Hoshin Kanri

Hoshin Planning

Hoshin Planning is one of the titles commonly used in the Western world to describe Hoshin Kanri. This is a system of planning and deployment which evolved in Japan from Management by Objectives (MBO) and now used around the world by many leading   companies.

Hoshin Kanri involves every part of an organization: first in selecting and defining a small number of key corporate goals; and then in contributing to the accomplishment of these. It is one of the pillars of Total Quality Control as practised in Japan, and similar approaches have been developed by a number of the Western companies which are pioneers in the field of quality management.

Hoshin Kanri differs from other systems of planning in that it makes extensive use of quality management principles and techniques. It may be thought of as quality management applied to the process of corporate planning.

The Development

The original development of Hoshin Kanri is inextricably entwined with the spread of quality management principles and practices within Japanese industry. These principles were first introduced by the Japanese Union of Scientists and Engineers in 1950, in an eight-day course with Dr. Deming as the guest lecturer. This led to the widespread use of the PDCA cycle (plan-do-check-act) and the 'seven QC tools' for the management of virtually any operation. This phase might be called Statistical Quality Control (SQC).

The idea of an integrated company-wide management system, bound together by a planning system, began to develop in Japan during the 1950's and 1960's. This was heavily influenced by:

• the Deming Prize, established in Japan in 1951, which from the outset called for a system of planning
• Peter Drucker's book The Practice of Management, which proposed Management By Objectives (MBO). This was published in Japanese in 1954
• General Motors' divisional system, which was a novel concept at that time
• Dr. Juran's lectures on general management.

By the late 1960's many Japanese companies had implemented MBO, and a number of leading companies � Bridgestone Tire, Toyota, Komatsu Manufacturing, and Matsushita � had developed their own innovative approaches, going far beyond the original concept. These innovations, which would form the basis for Hoshin Kanri, sprang from the formidable expertise in SQC which these companies had established, which at that time existed only in Japan.

The term 'Hoshin Kanri', referring to this new approach, became widely accepted in Japan in the mid-1970's. By the late 1970's the experience accumulated in industry had been distilled into a formalization of the principles, and the first books on the subject appeared. The first symposium on Hoshin Kanri was held in Japan in 1981, and in 1988 the Japanese Association of Standards published a series of works dealing with Hoshin Kanri practices.

In the USA, a few leading companies began to implement their own versions of Hoshin Kanri during the late 1980's, including Hewlett-Packard, Procter & Gamble, Florida Power & Light, Intel, and Xerox. Many of these companies have shared their experiences in the public domain, but Western literature on this subject started to become available only in the early 1990's.

Various names for this approach have been used in the West such as 'Hoshin Planning', 'Management by Planning', and 'Policy Deployment'. These are approximate translations of the Japanese phrase. None of them captures the subtleties of the original meaning, and all are slightly misleading in some way. However, none of these terms is in very wide circulation, even in those companies implementing Hoshin Planning. Most employees are simply aware of the workings of the system in use, and only a few specialists need to know more than this. The common English name 'Hoshin Planning' is used in this paper.

Benefits of Hoshin Planning

The benefits of Hoshin Planning include:

• communicating the organization's vision as the starting point for all planning; as well as communicating business goals, major shifts in direction, and important new initiatives

• emphasis on a thorough analysis and understanding of problems which occurred during the previous cycle of planning/deployment. This helps ensure that new goals are based upon a sound understanding of the organization's current capabilities and opportunities for improvement

• involvement in planning of those who will carry out the implementation. This helps ensure that the goals are understood, achievable and 'owned' by those who have to achieve them

• alignment of departmental and individual efforts throughout the organization, all in support of the vision and the business goals. In this way many small achievements can complement each other in key areas of performance � to sustain improvement trends, or to create a step improvement (a 'breakthrough')

• a built-in continuous improvement cycle � to refine each annual iteration of the plans, as well as to improve the planning/deployment process itself.

What is Hoshin Planning?

One way of understanding Hoshin Planning is to picture a typical well implemented Management By Objectives system, and then to explore the possible differences between this and a Hoshin Planning system.

MBO as we know

The MBO system might include the following elements:

• a review by top management of information about: the company, including past financial results, market share trends, product margins and costs; the activities and performance of competitors; trends in the economy and in the chosen marketplace; technological developments; and so on

• examination of various strategies and prediction of outcomes; selection of a few key strategies; and quantification of the goals � the corporate outcomes sought, both long-term and short-term

• deployment of the chosen goals and strategies throughout the organization, so that each department undertakes to achieve some portion of the whole (for example a certain reduction in costs), and the sum of these individual goals equals the total goal. Each department will have a plan for achievements of these goals on (say) a monthly basis

• a thorough system of review and follow-up so that the performance of each department is reviewed (say) on a monthly basis against its plan, any shortcomings can be identified and investigated immediately, and corrective action can be instigated.

