The Hoshin Kanri Method

(A position paper)
The Quality Journey, the second World Congress for Total Quality Management,
June 1997, Sheffield Hallam University
"A narrow compass, and yet there dwells all that's good and all that's fair."
Edmund Waller, 1606-1687

INTRODUCTION

This paper reports on the first six months of a two-year research project sponsored by the
Economics and Social Research Council - 'The Use of Hoshin Kanri as a Planning Tool
to Implement and Align Strategy in Operations'. An outline is presented of an overall
framework which has been derived from both published sources and our own research to
end-May of this year.
Developed originally in Japan hoshin kanri has been used in a small number of innovatory
Western companies to bring a strategic focus to daily working. The first authoritative text in
English, translated from the Japanese, and edited by Yoji Akao, describes hoshin kanri as
a planning, implementation, and review system for managed change (Akao, 1991), and as
the sub-title of the book suggests, a policy deployment framework for successful total
quality management (TQM). Our previous research had suggested the failure to link the
achievement of top management goals with TQM initiatives at operational level is often a
cause of loss of momentum in change management.
The words hoshin kanri translate approximately as policy management and Japanese
authors have stressed a consensual and directional essence in its meaning - the Japanese
etymology suggests a shinning light from the metal of a compass needle to show the way
forward (Akao, 1991: xii-xiv). This idea of a compass directing the individual ships of a fleet
over a long voyage, so they all sail together in the same direction, has a poetry which has
caught the imagination of many Western observers - among the best publications is a
recent American Management Association Briefing by Michele Bechtell, The Management
Compass (1996).
Hoshin kanri has its roots in the early 1960s as the Japanese transformed statistical quality
control and management by objectives into an integrative form of organizational
management which they called total quality control. A key stimulus was the inclusion of
'policy and plan' as an audit item in the Deming Prize in 1958 (Soin, 1992: 53) and term
itself appeared first when the Bridgestone Tyre Corporation benchmarked Deming prize
winners and afterwards codified hoshin kanri as a TQC system in its company manuals in
1965 (Akao, 1991: 175).
An important influence on hoshin kanri's development in the West has been the
commercial success of Hewlett-Packard. In 1982 Yokagawa Hewlett-Packard won the
Deming prize and its success with hoshin kanri ultimately led to its adoption by other
companies in the Hewlett-Packard Group. A number of Western-owned companies now
use hoshin kanri but a diversity of names seems to be used for its practice. This could
reflect a divergence of practice though the literature lacks the insightful cases which would
throw some light on this (see below, our observation about a hypothesized difference
between a Japanese and a Western view of hoshin kanri). Examples of different names
include 'policy deployment' in parts of AT&T (AT&T, 1992), Xerox in the UK (Rank Xerox,
1992), and Rover Cars (Cullen, 1993); 'goal deployment' at Exxon Chemical (Oakland and
Porter, 1964); 'policy management' at Florida Power and Light (Balla, 1986); 'managing for
results' at Xerox Corporation (Palermo and Watson, 1993); 'hoshin planning' at Hewlett-
Packard (Cobbe, 1993), and 'hoshin kanri' at Digital Equipment (Kern, 1993). Japanese
owned-companies in the West stick to 'hoshin kanri'.
At least one Japanese writer (Kano, 1991) thinks this diversity can be explained by a
mistrust in the West of the meaning of 'policy' because this word has deterministic
connotations; he suggests that such semantic confusion could be an important barrier to
understanding and implementing hoshin kanri in Western organizations. Our preliminary
impression of both the literature, which mainly derives from Akao, and practice, is that
understanding itself is indeed variable. Thus the main objective of our research is to clarify
hoshin kanri, from the dual perspectives of TQM and strategic management, in terms of its
context, content, and processes. As a starting point in this, we are using the following
model to guide our investigations.

