feel that we are good people that is not
the criteria by which they will select a project to support. When dealing with
most management?s in an effort to sell a project, we must develop the
equivalent of a business case for them to review.
What
is involved in building a business case? It is all about the numbers. We can
rationalize a slew of reasons why a project should be supported like, 1) it will
increase employee moral, 2) it will assist our relations with the community, 3)
we want to treat our people like assets, or the like, but it all boils down to
the bottom line. If we cannot prove its ability to generate (in some fashion) a
profit for the company, than the chances of implementation are waning.
The
following is an outline of a business case for selling RCA to management. These
are based on our experience and meant to express general guidelines.
Project Acceptance Criteria
? Typically any manager will have either a written and/or unwritten list of
criteria in their mind by which they will evaluate a project?s viability.
Examples are 1) the project must return XX% over a year?s period, 2) the
project must not conflict with capital projects already on the books, 3) the
project must have a synergistic effect both upstream and downstream, or 4) the
project must increase throughput by 5%. It would be very helpful upfront if we
could discuss these criteria with our management and have them provide us
guidelines by which we could develop our business case. If we know what the
rules of the game are, we can play by them. This is an ideal situation, but not
a deal breaker if they do not wish to provide us such information.
Establishing the RCA
Potential ? Once we have an idea of the KPI?s that our management is
responsible for, then we can start to mold our RCA effort around attaining those
goals. If the manager is responsible for increasing throughput through his unit
by 5% in the calendar year, than that will be the scope of our business case. At
this point we would want to know what is the potential design capacity of the
unit in its current state and compare it against what we are actually producing
on an average basis. This difference is commonly referred to as the GAP. This
gap should be first expressed in units that the manager will understand (i.e., -
tons/hour, feet per minute, barrels per day). Then these units should be
converted to a dollar value based on the current market value. This dollar value
will depict the potential that is available immediately within that unit. This
is the carrot.
Obtaining the Identified
Potential ? Now we must determine what are the specific reasons as to why
we are operating at a certain level versus our potential. This would involve our
conducting a modified Failure Modes and Effects Analysis (FMEA) on the unit in
question. This process would break down the system into subsystems. Once these
subsystems are identified, we would use historical production data (from hourly
workforce and electronic data systems) to find out the specific reasons that
throughput was interrupted. We would record how many times a year these events
occurred and how much they cost when they did occur. Cost/occurrence include
(but are not limited to) manpower dollars expended, material replacement costs
and lost downtime (lost profit opportunities). At this stage we want to sell the
modified FMEA concept and the need to do so in order to focus our RCA efforts.
We must now estimate the cost to conduct this modified FMEA on the unit. This
typically involves man-hours to conduct. An average modified FMEA on an
average sized process will require about 40 man-hours at the loaded rate (which
includes benefits).
The Pareto Cut ?
Theoretically Once the modified FMEA list is complete, we will have an
annualized cost per event. The aggregation of these events would equate to the
gap between actual and potential production. At this point, we would explain to
management that we took a Pareto Cut of the FMEA data and identified the 20% or
less of the events that accounted for 80% or more of the losses. This 20% of the
events can be referred to as the ?Significant Few?.
The PROACTâ RCA Process
? This is the point in the business case where we would explain the PROACTâ
RCA process. This can simply be done by explaining the acronym like such:
PR
eserving Event Data ? We would highlight and emphasize the need
to collect data surrounding the identified Significant Few just as a detective
would at a crime scene.
Ordering
the Analysis Team ? We would highlight and emphasize that a Principal
Analyst is one that can remain objective and facilitate the RCA process versus
participate.
Analyze
the Data ? Here we would explain the Logic Tree process, which assists
with identifying Physical, Human and Latent Root Causes. The ultimate goal of a
RCA is not only to eliminate the risk of recurrence, but more importantly to
transfer the logic used to solve the event to others who could use the
information.
Communicate
Findings & Recommendations ? This would focus on the need to have our
recommendation from RCA reviewed and approved in order for success to be
recognized.
Tracking
for Bottom Line Results ? This is where we would identify key metrics,
which would prove the positive effect our recommendations have had on the
operation.
Average
times to conduct an RCA are difficult, as the nature of the event will dictate
its complexity. Estimates would need to be developed to determine the number of
man-hours required of team members and the costs of any testing to prove
hypotheses. These numbers should be liberal allowing for the worst case, or high
end to be exposed. Rest assured that the returns would still far exceed the
costs to conduct the analysis.
Calculating the ROI ?
The business case should conclude with a calculation showing the estimated
potential returns divided by the estimated expenses to conduct the modified FMEA
and RCA. A timeline should also be established to show when the effects of the
analysis will start to show up on the bottom line.
Like
any engineering project, we must demonstrate the returns that the project will
provide and compare against the funds that will be required to obtain the
returns. We are doing the same thing with a thought process called RCA versus
working with a physical process or piece of equipment.
Selling
the PROACT RCA process should not be difficult as the ROI?s are astounding.
The PROACT concept is not a new fangled idea. It is field proven and the basis
for any investigative occupation (i.e. ? detectives, NTSB investigators,
doctors, etc.). In my text entitled Root Cause Analysis: Improving
Performance for Bottom Line Results (ISBN: 0-8493-0773-2), we were
fortunate enough to have three of our clients publish their actual RCA results.
The ROI?s ranged from a 3,200% to 17.900%. The key to the sell is to make it
so attractive that it would seem irrational NOT to do it!!
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