2019, Volume 3, Issue 4 - Spring 2019

An introduction to Hoshin Kanri

The tool for keeping your New Year’s business resolutions

By Erwin Matusoc

On a year-to-year basis, many organizations leverage various strategic planning processes to formulate their best and most competitive strategies to stay on top of the market.

Often, these processes take on a very ‘top-down’ approach, where the executive team sets and cascades goals, usually based on financial metrics. It is then up to front-line management to address problems and deploy appropriate methodologies to make it happen. The result is, almost always, a disconnect between the how and the why — where the interpretation of priorities and directives become detached to the purpose of the strategy. That has wide-ranging and detrimental effects, from weak performance and stifled employee development to a breakdown in organizational morale.

Through my years guiding senior manufacturing leaders and conducting lean assessments, I can say with confidence that most businesses have too many priorities, insufficient detail and a lack of clarity around execution, and a poor system of accountability. When I ask about their strategic plan, what I routinely see is a thick manual, broken out into multiple tabs and sections. As a rule of thumb, the number of pages in a strategic plan is inversely proportional to its clarity and focus.

According to a survey conducted by CFO magazine, companies showed the lack of value in the planning process can be explained by the absence of well-defined strategy, as well as the absence of a clear linkage connecting strategy to operational planning. Only 27 per cent of those studied integrate strategy with tactics. Without that alignment, each level of the reporting structure is like another cliff that the strategy is plummeting down from — starting with top executives, onto their direct reports, onto their lower-level managers.

If you are one of the organizations experiencing the resulting symptoms, like project failures, long lead-times for improvement, missed budgets versus forecasts, or separation between corporate vision and organizational activities, then you need to consider implementing Hoshin Kanri.

What is Hoshin Kanri?

Originating in Japan, Hoshin means ‘a methodology for strategic direction-setting,’ while Kanri means ‘execution.’ Other names — Hoshin Planning, policy deployment, and strategy deployment, to riddle off three — are used widely as synonyms in North America.

Hoshin Kanri became the management system that Japanese business leaders used to align the work of their front-line staff to the strategic direction of the organization. It provides a step-by-step planning, implementation, and review process for managed change. Specifically, it is a systems-based approach to change management in critical business processes.

Bridgestone Tire Corporation was the first company to adopt Hashin Kanri in 1965. Yokagawa Hewlett-Packard (YHP) followed in 1976 as part of its pursuit of the Deming Prize. By 1982, YHP had leveraged Hoshin Kanri to oversee a strategic shift that took it from the least profitable Hewlett-Packard division to the most profitable. Three years later, Hewlett-Packard introduced Hoshin Kanri to the rest of the company as a lesson learned from the YHP Deming Prize journey.

Why Hoshin Kanri?

For every business system, there are measures of performance and a desired level of performance. What Hoshin Kanri provides is a planning structure that will bring selected critical business processes up to that desired level.

An organization implementing Hoshin Kanri manages 3–5 long-term, breakthrough objectives. The reality is that 70 per cent of most organizations are attempting more than they can reasonably handle. Everyone is being pulled in different directions and, at the end of the year, not even one of the many priorities the organization set has been accomplished because of the division of resources and lack of clarity, focus, and alignment. Hoshin Kanri establishes a synergy between top-down and bottom-up processes through continuous and systematic management, rigorous application of the plan, do, check, act cycle, emphasis on cause-and-effect relationships, and enhanced employee engagement.

Hoshin Kanri operates at two levels. The first is the ‘breakthrough management’ or the strategic planning level. The second revolves around daily management, or on the more routine or fundamental aspects of business operations.

Organizations that truly embrace Hoshin Kanri focus on the method rather than the result. This may, for example, manifest itself in the writing of an A3 problem-solving proposal, followed by an interactive brainstorming session where staff members are encouraged to express their problems and are then empowered to fix those problems immediately as they are revealed.

Having seen first-hand how both low-performing and high-performing organizations strategize and execute, I no longer believe in putting numbers and results first. Having the right processes will produce the right results — if you trust in both your people and your strategy. Planning, training, and people development, however, are fundamental to success.

Hoshin Kanri is an open-minded method. It is not just about management by means or results — it works under a system of self-deployment and motivation. It does not encourage random business improvement. Instead, it prioritizes organizational advancement along the strategic direction.

Erwin Matusoc is a certified Lean Master Black Belt and Hoshin Kanri Champion with Canadian Manufacturers & Exporters in Manitoba.