Originating in Japan, Hoshin Kanri is a strategic planning method. The term “Hoshin” means “direction or compass,” and “Kanri” stands for “management or administration.”The whole term thus translates to Compass Management.
Also known as Policy Deployment or Strategy Deployment, Hoshin Kanri is a powerful methodology that aligns a company’s overarching goals (strategy) with the plan crafted by middle management (tactics) and daily work executed by employees or operations.
What good is this structured alignment? Well, it ensures everyone is moving toward the same objectives, minimizing wasted effort and communication across teams is uniform and effective. To facilitate your learning, this article thus serves as an exclusive guide on Hoshin Kanri and shares insights on how it ensures that efforts at every level contribute to the company’s long-term success.
What is Hoshin Kanri? The Core Concept & Details
Hoshin Kanri is a strategic design that aims for a business’s long-term vision by keeping every level of organization in a loop focused on a shared strategy. It was developed in post-war Japan and has since spread globally. Its core concept is to align goals from top management down to the operations level. This is how companies can achieve consistent and efficient progress.
In Hoshin Kanri, goals and key performance indicators are set and shared from top to bottom. The flow of information in Hoshin Kanri involves a stream that starts at the top-level strategy down to the middle management and reaches operations.
On the contrary, the results travel back up, creating a continuous, feedback-driven improvement loop.
Key Features of Hoshin Kanri
| Top-Down Approach | It focuses on the strategic goals that are set by the top management of the business and then communicated down throughout the organization at every level. |
| Alignment | This area ensures that all employees; daily work aligns with the organization’s long-term strategic goals. |
| Catchball System | It’s a feedback loop where ideas and goals are passed back and forth between different organizational levels to ensure buy-in and alignment. |
| PDCA Cycle | This feature Incorporates the Plan-Do-Check-Act cycle for a continuous improvement culture |
| X-Matrix | It is a visual tool used to map out strategic objectives, annual objectives, and key performance indicators with tasks clearly laid out and the person responsible for such tasks. |
How to Implement Hoshin Kanri
From strategic planning to reviewing and refining actions, implementing Hoshin kanri is a matter of 4 steps given below:
Step 1 – Create a Strategic Plan
Before the implementation starts, a strategic plan needs to be devised first by the top management to guide the company’s long-term objectives. Here are some important considerations when setting strategic goals:
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Limit Goals to Five or Fewer:
Too many goals can dilute focus and efforts, making it difficult to see real progress. Therefore, the best practice is to concentrate on a few vital goals, which allows the organization to focus its resources on more substantial objectives that will deliver value and growth,as well as achievable progress.
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Effectiveness Over Efficiency:
Effectiveness is about achieving results that contribute to the organization’s future. Rather than just doing things correctly, strategic goals need to address doing the right things to ensure the business remains competitive and adding value to stakeholders. Focusing on the right goals pushes the business forward, therefore less critical goals should be omitted.
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Evolution vs. Revolution:
Goals can be of two types: evolutionary and revolutionary. The former focus on gradual improvements whereas revolutionaries aim for breakthrough changes. Incremental improvements help maintain steady growth, while dramatic changes may be crucial for addressing larger market shifts, and Hoshin Kanri emphasizes the value of these both.
So, take into account what sort of goal aligns with your strategic plan.
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Top Down Consensus:
Top management should involve middle management while creating the strategic plan to gain diverse perspectives and foster an environment of shared responsibility for fulfilling the business’s objectives. With this shared ownership comes a sense of accountability across all levels.
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Careful KPI Selection:
KPIs should be chosen to ensure they fuel the right behaviors without unintended negative consequences, such as sole focus on efficiency which might lead to excess inventory or quality or service level declines.
Furthermore, each goal must have a designated owner responsible for removing obstacles, tracking progress, and adjusting actions when needed. Besides, he or she must facilitate others to ensure the goal’s timely and successful completion.
Step 2 – Develop Tactics
This stage builds commitment to strategy and promotes better alignment between the goals set by the top management and the operational reality that the company faces.
