Chapter.14 Hoshin Mgt

14

Hoshin Management

Hoshin management aligns the activities of peoplethroughout the company so that the company can achieve keygoals and react quickly to a changing environment. Hoshinmanagement involves all of the managers in a coordinated wayin the annual planning cycle of the company. Thus it providesan important strategy for total participation as well as fulfillingits obvious purpose of company alignment.!

WHAT IS HOSHIN MANAGEMENT?

Aspects of what has become hoshin management weretested by a number of Japanese companies in the second half ofthe 1960s.Among these companies were Toyota, Komatsu, andBridgestone Tire Company. By the late 1960s and early 1970s,hoshin management had taken shape. It spread rapidly and be-came one of the major components of TQM. The Japanese calledit hoshin kanri. Other English speaking authors have called itmanagement by policy or policy deployment. Wewill follow thecurrent convention of calling it hoshin management.2

l

411

I

412 TOTAL PARTICIPATION 413Chapter14: Hoshin Management

Hoshin Management for Alignment The following figure shows that as environmental changesoccur, company goals must be changed quickly and people andjobs realigned to these new goals.Hoshin management has three alignment purposes:

. It aims to align all the people throughout the companytoward the key company goals, using indirect ratherthan direct enforcement -creating a sense of urgency;thus, even hourly employees are influenced to chooseactivities with strategically important objectives.. It aims to align all jobs and tasks, whether daily work orimprovement work, toward the key company goals inorder to create breakthroughs - focusing and coordinat-ing efforts and resources.

. It aims to quickly and effectively bring the company'sgoals and activities in alignment with rapid societal orenvironmental changes.

The following figures illustrate the power of alignment. Inthe following figure, the people and jobs are poorly aligned; theresult is a total force that is limited and possibly ill-coordinatedwith key company goals.

Akey company

/ goals

~ = 1111/ environmental change

Hoshin management also has another purpose (discussedin greater detail in Chapter 15) - to force managers to run thePDCA cycle themselves as part of their daily job, and thus to de-velop themselves as managers.

"i

Components and Phases of Hoshin Management

The main components of hoshin management are shown inFigure 14-1.3

As shown at top left of the model, the company's long-andmid-term vision and plans must be adjusted in consideration ofenvironmental changes. From the mid-term plan, annual hoshinsare developed.4.5 Hoshins are statements of the desired outcomefor the year, plus the means of accomplishing the desired out-comes and measuring the accomplishment. Each hoshin ideallywill include the following five elements:6

Hoshin = statement of desired outcome for next year+ focused means

+ metrics to measure progress+ target value for metric+ deadline date

peopleand jobs

/"T

~::r~

~ key companygoals

In the next figure, people and jobs are properly aligned; theresult is a strong force aimed toward company goals.

~

--..

--..

--..

~

key companygoals Here is an example of a hoshin:

Statement of desired

outcome for next year -

.daily practice ofmarket-in concept

Chapter14: Hoshin Management .us414 TOTAL PARTICIPATION

Do

erarchy of subgoals and means for accomplishing and measuringthem is developed, all in alignment with the top-level hoshim;.At each lower level the hoshins have the same format but are

more specific. .

Next a control by measurement plan is made for monitoringmonth-by-month whether the goals and subgoals are being ac-complished and the planned means for accomplishing them arebeing carried out, and for taking corrective action if they are not.Once the hoshins are deployed and the control by measurementplan is in place, these plans are executed. When it is time to planfor the next year, the data on which means were carried out andwhat was accomplished are analyzed (check) to discover whatneeds to be improyed for the next cycle, and decisions are madeon appropriate actions (act). This information is fed into theplanning for the next year. Also on a yearly basis, the presidentdoes a diagnosis of the hoshin management system and suggestsimprovements relating to the system's effectiveness, any envi-ronmental changes that have occurred, and the company's long-and mid-term plans.

company'smid-term plan

long-termvision and plan

Plan

annualhoshins

h03hin andmeasurement

plan deployment

control bymeasurement

Figure 14-1. Hoshin Management

Focused means = Create attractive product byimproving market research;

Increase customer satisfaction of

our product by using quality tables;

Assure on-time delivery by improvingprocesses;Improve quality ofproduction process by usingstatistical process control.

Metric to measure progress = On-time delivery rate

Target value for metric = 100%

Proactive, Reactive, and Control in Hoshin Management

Deadline date = March 1993

Hoshin management includes the problem-solving ap-proaches enumerated in the WV model - proactive, reactive,and control, as shown below.

In the proactive phase the long- and mid-term vision andplans are adjusted in consideration of environmental changes,and the hoshin management system is itself managed, diag-nosed, and improved.

The reactive phase is best thought of as a year-long PDCAcycle:

.Plan: develop annual top level hoshins, deploy thehoshins down the organization, and develop the controlby measurement plan.

. Do: carry out the hoshins over the course of the year.

x

The primary, or top-level, annual hoshins are then deployed(or cascaded) throughout the organization. In other words, a hi-

416 TOTAL PARTICIPATION Cluzpter14: Hoshin Management 417

(

management. Second, there is an annual reactive PDCA cycle.Third, there is an outer PDCA cycle that starts from the long-term and mid-term plan, goes through the annual deploymentand execution do, and then does the diagnostic checkand act toimprove in the hoshin management system. These three PDCAcycles are consistent with the overall goal of the company.

We'll now describe the phases of hoshin management interms of Figure 14-2.

long-termvision and plan.

company'smid-term plan

-bPHASE 1 - STRATEGIC PLANNING (PROACTIVE)

Reactive

The current daily management system of a company andthe way people are currently doing their work should ideallyprovide a continuing degree of improvement in, for example,customer satisfaction (see top left of Figure 14-7).7 However,analysis of circumstances may reveal that greater rates of im-provement are needed. In such cases companies must analyzethe difference between what the existing management system

can provide and what is needed. They can then pinpoint theroot factors that prevent the current system from improving fastenough and plan a solution. Solutions will employ standardtools and analogues of the 7 QC steps (described in Chapter 5).The 7 tools for management and planning (described in Chapter6) will also be used. When the solution is deployed it may have

two parts. First, it may be necessary to improve what people arecurrently doing or, second, it may be necessary for people to donew things. In either case, a revised system of daily workshould provide the needed rate of improvement of customersa tisfaction.

Hoshin management provides a systematic mechanism forcalculating the difference between what a company can do andwhat it must do. It determines what: improvements are neces-

sary, and insures that solutions cascade through the organiza-tion so that people's daily work actually changes. Consider theschematic representation of the annual hoshin planning processin Figure 14-4.

Figure 14-2. The Proactive, Reactive, and Control Phases inHoshin Management

. Check: analyze why hoshins were not accomplished -did the planned means not work, or were the plannedmeansnot carriedout?.Act: decide what to improve for next year.

The control phase is carried out over the course of the year.The company uses the control by measurement plan to monitorthe results and controls the results and the means so that the

planned means are in fact carried out and corrective action istaken when the means and results are not as planned.

As Figure 14-2 shows, there is overlap among the proac-tive, reactive, and control phases of hoshin management. Proac-tive and reactive overlap at the top-level annual hoshins.Reactive and control overlap where the control by measurementplan is used to monitor things over the course of the year, andthe control phase is the do part of the reactive phase.