Contrast with Hoshin Planning

A mature Hoshin Planning system has, in addition, the following characteristics. Some or all of these may represent significant differences from the MBO system just described.

• the system encompasses both control and breakthrough. It is founded upon a system for control, often called the 'daily management system'. This is the day-to-day management of processes throughout the organization, with measurements reviewed frequently, and reported upwards and consolidated to show overall performance related to business objectives. This system also indicates where the current capabilities fall short of the needs of the organization, and this is one of the important inputs to the selection of the top-priority goals (Hoshin items). Once Hoshin items are chosen, additional resources and attention may be devoted to these, and the accomplishment of these goals is monitored by the Hoshin system. This can be pictured as a set of improvement projects, chosen to achieve a few top-priority goals, overlaid on the routine management of the organization.

• the system makes effective 'connections' all the way from the organization's long-term vision and business objectives to the day-to-day activities of supervisors and front-line employees. From the long-term plan flows the annual plan, with the priority goals for the coming year. This in turn is supported by many lower-level plans which are progressively more detailed and more short-term. And with these different planning horizons go different review cycles. Routine or detailed activities are reviewed daily or weekly, while overall progress is reviewed by different levels of management monthly and/or quarterly

• the system is conceived as a PDCA cycle, but with the sequence changed to CAPD � i.e. the 'check-act' phases comes first. The first phase is a thorough review of the previous year's plans and outcomes, and a thorough analysis of where, how and why the outcomes differed from expectations. Standard quality techniques are used, such as the 'seven QC tools' and root cause analysis, to identify the fundamental causes of problems. Over-achievements are analyzed in the same way, since these are also unexpected results which may contain some valuable nugget of learning.

• most of the items in the plans are related to process improvements of some sort. Since process improvement is a continuing activity, and since the gains are cumulative, a thorough analysis of last year's efforts provides a lengthy list of possible activities, any of which will yield further gains. Analysis of failures will reveal the root causes, and thus a course of action more certain to succeed next time. Analysis of successes highlights courses of action which proved successful, and which can be reinforced, repeated, and standardized. Even external events completely beyond the control of the organization are scrutinized during the review, to determine whether the planning process could have enabled the event to be foreseen, or the risk hedged in some way. With this type of information available, much of the groundwork for planning is already done, and the remaining task is to select and prioritize actions.

• the planning/deployment process itself is subject to the same type of thorough review and analysis, so that it can be improved. This built in improvement cycle is one of the reasons that Hoshin Planning, although sprung from MBO, is now very different

• the process by which the corporate goals are arrived at is a participative one. Discussions of possible targets (and means of accomplishing them) take place at every level in the organization. The intent is to give everyone the opportunity to provide input before the goals which affect them are finalized. This process is known as 'catchball' � for the game in which a ball is thrown repeatedly from one person to another in a group. The outcome is that everyone in the organization can understand how their own efforts contribute to the grand scheme of things, and no individual or group has imposed on them goals which they do not feel able to achieve

• the various aspects of the plan (goals, the components of the goals, the relationships between them, responsibilities, milestones, etc.) are captured and documented in considerable detail, using formats which are standardized throughout the organization. These formats also show how senior management goals are translated into more specific goals at the next level, and so on

• the goals deployed are of two types � quantified targets, and the actions required to achieve these � and these are closely intertwined. No target will be adopted unless the means of achieving it have been agreed, and both then become part of the plan. A series of matrices is often used to capture both of these dimensions of the plan. This matrix also helps to verify consistency � all targets should be supported by appropriate courses of action, and no course of action should be adopted unless it supports one or more of the targets. Annual targets are translated into trends or anticipated periodic results which can be tracked during the year, and actions are assigned milestones for tracking completion of intermediate tasks. The final plan is therefore a complete interlocking fabric: of scheduled activities which can be pursued to completion; and of the quantified outcomes which should flow from these actions during the year

• when a unit is not meeting its targets, then help is provided. This is not the type of so-called 'help' provided in many organizations: in which senior management interfere or take over, reverse local decisions, and leave local management tarnished with blame. The aim is to gain an understanding the underlying causes and to deal with these.

Relationship to Other Methodologies

No system of continuous improvement can be complete or fully effective unless it embodies an effective planning and deployment system. Without such a system there is a tenuous connection between business goals and employees' daily activities, many corporate management decisions lose their force, and purposeful change of any sort becomes difficult. This system is also the 'glue' which helps bind together all kinds of activities in an organization, including the various other quality management methodologies and techniques which may be in use.