Middle managers develop tactics to achieve strategic goals at the departmental level. To ensure clarity between strategy and tactics, this step often involves a catchball process, where ideas are exchanged back and forth with the top management.
The catchball process aims at achieving flexibility and adaptable tactics to address evolving challenges. Besides, the exchange of ideas through a catchball ensures the middle management is not simply executing orders but is actively participating in shaping the plan.
For instance, regular reviews (e.g., monthly) help ensure that progress is maintained and that tactics are recalibrated as needed.
Step 3 – Take Action at the Operational Level
Supervisors and team leaders work out the implementation details of the tactics at the operational level. The catchball process applies here too, ensuring actions align closely with the overall organizational goals.
Action at this level is crucial because it is where strategic plans are transformed into real-world results. Also referred to as Gemba in Lean practices, this step involves the managers and keeps them engaged with the frontline teams to maintain alignment and support. Gemba aims to observe, engage, and support workers directly in the different areas and departments where they are making a difference.
Other than managers, the employees on the ground are the ones who execute the actions, and their feedback and performance help determine if the tactics are working well or require adjustments.
Step 4 – Review and Adjust
Hoshin Kanri’s bottom-up feedback system comes into action in the final step. Unlike strategic goals that flow downwards, feedback flows back up to close the loop. This feedback loop is essential for creating a closed-loop system where strategy, tactics, and operations are continuously aligned, and the company can adapt quickly to challenges.
Formal reviews provide an opportunity for leaders at every level to assess progress, identify issues, and make necessary adjustments.
Monthly progress checkpoints, for instance, allow for adjustments of tactics and operations based on results.
The Benefits of a Flat Management Structure in Hoshin Kanri
Before we discuss benefits, note that a flat management system is a management model that has none or a few levels of middle management between the employees and executives.
In other words, there are a few barriers between the top management and the operational level, making it easier to maintain alignment, communicate and respond quickly when necessary.
This is exactly how Hoshin Kari’s system works.
Now, we’ll discuss the perks of Hoshin Kanri in managing business.
- This system helps organizations focus on key strategic objectives and avoid spreading resources too thin.
- Better communication and understanding of goals across all levels of the organization can be promptly and efficiently achieved by implementing Hoshin Kari.
- This technique aligns daily operations with strategic goals that lead to a more efficient use of resources and better overall performance.
Real-World Examples of Hoshin Kanri in Action
Hoshin Kanri is not just a theoretical framework — it has been successfully implemented in numerous industries to achieve goals.
Danaher:
As a global leader in operational excellence, Danaher has applied Hoshin Kanri within its Danaher Business System. It has seamlessly integrated Hoshin Kanri and improved the performance of numerous acquisitions over the last few years allowing the business to grow through effective acquisitions that have delivered value to shareholders..
Ingersoll Rand:
Ingersoll Rand leveraged Hoshin Kanri to synchronize its business units and promote cross-functional collaboration. The company established clear goals and efficiently tracked progress by using the X-matrix tool. This led to gains in productivity, cost reduction, and overall performance improvements.
Xerox:
Xerox implemented Hoshin Kanri to refine its operations and attain continuous improvement. It was able to boost efficiency, cut waste, and enhance customer satisfaction by aligning its strategic objectives with day-to-day activities.
Regenersis:
A European company, Regenereis, specializing in aftermarket electronic repair, implemented Hoshin Kanri to drive productivity and profitability. The company increased productivity by 14%, boosted gross profits by 17%, and reduced absenteeism by 33% within eight months. All this happened after the goals were clearly defined and the resources were effectively allocated.
Conclusion
Hoshin Kanri is a comprehensive system that unites all levels of an organization towards common objectives. Using steps like aligning the top strategy with operational actions through structured, iterative processes like the catchball and Gemba, Hoshin Kanri makes sure the organization proceeds towards achieving the set goals.
The system focuses on clear goals, regular reviews, and cross-level communication, promoting a culture of continuous improvement besides ensuring adaptability, growth, and alignment concerning evolution and changes.
So, whether you’re a leading small startup or a global corporation, implementing Hoshin Kanri can be extremely fruitful in the form of clarity, improved focus, and necessary alignment to achieve sustained success.
