(EN) The Evolution of Strategic Management—Hoshin Kanri

In this last post on the evolution of strategic management, I will talk about Hoshin Kanri. For me, it is the big thing—albeit I may be influenced by being an Ex-Toyota employee, and, while Hoshin Kanri was not invented by Toyota, it was certainly made popular by it and its lean manufacturing. Hence, it is also the last post in this series, even though timewise it came before the balanced scorecard, which also had Hoshin Kanri as an inspiration.

The Name Hoshin Kanri

Many Japanese terms in lean manufacturing are taken out of context from the ordinary Japanese language. A kanban is for an everyday Japanese a signboard rather than a card with production information. Kata is not a method, but a martial arts practice. Ikigai is just a word for purpose of life, wildly taken out of context in the western view of the (supposed) Japanese philosophy. As such, it is refreshing that hoshin kanri is just a Japanese everyday word, and every Japanese with some business experience has heard of it (even though they don’t necessarily agree on the finer details).

In Japanese, Hoshin Kanri simply means policy deployment. It has the characters for Policy (方針 Hoshin) and Control or Management (管理 Kanri). The Japanese Wikipedia simply calls it „Policy management“ are activities that are carried out with the cooperation of the entire corporate organization in order to establish medium- to long-term management plans and short-term management policies based on the management policy, and to efficiently achieve them (based on the definition by the Japan Science and Technology Federation). As such, there is a wide range of different styles and approaches in different companies on how they do hoshin kanri. They all have in common that you need to clarify your long term plan, break it down into corresponding short term goals or policies, take action to implement those short term goals, and verify at the end of the period (usually a fiscal year) if the short term goals were achieved. The findings of this verification are the feedback for the person responsible for one or more short term goals, helping him to do (even?) better next year (You see the Plan-Do-Check-Act (PDCA) in there?)

When the western world talks about Hoshin Kanri, they mean in particular the style of Hoshin Kanri used within the Toyota group. But, it was a thing already before Toyota, and Toyota was actually a bit late to the party, using Management by Objectives first.

Hoshin Kanri before Toyota

Hoshin Kanri was the Japanese adaption of Management by Objectives during the post-war era in the 1950’s and 1960’s. There were quite a few early users, and it is not clear (at least to me) who truly was the first one. The Japanese tire (and other stuff) company Bridgestone was one of the early users of Hoshin Kanri in Japan. Others claim that the Japanese branch of Hewlett-Packard may have been one of the first users.

On the academic side, Professor Yoji Akao (赤尾 洋二, 1928–2016) is often mentioned as a key driver of Hoshin Kanri. He was a professor at different universities over his career, including the Tamagawa University in Tokyo and the Asahi University in Gifu. He wrote and coauthred quite a few books, including Practical Application of Hoshin Kanri (方針管理活用の実際) around 1988 and a few books on quality deployment. The whole topic of Hoshin Kanri is in Japan often somewhat intertwined with quality deployment.

Another person frequenly mentioned in connection with Hoshin Kanri is W. Edwards Deming (1900–1993). However, I am a bit sceptical about his true involvement with Hoshin Kanri, as he was a) a quality guy, and b) his achievements are often exaggerated (e.g. Joseph Juran had in my view a bigger influence). I believe Deming and the PDCA circle he promoted were an inspiration and a foundation for a Hoshin Kanri, but until I see actual proof I believe he was not directly involved in Hoshin Kanri (If you have proof, let me know!).

Hoshin Kanri at Toyota

Toyota was using Management by Objectives (MBO) since around 1963-1964, along with Total quality control (TQM) (which you would nowadays call Total Quality Management). However, they found the method lacking. Management by Objectives did not well in aligning the goals (objectives) with the vision, nor did it include a proper check if the goals were actually reached and the necessary follow ups.

After the 1970 oil crisis, their quality started to slip, management lost focus. Hence, Toyota decided to adopt Hoshin Kanri in 1979. Adopting Hoshin Kanri is more than just an executive email sent to all managers. Toyota started a two year program to train all managers in the use of Hoshin Kanri. This was the Kanri Noryoku program (管理能力プログラム), usually shortened to KanPro. This program combined the previous Management by Objectives with the PDCA into the modern Hoshin Kanri, got it all on a single page (the A3 Report), and used cooperative approach to set the goals (the „catchball“ process) rather than command and control.

the Kanri Noryoku program was under the leadership of the director in charge of quality control, Masao Nemoto (根本正夫). Altogether, 2,000 key leaders at Toyota had to develop their own Hoshin Kanri on A3 paper. The managers were trained in

• How to use PDCA (not only the theory but actually on using it correctly)
• How to identify key issues and problems
• How to develop targets and goals
• How to make plans for improvement
• How to implement
• How to analyze results
• How to review the Hoshin Kanris of their own people
• How to use an A3 sheet, including how to use the A3 for a presentation for management

The Kanri Noryoku Program refreshed the vigor for Hoshin Kanri, and also strengthened the use of A3 sheets for project management. All presentations in this program had to be done using A3 sheets, which helped to focus on the key points. Isao Yoshino compares this to doing 5S on a presentation (sources below). Furthermore (unlike PowerPoint) made all points visible all the time. The Hoshin Kanri at Toyota is usually a table, often with graphic elements including the overarching vision (or all visions from the top down). Below is an example of the Toyota UK Engine Division Hoshin Kanri from 2018.

Hoshin Kanri in the West (i.e. the X-Matrix)

The concept of Hoshin Kanri came to the western world along with lean manufacturing.Early adopters were for example Hewlett-Packard (through their Japanese subsidiary), but it also made it into the Six Sigma toolbox. One major change in the west is that the tabular hoshin kanri was squeezed around the corner into what is called an „X-Matrix„. This was done around the 1990’s by early Lean consultants and companies like Danaher Corporation and Hewlett-Packard. The X-Matrix is IMMENSELY popular in the west…but not with me. I find it overly complicated, and I think the perceived added value does not justify the complexity of doing it in an x-form at all.

Somehow, the western world is equaling Hoshin kanri with the X-Matrix, when in reality the X-Matrix is not much more than a weird format for the same content as Toyota has in their tables. This X-matrix is pretty much unknown in Japan. if you google „Hoshin Kanri“ in an image search, you will find mostly X-Matrices. If you google the Japanese word 方針管理, you will probably not see any X-matrix at all. I did this for you just below, and highlighted all images with an X-Matrix in red. 14 out of 19 images for a worldwide image search on „Hoshin Kanri“ were X’es, none for „方針管理“ (screenshot blurred for copyright reasons).

Overall, Hoshin Kanri is a great tool, albeit I recommend avoiding the X-Matrix. I have seen a lot of Hoshins at Toyota, but never ever an X-Matrix. Now, go out, align your short term projects with your vision, include your people (the catchball) check if it works (PDCA), and Organize your Industry!