Q 351. 'It is the set of the sails, not the direction of the wind that determines which way we will go!' - is a quote most suited for Hoshin Kanri. What is Hoshin Kanri and how can it help steer the organization in the right direction?

 

 

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Hoshin Kanri is a Strategic planning tool that typically follows a 7-step process in which the organization's strategic goals are designed and communicated across all levels in the organization and then put into action. The Goals are aligned to the Vision of an organization over a period of 3-5 Year horizon and then these goals are broken down to smaller denominations over short team (6 Months - 1 Yr.), medium-term( 1-2 Yrs.), long term(2-3 Yrs. ) and Strategic terms (3-5 Yrs.) and then further bifurcations of the actions and its objectives are planned out for roll out and benchmarking the outcomes. The goals have to reviewed at a monthly basis and the larger goals are evaluated at year end annual reviews. Measurement of performance indicators is also a key factor in the process. Hoshin Kanri is built on a Top-Down approach , where the goals are decided and managed by the management and executed by employees at all levels of the organization. When an initiative is rolled out that level and over a long period of time , it’s important that everyone is aware of the role and responsibilities and how they are the Cog in a system that will enable the process to work as desired, hence it’s important that the system exists where the objectives and the expectations are clearly communicated across hierarchy .That’s where the concept of Catchball is used and becomes effective in seeking and managing the bidirectional communication of Goals ,  opinions , feedback and other communications channels  throughout the organization.

 

Catchball process is developed in Hoshin Kanri , where the communication flow on the goals and objectives are communicated top down but the feedback , negotiation and alignments happen across the hierarchy. The name of this technique is derived from the simple children’s game by the same name and its implementation in Hoshin Kanri follows a simple approach of passing, sharing and discussing the goals across the teams , so that everyone is in agreement and the goals are owned by all. Catchball helps in Increase information sharing across all levels of the organization hierarchy, Align the actions of every person and the goals of your company and Boost the process of continuous improvement.

 

THE ABOVE EXPLAIN FIRST PART OF THE STATEMENT THAT 'It is the set of the sails, not the direction of the wind that determines which way we will go!” , until and unless an organization have not planned out their strategies and the process to achieve the goals , no matter how hard or with dedication the Teams engaged in executing those strategies , will not be able to achieve what the original objective was .That where the 2^nd part of the statement , gains relevance that once the teams across the organizations are aligned and tuned to the Goal , Processes and the Measurement successes , the efforts and the actions deployed will bring in the impetus to drive towards the goals. The momentum and the magnitude of the successful implementation will depend upon the synergies between the Set of the sails and the direction of the wind.

Hoshin KJanri is a 7 step process to communicate and implement strategic goals through the organization. It gives a systematic direction to manage the policies those are chalked in board room. It is also known as Policy or Direction management.

Hoshin+ Kanri = Direction / Policy + Management / Administration.

Organizations like Toyota the big name in automotive business, which has achieved phenomenal success with the help of directing their strategies which are based on strong foundation of their vision and mission. The key to the success is the annual goals,two way communication between all layers of management,  regular review, Study the situations, Plans to achieve the required results and execution.

It involves following steps:-

1.       Develop  Vision, mission and x Metric:-  Every organization is having the visions to reach at a particular Goal with the help of its mission. Vision and mission are the two important wheels for the growth of the organization. It is supported by the executable Metric formed according to the mission of the organization.

X Metrics is the canvas prepared by management to execute the strategic goals. It includes –

·         Strategic Objectives for 3 to 5 years,

·         Annual objectives,

·         Improvement initiatives needed to be taken,

·         Improvement targets (KPI) – the important indicator to keep the growth on track.

As indicated in the figure above – it shows the different metrics and their relationship between. It also covers the allocated resources with responsibility for individual initiatives.

1.      Identify breakthrough objectives:-

Why breakthrough – yes objectives need to be breakthrough to be ahead of competition, sustain the business growth. These are generally for 3 to 5 years and stands on the strong foundation of companies vision and mission. It takes into account companies strength to strengthen the performance and weakness to take into account to overcome.

 

2.      Set annual objectives:-

It is necessary to bring break the long term (3 to 5 yr) goals into annual goals for easy implementation, monitor and get the results. The annual goal management helps to structurise the long term goals in systematic small goals. It is easy to plan small small things easily and execute effectively. It ensures the results.

 

3.      Develop via catch ball:-

The “Catch Ball” technique comes from the game – base ball where the ball is passed from one player to another with a strategy and finally Goal is done. In Hoshin Kanri the vision is transferred as a mission from-

ü  Top management to middle management,

ü  From middle management – departments,

ü  From departments to section manager/engineers and

ü  From engineers to shop floor operators.

