Hoshin Kanri: Setting Management's Compass for Alignment

If management by objectives is so deficient in communicating direction and ensuring cross-functional coordination, then how can managers develop, communicate, and monitor their corporate road maps? The answer is to find an alternative management methodology to disseminate and implement strategic policy in a turbulent operating environment.

Such a planning process already exists. The Japanese call it Hoshin Kanri. The word hoshin is formed from two Chinese characters: ho stands fro “method,” shin means “shiny metal showing direction.” Kanri stands for “planning.” Together, hoshin kanri is used to communicate a “methodology for setting strategic direction,” in other words, a management “compass.”

Hoshin kanri is not a strategic planning tool, it is an execution tool. It is a system to deploy an existing strategic plan throughout the organization. In other words, hoshin management is an idea handler, not an idea generator. It depends on a preexisting statement of direction typically generated by an augmented strategic planning process.

There are many versions of hoshin kanri. However, certain themes recur in many stages of the planning process, at many levels of the hierarchy, and at many levels of abstraction. These principles include:

• Align the organization’s goals with changes in the environment.
• Focus on the vital few strategic gaps.
• Work with others to develop plans to close the gaps.
• Specify the methods and measures to achieve the strategic objectives.
• Make visible the cause and effect linkages among local plans.
• Continuously improve the planning process.

These principles describe certain basic practices associated with the school of total quality management (TQM). In the context of hoshin kanri, they are specifically applied to achieving dramatic and measurable breakthroughs.

At the heart of hoshin kanri is the Plan-Do-Study-Act (PDSA) cycle. Promoted by w. Edwards Deming, this management cycle (sometimes called the PDCA cycle) is an iterative process. A closed loop system, it emphasizes four repetitive steps:

• First, start with an idea and create a PLAN to test it.
• Then, DO adhere to the plan, and take corrective action when necessary.
• Next, analyze and STUDY discrepancies to identify the root causes of obstacles.
• Finally, take appropriate ACTion. If the outcome matches expectations, then standardize the process to maintain the gains. If the results were disappointing, then modify the process to eliminate the root cause of remaining problems. In either case, repeat the process starting again with PLAN.

While these steps appear in a linear sequence, when implemented the phases are best thought of as concurrent processes that can continually be improved.

The hoshin kanri process is sometimes described as the SA/PDSA (Study-Act/Plan-Do-Study-Act) cycle. In the face of changing goals and moving targets, the SA/PDSA cycle reminds members of the organization not only to review pas performance, but also to conduct a qualitative assessment of the next important direction. As the environment changes, the organization can modify it strategic priorities to ensure a dominant position in the eye of the customer.

Hoshin Kanri is the system for setting management’s compass toward True North. It is a tool to align people, activities, and performance metrics with strategic priorities. It can be used to communicate direction, coordinate activity, and monitor progress. It enables members of the organization to work together in the most creative way to define and achieve the strategic intent.



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