Hoshin is a unique process to align organization’s functions and activities with its strategic objectives. It eliminates the waste that comes because of inconsistent direction and poor communication. Everyone in the organization gets a good idea of the decisions and actions for which he or she is responsible. The Japanese words "hoshin" means direction. The primary goal of hoshin is to identify necessary and achievable business improvement required and engage people across the functions to effect positive changes across the organization. Every part of the organization proposes actions to their seniors for what they are going to improve, in their zone of influence, to support the overall business.
The Need for Hoshin
"No One Knows Your Strategy — Not Even Your Top Leaders. The Alignment Plummets Between Top Executives and Their Direct Reports.”
The adjacent graph shows the average number of managers, at each level in organizations, who can list the company’s top three priorities. For a typical company, just over half of top team members can do so. It is pretty bad when only half the C-suite agrees on the same objectives, but things look even worse for their direct reports.
Getting results from strategy deployment is a serious leadership challenge - What all goes wrong?
Managing horizontal performance commitment normally goes wrong. A lot of importance is given to strategic planning. After investing so much time and energy in formulating a plan and allocating budget, management considers changes in the plan as lack of discipline, making it another big problem.
The allocation of funds, people, and managerial effort cannot be onetime decision in such an uncertain and volatile business environment. It requires dynamic discussions and adjustment. Good understanding of strategy and its dynamic adjustments need proper communication. During communication many other corporate priorities are inserted, and these priorities are often different from strategic objectives, making it very confusing to the people. As we all know the confusion grows many fold as it travels down the line.
Companies with robust performance cultures have their own problem in executing their strategy:
Such companies give much less value to the people’s ability to adapt to changing circumstances—the agility needed to execute strategy. The agility demands willingness to experiment, which good performing managers avoid due to fear of failure and its consequences.
The culture for accepting failure is week in most of the companies. Excessive emphasis on performance impairs execution of strategy in another subtle but important way. It makes people believe that hitting their numbers is most important, and they start playing safe, making conservative performance commitments.
The strategy formulations, at times, ignore the threats from competitors, new entrants, and new technologies. Whereas, a business strategy is expected to secure the competitive position in the market. At times, the bargaining power of the customers and suppliers throws the strategy out of gear.
Strategic plans, developed at the top, with no feedback from lower levels about the resources available or the conflicts between the strategic plans and the pre-existing budgeting and management performance systems with their KPIs are bound to fail. So, in our approach different level of managements make plans jointly to solve the business problems. At the strategic level, top management team work with managers; at department level, managers work with the group leaders; at process level, team and group leaders engage with front line workers. The leaders are continuously encouraged to create a common understanding of the issues, to ask for countermeasures, and to mentor people on possible solutions.
Establish alignment to achieve the purpose of the organization
Mostly managements struggle to introduce the complex planning systems on strategy deployment:
Such plans are often based on illusions. It must be simpler and effective. Hoshin is based on simple and visual measurement of current performance levels which everyone must understand. A persuasive simple story is developed for each plan specifying a way to solve it. This specific way is nothing but the A3 management. Learning and mastering the art of A3 management is key to Hoshin.
A plan, often does not produce the expected results on expected lines; therefore, adjustment is inevitable and must be a continuous process. Often organizations are weak in adjustment. Hoshin with human touch is essential success factor in any organization. Everyone is engaged in learning and experimentation to make improvements. This harnesses people creativity to provide superior results. Hoshin is more of a social process and less of technical. Those who treat it as technical stereo type and a format-based process, invite failures, and end up saying, “it works in Japan not here.”
A3 Management for Effective & Efficient Rotation of PDCA
Above model takes you on a journey to help you focus on organization's most important goals and engage into vertical and horizontal dialogue. It helps all in the organization to see the real problems and develop synergy and collaboration. Along the way, everyone starts looking for facts. A good visual communication model is essential for people to discuss and arrive at quicker conclusion, rather than get into endless arguments and debates. understand the concepts.
Without up-to-date information all work become useless. Oobeya concept has been found very useful in coordination, communication and maintaining accountability to the highest level. A visual model of Oobeya is as below:
Hoshin is essential for long term profitable growth of an organization. New customer groups or purchase occasions arise; new needs emerge as societies evolve; new distribution channels appear; new technologies are developed; new machinery or information systems become available. When such changes happen, new entrants, unencumbered by a long history in the industry, can often more easily perceive the potential for a new way of competing. Unlike incumbents, newcomers can be more flexible because they face no trade-offs with their existing activities.