Thus, PDCA cycles exist in hoshin management. First,there is an inner PDCA cycle in the control portion of hoshin

,I

418 TOTAL PARTICIPATION Chapter 14: Hoshin Management 419

I , ForecastI improvement: from dailyI managementI

Targetdate

last year'shoshin

managementresults

hoshinmanagement

system

(given)

Level ofCustomer

Satisfaction

iT: Difference

:~

past

reflection

focuson

vitalfew

(what is)

Deployment ofsolution

Present

fact vision

(what must be)

'(

Improvementof currentjob or task

New jobor task

Figure 14-4. The Annual Hoshin Planning Process

The part of the hoshin planning process that deals with thepast will be discussed later in this chapter. The section belowaddresses that part that deals with the future, an essential phasein strategic planning.Figure 14-3. Analyzing the Gap Between Forecast Improvement and

Improvement Required

A Process for Creating a Mid-term Plan

What a company needs to do is dictated by the past (whatit has been doing), by the environment, and by its vision of thefuture. To address the past, a company has the facts (what is), ifit has the discipline to use them. The reactive, PDCA, portion ofthe hoshin management model deals with what is. The proac-tive portion of the hoshin management model addresses the en-vironment (a given which the company needs to discover andaddress) and future vision (what is wished to be or will be).

Once a company knows wnat is needed, it must focus peopleand jobs throughout the company according to what they cancontribute to those needs. The hoshin plan and its deploymentdoes this - it gives people the tools they need to change theway they work.

,Russell Ackoff has proposed some interesting methods fordeveloping a vision fnr the future. He calls it backward plan-ning. Ackoff's methods are compatible with the mid-term planin hoshin management.

Ackoff's planning method, which he outlines in his bookCreating the CorporateFuture}has five steps, three of whicharedescribed below.

x

Stage 1: Situation analysis. Situation analysis, or "formu-lating the mess," as Ackoff calls it, is identifying problems andopportunities. During this stage all current aspects of the com-pany and its people are analyzed, the sources of obstruction are

420 TOTAL PARTICIPATION Chnpter14: Hoshin Management 421

listed, and past and current performance is extrapolated assum-ing things stay as they are.

Stage 2: Ends planning. Ends planning means designingthe desirable future. This step includes designing organizationalstructure and management systems. But its most interesting as-pect is what Ackoff calls idealizeddesign.

Idealized design is a powerful method of stating the de-sired future and planning efficient and practical means of ac-complishing it. Idealized design does not design the companyfor some future circumstance. Idealized design designs the com-

pany you wish you had now.Idealized design has the following properties:

.Work from the assumption that there is no system butthe same environment.

. Design a technically feasible new system (consider thefeasibility of the new system once it exists, not the feasi-bility or cost of bringing it into existence)..Make sure that the new design is operationally viable inthe current environment.

. The new system dissolves the mess.

. The new system allows for rapid learning and adaptation.

To do an idealized design you need a mission statementthat says something useful about the business the companywants to be in, how it wants to operate, and what it wants to ac-

complish. You also need to specify .~he desired properties of thedesign. Examples might include:.What products or services the company should provide

and what its distinguishing characteristics should be. How the products should be sold (where, by whom, on

what terms, pricing). How products should be serviced.Where and how products should be manufactured.Which support services should be provided internally

and which externally

.How the company should be organized and managed. Personnel policies

. Methods of financing company activities

. Environmental and regulatory responsibilities

The next step is to figure out a design that has the desiredproperties. This design starts with a blank piece of paper. Thedesigners assume the old system does not exist. This frees themfrom figuring out how to get from where they are to where theywant to be, constraints that usually impede change.

The key value of the idealized design is that the designerscan see the differences and similarities between the existing sys-tem (analyzed in stage 1) and the ideal system (designed instage 2). Once they understand those points of comparison, theycan plan the means for getting from where they are to wherethey want to be.

Stage 3: Means planning. Means planning is creating themeans by which one effects the desired future. With the infor-mation on what design (rather than just the market share, rev-enue, and profit goals) a company wants to have, the plannerscan approximate a path from the new to the old. One methodAckoff suggests for finding this path this is to successivelyapply existing constraints on the new until the old is reached.This is illustrated in Figure 14-5.

At this point the designers have a map for undoing theconstraints on the current system that prevent it from being thenew system. They call this means planning.

Ackoff believes that the activities carried out in stages 1through 3 will result in a plan that is much more feasible and fo-cused than one created with the reverse strategy (starting fromthe present and moving toward future goals).

The typical company planning process goes something likethis: The company decides on the goals it wants to achieve in 10years and then plans toward them; the planners layout a plan Ifor achieving one-tenth of the goal per year (or project a hockeystick effect in which most advancement toward the goal is made

422 TOTAL PARTICIPATION Ciwpter 14: Hoshin Management 423

Idealized design planners figure out a path from the ideal company to the currentcompany. By simply reversing this path, they have a demonstra-ble path from the current company to the future company, andone likely to be shorter than 10 years.

Ackoff's methods fit nicely into the hoshin managementmethods of TQM (see Figure 14-6).

~Apply as many constraints of the currentcompany as can be removed in one year

~Constrainedidealizeddesign

+Apply as many more constraints of the currentcompany as can be removed in one year

~More constrained idealized design

~

(Ackoff's stages)

Stage 1:

formulatingthe mess

)

'\

Apply as many more constraints of the currentcompany as can be removed in one year

+More constrained idealized design

tt

Current company with all its constraints

.Stage 2:

idealized design

tStage 3:

planningfrom the future

Figure 14-5. Means Planning by Applying Constraints to theIdealized Design Plan

Do

hoshin andmeasurement

plan deployment

control bymeasurement

in the later years); the planners don't provide a detailed plan ofthe year-by-year changes that will have to be made in the com-pany to achieve the goals; the planners don't understand whatthe company will have to become in order to achieve the goals.Thus, the typical company planning process assumes a 10-yeareffort to reach goals without really understanding what thosegoals imply about the changes that the company will have tomake, and without making a plan for making those changes.9

In Ackoff's system of planning, the planners do situationanalysis to make explicit where the company is, where the com-pany will stay unless it changes, and what is preventing change.Then the planners do idealized design to figure out what theywould want their company to be like now, if they could createan ideal company for competing in today's world. Then the

annual (orsemi-annual)

hoshins

FigurE~14-6. Meshing Ackoff's Means Planning with HoshinManagement

Goal Setting - Case Study of NEC Shizuoka

We learned the following details about goal setting in NECShizuoka's hoshin management system from a presentation

424 TOTAL PARTICIPATION Chapter14: Hoshin Management 425

given by Michio Ikawa, president of NEC Shizuoka.1O The pre-sentation was striking in its description of the NEC Shizuoka hi-erarchy of corporate mission and long- and mid-term objectives,which are so different from what we are accustomed to in U.S.

corpora tions.NEC Shizuoka was formed in 1969; by 1991 it had 1,350 em-

ployees and sales of $4.8 billion. Its main products are modems,facsimile machines, pagers, sophisticated telephone handsets,personal computers, and portable terminals.

The company has the following characteristics:

. a wide range of machine types, from communications tocomputers. unification of design and manufacturing by product line. realization of "2.5 industry" through operation of un-manned product lines

. corporate activities closely linked with the local com-munity

A "2.5 industry" is an adaptation of economics jargon,where by the primary industry is agriculture, the secondary in-dustry is manufacturing, and the tertiary industry is service.NEC Shizuoka is seeking to be a 2.5 industry, or to be betweenmanufacturing and service.