This way the mission is achieved to fulfill the vision of the organization and strategic annual goals. The key factor is two way communication at all levels to adjust the goals, negotiate and achieve them effectively.

1.      Review results weekly, monthly and annually:-

The most important step in any planning is to keep the track of the progress. It is the indicator which intimates about the lagging and leading parameters of the targets to be achieved for that particular period. To achieve annual targets effectively they are break down to monthly or weekly. In mass production it is advisable to break into daily targets. The scheduled review gives the directions to correct the space, modify resources and change the weekly strategy to bring the required growth as per target.

 

2.      Problem Solving – PDCA:-

Like growth and opportunity – Challenges are the part of business. It stops the growth engine for some time. To overcome this lot of planning is required. The proven technique of PDCA -  PLAN – Do – Check and ACT is very helpful here. Checks ensures the things happen in right direction. It helps to achieve first time right and saves lots of cost involved to maintain profitability for the business.

 

3.      Reflect and learn for continuous improvements:-

Reflection is the key to success for every business. It involves continuous improvement-

CI – Continuous improvement is not remained as the buzz word but fast track way to achieve growth in terms of more market share, on time delivery in full to customer at competitive price with high moral of workforce in safe atmosphere. Continuous improvement teaches us to learn from the mistakes, overcome them with advance techniques like Six Sigma, lean concepts, Kaizen etc. 

Reflection:- To heat the target directions are very important, the path to follow the directions is very important. To keep oneself on that path is the key to achieve the success. Hoshin Kanri practically known as the Direction or policy management gives the systematic directions to the business to achieve strategic goals which fulfill the vision and mission of the organization.

“Hoshin” in Japanese means “Direction” or “Compass Needle”, whereas “Kanri” means “control” or “Management”. The combination of the two words reflects the connotation “Direction Control”. Hoshin Kanri is also dubbed as “Policy Deployment”.

 It is essentially a Lean management method to ensure that that the strategic goals of an organization, drive progress and action at every level within the organization. The intention of the technique is to let the strategic goals guide every decision and action in a planned manner and eliminate the waste that comes from inconsistent direction and poor communication.

It is a powerful, process oriented strategy deployment methodology for defining long range key entity objectives. These breakthrough objectives, which brings about significant way the organization operates, extend 2-5 years with little change. In addition, the Hoshin Kanri process continues to focus on the day to day business measures to run the business effectively and align with the set strategic goals. This dual approach countenances the organization to focus on a systematic growth of the organization in any business environment.

How does Hoshin Kanri work in a Business organization??

“Strategy without tactics is surely the slowest path to victory. Tactics without strategy is the din before defeat.”- Sun Tzu

At the onset, the top management must understand the symptoms that indicate that the organization needs to follow Hoshin Kanri.

-      Senior Management Vision does not match the organizational activities

-      Annual objectives are rolled out in March and not earlier, say in January- shows that the planning in being done JIT- a big flaw!!!

-      Year to Year Plans never seem to connect.

-      Constantly missed budgets and forecasts

-      Too many bad projects in process

-      Very long lead times for improvements

-      Most employees, never seem to feel part of the team. The “old” ones feel that the new changes are demeaning and useless and the “New” employees feel that the old system is too rigid and useless- dissatisfaction is omnipresent along with low morale

-      Little or no connection between strategy and continuous improvement

-      Excessive brooding over market conditions for dissatisfactory results.

-      Very less time is spent on planning . Ideally it is a recognized fact that 60% of time in a PDCA schedule should be spent on planning, but most organizations as a culture believe that maximum time should be given to doing- A misconception that needs to be ironed out.

The Top management must also recognize and act to nullify the key limitations of standard strategic planning

-      Too Many priorities

-      Insufficient detail/ data for analysis

-      Lack of active review

Hoshin Kanri helps to capture and concretize strategic goals as well as to develop the means to bring plans to “real” effectiveness- It is therefore a target-means deployment.

Many Organizations use Hoshin Kanri as a visual Planning tool to aid them to identify the key focus points and strategies to use to steer the organization towards its vision. The tool enables “everyone to see” where the organization is going and simultaneously, the plan towards the vision. The modus operandi is to build plan and strategies as a team and share responsibilities across all levels to get results.

 

<Diagram 1> 

The idea put forth by Professor Yoji akao was that “Each person is the expert in his or her own job and Japanese TQC (Total Quality Control),is designed to use the collective thinking power of all employees to make their organization the best in their field”.  Based on this concept the Hoshin Kanri planning process indicates the method in which an organization can drive it’s action on a day to day basis to reach their strategic vision.

The three levels of Hoshin Kanri Deployment in an Organization.

