This document discusses how to align projects to a company's overall business strategy and needs through understanding critical-to-quality factors (CTQs). It provides a three-level CTQ drill-down framework to determine the CTQs from the shareholder level down to specific department metrics. Understanding the CTQ hierarchy allows workers to ensure their work contributes to priorities that satisfy shareholders, customers, and financial performance goals. The document uses an example CTQ drill-down and recommends practitioners apply the framework to identify level-three CTQs in their own area and align projects accordingly.

1. Section & Lesson #:
Pre-Requisite Lessons:
Complex Tools + Clear Teaching = Powerful Results
Corporate CTQ Drilldown
Introduction – Lesson 4
A review of how to align a project opportunity to the overall business
strategy and needs by understanding the business CTQs in a CTQ Drilldown.
None
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted by any means
(electronic, mechanical, photographic, photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.

2. o Why do we need to align our project to the business strategy and needs?
• In general, everyone wants to do work that’s meaningful and makes a positive contribution.
• What if we don’t see the value or positive results of our work?
 It could negatively influence how we see ourselves: “If my work isn’t adding value, then I’m not of value”.
 It could negatively influence how leadership views us and put our job at risk.
• If we want to know if our work adds value, then we must understand what the business values.
 Just as a small gear can indirectly affect the movement of larger gears,
we need to understand how our work (no matter how small) affects
the strategy and needs of the business at the top.
o How can we understand what the business values?
• The values of the business are also described as that
which is Critical to Quality (CTQ).
• A CTQ is a characteristic (often measureable) of what
the customer requires, expects, or considers a priority.
o What are the CTQs of the business?
• To learn the CTQs, you have to answer the following:
1) Who is the ultimate customer?
2) What does that customer want/expect?
• The following is a CTQ Drilldown that helps answer these questions.
 The CTQs are typically drilled down 3 levels deep and can be generally applied to almost any corporation.
 The following CTQ Drilldown includes some example measurements common in many companies.
Aligning to the Business Strategy and Needs
2
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.

3. Corporate CTQ Drilldown Example
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
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4. CTQ Drilldown: From the Top
o Who is the company’s ultimate customer?
• Hint: It’s NOT the person buying the company’s product or service.
 Yes, they are the primary revenue source, but the company’s success is based on net worth (i.e., equity).
 If the company mismanaged it’s funds, then more revenue won’t help – it only prolongs the inevitable.
• The ultimate customer is the Shareholder.
 The shareholder is the true owner of the company as represented by the Board. The CEO is the primary
steward of the company who is ultimately accountable to the shareholder.
 The satisfaction of the Shareholder can be measured by the company’s stock price.
o What does the Shareholder want or expect?
• The Shareholder’s CTQs are for the company to perform well (improve stock price) in two ways:
 Marketplace Performance (e.g., generally measured by various Analyst Ratings)
– The CEO and executive staff have only indirect influence over the company’s performance in the marketplace.
 Corporate Performance (e.g., generally measured by Earnings per Share or EPS)
– The CEO and executive staff have direct control over the corporate performance of the company.
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
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Shareholder
Satisfaction
(Stock Price)
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)

5. CTQ Drilldown: Level 1
o What is the CTQ for the Marketplace?
• Corporate Brand (e.g., corporate image, integrity, speculation of performance, etc.)
 This doesn’t mean the Marketplace doesn’t care about corporate performance, but that the Marketplace
represents the public perception of the company.
o What are the CTQs for Corporate Performance?
• Employee Satisfaction (e.g., % turnover, # of grievances/lawsuits, employee sat. surveys, etc.)
• Customer Satisfaction (e.g., % turnover (a.k.a., churn), customers sat. surveys, etc.)
• Financial Performance (e.g., EPS, Economic Value Added or OIBDA, Net Equity, etc.)
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
5
Shareholder
Satisfaction
(Stock Price)
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)
Level1
Corporate Brand
(Market Speculation)
Employee
Satisfaction
(% turnover,
grievances)
Customer
Satisfaction
(survey, churn)
Financial
Performance
(EPS)

6. CTQ Drilldown: Level 2 – Corporate Brand
o The CTQs for the Corporate Brand can be categorized by the following:
• Uncontrollable –areas the company can’t control
 Examples include the economy, government regulations, weather/disasters, etc.
• Controllable –areas the company can control or influence
 Examples include audits, advertising, government compliance, safety, environment, etc.
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
6
Shareholder
Satisfaction
(Stock Price)
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)
Level1
Corporate Brand
(Market Speculation)
Employee
Satisfaction
(% turnover,
grievances)
Customer
Satisfaction
(survey, churn)
Financial
Performance
(EPS)
Level2
Uncontrollable
(Various)
Controllable
(Audits, Industry
awards/rankings)
Influence, but not direct control

