Toyota has persistently applied Hoshin Kanri-style management for several decades. They have never wavered in this. In the 1950s, they were well behind most of the world's leading automotive producers but, year by year, one by one, they moved through the pack passing one competitor after the other until in the end, in 2007, they outstripped the giant General Motors to become the world's leading automobile producer. For years both Ford and GM attempted to stop their advance but they were unable to do so for no other reason than they did not fully understand Hoshin Kanri, Japanese Total Quality Management (TQM).
Hoshin Kanri is a means of managing a business that recognizes the value, knowledge, and skills of all employees in an organization. The objective of Hoshin Kanri is to take the strategic goals established by upper management and ensure they drive every action at all levels within an organization. Action that is not in support of the strategic goals is considered waste, and it needs to be eliminated.
There are four core principles of Hoshin Kanri. These seem to be a common sense approach that anyone would follow. But, without the guidance of Hoshin Kanri, few organizations actually do their planning and implementation according to these principles:
- Vision - strategic planning that focusing on the things that really matter to the customer.
- Policy Development – creating realistic, workable tactical plans that implement the goals of the strategic plan.
- Policy Deployment – taking the tactical plan and putting it into action to achieve the desired goals.
- Policy Control – the use of feedback to control and correct the process (Plan-Do-Check-Act).
A fourth component of Hoshin Kanri that applies throughout the four step process, is Total Quality Management (TQM). In TQM everyone works toward improving products, services, and processes, such that customer satisfaction is increased. It applies principles of continuous improvement that are customer focused, and that look at improving all aspects of delivering a product to the customer, from placing of the order through delivery of the product.
Overall the objectives of Hoshin Kanri can be described as ensuring that the strategic goals of the organization are the driving reason behind all plans and actions. The objectives are to eliminate waste that results from poor communication, and eliminate activities that are not in alignment with the strategic goals. Hoshin Kanri can be summarized as getting every employee pulling the same direction at the same time.
Vision - Strategic Planning
Hoshin Kanri starts with a strategic plan. This is typically an annual plan, developed by upper management that establishes the long-range goals of the organization. The “two fives” typically applied focus on five goals for five years.
Five Goals – a strategic plan should focus on a limited number of goals, typically no more than five. Having more than five goals usually results in none of the goals being fully accomplished. Even the largest organization has limited resources, limited energy, and just like individuals, a limited attention span. Spreading those over a large number of goals, making everything important, usually results in nothing getting done.
Five Years – a strategic plan is a long-term plan, typically looking five years into the future. This does not mean that all goals must be five year goals. The target completion date should be appropriate for the goal to be achieved. However, anything that can be achieved in a year or less is probably a tactical goal, not a strategic goal.
In setting up strategic goals, focus on those that will be effective. There are two basic types of goals: those that target improving effectiveness and those that target improving efficiency.
Improving efficiency means to find ways of doing things better. We become more efficient, and less wasteful, at what we do.
Improving effectiveness means looking to do the right things. Goals should be targeted at doing the right things, not at doing the wrong things more efficiently.
It is also important to involve middle management when putting together the strategic plan. Part of the philosophy of Hoshin Kanri is that the value of all employees is recognized. Those in middle management can provide insights that will be helpful in determining appropriate goals, as well as establishing measurable milestones.
This brings us to the final important principle of strategic planning. There must be a quantitative means for measuring progress, and the achievement of the goals. Goals cannot be nebulous. They must be realistic, specific, measurable, and timely
- The goal must be possible to achieve.
- What is it that we specifically want to accomplish?
- How will progress and accomplishment be measured?
- There must be milestone dates, and a completion date.
Measuring progress toward achieving a goal is typically done using Key Performance Indicators (KPIs).
One final point on strategic goals; every goal should have an owner. The owner is not involved in the day-to-day work toward achieving the goal. Instead, the owner acts as a facilitator and coach. They typically are someone in upper management who has the skills and authority to guide those working toward the goal. As a facilitator, the goal owner has the authority to remove roadblocks and smooth the way so progress can be made. As a coach, the goal owner tracks the progress, and if progress is not being made, or things are going in the wrong direction, they step in to re-focus everyone on the right objectives.
Policy Development - The Tactical Strategy
Middle managers take the strategic goals and, with input from those who work for them, create a tactical plan... meaning an action plan. At this point effective communication becomes critically important.
Hoshin Kanri uses a process known as “catch ball.” It got this name because it is like a game of catch, involving a back and forth exchange between upper management and middle management that ensures the strategic goals are clearly understood. Asking questions is seen as being good. Questioning aspects of the strategic goals, and the KPIs, is good. The point of “catch ball” is to ensure there are no misunderstandings, that the goals are achievable, and the KPIs appropriate.
The tactical strategy must:
- Be directly tied to achieving the strategic goals.
- Establish action plans to reach the desired outcome
- Be flexible and responsive to changing situations
- Be measurable and include a feedback mechanism. A regular status review should be included.
Many organization use strategic and tactical planning. However, the principles of Hoshin Kanri create a flow of information between upper management and middle management, and also between middle management and those who work for them. It is the flow of information that is essential to staying on-track and achieving success.
The tactical plan is now implemented by the supervisors, team leaders, and those who are actually doing the work. The policy becomes reality.
Once again the Hoshin Kanri principle of “catch ball” comes into play. It is critical that those doing the work fully understand the policies and the plan. This once again involves back and forth communication, this time between middle management and those responsible for getting the work done. Middle managers should engage in Genchi Genbutsu [link to Genchi Genbutsu article], meaning going to the physical location where the work is being done, and where the questions are. Middle managers need to see for themselves what is happening, before making a decision.
This is the level at which actions are implemented based on the plan. The plan becomes a reality that changes what is delivered to the customer. That means that feedback, and knowing what is happening is the critical fourth principle of Hoshin Kanri.
If things are not going as planned, the problems need to be identified and correct quickly. That is what the fourth step in Hoshin Kanri is all about – feedback, control, and making corrections to the process.
Policy control provides a flow of information bake up through the chain of command, from the production area back to upper management. This could be information that shows everything is fine and is going according to plan. Or it may be information that reveals problems or deviations from the plan. The key is to have accurate, relevant, and useful information. If someone in management takes a gemba walk, they should see exactly what was reported to them.
The flow of feedback should start as soon as work on achieving the goals starts. It is important that everyone involved can track progress. Regular evaluation and review of progress is needed to ensure the resulting changes are moving things in the right direction.
Total Quality Management
The fifth component of Hoshin Kanri is Total Quality Management. TQM can be thought of as having a corporate culture in which continuously improving on the ability to deliver high quality products (or services) is a normal part of every workday. The general principle is that good is never good enough, there is always a way to further improve the quality delivered to the customer.
Incorporating TQM as a part of Hoshin Kanri puts the focus on the customer. It prevents Hoshin Kanri from becoming inward looking, and focused on “self.”
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