Hoshin translates into English as “direction needle,” like the needle on a compass, while Kanri translates as “management.” Together, Hoshin Kanri means Direction Management for an organization. In practice, Hoshin consists of a strategic, enterprise-level “breakthrough” target and appropriately aligned departmental goals that “point” the organization toward achieving that target. Kanri provides a framework for managing the process of developing the Hoshin and communicating, planning, and aligning all levels of the organization to achieve it.
Hoshin Kanri was developed in Japan in the 1960s by integrating two well-known quality and management schools of thought: Management by Objectives (MBO) and Total Quality Management (TQM). Toyota recognized the value Hoshin Kanri could add in meeting their business need to unify and align the thinking and effort of their expanding number of leadership and operational management teams worldwide. In Hoshin Kanri, Toyota’s senior leaders saw an opportunity to cultivate a shared understanding, amongst developing leaders throughout Toyota, of their vital roles in leading and supporting the journey of their respective organizations toward their desired destination: a workplace culture characterized by continuous improvement and mutual respect for all people.
Through the practice of Hoshin Kanri, senior leaders learned first to identify corporate-level, strategic priorities with associated targets and goals and then to engage their departmental leaders and managers in developing, communicating, and aligning their own Hoshin Kanri documents at all levels of the organization to contribute to the corporate level priorities. This cascade of the corporate-level priorities to the next level below ensures that the entire organization contributes in the same direction and does not spend resources on items that aren’t corporate-level priorities. In addition, the process continually challenges leaders to improve their daily thinking and behaviors per TPS thinking and principles. In turn, these leaders were able to model, reinforce, and coach the desired behaviors and thinking of TPS for all team members and newly developing leadership across their global operations.
With their TQM roots in Dr. W. Edwards Deming’s well-known “Plan-Do-Check-Act” or “PDCA” learning cycle, the steps of the Hoshin Kanri process were ideally suited for meeting the needs for strategic planning and continuously developing the desired behaviors and skills of “PDCA” thinking and problem-solving. Hoshin Kanri has continued to be used by Toyota’s senior leaders to develop new generations of leaders who, although drawn from the diverse cultural settings of their respective global operations, are uniformly grounded in and aligned with the principles and thinking of TPS.
The four essential outputs of the Hoshin Kanri process are:
- A strategic priority (an objective)
- A statement of a strategy (a direction)
- A statement of the means to achieve the strategy (a method)
- A statement of how performance is to be monitored (a target)
The 5 step Hoshin Kanri process for producing these outputs follows the “PDCA” cycle, as described below:
The “PDCA” of Hoshin Kanri
The first three steps of the Hoshin Kanri process make up its Planning phase. These three steps also produce the first three essential outputs shown above.
Business Assessment: The process begins with senior leadership's objective appraisal of the organization's performance relative to key business metrics. Based on this appraisal, a strategic priority or limited number of key priorities for improvement for the year can then be identified.
Establishing Hoshin Direction: Establishing an effective Hoshin direction requires a shared understanding by senior leadership of their “destination.” With the current condition assessed, senior leadership can identify “gaps” between their current condition and an ideal TPS principle-based “destination” condition. They must then reach a consensus on which gaps to address as strategic Hoshin priorities for the coming year. (Output #1 – Strategic Priority(s))
With strategic gaps identified, senior leaders then establish a target to begin to close the gap associated with each Hoshin priority. Senior leaders pass the higher-level Hoshin down to the next level of management. That manager then creates a "Hoshin" for their specific area, ensuring it supports the overarching Hoshin from above. Each Hoshin created for various areas, departments, and groups must be approved by two levels of management above. This process contributes to the development of management members. Senior leaders must then communicate and confirm an understanding of this Hoshin strategy to all departmental and area leaders within their scope of responsibility, thus providing the directional force for the needle of leadership’s “compass” to align the thinking of all members of the senior leadership team with that of every other leader throughout the organization. (Output #2 – Statement of Strategy/Direction)
Hoshin Development: Every Area leader on the senior leadership team is responsible for uniting and aligning the efforts of each level of leadership and all team members in their respective areas to achieve their contribution to the overall Hoshin. They must develop their 12-month plan, which communicates the Hoshin sub-targets and milestones for all leaders reporting to them. They must then support the development of specific action plans by these reporting leaders. Sub-targets and goals must be communicated so that leaders, managers, and team members at every level can see how their daily improvement efforts are impacting progress toward achieving their portion of the top-level Hoshin target.
The core thinking and steps embodied in developing these Hoshin plans for every level are for leaders and team members to work together to systematically break down and prioritize problems for elimination that will contribute to closing the top-level gap. Eliminating these problems will require determining the root cause for each targeted problem and then evaluating and identifying an effective countermeasure. Initial plans for accomplishing this process are drafted for each level within an area. Senior leadership team members complete the Hoshin development by reviewing their plans with their peers to coordinate them and address potential conflicts before beginning implementation. Once agreed to and finalized, plans are communicated throughout every level, ensuring horizontal and vertical alignment of all leaders, managers, and team members. (Output #3 – Statement of the plan/method for achieving the strategy)
Implement the Hoshin: This “Do” step should flow from the first three planning steps as each Area leader moves forward with implementing their plan. The implementation should be executed promptly, with leaders following up and checking on each step of the plan, following the TPS principle of Genchi Genbutsu, meaning to “go and see” for themselves, checking for any problems or unintended consequences associated with the implementation of their countermeasure plans. This is not a simple “one and done” process and may require several iterations, negotiations, and sometimes difficult but necessary adjustments or recovery plans. False starts, going back in the process, and other struggles are common in this step and should be recognized as part of a collective learning process inherent to the development of leaders. Successfully implementing Hoshin's plans requires patience, persistence, and the ability to continually balance the organization’s short-term needs for results with its long-term needs for the respect and development of its people.
- Achieving Results: The fifth step of the Hoshin Kanri process embodies the “Check” and Act phases of PDCA. Every Area leader and their reporting leaders throughout their area are responsible for monitoring and evaluating their progress toward hitting their Hoshin improvement targets and improving their ability to understand and follow the TPS principles and problem-solving thinking embedded in the Hoshin Kanri process. This process is accomplished through formal mid- and year-end reviews, during which each leader’s progress and understanding of their results are checked. These reviews also provide opportunities for senior leaders to evaluate their performance and to provide coaching and support as part of the evaluation and development of the leaders reporting to them. This “last” step sets the stage for a new assessment and the beginning of a new Hoshin cycle for the coming year. (Output #4 – Statement of how performance is to be monitored)