Hoshin Kanri – The Secret Behind Visionary Organizations

“If you don’t know where you are going, any road will get you there”

  – Lewis Carroll

If we are able to open the Business Lockbox of a Failed organization, we find an important element missing! It is nothing but execution failure. Organizations may have beautifully drafted vision, powerful strategies but without execution, they have no value.

Hoshin Kanri a concept originated from Japan is a solution for execution failures. Though it is a decades old concept, unfortunately many organizations are neither aware of it or not practicing it effectively. The word hoshin means “shining metal” or magnet which is used in the ship to know the direction. In Management Language Hoshin means methodology for setting strategic direction.  The word Kanri means “management or Administration”. Like many Japanese words, Hoshin Kanri also needs many English translations. It is also called Policy Deployment, Management for Objectives or Management of Direction.

The 9 Step Hoshin Process

The following are the 9 steps of Hoshin Process

1. Define Organization’s Mission, Values, Vision, and Strategies
2. Identify Areas for Break-through improvement ( 3 to 5 years) derived from the above
3. From the Long term goals above, arrive at Current year Goals
4. Deploy the above Goals in the entire organization –  Break-up annual goals into Quarterly & Monthly goals
5. Define methods of achieving the above goals – Lean, TQM, TPM, etc…
6. Ensure Buy-in from all leaders – Catchball
7. Establish a robust Daily work management System DWMS
8. Establish a Review mechanism and dashboards – follow PDCA cycle
9. Take regular corrective actions based on the review outcomes and improve the process

Step 1: Define Organization’s Mission, Values, Vision and Strategies

The mission is the purpose of the Business or the reason for the existence of the organization. It is a timeless statement. Below are some examples of mission statements

Merck    “To Preserve and improve human Life”

3M         “To solve unsolved problems innovatively”

Seven Steps      “Making Excellence a Culture through Total Employee Involvement”

Vision is a “general statement of an organization’s intended direction that evokes emotional feelings in organization members”

Related Article– Total Employee involvement through Quality circles and Kaizen Circles can take organization to World Class levels.

Below are some of the examples of Vision Statement

Ford: To become the world’s leading Consumer Company for automotive products and services

DuPont: “The vision of DuPont is to be the world’s most dynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere”

Seven Steps “To be recognized as World Class organization in coaching and practicing Business Excellence principles”

We may not find Mission, Vision and Value Statement for all the organizations. Some may have an only mission and some only Vision. It does not mean that those organizations don’t have a mission or vision. It is possible that they are not explicitly defined or documented. 

Values define the DNA or Culture of the organization. Values are not compromised to achieve a vision. They are like guiding principles.

Example of Values of our organization; Seven Steps Business Transformation Systems

1. Customer Focus
2. Deep Respect for People & Time
3. Speak with Data
4. Integrity
5. Practice what we Preach
6. Sense of Urgency
7. Honour Commitments

The mission of the organization normally arrived after a detailed brainstorming. Sometimes it is defined by the founding members of the organization.  Mission forms the foundation for Values and Vision.

For an organization, if Mission, Values, and Mission are not defined, we strongly recommend a workshop in a relaxed environment preferably offsite with all stakeholders facilitated by an expert or guru.  It may require one to five days depending on factors like size, locations, culture, organization structure, etc…  The workshop agenda includes SWOT analysis, stakeholder expectations analysis, Aspiration of leaders, etc…  A lot of preparation and homework required to achieve successful outcomes from the workshop.

Step 2: Identify Areas for Break-through improvement (3 to 5 years) derived from the Vision

Here we should understand the definition of Break-through improvement; otherwise, we will end up with routine improvement goals. Break-through means significant, phenomenal, exponential improvement as against continual improvement or marginal improvement. Some organizations call it 10X improvement. For example, improving our revenue 10 times in the next 5 years; improving our new product revenue share from 10 % to 50 % in the next 3 years; reducing our cost of poor quality 10 times in the next 3 years, etc…  Innovation and out of box thinking is key for achieving Break-through improvements

Many organizations fail here. They say it is not practical to take such goals.  Fear of failure makes them take conservative goals.

Below are the points should be considered while defining breakthrough improvements

1. The number of Breakthrough improvement goals should not exceed five.  More breakthrough improvements are difficult to focus on.
2. The goals should be challenging our status quo
3. Each goal should have an operational definition to avoid ambiguity in the future.  For example, when we say revenue from new products, there should be a clear definition of NEW PRODUCT

Step 3: From the Long term goals above, arrive at Current year Goals

The alignment of current year goals with long term goals is the key to achieve an organization’s vision.  We should break the 3-5 year goal to arrive at yearly targets. 

