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Craig Fry

Craig Fry

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Hoshin Planning for the Rest of Us
(Everybody Needs a Compass)

Craig Fry

Here at Wade&Partners, we were writing a textbook recently on Lean Manufacturing for Distributors and when it came to the chapter on Hoshin Planning, we had one of those epiphanous moments that ... well ... just don't happen often enough. I'll tell you what it was, but first, I digress.

Hoshin planning is something that's familiar to manufacturers. It's an important part of the whole lean manufacturing/quality revolution. Odd thing about this revolution is that to most folks in the manufacturing community it's old hat, an accomplished fact, yesterday's news, something they're getting tired of hearing about. This stuff started back in the eighties. By now, the old timers in manufacturing have been to the seminars, seen the paradigm shift, learned the Japanese terms and re-engineered the process. Now, they're teaching seminars to youngsters who don't understand what fuss is all about.

Outside the manufacturing realm, it's amazing how many people still don't know anything about the lean process or the impact it's had on their lives. That's one of the reasons why we decided to write the textbook. Kid's graduating from universities today have to live and work in the "lean" world. They need to know what it's all about. So the book was a sort of "Lean For Those Who Don't Work On The Manufacturing Line."

It's an interesting concept, because the principles of lean are so solid, so inherently valuable, they have beneficial application beyond the limits of manufacturing. That our frame of mind when it came to writing the chapter on hoshin planning.

As we talked about the benefits of hoshin planning in manufacturing, we couldn't avoid thinking about how this management practice might benefit other business disciplines. Epiphany, here we come.

Take the case of a sales manager who, based on nothing more than personal optimism, tells the sales force that everyone will have to increase their sales next year by 10%. It's not a plan, it's an edict, and it's doomed to failure. When it fails, a few heads will roll and a new "plan" will be dictated.

That's the old way.

Those familiar with hoshin planning techniques are already grinning. They know a better way. For those who aren't familiar with hoshin planning, or those who are but work in a department that doesn't use it, please read on. See if you can't discover gold, or at least golden opportunities, from the following textbook explanation of the hoshin planning process. Sales and marketing executives should pay special attention.

A Shiny Needle Points The Way

Hoshin, a Japanese word, comes from two root words. “Ho” means method and “shin” means shiny needle (or compass). Together, they mean “method for setting a direction.” As it applies to manufacturing, hoshin planning is a better way to create a plan so that the results would be more achievable, more often. To oversimplify, it means bringing more people into the planning process, the whole team, in fact, from top management down to the workers on the line.

In 1950, the principles of “hoshin planning” were introduced by the Japanese Union of Scientists and Engineers at an eight-day course with Dr. Deming acting as a guest lecturer. Hoshin refers to a method for setting a direction. In his lectures, Dr. Deming outlined his own concepts for planning that involved a process he referred to as Plan-Do-Check-Act or PDCA for short.

Plan-Do-Check-Act (PDCA) Cycle

As Deming envisioned this process, these were not four steps leading to an objective. PDCA was a cycle that would continuously repeat itself, creating plans that were more and more ambitious, more and more achievable. The four steps in the PDCA cycle are as follows.

PLAN. In this phase, a plan of action of action is developed to address a problem or achieve a goal. A good plan should have control parameters and be subject to review by others.

DO. The plan is implemented.

CHECK. To see how the plan is progressing, it’s important to check on progress. It’s not enough to simply say that the goal is to “win the war” and then check in one year to see if the war was won or lost. Rather, progress toward the goal should be made on a continuing basis using measurements of pertinent information: friendly casualties, enemy casualties, territory gained or lost, measurements of supplies, morale, etc.

ACT. As information gathered while checking on the progress of the plan is analyzed, it’s possible to identify differences between expected results and actual results. In this phase, such differences are identified and discussed.

Where necessary, corrective action is identified and incorporated into the plan. That’s why this is considered a cycle rather than a simple four-step process. Once corrective action is identified, the process moves back to the plan stage and begins again.

There are two important notions embodied in this approach to planning that are best understood when contrasted with the militaristic approach to planning that it replaces. Under that approach, the general makes the plans and the troops carry them out ... or die trying. It’s rigid, absolute, and definitely one-way. Plans always come from the top. Using the PDCA approach, the planning process is more open. Subordinates are consulted in a meaningful way. Plans are reviewed along the way. Success is measured. Corrective action is implemented. The process is continuous.

