What exactly is Hoshin Kanri? What are the benefits of using it? How to implement Hoshin Kanri? Find the answers here.
The words "hoshin" and "kanri" mean "direction" and "management", respectively. Used together, they bring the meaning of “How do we manage our direction” or “How do we make sure we go the right way”.
Hoshin Kanri is (essential in the Lean management) 7 step planning process for ensuring that the strategy of a company gets executed across the hierarchy.
The Hoshin Kanri method can be summarized with a 7-step process, also known as the Hoshin Planning:
As shown in the image above, the Hoshin Kanri planning is not only a top-down approach. It has built-in continuous improvement mechanisms, which are a key element to making the method successful. These are the Catchball and PDCA tools.
A crucial detail about the Hoshin Planning is that it is not executed strictly top-down. On the contrary, it is a joint effort between a manager and a subordinate who have to mutually agree on the optimal set of goals.
If management directs people into achieving certain goals without collecting feedback first, they risk demotivation and costly errors, should some details happen to be missed.
The benefit of discussing the goals with the people who will be actively working on them is that they will think through the details much more thoroughly than the management. Practically speaking, this is the essence of the Catchball.
Having well-communicated, realistic, and agreed-upon goals is important because it enables ownership and motivation, creates a valuable feedback loop, and improves the commitment to the execution process.
The Deming Cycle (PDCA / PDSA) was first introduced by Deming as a continuous quality improvement model. It consists of four steps:
The PDCA model can be considered as the scientific approach to continuous improvement, and as such, it requires some additional practices:
It has never been easier to start a business and reach a seven-digit revenue. However, in the history of mankind, it has never been harder to make people care about your products. There is severe competition in every market, and only the smartest and the most dedicated survive. That is why companies need to make sure they have a well-thought-out strategy and can execute relentlessly. It is not about having a strategy or execution. It is about both!
Additionally, alignment is among the big enterprise's greatest challenges, where thousands of people do thousands of jobs every day. It is often a challenge even for smaller companies, where work is much more dynamic, and the big picture can easily be lost.
When Hoshin Kanri is implemented effectively, it forces the leadership team to develop a vision and a list of breakthrough goals, creates a cascade of complementary goals, which ensures alignment, and provides the necessary leverage for successful execution.
In other words, Hoshin Kanri bridges the gap between strategy and execution by creating alignment and focus.
The first logical question to ask once you get convinced about the benefits of Hoshin Planning is “Where to Start?”. And this is an excellent question because there is not much practical advice out there. If you Google “Hoshin Kanri Tools” you will most likely find information about the “Hoshin Kanri X Matrix”, which looks like that:
Image Credit: LinkedIn
Mapping everything on such a spreadsheet is definitely going to help you during the planning process. However, there is not much help as far as the actual execution goes. One of the methods for Hoshin Kanri execution that has been successfully tested and validated is Portfolio Kanban.
The Portfolio Kanban is a holistic method that aims to improve your organization’s ability to deliver by applying visualization principles, limiting work in progress, and flow management on a system level.
Portfolio Kanban is a convenient tool for executing the Hoshin Kanri goals because it allows mapping them on a Kanban board and tracking the progress visually. In reality, the breakdown of the goals looks like this:
When the CEO and the leadership team come up with the vision and the breakthrough goals, they work with the Program Level to define the programs that will deliver on these goals (they play the Catchball).
On the next level, the program management layer works with the project layer to define the necessary projects to deliver on the program's goals (again, Catchball).
The process continues until all levels in the hierarchy have clearly defined goals. Then, the execution starts.
With software like Kanbanize, you can represent all the goals and the related work items with Kanban cards on team or management (Portfolio Kanban) boards. The benefit of the software is that it makes it visible when work items and goals get completed. This saves hundreds of hours for status meetings and eliminates the possibility of human error and reporting bias.
The automated way of status reporting makes the monthly reviews easy and data-driven. When a digital system automatically collects all metrics, the PDCA cycle is much easier to implement, and besides, you can do it retroactively. In other words, you could go back in time and analyze past events as if they were happening today.
An even greater addition to this approach is the ability to forecast on the Portfolio Kanban level. When the data is in place, you can use sophisticated Monte Carlo simulations that project how much work you can accomplish by a given date.
With this information in place, you can speed up the annual reviews and, in fact, make them monthly. This will create a much faster flow of information upwards, allowing the leadership team to take corrective actions, should they need to.
The only disadvantage to Hoshin Planning is that nobody can predict what would happen in a year. As a matter of fact, this annual goal setting has been widely rejected by the agile community, and this is no wonder.
Each company is like the human body – the departments and the teams represent the organs, and the information represents the blood that nourishes them. If it takes a year for the blood to reach the organs, then the body will die. The blood circulation needs to be regular and stable for the body to be healthy. The same holds true with information.
While the big goals and vision must exist, for an organization to be successful, there needs to be a system in place that adapts it to today's dynamic world. One of the possible solutions is Portfolio Kanban.
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