Hoshin Kanri: deploying strategy with catchball and PDCA

A logistics provider with four hundred staff has thirty improvement projects running. Every site has its own priorities, every project has a sponsor on the management team, and management meetings are mostly about which project gets first call on scarce IT capacity. When the managing director asks which three things should make the difference this year, five managers give five different answers.

Hoshin Kanri was made for exactly this situation. The method forces an organisation to choose a few breakthrough objectives, to translate them, together with the people who do the work, into what each department will do this year, and to drop or postpone everything else.

What is Hoshin Kanri?

The Lean Enterprise Institute describes Hoshin Kanri, also known as policy deployment, as a strategic framework for achieving sustained good results through structured PDCA thinking. Hoshin roughly means policy or direction, including the means of getting there. Basically Kanri means management or planning. You will also come across the term strategy deployment.

The core can be summed up in three ideas:

• Few goals: hoshin planning is essentially the PDCA cycle applied to a few critical strategic objectives instead of to everything.
• Translation through dialogue: the goals are not imposed but worked out in a back-and-forth conversation between the layers, known as catchball.
• A fixed rhythm of reflection: monthly reviews and an annual look back determine what needs to change the following year.

Origins

The method emerged in Japan in the sixties, as part of the quality management movement. According to the British researcher Barry Witcher, the term first appears in an internal document of the tyre manufacturer Bridgestone from 1962. Other researchers point to a 1965 report on the planning practices of companies that had won the Deming Prize. Outside Japan, Hoshin Kanri became known mainly through the collection edited by Yoji Akao in 1991, the most widely cited English-language work on the subject. Many companies with a lean tradition use variants of it.

Catchball: passing goals back and forth

Catchball is the heart of Hoshin Kanri. The Lean Enterprise Institute describes it as a dialogue in which ideas are tossed back and forth like a ball, a process also referred to as nemawashi. Management proposes the direction. The layer below responds: what can we contribute, what do we need for that, and what has to come off our plate? That answer goes back up, and so on, until goals and resources match.

The result is more than buy-in. According to the institute, the aim is to approve only projects that are desirable, important and feasible, so that popular initiatives do not stall halfway for lack of people or of coordination between departments. In mature organisations the movement reverses: departments propose actions themselves, and management tests them against the goals.

The X-matrix: everything on one sheet

Many organisations that apply Hoshin Kanri capture the plan in an X-matrix. This is a sheet with a large X in the middle and four quadrants around it, which together show how goals, projects and measures relate to one another.

In the corners between the quadrants, dots or symbols show which project serves which goal and which measure belongs to which project. A project without a dot contributes to nothing; an annual goal without a project remains a wish. To work out each project in detail, teams often use an A3, the lean form that puts problem, analysis, plan and follow-up on a single sheet.

Hoshin Kanri in seven steps

1. 01

   Start with vision and strategy

   Hoshin Kanri translates a strategy; it does not create one. Make sure your mission and vision and your strategic choices are clear.

2. 02

   Choose breakthrough objectives

   Two to four objectives for three to five years that call for real change, not an improvement on what already exists.

3. 03

   Derive the annual goals

   What must be achieved this year? Write them as SMART goals and link them to the budget.

4. 04

   Play catchball

   Discuss the annual goals with the layer below, let them propose projects and the resources they need, and keep aligning until the plan is feasible. Repeat this for each layer.

5. 05

   Capture it in an X-matrix

   Goals, projects, measures and owners on one sheet, with the links between them. Whatever is not on it gets no priority this year.

6. 06

   Review every month

   For each project, go through the measures and the variances, and where a project falls behind, look for the cause. That is the Check step; see management reporting.

7. 07

   Reflect at the end of the year

   What was achieved, what was not, and what does that say about the way you plan? This look back, hansei in Japanese, is the start of the next cycle.

Worked example: a logistics provider

After a strategy session, the provider from the introduction chooses two breakthrough objectives for five years: half of its revenue from contract logistics for healthcare and pharma, and fully zero-emission city distribution. After catchball with the site managers and the IT department, the core of the X-matrix looks like this.

Fictitious Firmfocus example.

The most important decision is not in the table. Of the thirty running projects, eight remain; the rest are completed, paused or cancelled. During catchball the IT department made it clear that track and trace and the rostering system would take up all of its capacity between them. As a result, a much-wanted new customer portal moved to next year.

Hoshin Kanri, OGSM, OKR and the Balanced Scorecard

The methods do not rule each other out. An organisation can set down its breakthrough objectives in an OGSM-style format, work out the annual goals through catchball and track the measures in a KPI dashboard.

Does Hoshin Kanri work in SMEs?

In a light form, yes. A company with thirty staff does not have several layers to play catchball with, but the principle still holds. Choose one or two breakthrough objectives, ask your key people in a single session what they can contribute and what has to give way for it, and put the result on one A3. Review progress every month and take an honest look back at the end of the year. In effect, that is a good annual plan with a tight rhythm.

Pitfalls

• Too many goals: the X-matrix becomes an inventory of everything that is already going on. What sets Hoshin Kanri apart is precisely what you leave out.
• Catchball as a formality: the goals are already fixed and the dialogue is only for show. That produces neither a feasible plan nor genuine support.
• No resources: projects appear in the matrix but not in the budget or the capacity plan.
• Reviews without root cause analysis: colouring things red and green without asking why.
• The form becomes the goal: a perfectly completed X-matrix is worthless if nobody acts on it in their daily work.

SMEs and large organisations

Hoshin Kanri is the most fully developed form of the cycle described under planning and control, from annual plan to monthly review.