1)    Top – Management by Principle

-      Vision

-      Mission

-      Shared Values

2)    Mid- Management by Priorities

-      Objectives setting

-      Target Means Deployment

3)    Tertiary-Management by projects

-      Network of interrelated projects

-      Cross Functional Management

The Next Step is to create a hierarchial system for Goal Alignment and measure through well-defined KRA & KPI. The idea is to ensure there is a vertical alignment through entire company structure using top down goal setting in such a fashion that each subsequent goal supports the previous level’s goals. This has to be integrated with Bottom up focus on total employee involvement in continuous improvement.- It is a Catch ball process.

<Diagram 2>

Mature organizations, thus link their Balance Score card, which contains macro measurements related to key success factors to the MBO (Management by Objective) programme by setting targets and encouraging the supervisors to negotiate the targets with their subordinates and recognising and rewarding wherever and whenever due. Hoshin Kanri accentuates this by providing focus on alignment and measuring key processes and putting forth who will do what and when to achieve the set goals!!

Hoshin karni uses the following three key principles ;

-      PDCA Cycle

-      Pareto Principle

-      Cause & Effect Relationship

The Seven Steps applied in Hoshin Kanri are;

i)              Establish Organization Vision

ii)             Develop 3-5 Year strategic objective

iii)           Develop Annual Objective that will culminate into the 3-5 year strategic objectives

iv)           Deploy to departments using target- means approach

v)             Implement the action plans

vi)           Review progress regularly (Monthly/ Quarterly)

vii)          Conduct bi annual reviews

Though this may simple , there are critical success factors that always need to be focussed upon to ensure that the methodology does not fail at any point.

-      All analysis and decision needs to be data driven – Management by fact!!

-      Focus needs to be consistently on the process – more than on the results

-      Management Goals and priorities need to be deployed across all functions and levels.

-      There needs to be adequate tactics to achieve goals

-      There needs to be just sufficient communication between the functions

-      Last but not the least- Regular reviews at all levels.

I have experienced the rooted use of Hoshin Kanri in a MNC which is a famous burger giant, wherein the whole process was called as 31Q. It stood for 3 Year vison, 1 Year plan and quarterly objective & execution. The Vison was Planned in the top line meetings and percolated to the mid management. The mid management team would have a departmental 31Q meet every year, wherein they would break away from daily routine work, for a few days and focus on reviewing internal processes and outputs and plan the objectives and execution to align with the vision. This in turn would be presented to the top management and a visual plan and toolkit would be drafted by the strategy team in collaboration with the top management. The output would be a distinct, measurable plan of action for each department- a target- means approach. This was denoted in an in-house version of the Hoshin Kanri X matrix in Excel sheet. It was designed to develop and implement strategic, tactical and synchronized plans across not only departments, but also the people across the organisation

The same would then be implemented as a part of the quarterly business plan. It was used for policy deployment . periodic reviews enabled each team to work on their strengths and optimize opportunities so that the team at each level could drive the results in a time bound fashion towards the 1 year plan and the 3 year vision.

The Hoshin Kanri XMatrix ensured ownership and accountability at all levels and thus encouraged organizational learning , faster course corrections and cross departmental coordination and people & process development and continuous improvement. The Hoshin Kanri X Matrix is available in Excel on the web and can also be created by using the QI Macros add-in.

The said MNC is a leading brand in India as well as in other 165 countries across the globe because of many reasons, but one of the most obvious reasons is this adopted method of Hoshin Kanri as a culture.

Some other famous organizations which employed Hoshin Kanri include Toyota, HP, and Xerox. Toyota has followed the Hoshin Kanri concept since the 1960s. These company’s long-lasting success clearly proves that this approach leads to positive results.!! Hence , as stated in the question, as an analogy, Hoshin Kanri as a strategic approach ensures that the boat of business smooths smoothly in the desired direction, However or whichever may be the direction of the winds of external market conditions.

What is Hoshin Kanri?

Hoshin Kanri means policy management and it is a concept of guiding an entire company on agreed goal and enable to move from Grey zone to clear direction.  It’s made of three Japanese words: Ho (method), Shin (compass), and Kanri (management or control). It is methodology for strategic direction setting.

Hoshin Kanri term was created by Dr. Yogi Akao after Deming’s Plan - Do - Check - Act cycle, Shewhart’s P-D-S-A, Joseph M. Juran’s teachings about the role of management in quality control methods needed for strategic development.

It is based on 3 major components: 1. Inclusion – everyone in the organization is involved in this process of strategy execution or creation by catchall/feedback/ contribution in execution. ; 2. Communication- It’s critical to ensure everyone know their role and way of contribution I common goal therefore, communication is critical; 3. Creativity- It’s new way of thinking or breakthrough elements focused thinking.