THE HOSHIN KANRI FRAMEWORK

It is evident from the literature, and we are finding this in our research, that the fundamental
pre-requisite for hoshin kanri is a successful TQM system which has standardised business
processes under control, which makes use of cross-functional ways of managing, and
applies as daily practice the plan-do-check-act (PDCA) cycle in conjunction with basic
quality tools. For this reason we summarise the hoshin framework as an annual cycle along
PDCA lines in Figure 1. The figure depicts four phases. Beginning with the Act stage where
senior executives with company general managers revise corporate strategy, this is the
FOCUS phase of hoshin kanri when the vital few strategic objectives are determined for
the corporation and its companies. This is followed by the Plan stage when the vital few are
translated and developed cross-functionally within the single company so that unit priorities
are brought into ALIGNMENT. The Do stage is the INTEGRATION of priorities into daily
management and project working. The Check stage is the management of the strategic
objectives in the processes of daily working, involving daily and periodic reviews of work in
progress and, towards the end of the annual cycle, an annual (quality) audit. In Figure 1
this is labelled the RESPONSIVE phase, where progress is continually monitored, checked
and, if necessary, acted upon; informsation from these reviews and the audit will be fed
back into the next annual cycle as the FOCUS phase comes round again.
 FIGURE 1
The elements of the hoshin cycle phases are summarised in Figure 2 under the F-A-I-R
headings.
Focus
The five elements of vision, mid-term objectives, voice of the customer, external conditions,
internal conditions and progress, have been identified by the research thus far as the
features of the corporate strategy process associated with hoshin kanri organisation. There
is a corporate vision statement which concisely establishes the values and long-term goals
of the corporate entity, and a mid-term plan which translates vision into objectives usually
for no more than three years ahead. These are considered along with the current and
anticipated needs of customers. This is often done as directly as possible so that the 'voice
of the customer' can be translated in terms of quality, cost, delivery and employee-related
targets known in Japanese TQM as QCDE and sometimes referred to in the TQM literature
as 'business fundamentals'. It is similar to the looser notion of stake-holder needs, which in
a Western context, one often finds specified in a mission statement. External and Internal
conditions and progress refer to audits of both the trading and marketing system in the
widest sense, and the internal capabilities and competencies of the organisation, plus, the
feedback on the whole previous hoshin cycle.
This phase of the cycle differs from traditional re-formulations of corporate strategy in that
emphasis is placed on the selection of just a vital few objectives, usually no more than
about four, and all vital if the corporate mid-term objectives are to be achieved.
Alignment
It is then up to company and unit managers to determine in the next phase what these
objectives require in terms of annual means. It is not so much that the corporate centre has
prescribed policy but rather it has defined strategic intent as a set of annual priorities which
the Group's companies, divisions and units, must then translate and balance against
budgets and local priorities. This involves the iterative deployment of the few critical
objectives in the form of hoshins or policies. A hoshin is a combination of a statement of a
strategy (sometimes called an objective), plus a statement of the means to achieve the
strategy, plus a statement of how performance will be monitored (sometimes called a
target). Typically, a hoshin is passed by one level of management to another, where
subordinates or managers in other functional areas will translate their part as a sub-hoshin,
with its own strategy, means and targets, and so on across the organization. Usually this
deployment process goes through about no more than about three translations or sub-
hoshins.
The process which drives this activity is called catchball and this involves discussions,
usually in meetings, about the practical issues of implementation and about what are
reasonable strategies and means. Usually these discussions are not so much about what
must be achieved in terms of a hoshin, so much as how they can be achieved: the question
is how to achieve hoshins realistically given organizational competencies and capabilities.
Thus the 'ball' is passed back and forth until general agreement is reached. The process is
cross-functional and typically takes a month but it can take much longer. Managers must
agree the ownership of objectives and performance criteria, the key strategies involved and
who is to take responsibility for them. The alignment and development of hoshins typically
only involve management, thus the catchball process rarely extends down beyond section
head, or team leader levels.
Integration
When the catchball process is finished and the hoshins have been agreed, implementation
plans are drawn up (the overall company annual plan is sometimes referred to as an
integrated business plan). These plans give a clear overall idea of the critical paths
involved, the key activities are specified, along who actions them, and their targets and
associated time-scales. This is communicated by management to individuals and teams.
For hoshin related activity which does not easily integrate into daily work on the process,
then usually a project team approach is required; this may follow a routine quality
improvement inquiry process, or involve special management team projects.
Responsiveness
This phase involves the routine management or daily control of processes, and the periodic
check and problem-solving of chronic problems and critical issues, and the resultant
standardization of solutions. Thus through the normal PDCA practices of daily
management, hoshin related targets are reviewed and if necessary acted upon on a
continuing basis. Persistent problems may require hoshin means, targets, and even a
policy itself, to be re-thought and modified.
Towards the end of this phase information is rolled up from the periodic reviews for
feedback to senior management for the next focus phase, which starts the annual cycle all
over again. Feedback may include the results of an annual quality audit, which will aim, at
least in part, to assess the progress of the hoshin cycle as a whole. These company-wide
audits are usually scheduled over a brief period and can sometimes make use of criteria
based on a model of how an organization is managed in terms of key objectives or in terms
of a framework used for assessing quality awards. In Japan the audit is sometimes
conducted by the board of directors where it is called the 'president's diagnosis'.
 ISSUES

