Most business leaders know that in order to be successful and meet customer expectations over the long run, a multi-year strategic plan is essential. However, many are challenged by the equally compelling need to keep day-to-day operations on track and make incremental improvements that will have a more immediate impact. Hoshin Kanri, sometimes called Hoshin planning or simply Hoshin*, is an approach to strategic planning and execution that helps organizations accomplish both.
Hoshin Kanri fits naturally in organizations that have adopted a business management methodology such as Lean or Six Sigma, but almost any organization can gain from its core principles:
- Strategic planning with a focus on breakthrough activities
- Highly executable plans built through consensus
- Carefully selected KPIs for progress measurement
- Regular communication and follow-up
Although Hoshin planning can be adjusted to meet the specific needs of an organization, the process generally follows these six steps.
Step 1. Define "True North"
It is important to start by understanding the current state with respect to the organization’s mission, vision, and values. Sometimes these are already defined and understood. Other times, it's necessary for the organization to formally write these down and gain consensus and buy in. Building on the mission, vision, and values comes the "True North" objectives for an organization that define a consistent path forward. For a company, these categories might include Safety, Quality & Customer Satisfaction, Innovative Products, and Financial Stability. Everything else gets aligned to this True North throughout the organization.
Step 2. Identify Significant Business Issues
Breakthrough objectives are a key factor in Hoshin. These are usually objectives that will take three to five years to achieve. They should be directed at significant performance improvements that often change the way the organization, a department or key business process operates. Often they address profitability, growth, particular business blockers, such as poor quality or customer satisfaction concerns, or they may involve the introduction of a new product or service. Each True North category often has a small number of business issues associated with them. It's better to have 12 goals that can be tracked closely by senior leadership instead of having 400 goals, as many organizations do.
Step 3. Develop Measurable Annual Objectives
Because the process is designed to consider both short and long-term success, annual objectives are developed. Annual objectives include the milestones that will need to be met this year in order to achieve the breakthrough objectives as planned. Each objective should be paired with a means of measuring success.
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Step 4. Define measures throughout the organization
After the True North and high-level objectives have been defined, Hoshin drives us to create alignment throughout the organization. Front-line staff and managers should have local goals and objectives that fit into the True North categories. The goals do not need to be exactly the same, but there should be one or two measures for each True North category.
Step 5. Develop strategies, projects, and tactics
The annual objectives must be broken down into realistic and measurable projects for the organization and for every department. Every individual, team, and department objective should be aligned with the larger, more strategic annual and breakthrough objectives for the organization.
Step 6. Monthly and Annual Review
Monthly reviews are essential for keeping the organization engaged in the execution of the plan. They also give managers the opportunity to recognize and address stalled progress. Frequent reviews help to ensure employee engagement and accountability.
The annual review offers leaders the opportunity to assess the likelihood of achievement of the breakthrough goals. If necessary, adjustments can be made to the next cycle or resource deployment can be reconsidered.
This two-pronged approach of Hoshin Kanri is ideal for organizations that want to focus on breakthrough efforts while continuing to improve business process on a day-to-day basis. Although there is no one-size-fits-all prescription for Hoshin planning, these six steps are a good start.
* Hoshin is also sometimes called "strategy deployment" or "policy deployment."