For example; if our 5-year goal is to improve our revenue from USD 10 Million to 100 Million, the goals for each financial year will be 20, 40, 60, 80 and 100 million USD respectively.  In many cases, it may not be uniformly distributed as there may not be sufficient products or services to reach the goal. In such cases, it can be 12, 15, 30, 60 & 100.  The important point to remember is, these are not just numbers, and these should be derived from a comprehensive analysis of current and future market opportunities. This has to be achieved through market research, data analytics, etc.  However, no one can predict the future but if it is derived out of the systematic study, we can minimize the probability of failure.

Step 4:  Deploy the above Goals in the entire organization –  Break-up annual goals into Quarterly & Monthly goals

In this step, we need to convert Organization goals into department goals wherever applicable. Not all the annual goals can be converted into department goals as some of them directly handled by leaders. Care should be taken to ensure department goals are not conflicting with each other.

For example, the Inventory Reduction Goal in the manufacturing Industry should not conflict with a Delivery goal.  While one department is trying to reduce inventory levels, other departments may face a material shortage. It is important for the leadership team to strike the right balance considering the long term impact.

The next action is to convert annual goals into quarterly and monthly goals. This will help to have better focus. This will be further converted into weekly and daily goals at functional levels

X Matrix  is a very useful tool to ensure the complete alignment of Long term, Short term, organization and department goals

Step 5:  Define methods (Means) of achieving the goals

This is the major difference between other Strategic management tools & Hoshin Kanri. Here the owners of goals should identify the right tools (means) to achieve their goal. They should have a strong justification for selecting the mean. Example: Lean methodology may be selected to reduce the total lead-time by cutting down nonvalue added activities. Similarly  development of project management tools may be selected to effectively track project progress.  Under no circumstances, the goal should be taken without knowing the means of achieving it.

Step 6:  Ensure Buy-in from all leaders – Catchball

In this step, the manager who is deploying the goal and subordinate who is responsible for achieving the goal starts the conversation on goals and means.  The consensus is achieved after several iterations.  Once the win-win stage is reached, both will sign the document to have a formal buy-in.  This process makes people own the goal with conviction  

Related Article– How to create an effective Lean Daily Work Management System

Step 7:  Establish a robust Daily work management System DWMS

One of the reasons for the failure of strategy execution is not having a system for daily management.  Employees in an organization need to perform two types of activities. One is routine daily management and another is Improvement. In most cases, people are occupied with neither of the above activities but busy in firefighting. 

Daily work Management Systems (Also called as Daily Management, Lean Daily Management) when effectively implemented free-up a good amount of manager’s time for improvement activities. Below are a few simple questions which will give you an idea if your organization is struggling with firefighting

1. Do you know your Department’s Mission and Goals?
2. Are SOP and Procedures available to perform your Functions Effectively & Efficiently?
3. Does everyone in the dept know about SOP, Goals and Their Job Description?
4. Do you Have Key performance Indicators to know where you are?
5. Do you have enough Lead Indicators?
6. Do you establish the frequency and monitor the same? – Dash Boards
7. Do you take action when you are not meeting targets? Is your team trained on Problem-solving tools?
8. Are you working on continual improvements?

If your answer is NO to any of these questions, better to bridge the gaps. Otherwise, it will be very difficult to achieve the strategic goals set by Hoshin Kanri.  The Hoshin Kanri Goals achieved this year will become daily management KPIs for the next year

Related Article– How to Implement Daily Work Management System For Business Sustenance

Step 8: Establish a Review mechanism and dashboards – follow the PDCA cycle

A review mechanism is required at all levels of the organization. The frequency of review may be different.  Higher the level, the lesser the frequency.  Below are some of the review frequencies and mechanisms

Steering Committee Reviews –  Organization Level Goals –  Fortnightly/ Monthly

Department Reviews –  Dept Goals – Weekly

Frontline Reviews  –      Sub-Function level Goals – Daily

Following are the tools for review

• Conference Room Review
• Gemba (Work Place) Review
• War Room Reviews
• Layered Process Audits

Leaders should use right proportion and frequency of these reviews to achieve the required results

Step 9: Take regular corrective actions based on the review outcomes and improve the process

It is the last part of the PDCA cycle. If the results are good, we need to standardize and sustain them. If results are not as per plan, immediate actions should be taken to ensure we still meet the goals.

Overall, If the above 9 steps followed, there won’t be any doubt in achieving or exceeding long and short term goals together.

By the time this article has written, the entire world is going through a tough phase of COVID-19 or Coronavirus threat.  Thousands of lives lost and most economies struggling to cope up. A lot of uncertainty prevails in more than 140 countries.  It is relevant to mention here that though we cannot predict the uncertainties, the Hoshin Kanri process protects us with lesser damage when compared to others who have not followed it. Because it asks lots of questions in the planning phase and makes us anticipate risks and be ready with suitable responses.

List of tools to support Hoshin Kanri

1. SWOT Analysis
2. X Matrix
3. A3 thinking
4. DWMS
5. Layered Process Audits
6. Gemba Walks
7. QC Story & Q7 – Problem solving Tools