The Big Idea – Align company goals (Strategy) with the plans of middle management (Tactics) and work performed by employees (Operations) to ensure that everyone is pulling in the same direction at the same time.
- WHAT IS HOSHIN KANRI
- IMPLEMENTING HOSHIN KANRI
- ADDITIONAL CONSIDERATIONS
Hoshin Kanri (also called Policy Deployment) is a method for ensuring that the strategic goals of a company drive progress and action at every level within that company. This eliminates the waste that comes from inconsistent direction and poor communication.
Hoshin Kanri strives to get every employee pulling in the same direction at the same time. It achieves this by aligning the goals of the company (Strategy) with the plans of middle management (Tactics) and the work performed by all employees (Operations).
Hoshin Kanri creates an organic flow of information that runs through an entire company – much like the human nervous system runs through the entire body. Goals and KPIs travel from the top down, while results are returned from the bottom up.
One way to understand Hoshin Kanri is to walk through a typical set of implementation steps.
Step One – Create a Strategic Plan
Hoshin Kanri starts with a strategic plan (e.g. an annual plan) that is developed by top management to further the long range goals of the company. This plan should be carefully crafted to address a small number of critical issues. Key items to consider when developing the strategic plan are:
Focus on Five
Focus on five goals (or less). The mere act of writing down goals can create a (false) feeling of progress – and more goals feels like more progress. In reality, a goal only expresses intent. Taking action is the hard part. Every company has finite resources and energy…and a limited attention span. Focusing on a small number of goals makes success far more likely than dissipating energy across dozens of goals. Or looking at it another way…if everything is important; nothing is important.
There is a well-known distinction between efficiency and effectiveness: efficiency is doing things right while effectiveness is doing the right things. Strategic goals need to be effective – doing the right things to take the company to the next level. If a goal doesn’t have that kind of broad impact it’s probably not strategic.
Evolution vs. Revolution
Goals can be evolutionary (incremental goals usually achieved through continuous improvement) or revolutionary (breakthrough changes with dramatic scope). Both are legitimate and important forms of improvement.
Top Down Consensus
Top management is responsible for developing the strategic plan – it’s one of their most important responsibilities. But taking the time to consult with middle management serves two useful purposes:
- It provides additional perspective and feedback that helps craft stronger, more informed strategies
- It creates a sense of shared responsibility for the plan and significantly more buy-in from middle management
Key Performance Indicators (KPIs) provide the means for tracking progress towards goals. They also have a considerable ability to drive behavior. So choose KPIs with care. It is essential to think through whether the selected KPIs will drive the desired behavior without unintended side effects. For example, more than one company has found that a single-minded pursuit of efficiency can lead to unintended consequences such as excess inventory (larger batches means less changeovers) and reduced quality (a subtle “fix it later” pressure creeps in to keep lines running).
Own the Goal
Every goal should have an owner – a facilitator and coach who has the skills and authority to successfully see the goal through to conclusion.
- As a facilitator, the goal owner will remove roadblocks and smooth the path to progress
- As a coach, the goal owner will track progress and intercede if things get off track
Step Two – Develop Tactics
At a departmental level, mid-level managers develop tactics that will best achieve the goals as laid out by top management. One of the most important aspects of this process is “catchball”…a back and forth exchange with top management to ensure that the strategy and goals are well understood, that there is strong alignment between strategy and tactics, and that the KPIs are meaningful and appropriate.
Tactics may change throughout the course of fulfilling the strategy; flexibility and adaptability are important characteristics of the process. As a result it is helpful to have regular progress reviews (e.g. monthly), at which time results are evaluated and tactics are recalibrated.
Step Three – Take Action
At the plant floor level, supervisors and team leaders work out the operational details to implement the tactics as laid out by mid-level managers. Once again, the principle of catchball applies, to ensure that activities at the plant floor (and other areas of the company) are strongly aligned with tactics and strategy.
This is the level where goals and plans are transformed into results. This is Gemba (the place where real action occurs). Therefore, managers should stay closely connected to activity at this level (e.g. regularly practicing “management by wandering around”).
Step Four – Review and Adjust
So far the steps have focused on cascading strategic goals down through levels of the company; from top management all the way down to the plant floor. Equally important is the flow of information in the other direction – information about progress and results. It is this second flow that creates a closed loop system – enabling control and adjustment of the entire process.
Progress should be tracked continuously and reviewed formally on a regular basis (e.g. monthly). These progress checkpoints provide an opportunity for adjustment of tactics and their associated operational details.
It’s for Everyone
Hoshin Kanri is not as well-known or “popular” as some of the other lean tools – but it is an extremely valuable tool. Although it fits most naturally within a well-developed lean culture, where continuous improvement is firmly ingrained at all levels of a company, virtually any organization can benefit from its core principles:
- Visionary strategic planning (focusing on the things that really matter)
- Catchball (building workable plans through consensus)
- Measuring progress (carefully selecting KPIs that will drive the desired behavior)
- Closing the loop (using regular follow-up to keep progress on track)
Benefits of a Flat Management Structure
It should be pretty obvious that a flattened management structure is beneficial to Hoshin Kanri. The fewer levels there are, the easier it is to cascade goals down and the fewer opportunities there are for strategy to be diminished through successive layers of translation. Fewer layers also means faster decision making.
Some very large organizations have flat management structures. One of the best known is Nucor Steel, which has approximately 12,000 employees and only four layers of management between the CEO and line-level employees. In fact, a common joke is you can go from Janitor to CEO at Nucor with only five promotions. In contrast, a typical Fortune 500 company has 8 to 10 layers of management.
Create a Shared Vision
People perform best when they have a purpose. When they understand not just what to do – but why it’s important. One of the benefits of Hoshin Kanri is that it can help to create that purpose; providing focus and drive towards specific and important goals.
So, it’s worth putting some effort into creating a shared vision of the strategic plan (the future state; the destination) and associated tactics (the path to get there). Make sure as many employees as possible are given an opportunity to understand why the strategic goals are important and how the tactics and operational details support those goals.