It Caught On Because It Works

This new approach to planning began to pick up momentum in the decade of the fifties. Management By Objective Peter Drucker published a book in 1954 called “The Practice of Management” in which he outlined the concept of “management by objective.” In it, he advanced the notion that all management should be directed toward clearly defined objectives. The problem, according to Drucker, is that those objectives are rarely known. He insightfully quipped, “Management by objective works - if you know the objectives. Ninety percent of the time you don't.”

The Japanese quickly recognized the wisdom of Drucker’s work and began to incorporate it into their own approach to management planning, hoshin kanri. By the sixties, this type of planning was deeply integrated into a number of successful Japanese companies: Bridgestone, Toyota, Komats and Matsushita. It was part of their overall quality control system. It wasn’t until the seventies, however, that the term hoshin kanri started to be used to describe this process. It wasn’t until the eighties that a small number of American companies began to look into this “new” concept. Hewlett-Packard, Procter & Gamble, Florida Power & Light, Intel, and Xerox were among the early pioneers. But as their success with the technique became apparent to others, a widespread interest developed.

By the nineties, books on the subject began to appear and the inevitable business seminars soon followed. The Hoshin Process To start with, it’s important to understand that hoshin planning is designed to develop long-range plans. Typically, that means a two to five year plan. This may sound like a contradiction at first. Two to five years isn’t very long. But in the fast-moving world of business, it’s a long time. If anything, it seems to many as though it’s too far out to be making realistic plans. But that’s one of the advantages of hoshin planning, it focuses on the big picture. It invites the participants to make daring plans. At the same time, the hoshin planning process requires that day-to-day business fundamentals are kept in mind. This approach is designed to keep the business healthy and profitable while the growth plan is realized.

All in all, there are six basic aspects of hoshin planning.

  • Breakthrough Planning.
  • Adequate Planning.
  • Progress Review.
  • Plan Modification.
  • Continuous Improvement.
  • Organizational Education.

Certainly, these are based on the concepts found in Management by Objective and Deming’s PDCA cycle. But in the interests of improving everything, including the improvement process itself, the Japanese have taken planning to the next level. Let’s consider these six steps to see how.

Breakthrough Planning

Hoshin planning does not look for small objectives or short-range goals. Rather, the focus is on breakthrough activities. These would not be minor gains in productivity or quality but significant changes in the way the organization works, or at least the way a department works. These are not things that can be accomplished in a few weeks or even a business quarter but changes that will take at least two to five years to accomplish.

Creating a good hoshin plan is going to take a lot of time, so it shouldn’t be a small or modest plan. This could be a plan for how you’re going to become number one in a given market, or reduce the cost of manufacturing something by a substantial margin, or how to make a product last longer or work better. Normally, it starts with a mission statement. It should indicate what you want to do, how you’ll know when you’ve done it and when you expect to complete the mission. “We want to reduce costs” isn’t good enough. “We want to reduce costs by 50%” is better because it’s more specific. “We want to reduce labor costs in manufacturing from $50/unit to $25/unit” is even better because it’s more specific and it includes a component that can be measured. “We want to reduce labor costs in manufacturing from $50/unit to $25/unit in 48 months” contains all three components of a good hoshin mission statement.

The idea behind hoshin planning is not to come up with a plan that says, “we’ll try harder.” That would be typical of a plan that’s doomed to failure. Hoshin planning asks those involved to be as specific as possible, look at all of the barriers, come up with realistic solutions for how to get around those barriers. And most importantly, it demands participation of those involved.

So, in the example of trying to reduce labor costs by 50% within four years, it would be necessary to identify how you expect to accomplish the goal. Perhaps you plan to offer training classes to all your employees to improve their skills. Perhaps you intend to purchase new assembly line equipment that will make them more productive. Perhaps you plan on squeezing some of the cost out of your materials suppliers. However you plan on accomplishing your goal, you’re expected to include the details in the hoshin plan. Then comes one of the most important parts of the planning process. You hand off the plan to the next department down the line so they can review it.

This is a process referred to in hoshin planning as “catchball” and it embodies the notion that every plan will be “tossed” up and down the line from top management to floor team members. Each team gets to review, interpret and rewrite the plan. Sometimes, a team will look at the plans and respond by saying, “we can do better.” You ask for a 10% improvement. They feel that 15% improvement is possible. Of course, sometimes another team will throw cold water on one or more parts of the plan. When they do, it’s important to listen.