NEC Shizuoka's goals are strongly influenced by those ofits parent company. NEC's corporate philosophy is the follow-ing: "NEC strives through its slogan, Computers & Communi-cation, to help advance societies worldwide toward deepenedmutual understanding and the fulfillment of human potentiaL"This is a noble goal, in the sense of the three levels of goals in-troduced in Chapter 8. Following from the corporate philosophyNEC also has what it calls the NEC commitment:

.Giving top priority to customer satisfaction through re-lentless efforts to provide better products and better ser-vices. Creating value for society through the active explorationof new frontiers in science and technology

. Tapping the individual uniqueness of each employee and ~

bringing out his or her fullest potential. Fostering the autonomous spirit of each group and af-

filiate, which adds to the integrated strength of the or-ganization as a whole

. Fulfilling its responsibilities as a corporate citizen. Increasing profitability to facilitate dynamic growth in-ternally and to contribute to society at large

Within the context of the NEC corporate goals and commit-ments, NEC Shizuoka has adopted the following managementphilosophy:

. Management places top priority on quality.

. The customer comes first..Make the workplace a place where individual potentialcan be realized to the fullest.

NEC Shizuoka has the slogan: "Immediate response whenquality is at stake." Or, according to the president of NECShizuoka, when quality is at stake, the company pours in everyresource.

NEC Shizuoka began its TQM implementation in 1983 inresponse to changes in the market: diversification of customerneeds, major technology innovations and shorter product lifecycles, and intensification of price competition to boost marketshare. In the face of these market changes, the company con-Quded it had insufficient systems for incorporating quality intothe design and manufacturing processes and a passive businessstance due to excessive reliance on NEC.

The TQM objectives of NEC Shizuoka state its desire to be-come:

. A company that can vertically handle everything fromdevelopment and design to shipment, and that suppliesproducts that meet customers' needs.A company that incorporates higher quality and cost re-duction both in design and in each process stage

7-0 lUi.,\.L lrlhllLl1rU1U.\

. A company that can positively challenge and achievemanagement objectives

. A group of people with a consciousness of problems andthe will to solve them

To these ends, NEC Shizuoka initiated the following main'activities:

Table 14-1. NECShizuoka's Goal-Setting Process

PHASE 2 - HOSHIN DEPLOYMENT

1. Implementing QeD (quality, cost, and delivery) focusingon source control

. strengthening and expanding design capability

. improving quality assurance in design and manufac-turing stages

. improving comprehensive production control that re-sponds flexibly to changes in orders

2. Achieving management targets through promotion andimprovement of hoshin management

3. Nurturing human resources

To summarize, NEC Shizuoka is a part of NEC, and allNEC companies have the same corporate identity: "Computers& Communication."n Based on the NEC corporate identity,NEC Shizuoka developed its company philosophy. From itscompany philosophy, NEC Shizuoka developed its Vision 2001,or mid-term plan. Vision 2001 is the basis of the annual plan. Allof this goal setting can be charted as shown in Table 14-1,whichincludes the annual goals derived from the longer-term goals

Once a company has obtained the annual hoshin throughanalysis of the future and past, it is time to deploy the hoshinthroughout the organization.

There are three fundamental aspects to hoshin deployment:moving down and up the ladder of abstraction, basing the de-ployment on facts and analysis, and deploying metrics to mea-sure how well the means have been carried out and the targetsachieved.

Moving Down and Up the ladder of Abstraction

There are several ways hoshin management moves down iand up the ladder of abstraction. For instance, you can movefrom a long-term vision to an annual plan and deploy down themanagement hierarchy (see Figure 14-7).

You can also move down and up the hierarchy of processesto understand the targets and to analyze the root causes of

Corporate Identity Computers and Communication

Company philosophy 1. quality first

2. customer first

3. development of employee capabilities

Vision 2001 1. total sales $1.4 billion(mid-term plan) . company to focus on office automation. convey quality-first attitude to all employees. accelerate new product development and

factory automation

2. etc.

3. etc.

Annual plan (1990) 1. most important policy. full implementation of quality-first attitude. quick introduction and adaptation towardsmall volume and large variety productionsystem. etc.

2. target (goal). cost down- implementation of factory automation

requires pre-analysis- with no people production system. etc.

3. guideline for management's behavior. role was production only. role should be planning design and production


(

Basing the Deployment on Facts and Analysis

IThere will follow a simple example of the deployment of

hoshins from the president to the functional organizations. Eachof the hoshins has the standard form

Figure 14-7. Deployment Down the Hierarchy

Outcome by Means: Metric: Target

For this example we'll not include the deadline. It is typical thatthe units of the metrics change at every level in the deploymentand may differ from one hoshin to the next at the same level.Deployment will go down many levels in the organization, per-haps to the section level.13

Suppose, through analysis of the past, the environment, andthe vision for the future, the president concludes that an annualhoshin should be "reduce costs 20 percent by decreasing thelength of business cycles." The next step is to deploy relevanthoshins to each of the functional divisions below the president {

(see Figure 14-9).

worse-than-expected performance.12 For instance, as ProfessorKogure showed us with Figure 14-8, the machine is a higher-level process which is in turn set up by a lower-level process,consisting of operators, materials, machines, and methods.

F:>c"/'

r:.Jo~o

~« / 0°«:oJ./

1lJ'$'

~~ (:.'

0~1lJ / ~V/

~o10''1>'

/ o~"-

"-

"-

,/

Higher-level process

- - - - operator- meth~ "I

~ ~ I higher-level

/ / I. prod~ctquality

Imachine material

Manufacturing

1---

IIIIIIIII

'--------------

President'shoshin

Administration/finance

~ Sales

.~c"~10'" /

~'I>'.~10 /

~l~ /~ /

Reduce costs20% by

decreasinglength ofbusinesscycles

Marketing

Development

Support

Figure 14-9. Deploying Hoshins to the Functional DivisionsFigure 14-8. Deployment from Lower-Level to Higher-Level Process

long-term vision president

1

division head

mid-term plan

1

department head

annual plan section chief

-X.JU i U lAL YAhllLHAlll._h\i ,-,

Facts and analysis are essential to the deployment of ahoshin from one level down to the next. Analysis of the factsabout key goals focuses hoshin deployment on the vital few.

The president and division heads must determine whatprevents the company from achieving the key goals, and thepresident's subordinates must do the same. In other words, todeploy the targets and means sensibly, you must stratify themarket, customers, products, sources of possible cost reduction,and so on. For example, you analyze which products have thebiggest sales, which products grew most last year, and wherecycle time can be reduced (see Figure 4-10).

The President and the division heads gather the data, strat-ify them, and then select the biggest problem at the next levelfor hoshin deployment.

At the lower levels, this analysis begins with the question,''What in our division prevents us from addressing our superi-or's proposed hoshin?" For instance, in the above example, themanufacturing division leader might ask, "What prevents usfrom decreasing the length of our business cycles?" Once again,a systematic, fact-based analysis is done, using, for example,

---,nextlevelhoshin

Figure 14-11. Stratifying to Select Problems for the Next level Hoshin

Defects notdetecteduntil final

inspectionWhy are cycle

times long?

Pareto diagrams, Ishikawa diagrams, and a seven-step PDCAprocess. As a result of this analysis, the manufacturing directormight conclude that the root cause of manufacturing's inabilityto achieve the president's hoshin is "unresponsive procurementand inventory system." Similarly, each functional area woulddetermine what prevents its own achievement of the presi-dent's hoshin.

Figure 14-12shows what might result from each function'sanalysis of what prevents achievement of the president's hoshin.

From this analysis, each functional manager can draft ap-propriate hoshins deploying the president's hoshin to thefunctional area. Facts and analysis are also used to developthe hoshins, as well as the means and targets. Table 14-2shows hoshins that might be developed on the basis of datagiven in Figure 14-2.