The hoshin kanri literature is prescriptive and is essentially normative in style. The
framework above is similar to many descriptions of hoshin kanri in the literature but differs
in two fundamental respects. The first concerns the links between corporate strategy and
annual planning. Generally the literature suggests a catchball process at the link between
the focus and alignment phases. From our research so far, there is no such link. Nor for
that matter is it clear how feedback from the hoshin cycle helps in the focus phase to revise
corporate strategy. There seems to be little evidence from UK-based hoshin kanri that
senior executives from a corporate centre actively participate in annual audits in a way
which might keep them in better touch with unit (and quality) issues.
Secondly, much of the literature proposes a policy deployment stage, where the catchball
development of hoshins is confused with integration. Our research is suggesting that the
co-ordination of the mechanisms which integrate hoshin related activities into daily working
and project work has to be administered more closely than many observers seemed to
think. The model for the deployment of hoshins does not seem like a cascade of
translations, but is more like a two stage process of catchball (management only) and
operations planning (through focused problem-solving).
At this time in hoshin kanri's development, there seems to be a transition in progress from
what one might term a Western view, to a more Japanese-based one. The former would
seem to be looser and more participative in aspiration, while the latter is more prescriptive
and perhaps truer to its Japanese origins in management-by-objectives. Historically, a
Japanese-owned subsidiary in the UK will have received little guidance about hoshin kanri
from its parent and some Western senior managers have commented to us that the
Japanese are not as directional as they could be. The Japanese reply is that this "is not our
way" - it is Japanese to respond quickly to operational requests but to hold back on the
bigger decisions of policy management itself. There are some signs though that this is
changing for some Japanese companies seem to be encouraging subsidiaries to
implement new forms of TQM based on hoshin kanri principles and quality management
administration which is aimed at driving QCDE targets through cross-functional
committees, and which is more in line with the two-stage alignment and integration
framework as posited above. It may be that while hoshin kanri is process driven, based as
it is on TQM principles, it is not as participative in terms of rank and file involvement as
much of the Western literature implies.
In fact we know very little about how it works in Western contexts. For example, how is
possible to administer cross-functional teamworking during the catchball phase, given the
prevailing and traditional non-consensus manager-subordinate relationships we have?
Hoshin kanri seems to differ between organizations: so why, and what are the major
differences for manufacturing as opposed to services? It could be that many existing
planning implementation methodologies, such as adaptations of management-by-
objectives, are very similar to hoshin kanri. If so, how unique is hoshin kanri? Some of the
key issues are summarized in the table below.
 There is a clear requirement to establish a broadly accepted translation of the term and to
explore the broad tenants of its operation. The lack of critically-based studies of Western
settings, and the consequent lack of suitable material to inform practice, has probably
delayed a more widespread use hoshin kanri in business and industry in the West.
The present study began in October 1996 and will run until October 1998. It is based
primarily on the experience of three Japanese owned companies engaged in the
automotive components industry in the north of England. It involves an investigation of
hoshin decision-making, teamworking, and implementation in practice. The focus is to
identify and analyze the hoshin kanri process in terms of the experience of the respondent
companies in terms of emergent issues, such as the administration of people, cross-
functional relationships, and rank and file involvement.

REFERENCES

Akao, Y. (ed.) (1991) Hoshin Kanri: Policy deployment for successful TQM, (originally
published as Hoshin kanri katsuyo no jissai, 1988), Cambridge MA: Productivity Press.
AT&T (1992) Policy Deployment: Setting the direction for change, Indianapolis: AT&T.
Balla, D. L. (1986) Florida Power & Light Company: The journey continues, Quality Circle
Journal, September, 28-31.
Bechtell, M. L. (1996) The Management Compass: Steering the corporation using hoshin
planning, An American Management Association Management Briefing, New York: AMA
Membership Publications Division.
Cobbe, G. B. (1993) Growing Total Quality into a Management Process, Business
Quarterly, Spring, 96-100.
Cullen, J. (1993) Visualizing Improvement, TQM Magazine, August, 33-38.
Kano, N. (1993) A Perspective on Quality Activities in American Firms, California
Management Review, 35, 3, 12-31.
Kern, J. P. (1993) Toward Total Quality Marketing, Quality Progress, 26(1), 39-42.
Oakland, J. S. and Porter, L. (1994) Cases in Total Quality Management, Oxford:
Butterworth-Heinemann.
Palermo, S. C. and Watson, G. H. (1993) A World of Quality: The timeless passport ,
Milwaukee: ASQC Press, 212 pps.
Rank Xerox (1992) The European Quality Award Rank Xerox Submission Document,
Marlow: Rank Xerox.
Soin, S. S. (1992) Total Quality Control Essentials: Key elements, methodologies and
managing for success, McGraw-Hill.