 

 

Why Hoshin Kanri :

This lean methodology enables an organization to be more competitive and drive breakthrough improvements across all levels of company.

1.       Drive efforts towards organizational common goal –in order to create higher positive impact efforts has to be aligned with the big picture that alignment / linkage would be created by HOSHIN KANRI

Aligned Efforts- Common Goal                             Scattered efforts – non aligned Goal

                                                     

 

2.       To achieve Breakthrough objectives – Breakthrough objective is a big win to gain competitive advantage. Something, which we don’t know yet / out of box idea, it’s a significant change in process/service/product from customer’s eye perspective.

              

3.       Drive Futuristic growth/initiatives and therefore called as Transformation initiatives, it’s more than the running current business understand how technology, Customer and Business would shift over the time.

 

                                                                                     

            

                                   

 

Daily management KPIs to drive set AOP                         Hoshin for Transformation initiatives

 

4.       Involve all level of organization to create strategy and execute it with Nemawashi or catch-ball approach.

How to use Hoshin Kanri?

There are several tools to deploy strategic plan (Hoshin Kanri) Like SWOT Analysis, PEST analysis, strategic map, Porter’s five forces map, Customer Balance scorecard, Objective and Key Results (OKR), Visioning, VIRO Framework, X matrix and so on. Amongst all these tools and techniques X matrix is well known Hoshin Kanri tool.

Most of the organizations uses X matrix to drive Hoshin (Strategy), it is excel based tool which has 5 major sections, it arranged in X shape and therefore named as X matrix  & also called as 12-3-4-9 O’çlock diagram.

1^st block (6 O’clock) :  What ?  - Should link directly to corporate strategy. Significant benefit in growth, quality, delivery, cash or cost. Customer value focused. Provide significant competitive advantage. Require multi-functional involvement. Defined as a gap (baseline performance is from … to …. )

2^nd Block (9 O’clock) : How Far this year ? Annual breakthrough targets – It breaks down long term strategy from What to annual planè Copy text from 3-5 objective, Realistic aggressive goal (e.g. 30-50% to create a quick start), Is it stretched enough?, Is it “strain”?, Does it create competitive advantage?, Does it create significant operating improvement?, Defined as a gap (baseline performance from … to …)

3^rd Block (12 O’clock) : How? Identify Key Process to Improve – In order to achieve 1^st and 2^nd clock targets/objectives what processes needs to be changed / Modify significantly or which processes/ procedures needs to create newly.

Which key processes drive the performance needle with the greatest impact? Does it begin with action verb (e.g. reduce, increase, … ) and does it contain the word “process” or “capability”, etc., need iterations (catch ball)

4^th Block (3 O’clock) : How much/when/who  - This is also called as Target to improve (TTI’s), need to focus on what would change/improve from X to Y by when.

Use both leading and lagging indicators, Can it be broken down into monthly increments, Format is “from x to y by date z”, Need Jump Off Point (JOP), TTI’s should exceed AOP targets. need iterations (catch ball)

TTI’s can be considered as small improvement projects or KPIs to be tracked over the time of project/action execution through Daily management KPIs.

X matrix – Hosin Kanri method to drive Strategy

Example of How Organizations uses it to steer the transformation to be in set right direction:

 

Hoshin Kanri / strategy deployment has 7 steps :

1.       Create Strategy or long term vision

2.       Build short term objectives

3.       Drill down to the annual objectives

4.       Communicate it to all teams

5.       Execute objectives with improvements like PDCA or Kaizen events

6.       Review the status of TTI’s – how are we doing?

7.       Ananlyze and set objectives for next year

In Organizations, management create a Hoshin plan since they have end-to-end value chain understanding and therefore they can create a direction. During catch ball process, everyone gets a chance to add their suggestions and share feedback. X matrix is the best way to deploy strategies by creating cascade communication and right KPIs/Projects to engage people and ultimately drive efforts to common Goal.

Goal deployment and alignment example:

 

Example of Hoshin alignment with Vision-Mission and action plan:

Conclusion:  Hoshin Kanri is a strong methodology focuses on future transformation. It is very much an alignment between Vision çè Strategyçè Breakthrough improvements çè Goal /KPI deployment with structure of X-matrix. Focuses to involve all employees and drive everyone’s efforts in meaningful direction. Communication is a key to create consistency in drive of stratrgy.

All transformation initiatives now a days are driven by X matrix to create a mechanism starting from Vision to implement an actions. Like ecommerce, Digital Transformation, IoT implementations, RPA implementations and so on.

 

While all published answers are great, the one answer that stands out in terms of details regarding the explanation, usage and a relevant example is from Rajesh Chakrabarty. Hence, his answer has been selected as the best answer!