The system of hoshin deployment described here focuseson finding the process to achieve the desired outcome. In thissense it is very puwerful. However, it has a weakness in that itfails to make clear what each means contributes to the higher-level outcome. Hoshin management as it has developed inJapan has a remedy for this weakness. We will return to thisissue at the end of the chapter.

Let's take this deployment down another level, for in-stance, in the sales function. The sales hoshin in the example

Engineers haveproduct-outorientation

Fully qualifiedprospects don't buy

Figure 14-10.Analysis of Facts About Key Goals

432 TOTAL PARTICIPATION Chapter14: HoshinManagement 433

we've been following is "decrease average sales cycle 30 percentby decreasing qualified prospects who don't buy." Within thesales division there are two departments - direct sales andsales support. Each of these departments must gather the factsand analyze what prevents them from achieving the saleshoshin. Their analysis might resemble Figure 14-13.

What prevents achievementof president's hoshin?

r ,Manufacturing: unresponsive procurement and

inventory systemPresident's

hoshin Administration!

finance: unnecessary approval loops+

Reduce costs20% by

decreasinglength ofbusiness

cycles

Sales:Sales hoshin

what prevents?

( ,no system forevaluating andaddressingpossibleobjections

qualified prospects unexpectedlydecline to purchase at last minute

Direct sales:

+Marketing: each new product requires a new

effort to line up distributorsDecrease

average salescycle 30% bydecreasing

qualifiedprospects who

don't buy. Sales support: user difficulty in

using productresults inunsuccessful

product trials

Development: products that meet product specficationsaren't accepted by beta-test customers

Figure 14-12. Function-Level Analysis of Barriers to AchievingPresident's Hoshin

Table 14-2. Development of Functional Division Hoshins

solutionr ,use PDPC toanticipateobjections andprovide counter-measures

hold user's hand

during producttrials

Figure 14-13. Analysis of Barriers to Achieving Sales Hoshin

You also use facts to align the deployment process. At agiven level in the deployment, the manager's hoshins indicate adesired outcome and the means deemed appropriate to achievethe desired outcome. These hoshins are passed to the manager'sreports, who draft hoshins supportive of those received fromabove. However, there may be disagreements. Between levels,managers use facts to verify the validity and feasibility ofhoshins or to adjust them. These facts are conveyed back andforth on standard data sheets and through face-to-face discus-sions. This process of aligning the hoshins through the use offactual analysis is known as "catchball" in Japan. Catchball is in-dicated by the following symbol: @. Catchball is not a negotia-tion of conflicting desires; it is a reconciliation of the plan with Ifacts. The catchball occurs throughout the hierarchy (as- '1ownin Figure 14-14).

FunctionWhat Prevents Achievement Functional Division

of President's Hoshin Hoshin

Manufacturing unresponsive procurement and decrease manufacturing cycleinventory system time 50% by implementing JIT

Administration! unnecessary approval loops decrease k.ey administrationfinance and finance cycles 40% by

flowchartin9 processes andeliminating NV A work

Sales qualified prospects decrease 8{erage sales cycleunexpectedly decline to 30% by decreasing qualifiedpurchase at last minute prospects who dont' buy

Marketing each new product requires a decrease average time tonew effort to line up distributors release a new product 50% by

creating strategic alliances

Development products that meet product decrease average time tospecifications aren't accepted successful product releaseby beta-test customers 30% by increasing engineers'

understanding of customercontext

-1.:)-1 TOTAL PARTICIPATION

President'shoshin

~

Figure 14-14. Aligning Hoshins Through Catchball Reduce costs20% by


cyclesOnce the analysis of facts and catchball is complete at all

levels, a deployment like that shown in Figure 14-15results.How much guidance should a manager provide to subor-

dinates in deploying hoshins? In his book Tot~lQuality Controlfor Management,14Masao Nemoto gives the following guidelinesfor managers' deploying hoshins:

. Targets should be challenging but persuasive.. Local issues need not be included as hoshins.

. Include as hoshins the few issues that will get special at-tention.

. The superior must provide implementation plans (means)for key hard items.

. The superior provides "points to consider" for a fewitems.

. Subordinates develop the rest of the means themselves.While we have shown the deployment above as a tree, it is

typical for the deployment to be documented in an alignmentmatrix such as that shown in Figure 14-16.

In the figure, the dotted circles indicate that hoshins a andb of the subordinate are aligned with hoshin B of the superior,and Hoshin c of the subordinate is aligned with hoshin C of the

Cllilpter14: Hoshin Management 435

Manufacturing:decrease manufacturingcycle time 50% byimplementing JIT -[

-[...

Administration/finance:

decrease key administrationand finance cycles 40% byflowcharting processes andeliminating NVA work

Sales:decrease average salescycle 30% by decreasingqualified prospects whodon't buy

Direct sales:

decrease qualified

-[prospects who don'tbuy 50% by use ofPDPC

Sales support:decrease qualifiedprospects who don'tbuy 50% by improvedproduct trial support

Marketing:

~decrease average time to .. .release a new product 50%by creiting strategic alliances

Development:

-[decrease average time to . . .successful product release30% by increasing engineers'understanding of customercontext

Support: NA

Figure 14-15. Deployment to the Next Level

superior. In this case, the subordinate does not have a hoshin re-lated to the superior's Hoshin A. Focusing on the vital few atevery level may mean that subordinates do not address all ofthe superior's hoshin goals.

Such alignment charts can easily be extended to summarizethe hoshins of all of the subordinates of a manager, as in Figure14-17.In this example all three subordinates have hoshins that

436 .1UIAL FAKI1UFAIIUN Cl111pter14: Hoshin Management 437

Superior's HoshinsDeploying Metrics

Subordinate'sHoshins

A third critical element of the deployment phase (along IV\rithmoving down and up the ladder of abstraction and use offacts and analysis) is use of metrics on execution of the plan andits results. The nature of these metrics can be made clear only

through an examination of their use in the third (and next)phase of hoshin management.

Figure 14-16. Hoshin Alignment MatrixPHASE 3 - CONTROLLING WITH METRICS (CONTROL)

Superior's HoshinsEach of the hoshins deployed includes a metric and target.

The metrics are monitored and compared against the target. Al-though the metrics and targets may also be shown in alignmentmatrices, the next figure shows them as little meters superim-posed on the deployment tree. In addition to the meters repre-senting metrics to monitor the outcome, the illustration also ~shows meters (metrics and targets) on the means to control exe-cution of the means.

These metrics and targets permit the results and means tobe monitored over the course of the year and corrective action tobe taken as appropriate (see Figure 14-19). This is SDCA, wherethe "standard" is the planned means. Also, the metrics and tar-gets tell you at year's end (or sooner) whether the failure toachieve the desired outcome was due to malfunctioning of theplanned means or to a failure to carry out the planned means. Ifthe means were carried out, then the process capability (plannedimprovements to product results) is inadequate and discrepan-cies between planned and actual results should initiate PDCA. Inother words, the metrics allow you to monitor and control pro-cesses, even the process of changing other processes themselves.

The measurements of means and targets are monitoredmonthly, and actions are taken if the measurements are outsideprespecified limits. A document specifying which actions totake in the case of unexpected measurements is called a mea- \

S"boed;""!.1 {

S"boed;""!. 2 {

S"boed;,".3{Figure 14-17. Extended Alignment Matrix

are aligned with the superior's hoshin C, and subordinates 1 and2 have hoshins that are aligned with the superior's hoshin B.Subordinate 1 does not have a hoshin related to the superior'shoshin A, but that may not be a concern because subordinates 2and 3 do have hoshins that are aligned with A.