7. CTQ Drilldown: Level 2 – Employee Satisfaction
o The CTQs for Employee Satisfaction can be categorized by the following:
• Opportunities/Environment
 Examples include advancement potential, improving skillset/retention, working conditions, safety, etc.
• Compensation
 Examples include competitive wages, insurance benefits, time off, bonuses, discounted services, etc.
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
7
Shareholder
Satisfaction
(Stock Price)
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)
Level1
Corporate Brand
(Market Speculation)
Employee
Satisfaction
(% turnover,
grievances)
Customer
Satisfaction
(survey, churn)
Financial
Performance
(EPS)
Level2
Opportunities/
Environment
(Emp Satisfaction
Surveys)
Compensation
(Wages, Benefits)

8. CTQ Drilldown: Level 2 – Customer Satisfaction
o The CTQs for Customer Satisfaction can be categorized by the following:
• Product/Service – WHAT products/services we offer
 Do we offer the right products or services that meet the needs, wants and price-point for customers?
• Quality – HOW effective are the products/services we offer
 Are our products/services effective at meeting needs or wants to give the customer a perceived value?
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
8
Shareholder
Satisfaction
(Stock Price)
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)
Level1
Corporate Brand
(Market Speculation)
Employee
Satisfaction
(% turnover,
grievances)
Customer
Satisfaction
(survey, churn)
Financial
Performance
(EPS)
Level2
Product/Service Quality

9. CTQ Drilldown: Level 2 – Financial Performance
o The CTQs for Financial Performance can be categorized by the following:
• Manage Assets (part of the corporate Balance Sheet)
 Examples include how fast we collect cash (A/R), controlling asset purchases, capital investments, etc.
• Manage Liabilities (part of the corporate Balance Sheet)
 Examples include how fast we pay off debt, how slow we pay expenses (A/P), managing debt ratio, etc.
• Operating Revenue, Operating Expenses & Non-Operating Expenses (part of Income Statement)
 Examples include increasing revenue, decreasing bad debts, reducing payroll, efficient operations, etc.
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
9
Marketplace
Performance
(Analyst Rating)
Corporate
Performance
(EPS)
Level1
Corporate Brand
(Market Speculation)
Employee
Satisfaction
(% turnover,
grievances)
Customer
Satisfaction
(survey, churn)
Financial
Performance
(EPS)
Level2
Operating
Revenue
(OIBDA)
Operating
Expenses
(Net Expenses)
Manage
Liabilities
Non-Operating
Expenses
(Net Income)
Manage
Assets
Measured on
Balance Sheet
Measured on
Income Statement

10. CTQ Drilldown: Level 3
o What are the Level 3 CTQs?
• Level 3 CTQs drill down to key metrics and initiatives from their respective Level 2 CTQ.
 Level 3 is generally the lowest and most detailed level necessary.
 They are generally at the department-level and will vary across the organization.
 They are more likely to change over time compared to Level 1 and Level 2 CTQs.
o How can you know what are the right Level 3 CTQs?
• Level 3 CTQs are often outlined in any vision or strategy from departmental leadership.
 Any key metrics, projects or goals for the department are likely candidates for Level 3 CTQs.
 For these candidate CTQs, use your judgment as to which Level 2 CTQ they should be aligned.
 Some Level 3 CTQs may align to more than one Level 2 CTQ.
• If possible, validate the Level 3 CTQs with your leadership to ensure they’re correctly aligned.
o How do your projects and initiatives align with the Level 3 CTQs?
• You should be able to easily see where your functional work aligns to at least one Level 3 CTQ.
• Any work that does not align to a Level 3 CTQ should be re-evaluated with leadership.
 In these cases, consider eliminating that work or researching it more in case a Level 3 CTQ is missing.
o Which Level 3 CTQs are ideal for me to target for projects?
• From a Lean Six Sigma perspective, target any CTQ that is measurable and critical to your area.
• If you have the option, always select projects that affect Financial Performance.
 Projects improving Financial Performance are generally more measurable and have more “Wow” factor.
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
10

11. Corporate CTQ Drilldown Example
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
11

12. Practical Application
o What do you think are the level 3 CTQs in your department or functional area?
• What level 1 & 2 CTQs do these align to?
• What critical metrics from your functional area can’t be aligned to the CTQ drilldown?
o Compare these level 3 CTQs to your normal and ad-hoc job functions.
• Which of these functions can’t be aligned to the CTQ drilldown?
 If these don’t align to the CTQ drilldown, then why do them?
• For the functions that align to the CTQ drilldown, how does their alignment affect their priority?
Copyright © 2011 - 2019 by Matthew J. Hansen. All Rights Reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted by any means (electronic, mechanical, photographic,
photocopying, recording or otherwise) without prior permission in writing by the author and/or publisher.
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