The Hoshin Kanri strategy planning and execution system were developed in the 1950s by Professor Yoji Akao in post-war Japan.
Created within the framework of the Total Quality Control (QTC) methodology, this strategic management model is about sharing the objectives of the organization at all levels of the company so everyone can contribute from their knowledge and the needs of their position.
Assuming that every person is an expert in his or her work, then each person’s expertise is reflected in the overall objectives of the company, which would make the company the best in its field. Thus, all workers in an organization are aligned toward the same strategic objectives.
Hoshin Kanri is a Lean approach used to implement strategic improvements that encompass all areas of the company.
The phrase Hoshin Kanri means policy management and represents the concept of guiding an entire company in a clear, consensual direction. The name is composed of three Japanese words: Ho (method), Shin (compass), and Kanri (management or control).
Let’s now see why Hoshin Kanri is necessary and what are the steps required for its correct implementation.
Why Hoshin Kanri is necessary
When companies do not implement Hoshin Kanri, every member of the organization goes their way without knowing the objectives to be achieved in the short/long term. With the Hoshin Kanri methodology, we know and inform the organization of where we are and where we want to go, what are the Company’s objectives and what are the foreseeable risks and opportunities.
How to implement Hoshin Kanri
In this figure, we can see the action path within the PDCA cycle:
P: Plan Phase in the Deming PDCA cycle
Step 1 of 4: Building or updating the vision
This phase starts with the identification of what is desired, and clearly stating the intended purposes, with clear ideas and relevant information. The goal is to clearly define the purpose of the organization, and vision, where realistic but demanding goals and objectives are established with a clear and direct mission. This plan should always be applied, especially in good times, and not wait for times of crisis. Once the vision is defined, we move to the next step.
Step 2 of 4: Diagnosis of the situation
This step is aimed at identifying where we currently are, and we do it by:
- Running a preliminary diagnosis of the current internal and external situation
- Defining what our strengths and weaknesses are
Step 3 of 4: Strategic analysis and definition of strategic axes
Once the diagnosis is performed, we move forward defining where we want to be in the future:
- Definition of a company strategy for a specific term (3 or 5 years)
- How we want and need our company to be after this period
- In which market niche do we want to be or compete
- What we want to stand out from our competitors
- Which parts of our organization and our processes are most relevant to fulfill this strategy
Step 4 of 4: Establish detailed annual objectives and associated action plans
The last step in the planning phase of the PDCA cycle is establishing specific objectives and action plan to achieve them, by creating annual plans that further break down the 3-5 year strategic objectives:
- Establishment of goals and objectives to be achieved
- Objectives should be clear, concrete, and measurable
- Identification and assignment of responsible parties
- This task is fundamental since they are the ones who will define and apply the actions that will make it possible to achieve or not achieve these objectives
D: Phase D in the Deming PDCA cycle: Execution of action plans
The objectives themselves are a declaration of intentions, if we do nothing different, they will not be achieved. It is now time for each manager to use the Deming cycle (PDCA) or kaizen events based on the SCORE methodology (Select, Clarify, Organize, Run, Evaluate), assign collaborators and together with them define and schedule the action plans through which they will achieve those objectives.
At the end of a complete deployment cycle:
- Every stakeholder knows:
- Its objectives and those to which it contributes
- Actions to be piloted by him, in addition to day-to-day management
- Other actions in which it participates
- The piloting for the achievement of each objective is organized:
- Continuous monitoring by each pilot
- Periodic meetings (at the highest level) to evaluate progress and validate
C: Check Phase in the Deming PDCA cycle, Review and Process. Are the objectives being met?
Once the plan is being executed, it should be reviewed to check and see how the company is progressing towards meeting the objectives, for which we must:
- Set review schedules
- Establish the plan’s monitoring, measurement, and evaluation system
- At this meeting, each manager will present the evolution of his or her objectives, the necessary measures to achieve them will be provided and, if necessary, some of them will be reformulated
A: Act phase in the Deming PDCA cycle, closing the cycle:
As its name specifies, PDCA is a cycle that must be run again as it allows us to:
- Stabilize and capitalize on the experiences of the Plan
- Generalize the practice
- Leverage self-criticism throughout the process to improve and provide feedback
- Restart redefinition of objectives (P phase)
Why should companies implement Hoshin Kanri?
Hoshin Kanri Planning helps develop a strategic direction deployment at all levels of the company, from the CEO to the local team leader, generating also new ways to successfully communicate and monitor the chosen course for the organization.
Benefits of Hoshin Kanri
- Hoshin Kanri helps to have a clearer vision of the current status of the organization
The Hoshin Kanri model can be seen as a map that helps us get to the ideal state of an organization. For a map to be useful it is essential to be clear about where you stand on it. Thus, one of the most important issues in the model is that it establishes benchmarks of the organization’s current performance and determines indicators to measure progress towards success and that ideal state.
- Hoshin Kanri generates unified commitment
No organization performs better than one whose employees are committed to the objectives. Unlike other strategic models, the Hoshin Kanri model comes to life throughout the entire organization. All goals, objectives, and improvements of each person, area or team are aligned. In this way, workers feel much more committed when they see that their work is critical within a global picture.
Among other advantages that can be generated by applying Hoshin Kanri to implement your strategy, we can highlight the following:
- It improves the organizational alignment of employees
- It increases ownership and commitment to results
- It helps focusing on actions that lead to results, not just numbers
- It makes it easier and more consensual decision making
- It gives widespread awareness of the importance of the strategic plan
- It increases problem-solving orientation
What are the disadvantages of using Hoshin Kanri?
Hoshin Kanri, like many management tools, is a powerful methodology. However, like any tool, if not used properly, it can have some disadvantages, for example:
- The greatest danger is to implement the method without understanding its purpose and without a proper development of what is stated in the Phase Plan.
- Hoshin Kanri only makes sense if the objectives are met. If the objectives are not achieved by a wide margin, either because they are not realistic, or because of lack of motivation and involvement of the organization, then the whole exercise makes no sense and loses credibility. Then, the process becomes a meaningless race in which the staff knows they have to participate, but which does not engage them, and finally does not contribute to their knowledge and does not make them feel it as something strategic. As in all cases, leadership is essential to keep this tool active and dynamic, adapting it to the reality of the market, the Company and the existing resources.