HoshinA HoshinB HoshinC

Hoshina 0Hoshinb 0Hoshinc 0

a

b

c

d 0e

f

9 0h

\ I

..U~ TOTAL PARTICIPATION Chapter14: Hoshin Management 435

I I

I I

~

President'shoshin

Figure 14-14. Aligning Hoshins Through Catchball Reduce costs20% by

decreasinglength ofbusinesscycles

Once the analysis of facts and catchball is complete at alllevels, a deployment like that shown in Figure 14-15results.

How much guidance should a manager provide to subor-dinates in deploying hoshins? In his book TottilQuality Controlfor Management,14Masao Nemoto gives the following guidelinesfor managers' deploying hoshins:

. Targets should be challenging but persuasive.. Local issues need not be included as hoshins.. Include as hoshins the few issues that will get special at-

tention.

. The superior must provide implementation plans (means)for key hard items.

. The superior provides "points to consider" for a fewitems.

. Subordinates develop the rest of the means themselves,While we have shown the deployment above as a tree, it is

typical for the deployment to be documented in an alignmentmatrix such as that shown in Figure 14-16.

In the figure, the dotted circles indicate that hoshins a andb of the subordinate are aligned with hoshin B of the superior,and Hoshin c of the subordinate is aligned with hoshin C of the

Manufacturing:decrease manufacturingcycle time 50% byimplementing JIT -{H

Administration/finance:

-{decrease key administrationand finance cycles 40% byflowchartingprocesses andeliminatingNVA work

Sales:decrease average salescycle 30% by decreasingqualifiedprospects whodon't buy

Direct sales:decrease qualified

-{prospects who don'tbuy 50% by use ofPDPC

Sales support:decrease qualifiedprospects who don'tbuy 50% by improvedproduct trial support

Marketing:

;{decreaseaveragetimeto . . .releasea newproduct50%bycreitingstrategicalliances

Development:

~decrease average time to . . .successful product release30% by increasing engineers'understanding of customercontext

Support: NA

Figure 14-15. Deployment to the Next Level

superior. In this case, the subordinate does not have a hoshin re-lated to the superior's Hoshin A. Focusing on the vital few atevery level may mean that subordinates do not address all ofthe superior's hoshin goals.

Such alignment charts can easily be extended to summarizethe hoshins of all of the subordinates of a manager, as in Figure14-17.In this example all three subordinates have hoshins that

436 iUiAL iJAKHUYAIIUNChllpter 14: Hoshin Management 437

Superior's HoshinsDeploying Metrics

Subordinate'sHoshins

A third critical element of the deployment phase (along I

with moving down and up the ladder of abstraction and use offacts and analysis) is use of metrics on execution of the plan andits results. The nature of these metrics can be made clear onlythrough an examination of their use in the third (and next)phase of hoshin management.

Figure 14-16. Hoshin Alignment MatrixPHASE 3 - CONTROLLINGWITHMETRICS (CONTROL)

Superior's HoshinsEach of the hoshins deployed includes a metric and target.

The metrics are monitored and compared against the target. Al-though the metrics and targets may also be shown in alignmentmatrices, the next figure shows them as little meters superim-posed on the deployment tree. In addition to the meters repre-senting metrics to monitor the outcome, the illustration alsoshows meters (metrics and targets) on the means to control exe-cution of the means.

These metrics and targets permit the results and means tobe monitored over the course of the year and corrective action tobe taken as appropriate (see Figure 14-19). This is SDCA, wherethe "standard" is the planned means. Also, the metrics and tar-gets tell you at year's end (or sooner) whether the failure toachieve the desired outcome was due to malfunctioning of theplanned means or to a failure to carry out the planned means. Ifthe means were carried out, then the process capability (plannedimprovements to product results) is inadequate and discrepan-cies between planned and actual results should initiate PDCA. In

other words, the metrics allow you to monitor and control pro-cesses, even the process of changing other processes themselves.

The measurements of means and targets are monitoredmonthly, and actions are taken if the measurements are outsideprespecified limits. A document specifying which actions totake in the case of unexpected measurements is called a mea- \

S,b.,d'oa', 1 {

S'bo",'oat. 2 {

S,bo""nat, 3 {

0

Figure 14-17. Extended Alignment Matrix

are aligned with the superior's hoshin C, and subordinates 1 and2 have hoshins that are aligned with the superior's hoshin B.Subordinate 1 does not have a hoshin related to the superior'shoshin A, but that may not be a concern because subordinates 2and 3 do have hoshins that are aligned with A.

HoshinA HoshinB HoshinC

Hoshina 0Hoshinb 0Hoshinc 0

438 TOTAL PARTICIPATION Ch£lpter14: Hoshin Man:!gement 439

~President's

Hoshin

~

Reduce costs20% by


cycles

~~ Marketing:

~decrease average time torelease a new product 50%

by creating strategic alliances~

~ Development:decrease average time tosuccessful product release30% by increasing engineers'understanding of customer

context ~

~ Manufacturing:decrease manufacturingcycle time 50% by

implementingJIT ~~ Administration/finance:decrease key administrationand finance cycles 40% byflowchartingprocesses and

eliminatingNVA work~~ Sales:decrease average salescycle 30% by decreasingqualifiedprospects who

don't buy~

Figure 14-18. Deploying Metrics

{H

{

surement implementation plan or control by measure plan. NECShizuoka's measurement implementation plan is a good exam-ple. See Table 14-3.

Table 14-3. NEC Shizuoka's Measurement Implementation Plan

@ Directsales:decrease qualified

{prospects who don'tbuy 50% by use of

PDPC~

~ Sales support:decrease qualifiedprospects who don'tbuy 50% by improvedproduct trial support

... ~

{HUnifying Daily Work with Hoshin Management

output

The purpose of hoshin management is to align every per-son and every activity so they address the key company goals.This makes it necessary to check whether people's daily work iscurrently in alignment with the top-level hoshins and, if not, tomodify them appropriately. Managers have considerable discre-tion over which activities they emphasize, and the "natural"balance of activities mayor may not support the current hoshinswell. Thus a necessary and fundamental aspect of hoshin man-agement is analysis of the daily work.

The components that support the objectives of each per-son's daily work need to be listed and organized. The result canbe summarized in a tree (see Figure 14-20).

Figure 14-19. Using Metrics to Monitor Results and Means

Division Section Measure- Goal When Action at Documentsmanager chief ment (warning warning or graphs

(zitem) leveQ to be used

decrease 1. decrease number of 0 1/month details ofdefects of major major defects (1) act.ionsincoming defects inparts incoming

parts

1.1 create asystem for ZD

1.1.1 system suppliers 1/monthto audit auditedsuppliers ofmajor defects

1.1.2 aCtraining suppliers 1/monthfor supplier trained

1.2 direct number of 0 1/monthcontrolof defects (1)worst two caused bysuppliers welding

440 TOTAL PARTICIPATIONChapter14: Hoshin Management 441

Next, the hoshins relevant to this person need to be corre-lated with the components which support his or her currentdaily job objectives, and new tasks must be added as necessaryto accomplish the hoshins (see Figure 14-21).

From this correlation matrix it is possible

. to understand which daily job tasks have higher priority,because they address hoshins

. to understand that new daily job tasks have to be addedso that the person addresses previously unaddressedhoshins

. for everyone to understand what each other is doing

You can then institute control by measurement methods(metrics and targets) that enable each person to monitor andcontrol his or her own activities. Each must be sure to follow the

process and accomplish the desired results. Thus, each personcan run his or her own personal PDCA.

new~

tasks~

objective ofthe daily job

objectiveof the -

currentdaily job

Figure 14-20. Tree for Components Supportingthe Daily Job Objectives new

dailyjOb

-{

Figure 14-21. Correlating Hoshins with Components Supporting theCurrent Daily Job Objectives

PHASE 4 - CHECK AND ACT (REACTIVE)

in the plan or the way it was carried out (check) and to act ap-propriately to influence the next year's plan or possibly thelong- or mid-term plans (act). (see Figure 14-22).

