ASQ: Improve Your Strategy Through Hoshin Kanri

Bill Troy discussed ASQ’s approach to strategic planning over the last several months and asks the Influential Voices this month how they approach strategy.

Companies must determine ahead of time what the vision and direction will be. A proper strategy must assign clear responsibilities and show what resources are to be committed. Metrics and timelines must be defined. Management must decide what core elements are to be deployed and the order of deployment.

Traditional planning methodologies focus on steering an organization in the direction desired by top management. Often referred to as management by objective (MBO) since top management establish the objectives, targets, evaluate whether employees meet these targets. Unfortunately, as we know, you can’t achieve the desired results by just dictating individual targets.

In Lean Thinking “Hoshin Kanri” is the process to select those annual objectives that will give the organization the greatest possible advantage. The word hoshin is formed from two Chinese characters: ho stands for “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 translates the strategic intent into the required day-to-day behavior. It is not another attempt to improve MBO. While hoshin kanri and MBO both aim to deploy company goals and encourage employees to achieve them, there are several radical points of departure. Specifically,

• Hoshin kanri deploys the voice of the customer, not just profit goals. More than the traditional MBO description of projected market share, profit goals, and revenues, hoshin kanri maps and controls the path to a new design based on customer priorities. It describes the behaviors needed to achieve the policies that support the strategic vision.
• Hoshin kanri deploys breakthrough strategies. It concentrates resources on strategic priorities and chronic problems by going after root cause(s) of obstacles to achieve dramatic improvements in performance.
• Hoshin kanri controls the means and methods, not just the results. It manages cause and effect linkage of supporting strategies, measures, and targets to ensure that employee efforts are realistic, synergistic, and add up to the total effort required to meet corporate objectives.
• Hoshin kanri is a continuous improvement management process, not calendar-driven system. MBO typically establishes a set of quarterly and annual goals. In contrast, hoshin kanri identifies a few critical breakthrough objectives that require coordinated and focused effort over an extended period of three to five years. Annual objectives are established within the context of these longer term objectives.
• Hoshin kanri emphasizes frequent reviews up and down the organization. In MBO, the performance review, often an annual event, does not capture or communicate valuable feedback to inform future rounds of planning. Hoshin kanri uses an explicit inter-level communication system to continually distill local lessons and channel them upward to the leaders of the organization. It routinely tracks performance, reviews the capability of the entire planning system, and modifies it accordingly.
• Hoshin kanri is not tied to performance appraisals. Authentic hoshin kanri separates the evaluation of personnel from the evaluation of the strategy. It focuses not on personnel, but on the quality of the strategic assumptions and the discipline of the planning system.

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.

The hoshin kanri process identifies and concentrates resources on the vital few stretch achievements that support the vision. It separates those performance issues that require dramatic improvement from the many incremental improvements that can achieved at the local level. All the changes that the leadership believes to be incremental are skimmed out of the strategic plan and addressed through quality in daily work. The remaining category of contribution – the vital few breakthrough achievements – becomes the core of the hoshin kanri process.

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.

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.

I’m part of the ASQ Influential Voices program. While I receive an honorarium from ASQ for my commitment, the thoughts and opinions expressed on my blog are my own.