One of the most important and challenging responsibilities of leaders is setting the strategic direction of the organization and steering everyone toward it. Sometimes, the ultimate goal is called “True North.” Hoshin Kanri is a strategic planning process that was first crafted by Professor Yoji Akao in Japan in the 1950s. Hoshin is the Japanese word for “direction” or “compass needle,” while Kanri means “management.” Hoshin Kanri is also sometimes called strategy deployment or policy deployment.
The Hoshin planning process recognizes that it is essential to work toward the organization’s three to five breakthrough goals that will take multiple years to achieve, while at the same time making daily, incremental improvements that will help reach the desired state. It is not like other forms of annual goal setting that become document artifacts that are pulled out once a year for review. Instead, Hoshin Kanri is an active method of management that becomes part of the thinking of every person in the organization.
Most organizations have seven steps in the Hoshin Kanri planning process. Although each is relatively simple, attention to detail and excellent documentation is essential.
Step 1 - Establish the Organization’s Vision and Document the Current State
Before you can work on the path to success, you need to understand precisely where you want to go. The first step, therefore, is to establish the mission, vision, and values of the organization. If they already exist, begin by reviewing them and conducting an honest assessment of how well the organization is honoring them and how much of an impact the vision is having on the culture. If the stated vision isn’t serving well, revise it before undertaking the rest of the steps.
Step 2 - Develop Breakthrough Objectives
Many organizations have yearly goals, but fewer look to the longer-term horizon. That’s what the breakthrough objectives in Hoshin Kanri address. These should be game-changing goals that will take three to five years to achieve. They often relate to new products, markets, or business models. They should be challenging but possible. They represent key aspirations, not a list of “nice-to-haves.”
Step 3 – Define Annual Goals
Once the breakthrough objectives are understood, they can be broken down into the goals that will need to be attained each year to get there. While the organization’s leaders usually set the breakthrough objectives, the managers who are closer to the work, are often involved in establishing the annual objectives. Buy-in at this stage is critical to success because these targets will drive decisions and activity. While some goals may be financial, most should relate to the operational things that need to be accomplished for success. (We recommend an X-matrix to help visualize the relationships between strategic, annual, and individual goals.)
Step 4 - Deploy Annual Objectives
It is important that defining the yearly objectives and deploying them are separate steps because too often organizations are very good at setting goals, but not so great at communicating them and cascading them down to the individual employee level. Managers, supervisors, and front-line employees should all be involved in setting employee performance goals. (The Lean technique of Catchball can be useful at this point.) Each person should be able to see how their KPIs relate to the breakthrough goals. This increases engagement and emotional investment in success. These goals should be front and center and should help people make decisions about what work should be prioritized.
Step 5 – Execute the Plan
For leaders, executing Hoshin Kanri means keeping close tabs on progress toward the annual and strategic objectives. This isn’t a once-a-year exercise, but instead, it is an essential daily function of the leadership team. Hoshin Kanri planning software can help visualize progress and assess the performance of each department or unit. For managers and front-line workers, executing Hoshin Kanri means implementing small improvements or steps forward that will get the organization ever closer to the annual goals.
Step 6 – Hold Monthly Reviews
The Hoshin plan can’t be run on auto-pilot. Monthly reviews help leaders get an early warning when there is a roadblock so that it can be overcome, or adjustments to the plan can be made if needed. They also remind employees of the importance of the plan and ensure that it remains front-and-center.
Step 7 – Conduct Annual Audits
At the end of each year, it is time to review the Hoshin Kanri plan in great detail. How did the team perform compared to the objectives? What parts of the planning and execution process went well, and which could use improvement? This is the time to establish the goals for the following year and begin the Hoshin planning process again, incorporating lessons learned and new information collected.
The Hoshin Kanri planning process requires commitment and constant management, but the benefits are abundantly clear to the organizations that have deployed it successfully. Check out this eBook for more details and tips.