The check step entails discovering why the planned pro-cess didn't achieve the desired results. In other words, a processhas been created that can now be analyzed using reactive im-provement methods - you use the 7 QC steps to analyze thedifference between the plan and reality, and determine the maincauses of the difference. For instance, using the data taken aspart of the measurement plan, you can discover whether parts I

of the plan weren't carried out or were carried out but didn't

produce the planned result (see Figure 14-23). This providesfeedback to the next planning cycle.

Once the annual Plan has been made (plan) and deployedover the year or half year (do), it is time to check for weaknesses

442 TOTAL PARTICIPATIONClwpter14: Hoshin Management 443

I(

changesto long- ormid-term

plan

PRESIDENT'S DIAGNOSIS

annual (orsemi-annual

hoshins

hoshin andmeasurement

plan deployment

control bymeasurement ~

At the top of the hoshin management model is diagnosis

by the president. This is part of the proactive pha~e of hoshinmanagement, the outside proactive PDCA loop of the modelfor hoshin management. Each year, the president assesses howeach division or functional area carries out its hoshin manage-ment activities. During the first step, the group to be auditedprovides a status report document to the president and his orher TQM staff.

Next the president, an external change agent, and the di-agnosis team visit the site of the group being diagnosed. Thesecond step consists of two parts, a presentation by the workgroup leader at the factory and visit to the work group in itsown environment. The first is formal; the second is personaland informal.

The third step begins while the president is still visiting thework group in its own environment. Still in a personal and in-formal manner, the external change agent accompanying thepresident summarizes the strengths and weaknesses they haveseen, and the president provides appropriate oral reinforcement.In Japan, this summary step may end with a round of sake andcontinued informal discussion. The third step ends one monthlater when the diagnosis team sends a follow-up memo on whatthe work group should do to improve.

During the fourth step, the president and associated staffplan how to improve the diagnosis process for the next plan-ning cycle. The site visits are typically one day in length. Duringa day the president and accompanying team may visit severalgroups at the site. These site visits are the president's main jobas part of hoshin management - they cannot be delegated. Earlyin the implementation of hoshin management, the presidentshould visit all sites. Ideally, the president should continue tovisit every site. Certainly, the most important should be visitedeach year. At one major Japanese construction company with:many branch offices, the president visited 100 sites per year.

,1

Plan

Do

Figure 14-22. Checking and Acting to Modify the Plan

\ results

plan/goal

).

difference

reality

~ time

Figure 14-23. Analyzing the Difference Between Plan and Reality

It is important to enforce such fact-based analysis throughuse of the use of the 7 QC steps. For this purpose hoshin man-agement dictates the use of analysis data sheets that the presi-dent or division head "diagnoses" to make sure they are done.

The act step then involves deciding on the key parts of theprocess to improve over the next cycle. This brings us back toplan and doas described previously.


Presidential diagnosis has several purposes. First, it pro-vides a deadline effect and thus indirect enforcement of the

yearly PDCA cycle of the divisions or functional areas - thedate is announced one year in advance, so improvements mustbe finished by that date. Second, the president's diagnosis willitself guide the divisions on how to strengthen their quality im-provement systems. The diagnosis is not a check of the results,but a check of their analysis (POCA) process. Third, the yearlydiagnosis gives the president another opportunity to show per-sonalleadership of TQM. Fourth, presidential diagnosis aids thepresident's mvn learning process.

. The president hears and sees what is really happening(e.g., changes, latent problems, and environmental pres-sures). This is important because subordinates hesitate tospeak about problems, and some presidents are disin-clined to hear about them.

. The president gets continuing education about quality:the accompanying change agent, an outside quality ex-pert, asks questions that enlighten the president.

. The president personally participates in a PDCA cycleand thus becomes more adept in use of proactive POCA..The president is able to compare divisions and thus iden-tify strong and weak models.

NEC Shizuoka's president made the following pointsabout the company's hoshin management system:

.Top management spends 20 hours in each 160-hourmonth on pure TQM activities, mostly on hoshin man-agement; the president's job has changed because thisperson now manages by hoshins.

. Results of TQM and hoshin management didn't come forseveral years.

. The most difficult thing to implement in TQM at Shizuokawas hoshin management because of the time it took to(1) understand how hoshin management works and (2)

get quantitative links between the president and man-agement to balance.

. At the beginning the paperwork of hoshin managementwas time-consuming, but later it became easier. .

. Shizuoka limited each manager's targets to three per.year - these were their business targets.

. QA, profit, and manufacturing lead time were the presi-dent's three targets. These were derived from the previ-ous year's results; more precisely, they were stated as lessthan x percent failure on final inspection, y percentage,and z days from order to ship.

. The president let his subordinates choose their means toachieve targets, but he reviewed the means with them.

Over the five years preceding our visit with the presidentof NEC Shizuoka, years during which the company implement-ed TQM and used hoshin management, NEC Shizuoka's salesrose at twice the rate of its staffing, and profits rose at five timesthe rate of staffing. The president attributes those excellent re-sults to bringing costs down via factory automation and to em-bracing a process of systemization.

The president of NEC Kansai (another NEC subsidiary)said that the most important benefit of presidential diagnosis isthat it enables him to detect latent problems and to adjust thehoshin management system to address them.

J

HOSHIN MANAGEMENT VERSUSMANAGEMENT BY OBJECTIVES

In the Japanese view, the United States may not have feltthe need for hoshin management as strongly as Japan does. Asshown in Figure 14-24, in Japan the CEO is felt to have less au-thority relative to vice presidents and division directors than doCEOs in the United States.15

Kogure quotes a 1980 survey of U.S. and Japanese compa-nies in which it was revealed that U.S. companies were superior

\{

446 TOTAL PARTICIPATION Chnpter14: Hoshin Management 447

high controlling the process. MBa as typically practiced puts stresson achieving objectives by managing people.

MBa and hoshin management do the same job with re-gard to deploying company goals into individual goals and let-ting people try to achieve them. Even though Japanese hoshinmanagement focuses on process, management does pay atten-tion to results; emphasis on process is not permission to fail toachieve the results. Since hoshin management controls the pro-cess to produce results, you can analyze the process for the caus-es of failure and change the process until it does produce thedesired results (see Figure 14-25).

Authority

low

CEO VP Divisionhead

Figure 14-24. Comparison of Authority Levels

in formalization, concentration of authority in the upper levels,and systemization of management planning systems; U.s. com-panies. were also strong in various aspects of cross-functionalmanagement (small business units) and in production manage-ment systems.16 Therefore, Japanese companies felt it necessaryto institute a formal system of deployment of policy from higherto lower levels in the company. They assumed that in the U.S.

context, where top-down management prevails, top manage-ment directives may penetrate more easily to the bottom thantheirs did. '

Japanese companies don't have clear lines of authority - itis part of the Japanese culture to appreciate "softness" in suchissues. Japanese companies prefer a bottom-up to a top-downsystem, and their hoshin management methods have developedaccordingly. For instance, as mentioned earlier, the hoshin man-

agement system includes the explicit interlevel negotiation sys-tem of "catchball." Thus, hoshin management evolved toinclude a significant bottom-up component to modify the initialtop-down policies.

