What is Hoshin Kanri strategic planning?

Introduction:

The Hoshin Planning has been used successfully by companies in Japan, e.g. Toyota. Many organizations have since then tried to change their business practice to be more accordingly to the Toyota System. The term Hoshin Kanri translated from Japanese is “the management of objectives”, focusing on achieving vital annual goals.

The process of Hoshin Kanri consist of many wisdoms for strategic planning. Grasping these wisdoms can be helpful for implementing strategy. By working with many different organizations, I’ve seen many initiatives but without any long-term success. One reason is the lack of clear understanding of the methodology and its principles. I thought I’d share some insights through experience combined with literature from academics. I believe that by these insights, it is possible to see its benefits and use the tool to contribute in strategic planning.

Understand its origins

Hoshin Kanri was developed in Japan with the purpose of communicating company strategy to everyone in the organization. It is a framework for organizing strategy management that is built around a cyclical approach (although there is a sequential approach as well – it consists of repeated reviews). Its strength lies in focusing setting a vital few strategic priority, thus focusing an organization’s attention. Another strong point is the integration with daily management. The goal with this approach is to align all parts of the organization to work together and accomplish important objectives. The process is driven by the Deming’s Plan-Do-Check-Act cycle. This implicates continuous improvement which is another aim of Hoshin Kanri. The PDCA-cycle is a foundation for sustainable control and integration, the 4 different stages are shown in table 1.

Table 1. The different stages of PDCA in Hoshin Kanri planning

Stage Objective Questions to think about
Plan Define What you want to improve and establish Sub-Goals a) A key strategic objective that needs significant change
b) What goals on (team/functional) level are needed to achieve this objective?
Do Communicate the plan Make sure that all levels of the company understand your vision and goals
Check Collect information and review Collect information and review key metrics with action owners and review the time frame
Act Analyze and improve Analyze results and take corrective action between expected and actual results. Review the plans on an ongoing basis

To further illustrate the PDCA cycle, figure 1  shows the strategic application of the different different stages. The PDCA-cycle is used to drive the strategy and ensure that goals are achieved.

PDCA-1.png

Figure 1. Strategic application of the PDCA cycle. Adapted from Zairi & Erskine (2006, p.7)

Link Strategic Planning with Operational Processes

What set Hoshin Kanri apart from the traditional methods of strategic planning are the focus on resolving several critical issues. Table 2 summarizes some of the traditional issues.

Table 2. Issues in traditional strategic planning

Traditional Issues

Implications from Hoshin Kanri

Poor communications of goals Continuously communicate the plan to everyone
Strategies are often top-down goals Use the method of catchball* to exchange information regularly and exchange combining top-down and bottom-up
Voice of customer is not really captured Understand for yourself by “going to Gemba” and use data gathering and analysis.
Poor execution Hold regular review meetings and find root cause analysis and take corrective actions
Too much focus on short-term goals Build consensus and commitment in the planning phase. Reflect and follow-up in every stage.
Too many goals and action plans Set the True North and focus on few priorities in each annual cycle

*Catchball: An open feedback loop with information sharing back and forth between top management and the rest of the organization. Top management throws the ball to a lower level that catches the ball and propose feedback. It is an ongoing iteration.

Literature provides several approaches to Hoshin Planning process, here we examine the process described by Hronec (1993) consisting of seven elements, see table 3.

Table 3. Seven steps to Hoshin Planning

1.Strategy
2.Goals
3.Critical Processes
4.Output Measures
5.Key Activities
6.Process Measures
7.Implementation

The main implication is that Hoshin Kanri aims to link the achievement of top management goals with an operational level, i.e. daily management. To explain this, we use an example provided by Hronec (1993), see figure 2.

PDCA-3.png
Figure 2. Example of Hoshni Kanri planning process.(Hronec, 1993 cited in Zairi & Erskine, 2006, p.11)

Conclusions:

Hoshin Kanri offers valuable insights on how to improve the strategic planning process. It is a powerful framework that supports the strategic formulation, implementation and alignment. Start by using Hoshin as a drive to change and explore the elements Hoshin Kanri process in the business planning process. Aim to clarify a vision taking a long-term approach and work to establish connection with the whole organization – let plans be communicated and allow interaction and iterations. Another concern is the involvement of those involved in carrying out the planning decisions. The line managers should be central in the planning and for securing necessary commitment. There is a vast of references available with lessons learned from different projects. Wiebe Nijdam from Lean Management Instituut provides an approach on how to deploy Hoshin Kanri. Access the article here – How to deploy Hoshin Kanri successfully.

References:
Alic, A. and Ideskog, J. (2018). MASTER THESIS WITHIN: Business Administration NUMBER OF CREDITS: 30 ECTS PROGRAMME OF STUDY: Civilekonom AUTHOR: Adina Alic & Johan Ideskog TUTOR: Duncan Levinsohn JÖNKÖPING May 2016 Hoshin Kanri – the Japanese way of piloting A n exploratory study of a Japanese strategic management system. MASTER THESIS. Jönköping University.

Hronec, S.M. (1993), Vital Signs Using Quality, Time and Cost Performance

Isixsigma.com. (2018). Hoshin Planning: Making the Strategic Plan Work. [online] Available at: https://www.isixsigma.com/methodology/hoshin-kanri/hoshin-planning-making-strategic-plan-work/ [Accessed 7 Mar. 2018].

Kanbanize.com. (2018). What is Hoshin Kanri Catchball?. [online] Available at: https://kanbanize.com/lean-management/hoshin-kanri/what-is-catchball/ [Accessed 7 Mar. 2018].

Mindtools.com. (2018). The Hoshin Planning System: Steering Everyone in the Right Direction. [online] Available at: https://www.mindtools.com/pages/article/newSTR_77.htm [Accessed 7 Mar. 2018].

Picchi, F. (2018). Ten strategic planning problems hoshin kanri can solve. [online] Planet Lean. Available at: http://planet-lean.com/ten-strategic-planning-problems-hoshin-kanri-can-solve [Accessed 7 Mar. 2018].

Zairi, M. and Erskine, A. (2006). [online] Managementjournals.com. Available at: http://www.managementjournals.com/journals/strategic/vol2/12-2-2-2.pdf [Accessed 7 Mar. 2018].

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