What is Hoshin Kanri?
Hoshin Kanri is a Lean approach used for strategic company-wide improvements.
The phrase Hoshin Kanri (方針管理) means policy management and represents the concept of guiding an entire company in an agreed-upon, clear direction. It’s made of three Japanese words: Ho (method), Shin (compass), and Kanri (management or control).
Hoshin Planning, as it’s also called, consists of 7 points setting the direction of improvement initiatives, which unify a company’s organizational strategy.
The origins of the idea trace back to the time of Miyamoto Musashi, a great Samurai teacher of strategy. Hoshin Kanri is also closely connected to Deming’s Plan - Do - Check - Act cycle, as well as to Joseph M. Juran’s teachings about the role of management in quality control methods needed for strategic development.
Why should companies implement Hoshin Kanri?
As with all Lean tools, the aim of implementing Hoshin Kanri is minimizing waste and driving value to the client. It’s quite clear, that if a company runs multiple Kaizen initiatives at once, they may be overlapping and, in some cases, conflicting with each other. While a company like that could achieve some results, they would be far greater if a systematic approach to deploying strategy - Hoshin Kanri - was used.
A common problem in strategic development is not knowing what to say no to, rather than what to say yes to. Too many projects lead to staff burn out and generate waste through context switching, resulting in delays and fewer projects completed at the end of the year. Lean-driven overproduction fighting through decreased Work in Progress not only minimizes context switching but also improves process throughput.
Hoshin Planning makes it possible to deploy a cascading strategic direction at all levels of a company, from the CEO right down to a local team leader, also delivering ways to successfully communicate and monitor that direction.
How to use Hoshin Kanri?
There is no better example of a successful implementation of Hoshin Kanri than the Toyota Production System. That said, it’s crucial to keep in mind, that the automotive masters have decades of Lean maturity under their belt, and trying to copy them without a preexisting culture would be equivalent to expecting a kid playing in their backyard to perform a triple salchow - the results will not be pleasant. Your journey should start with maturing present working models before you start emulating Toyota.
Step 1: Strategy: Create the vision
Build a 10-year vision through data from experts and your leadership teams’ experience, gathered across all areas and company locations. Take into account what, if any, vision statements and strategic goals are maintained already, and whether they need updating or turning into brand new ones.
Step 2: Tactics: Build short term objectives
Translate the 10-year vision into more concrete, actionable 3 to 5-year plans. It should be done through the process of nemawashi, a collaborative approach in which senior and mid-level management discuss the viability of the proposed objectives, making reality-based adjustments where necessary. Typically, at this stage, it’s worth making a distinction between the objectives valid from existing clients’ perspective, and form your potential client’s outlook, separately.
Step 3: Set up detailed, yearly objectives
It’s now time to create annual plans that further break down the 3-5 year strategic objectives, to decide how you’ll allocate targets to specific teams, and how they will achieve them. It’s a continuous, collaborative back-and-forth process known as catchball. It ensures that e.g. national and regional goals are refined while stretching the team, without creating unrealistic expectations.
Step 4: Communicate objectives to operations
Plans made at step 3 are communicated down to the teams along with KPIs and objectives. These plans are often communicated using a Hoshin Planning matrix, or supplemented with project plans, resource demands, value streams, and other artifacts. All goals need translation into measurable metrics, at every level of the hierarchy.
Step 5: Execute and establish objectives
Finally, it’s time to execute the yearly plans and objectives, often with the use of the PDCA cycle, or Kaizen events based on SCORE - Select, Clarify, Organize, Run, Evaluate. The key point here is to offer the teams a framework through which they’re able to plan, make, and measure improvements. Failing to do so is likely going to render the objectives unachievable.
Step 6: Review if the objectives are being met
Through the use of Gemba and Kaizen the plan is reviewed and checked to see how the company is progressing towards the goals, to plan actions for now, and to better plan for next year. The review can be done at intervals that best match your company size and speed.
Step 7: Analyze objectives for the next year
Using the data gathered from a year’s experience, you can now determine realistic goals for the year to come.
Remarks on Toyota’s experience
It’s important to note that Hoshin Kanri, just like any other Lean tool, is not a silver bullet. The author of The Toyota Way book mentions how Toyota never used the Hoshin Planning Matrix, in trust that tools like that could easily degrade into fancy charts that do not produce any disciple or focus on improvement.
Hoshin Kanri’s main focus at Toyota has been to develop its people and leaders. Rather than being a cost-cutting, quick profit-making tool, Hoshin Planning is a long term philosophy, focusing on building the right process to produce the best results.
The key benefits of using Hoshin Planning
- Unity and understanding of goals across all organizational levels
- Maintained alignment of goals through time, thanks to regular, detailed reviews
- Higher levels of strategic buy-in across all levels
- Easier decision-making process with more empowered employees