Although some basic system of planning and deploying goals is essential to the successful launch of a quality improvement initiative, Hoshin Planning is unlikely to be on the agenda of most organizations during the first iteration of their improvement plan. Changes leading towards this type of planning system may be worth considering during later iterations.

Applications

Hoshin Planning cannot be simply 'installed' in an organization. The potential benefits can only be won by trying to understand and apply the principles to the organization's particular situation, and by progressively learning from this experience.

The following considerations should be taken into account in deciding when and how to apply Hoshin ideas and methods to improve your planning system.

• Virtually every organization already has some kind of planning and review system. This cannot be scrapped or replaced overnight � it must be evolved from what exists today. This evolution may be in large or small steps, but it should be purposeful re-engineering, rather than tinkering.

• Since introducing continuous improvement involves change, a planning and review system which works is essential from the outset. Without planned action and persistent follow-through, sheer inertia will usually maintain the status quo.

• Even a fairly rudimentary planning and review system � if diligently applied � can suffice to deploy the start-up phases of an improvement initiative. (Such a basic system will not, however, support the achievement of ambitious business objectives.)

• Improving the annual planning system is an inherently slow process, compared with improving a system which repeats on a daily or hourly basis. There are fewer opportunities to make adjustments to the system, to observe the effects, and for the people involved to gain experience of the modifications. The time required to develop a mature Hoshin Planning system is generally five years or more, starting from the base of a sound, fully deployed (MBO) system.

• Some of the concepts of Hoshin Planning cannot be applied until other elements of continuous improvement and quality management have been learned. For example, in a mature Hoshin Planning system, plans are based upon a thorough understanding (and measurement) of current capabilities, and an analysis (with root causes) of current problem areas. This type of information is simply not available until the organization has developed some competence in process management. Another example is the use of matrices to record targets and means, to check consistency, and to deploy goals to lower levels in the organization. Much of this will seem strange and unwieldy to management teams which do not have experience with some of the 'seven planning tools'.

Implementation Logic

Together, these considerations David Hutton suggests the following logic:

• If the current planning and review system is simply 'broken', then this needs to be addressed as soon as possible. For example, if corporate management decisions often go unrecorded, or if there is not enough follow-through to ensure that decisions are translated into action, then there is an urgent need to improve the system. Since only a few changes can be made in any one year, only the most serious shortcoming(s) should be tackled at first.

• Since improvement has to be evolutionary, each revision of the system must be workable, and each change must be perceived as a step forward by those who use the system. Feedback from users can help identify those changes which will make the system more effective and improve it in the eyes of users.

• Because it takes a substantial amount of time to develop an effective planning system for your organization, this system it should not be ignored until it becomes a problem. It may be better to start work early on a long-term improvement strategy, and thus have adequate time to implement this in small, easily managed stages.

Implementation

• Make sure that the planning system is designed to help achieve the organization's business goals.

• Do not copy slavishly another organization's system.

• Start with the system that exists now. Do not introduce a new system in parallel with the existing one.

• Introduce change progressively, in easily assimilated steps.

• Strive to ensure that each change is seen as a step forward by users, and that each set of changes results in a practical and workable system.

Units of Change

In planning this evolution, the following are typical 'units' of change which might be made each year, perhaps a few at a time. The list below is not comprehensive, nor in any particular sequence:

• Ensure that plans are documented and linked to the review process in such a way that every item is pursued to 'closure' (i.e. plans completed and commitments met, or the reasons understood and changes accepted).

• Ensure that financial planning is coordinated with the planning cycle for improvement (e.g. budgets are not fixed before other forms of planning begin).

• Introduce mechanisms to capture feedback on the planning system itself � from users of the system at various levels.

• Broaden the scope of inputs, to include relevant information about customers, employees, suppliers, performance of competitors, trends in technology, etc.

• Introduce a requirement for some quality improvement goals (e.g. for achievement of some kind of process improvement), to complement financial goals, output goals, personal development goals, etc.

• Reinforce the distinction between quantified outcomes (targets) and actions required to achieve these (means). Provide a process for developing and recording goals of both types.

• Introduce a self-assessment process to analyse historic data (e.g. to identify the root causes of past variances from plan) and to recommend actions.

• Broaden participation in the process, to obtain the input, involvement, and 'buy-in' of everyone involved before the plans are finalized.

-From the article written by David Hutton.

References

This paper provides only a brief overview of a complex topic. The following materials provide starting points for further study and investigation:

• *"Hoshin Kanri � Policy Deployment for Successful TQM." Yoji Akao, Author and Editor-in-Chief. 1991, Productivity Press, Cambridge, MA 02140.

• "Hoshin Planning � The Developmental Approach." Bob King. 1989. GOAL/QPC, Methuen, MA 01844.