Do you sometimes feel like there is just so much that needs to get ‘fixed’ or needs your attention that you don’t even know where to begin? You are not alone. Every company in any industry has processes and procedures, which carry a high-risk factor and can add to your stress level if they are not followed or executed correctly. In fact, in 1949 the Military developed a procedure that helps to sort and prioritize all the different items that you have on your list. This procedure will help to identify what you should focus on first to eliminate your highest risk.
This tool is called Failure Mode and Effect Analysis (FMEA). It is a structured approach on how to identify the risk in terms of how different causes of failure impact your business and then helps to evaluate which of the items you should focus on first. Let’s say your company’s process on getting the billing out in time is not as good as you want it to be. And therefore your company suffers on under billing and keeps having issues with a stable cash flow. If you want to start working on this process you have a lot of different options on what to focus on first: PM’s understanding of the financial impact, PM’s accuracy of %-complete reporting on their job, PM’s Prioritization on the billing duties, accounting software’s capabilities of reporting, etc. If you try to work on all of these items at once it will feel like you’re not getting anywhere and you are stuck in quicksand. This is true since you are trying to focus on too many things at once while everyone is still trying to accomplish their primary duty of managing projects.
FMEA helps you to break the different elements down and to weigh them on how much impact they will have on the result being studied, underbilling in this example. Therefore, a couple items need to be identified: What is the potential failure, the cause, and what the potential effect will be, and if there are any process controls in place. After each of the items has been identified the expert group, which has been assembled to work on this project ranks how serious this effect can be, how often it potentially will happen, as well as if the controls that are currently in place will properly detect the issue. In Figure 2 you can find an example for the discussed billing issue. The last step includes multiplying the weighted numbers. Multiplying the values in columns’ (Severity), the value in column ‘O’ (Frequency) and column ‘D’ (Detectability) will result in the Risk Priority number (RPN) shown in the adjacent column. The RPN will identify the process steps that we need to focus on first. In our billing example, the accurate %-complete reporting and the PM financial understanding are the first two elements we need to focus on (RPN = 720 and 900).
If you are interested on how the FMEA tool can help you and your company to focus on the most critical items first please call (810) 232-9797