Hoshin Kanri: Method and Process

Hoshin Kanri is a Strategic Planning process and methodology that focuses resources on achieving strategic, tactical, and operational goals. Hoshin Kanri is also known as Hoshin Planning, Policy Management, or Lean Strategy Deployment, and means "compass needle management" in direct translation from Japanese.

The purpose of Hoshin Kanri is to improve an organisation's communication around its management and, in turn, the management itself. The idea is that a seven-step process will result in a reduction of unnecessary tasks, which are often the result of poor management processes and lack of direction.

There is often an ineffective gap between the management's strategic plans and directives, and the tactical and operational execution within an organisation. Hoshin Kanri links strategic goals with employees' tasks and perspectives by systematically involving employees in the development of strategy and goals. Participation creates cohesion, consensus, engagement, and a common direction.

Hoshin Kanri highlights vision and mission and has a close connection to (or can be seen as a) Lean and Quality Management methodology. Toyota, for example, is a well-known user of Lean and Kanban since World War II and has been using Hoshin Kanri since the 1960s.

Hoshin Kanri Methodology

The methodology states that all employees should determine measurements and goals for their own parts of the organisation. Those who set their own goals are more engaged and have a greater sense of ownership over their work, compared to those who are assigned goals from higher up in the "pyramid."

The Hoshin Kanri Methodology also states that an employee needs to understand the company's strategy, their place within the strategy, and how they contribute. This, in turn, should contribute to feedback and improvement suggestions from employees.

A shortcut to understanding the Hoshin Kanri Methodology is to learn the key concepts of "Catchball" and "Breakthrough Objective" before diving into the seven-step process:

Catchball

Catchball is a Lean tactic and part of Hoshin Kanri. Imagine that management has a meeting and sets the company's goals. They then pass the ball to the next level in the organisation. This level analyses the goals, identifies potential bottlenecks and problems, and comes up with ideas to achieve the goals. Then they pass the ball back to management.

When consensus is reached with management, the Catchball process continues to middle managers, then to team managers and further along the organisational structure. Eventually, the goals are supported by the entire organisation with specific and achievable strategies to achieve them, with input from each team.

Companies with an inclusive corporate culture find Catchball easier. It is possible to regulate whether the goals should be passed back to management after each level, which can affect and "top-down" more, but Catchball is about collaboration and only works if all levels and business areas work together.

According to the method, top-down strategies often dominate. This creates, in many cases, low levels of engagement and understanding between those who set the strategy and those responsible for implementing it in practice.

Effective use of Catchball creates shared responsibility and accountability at all levels of your organisation. Catchball thus gives your corporate goals and employee actions a common direction at all levels of your organisation.

While management may perceive Catchball as a fragile and time-consuming methodology, it is seen as the key to anchoring and creating participation with the Hoshin Kanri Methodology.

Breakthrough Objectives

This section of Hoshin Kanri starts with the company leadership coming to an agreement on company goals, vision, and mission. The leadership and experts within the company (often department heads) then define "Breakthrough Objectives". These objectives support and build on the company goals, vision, and mission, and describe what the company's situation will look like in three years.

Three questions need to be answered when creating a Breakthrough Objective:

Why should we reach the defined level of achievement?
What should the outcome be?
How can we tell if the goals have been achieved?

Department heads and experts synchronise the goals they have developed with each other, receive feedback, adjust them, and then take the goals to their teams and ask for feedback from them (Catchball).

When the team does not approve of the goal definition, it is taken back "one step up" where the leadership or "the level above" is given an explanation of why the goal definition is disliked. The idea is that the leadership will then help and correct the answers to the three questions (goal definition).

To enable employees to understand and embrace the goals, goals are created to be achieved annually. These are monitored continuously to see if everyone is on the right track, and if not, the leadership receives feedback directly. After one year, everyone meets and reviews the next year's goals, how they have progressed, and what needs to be improved to achieve their Breakthrough Objectives.

Hoshin Planning's 7 Steps

1. Create a vision

Develop or update a ten-year plan (a vision) using data, experiences, and knowledge from leadership and experts from all corners of your organisation. Base the plan on a small number of strategic goals.

2. Develop "Breakthrough Objectives"

Break down the long-term strategic goals (the vision) into strategic goals that are closer to execution. The goals should be achievable within 3-5 years. Use Nemawashi as a collaborative strategy to raise, discuss, and adjust goals among middle managers and leaders. Nemawashi's fundamental concept is to involve those affected by a decision in the decision-making process.

3. Develop annual goals

Develop annual goals that break down the Breakthrough Objectives, and you are now at a tactical level. Now you should determine how to allocate goals to specific teams and how they will achieve them through Catchball.

4. Communicate goals to employees

Now is the time to communicate goals and associated metrics to those who work on implementation. Communication is often visualised using a Hoshin Planning Matrix. The matrix breaks down Breakthrough Objectives into annual plans, prioritised improvement suggestions, KPIs, and accountability. It is a useful tool to determine whether the plans can be sustained.

5. Implement and communicate annual plans

Finally, plans and goals are launched and implemented, often with the help of PDCA (Plan, Do, Check, Act). Ensure that teams have a framework for planning, executing, and measuring improvements to achieve goals. A yearly wheel can assist with visualisation and communication.

6. Regularly follow up, preferably monthly

Monthly follow-ups are the most common. However, follow-ups should occur at a pace that suits your organisation but ensure that it is organised, such as through Gemba.

7. Evaluate and follow up for the next year

Now is the time to review the past year and improve and change where necessary. Based on the experiences and data gathered during the year, realistic goals are set for the next year.

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