If you’re plan is based on the idea that you can get the assembly line to run 5% faster, but the people who work on the line are telling you that it can’t be done, you need to get this resolved if you want your plan to work. The game of catchball is played, tossing the plan up and down the line over and over until everyone is comfortable with it. This implies a lot of trust and mutual respect, but the result is a plan that everyone can take ownership of.

Progress Review

The hoshin process involves reviewing, not merely the progress toward the goal, but the plans themselves. By developing a standard process for planning, and educating everyone in the company to that process, it’s easy for just about anyone to spot a plan that hasn’t followed the process. This enforces a consistency on the development of plans. Once a plan is accepted and implemented, the hoshin process requires regular reviews of the defined plans. Again and again, it must be checked against actual performance. A hoshin review table is created by the team or individual that’s responsible for the plan. It should include the following elements:

  • The Plan Owners
  • The Timeframe
  • The Performance Metrics
  • The Targets
  • The Results


If there’s a discrepancy between the plan and the results, it must be noted and discussed. Then, it must be determined what impact this discrepancy will have on next year’s plan. Plan Modification. Suppose the plan called for taking $5 out of the cost of an item every year for five years. That’s $25 savings after five years. But at the end of the first year, only $4 has been taken out of the cost. After discussing why the plan fell short, it must be determined whether or not this can be fixed next year. If we can get the plan back on target next year, then perhaps the five year goal must be adjusted by this year’s shortfall and nothing more. The five year goal now becomes $24. But if it looks like the lesson from this year is that $5 was just too optimistic, then perhaps the goal for every year must be reduced to $4. The five year goal must now be reduced to $20. That may be disappointing, but at least the plan will be more realistic.

The idea is not to assign blame, but rather to learn. Some of the objectives will have been met, or even exceeded. When that’s the case, a careful analysis should reveal why. What did we do right? How can we use that knowledge to make permanent improvements to the system. Some of the objectives will not have been met. Why? what went wrong? How can we learn from this so that the next plan we make will be more accurate? Or, what corrections can we make so that we can achieve the original objective next time? Like the rest of the hoshin process, this should be reviewed by everyone involved in the process. Good dialogue, discussion and understanding should result.

Continuous Improvement

It’s obviously that hoshin planning is quite a bit different than traditional, top-down, planning and goal setting. This is not the kind of planning that says, in essence, “Here are your goals for the year. Meet them and you will be rewarded. Fail and you will be punished.” Instead, hoshin planning is designed to help the overall organization improve, learn and grow. It’s closely tied to the concept of continuous improvement. The goal is not simply to save a set amount of money next year. The goal is to make the company better next year. This can sometimes be accomplished as much by a plan that wasn’t met as one that was.

In studying why a goal couldn’t be achieved, much is learned about the process. But here’s the point. Something must be learned and implemented from those lessons. The result shouldn’t be, “Well, we blew it. We’ll just have to try harder next time.” If that’s the case, not just the plan, but the entire hoshin process has failed. The entire organization must learn from each experience. That’s where the last point comes in.

Organizational Education

What a waste if would be if an organization went through the entire process described thus far, and then failed to learn from it. That’s why the entire process must be carefully documented and the results included in the organization’s “book of knowledge.” Only then will the organization have a clear and accessible history of its activities, the things it tried, the successes and failures, that it can learn from in the future. And this must be available for everyone that must need it.

Knowledge hoarding is something that simply can’t be tolerated in the drive towards lean manufacturing and constant quality improvement. Time must be unselfishly devoted to continuing organization education. And the historical documentation of plans, both successful and otherwise, must be open. An inspired idea from an employee must never be killed with a comment from a superior or an old-time like, “We tried that once. It didn’t work.” Imagine the benefit to be derived from a careful study of questions like, how did we try it? Why did it fail? What is different today? Have new technologies and materials make it possible to overcome some of the things that caused us to fail back then? What have we learned from the effort?

Nemawashi

One of the concepts that’s involved with proper hoshin planning is summed up in the word “nemawashi.” It literally means to prepare a tree for transplanting. As it applies to hoshin planning, it involves the idea of consensus building throughout the organization. It acknowledges the fact that to create true breakthrough plans, it’s usually necessary to get many different people on many different levels to accept the possibility that change is possible, change is desirable, the goal is achievable. That can only happen when the goal has been thoroughly discussed, everyone has been consulted, everyone has been listened to and everyone buys into the plan. At that point, the soil has been prepared. The tree can be transplanted ... and thrive.

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