In his book, Professor Kogure emphasizes the differencebetween hoshin management and management by objectives(MBa). Hoshin management puts stress on achieving results by

process

.,."../, ~~, ,',./:'

.

' '/ . /)~ !~ f-"'" ..f'

.

C"""" -.,.",..

. '''''~.., """" ...~.~.' .." ,..

measure. actions ~ results

results

Figure 14-25. Analyzing and Changing the Process to Get Results

With its emphasis on making people responsible for re-sults, MBa all too often abdicates responsibility for understand-ing the process used to meet the objectives. For example, it maynot take into account whether the process is capable of achiev..ing the objectives. Practiced this way, not only does MBa gam-ble on individuals and their own processes, which mayor maynot be capable processes, but MBa also has no way to learn howto improve if the individual or process is not capable - MBatypically does not even learn from an individual who is capable.


Table 14-4. Comparison of Management by Objectives and HoshinManagement

If only the targets and not the means are deployed, as fre-quently happens with management by objectives, the deploy-ment shown in Figure 14-15looks more like that shown in Figure14-26.

rManufacturing: reduce costs 25%

Administration/finance: reducecosts 30%

Reducecosts20%

Sales: reduce costs 5%

Marketing: reduce costs 15%

Development: reduce costs 15%

Support: reduce costs 15%

Figure 14-26. Management by Objectives

-[

-[

-[Direct sales:reduce costs 4%

Support sales:reduce costs 6%

-[

-[, ..,

-[

Note that the units of the metrics stay the same from levelto level of the deployment. This is really a system of partitioningor dispersion of objectives rather than deployment.

Table 14-4 compares MBO and hoshin management basedon our observations of actual use in U.S. companies.

Sales management often exemplifies the extremes of MBO.The cycle shown in the following figure will be familiar to manyU.S. managers. In the MBO cycle illustrated above, the effort isto achieve sales performance by controlling the investment insalespeople and motivating their output, with little direct effortto understand, teach, and improve the sales skill of the organi-zation. Managers and salespeople conspire to present sales as anindividual skill that depends on the company's ability to attract

successful salespeople. The company makes no effort to directlycontrol its destiny by learning to sell its product and to developsalespeople who can do so.

While companies may perceive less need for a system todeploy and manage policy than Japanese companies, the pur-poses of hoshin management (listed at the beginning of thischapter) are equally important to both. The system is also usefulto U.S. companies, as demonstrated by Texas Instruments andHewlett-Packard.

/\

\\

Management by Objectives Hoshin Management

12-month planning cycle 6-month planning cycle

Deploy a portion of the top-level target Deploy targets with different metrics toto each segment at each level (no each segment at each level (changechange of units of measure) of units of measure)

Lower-level management is Higher-level management suggestsresponsible for providing the means plausible means for key targets

Some negotiation of targets Catch ball of targets and means based(considerable pressure for lower-level on facts and analysismanagement to accept targetsproposed by higher-level management

Little monitoring of the means (if it Some targets and metrics are aimedworks, it's OK) at controlling adherence to the means

Analysis of causes and failure of themeans of the last planning cycle isused to improve methods proposedin next planning cycle

Presidential recriminations for missing Presidential diagnosis of the PDCAtargets and sometimes replacement cycle and suggestions on how toof the responsible manager improve next time

New manager blames predecessor's Old manager learns from past to do asystem for past problems and begins better job next timeto plan a new system

Dependence on undocumented Attempt to document needed skillskill in individual managers and institutionalize it in the compc:myassumed to be capable

Chnpter14: Hoshin Management 451450 TOTAL PARTICIPATION

Budget number of sales positions needed for yearly business plan

tHire needed people with a purportedly good sales track record

.Give sales people product training

.Give sales people quotas and an incentive plan

.Sales people use their personal sales skills to sell

.Reward good performers; fire poor performers

sure success. In the final analysis, Hoshin planning can beconsidered a more mature MBOprocess.17

Soin's view that hoshin management is a more matureform of MBO is consistent with our view of hoshin managementas being complimentary to the conventional business planningprocess, as discussed in the next section.

HOSHIN MANAGEMENT ANDCONVENTIONAL BUSINESS PLANNING

Sarv Singh Soin of Hewlett-Packard gives the followingview of hoshin management (which he calls Hoshin planning):

You may ask the question, "Why adopt Hoshin plan-ning? After all it is very similar to MBOand we have beensuccessful with MBO." While MBO has many strengths, ithas also many weaknesses. For example, there is a weaklinkage between strategy and implementation; there is nodetailed planning process; there is an insufficient consensusapproach; a hierarchy of objectives, although apparent intheory, may not exist in reality; finally and most importantthere is no framework for a formalized review procedure tomonitor and ensure success.

Hoshin planning on the other hand has all thestrengths of MBO and more to boot but none of its weak-nesses. The strength of Hoshin planning is that it is a sys-tematic and tightly coupled process. It does, however,require much more effort and consensus than MBO; but ithelps provide a focus, a single-minded approach by the en-tire management team. The entire process is designed to en-

1

I

./

I

The conventional business planning process has many par-allels to the hoshin management process we have described inthis chapter (see the right side of Figure 14-28).

The conventional business process is substantially focusedon results. In fact, MBO as it is often practiced can be viewed asa system to deploy desired results. However, process is neces-sary to achieve results, and providing the means to produce theresults is the domain of hoshin management.

Hoshin management also takes a longer term view thanthe conventional annual business plan often takes. The actualgoal of the company is not its annual results, but to achieve thecompany's vision and mid-term plan. The annual business planis but a step towards the mid-term plan and vision. Hoshinmanagement takes into account that some of the means neces-sary to achieve the mid-term plan and company vision may takemore than one year. [It therefore builds into annual plans themeans for achieving longer term objectives.] For instance, for aU.S. company to sell products in Japan takes more than a firstyear sales target. It takes a multi-year effort to understand theJapanese market and develop a capability to address that mar-ket. In this example, hoshin management will address the higher(longer-term) objective of selling products in Japan, while theannual business plan may specify only the Japanese sales ex-pected for the next year.

Figure 14-27. An MBO Model for Sales Management

452 TOTAL PARTICIPATION Chapter14: Hoshin Management [453

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As shown in Figure 14-28(and discussed in detail earlier in Ithis chapter), hoshin management begins by analysis of the envi-ronment, the vision, the mid-term plan, and last year's weak-nesses to discover the top "level (company or CEO) hoshins.These top level hoshins address the means necessary to achieveboth the mid-term plan and the annual business goals. They aredeployed downward through the organization using TQM'scommon language:

. Facts: using measurable data

. Process: using Ishikawa diagrams to understand what'sreally happening

. Focus: using Pareto diagrams to be sure to address thevital few

In the deployment of hoshins, the outcome at each higherlevel is the target of the means of the next lower level, as shownin the figure below:

I,

C)c

'2cIt!c::enenQIc

'iij:2Iniiic0:::cQI>C0

(.).c...'j't:IQI...It!Q,E0

(.)...CQIEQIC)It!CIt!:Ec:.cen0::J:

outcome

tmeans = outcome

tmeans = outcome

t

Let's put a 7 steps slant on this. In step 1, we state thetheme, that is, the desired outcome.

step1 ~ outcome

treI

'<t,..QI...:2C)ii:

means = outcome

t\

tii

C)

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.r:

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What is the means then? It is step 4, the solution.Mid-term alan;

environmental -"tooolys;, I

strategic

step 1 ---+- outcome

tstep 4 ---+- means = outcome

t

It is clear from this figure that we are missing something-steps 2 and 3, data collection and causal analysis. This makes itclear that creation of the means at the next lower level in hoshin

management should not be a speculative exercise. Rather, themeans is derived from data collection and causal analysis.

\I

step 1 ---+- outcome

step 2 ) -. tstep3step4 ---+- means = outcome

PDCA2(breakthroughimprovement)

HoshinManagement

SDCA(maintenance)

DailyManagement

PDCA,(incremental

improvement)

t Figure 14-29. Two Types of PDCA for Organiza\ion Integration

outcome. MBO does not have this weakness, since it specifies towhat degree each lower unit affects the result; however, MBOdoesn't specify the means of accomplishing objectives. Akao de-scribes a method of addressing this weakness.19

In this alternative deployment method, the top-level goal isstated and then guidelines are stated for the subdepartments.This first stage of deployment might look very much like theMBO deployment shown earlier (Figure 14-30).

Once the top-level outcome and guidelines for the next. level are deployed, means are deployed (see Figure14-31).The

means are developed further on the basis of facts and 7 QCsteps analysis of obstacles to the goal (see Figure 14-32).

Hybrid systems of deployment are also possible, whereguidelines toward the top-level outcome are deployed and thealternating target and means system of deployment describedearlier in the chapter is used to develop the means and processmetrics and targets.

Then, control by measurement is used to develop the basisof the interleaved SDCA (maintenance) and PDCA (incrementalimprovement) cyclesthrough which the deployed plan is imple-mented. As was stated earlier in this chapter, metrics are neededto measure both the results and the means.

Hoshin management is a vehicle to integrate the entire or-ganization to achieve the company goals. Kansai Electricshowed that to integrate the entire organization, two types ofPDCA were necessary - PDCA1and PDCA2.PDCA2is hoshinmanagement (see Figure 14-29).18This is discussed in more de-tail in the next chapter.

AN ALTERNATIVE HOSHIN DEPLOYMENT SYSTEM

Earlier in the chapter we mentioned that the hoshin deploy-ment system has a weakness in that it fails to make clear the con-nection between the means and its effect on the hi£her-Ievel

456 TOTAL PARTICIPATION

Guidelines

Manufacturing: reduce costs 25%

Administration/finance:reduce costs 30%

Reducecosts20%

Sales: reduce costs 5% Reduce costs 20%

L. bydecreasinglengthofbusiness cycleMarketing:reduce costs 15%


Figure 14-30. Guidelines from Top-Level Goal

Guidelines

Ch11pter14: Hoshin Management 457

Manufacturing: reduce costs 25%

L. by implementing JIT

Administration/finance: reduce costs 30%

L. by flowcharting processesand eliminating NVA work


L. by decreasing qualifiedprospects whodon't buy

Marketing:reduce costs 15%

L. by creating strategic alliances


L. by increasing engineer'sunderstanding of customer context J,

Figure 14-32. Top Management and Functional MeansManufacturing:reduce costs 25%

L. meansAdministration/finance: reduce costs 30%

L. means

HOSHIN MANAGEMENT AS "SYSTEMSENGINEERING" FOR ALIGNMENT

Hoshin management is intended to systematize alignment(within the company and between the company and the envi-ronment) - to make it a form of engineering, like process engi-neering for manufacturing. Therefore, the same infrastructureelements are necessary for hoshin management as ar:e neededfor process engineering.

In the case of process engineering the elements of the sys-tem consist of physical elements such as the building or jigs;however, in the case of hoshin management, the elements of thesystem are invisible and influence the organization indirectly."Soft" rather than ''hard'' elements must play key roles. I

Table 14-5 shows the correspondence between the ele-ments of process engineering and those of hoshin management.

Reduce costs 20%

L. means


L. means

Marketing: reduce costs 15%

L. meansDevelopment: reduce costs 15%

L. means

Figure 14-31. Means for Achieving Second-Level Guidelines

Chapter14: Hoshin Management 45L,458 TOTAL PARTICIPATION

Table 14-5. Process Engineering Compared with Hoshin Management

1. The discussion of hoshin management in this chapterintroduces a number of concepts that are needed for thediscussion of managerial development in Chapter 15.

2. For our discussion of hoshin management we are grate-ful to JSQC and its Research Committee on the Case

Study of Hoshin Management for the document Hoshinkanri unei-no tebiki (Guide for Hoshin Mananagment), 1989.

3. There is no one correct version of hoshin management.Each company adapts the basic concepts to its needs.The version we describe here is meant to be representa-tive. It is based on a 1991presentation by the presidentof NEC Shizuoka (Michio Ikawa), a 1991 presentationby Masao Kogure, a 1992presentation by the presidentof NEC Kansai, and a 1992 presentation by MitsuruNitta of Tokyo Electric Power Company. Akao's bookHoshin Kanri provides an extensive description ofhoshin management.

4. Some companies use a semiannual planning cycle be-cause it allows more accurate prediction and thus morerelevant planning and a more frequently improvementcycle.

5. The Japanese translation of what we are here calling:hoshins is "policies." We are not using the latter tenr.because hoshin management is describing something:different from "policies" in the usual American sense orthe word.

6. Many companies use variations from this ideal.7. The material here draws on Hidemi Veda, Yoshio Mit-

sufi, and Susumu Yamada, "Case Study of Hoshin Man-agement, Daily Management, and Cross-functionalManagement(2)," TotalQuality Control38,no. 11,(1987):79-89.

8. Russell Ackoff, Creating the Corporate Future (New York:John Wiley, 1981).

9. In WattsHumphrey's discussionof the software devel-opment process, his definition of insanity was "doing:the same thing over and over and expecting things tcchange."

10. Michio Ikawa, "TQC Activities at NEC Shiz~ka," Re-

ports of StatisticalApplication Research,Union ofJapaneStScientistsandEngineers37, no. 1-2 (1990-91):67-68.

11. c.K. Prahalad and G. Hamel, "The Core Competence 01the Corporation," Harvard BusinessReview 68, no. 3(May-June 1990): 79-91.

12. Masao Kogure, "Some Fundamental Problems onHoshin Kanri in Japanese TQC," Transactionsof the44thAnnual Quality Congressof theAmericanSocietyfor Quali-ty Control,May 14-16,1990,San Francisco, CA,5.

13. It usually stops short of the individual.14. Nemoto, Total Quality for Management.15. This figure is derived from Tadao Kagano, YujiroNon-

aka, Kiyonori Sakakibara, and Akihiro Okumura, Ni-chi-BeiKigyo noKeieiHikaku (ComparisonofManagemenPractices between U.S. and Japan) (Tokyo:Nihon-Keizai-Shinbunsha,1983).

16. Masao Kogure, JapaneseTQC: Its Review and New Evolu-tion (Tokyo: JUSE, 1988).

We have shown how hoshin management aligns the orga-nization. In the next chapter we show how hoshin managementenforces the use of POCA by all managers.

NOTES

System Process Tools Operation

Productionprocess building machines jigs manuals

engineering

Hoshin hoshin flow data sheets manualsmanagement management

system

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17. Sarv Singh Soin, Total Quality Control Essentials (NewYork:McGraw-Hill, Inc., 1992),58. Soin's book came toour attention as this book was in publication, just intime to include the above quote, but not in time to pointout other similarities or differences of viewpoint be-tween him and us.

18. Figure 14-29is adapted from a diagram in Kenji Kuro-gane, ed., EffectiveUseof ControlItemsin TQCActivities(Tokyo:Japanese Standards Association, 1990),171.

19. Akao, HoshinKanri,9.

Chapter.14 Hoshin Mgt

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