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Hoshin kanri: a study of practice in the UK

Article in Managerial Auditing Journal · October 2002

DOI: 10.1108/02686900210437499

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Hoshin kanri: a study of practice in the UK
Keywords
Total quality management,
Strategy, Policy management,
Strategic management
Abstract
This article presents findings from
an ESRC sponsored research
project about the use of hoshin
kanri (policy management) in the
UK. The research used tracer
studies to follow in real time the
development and management of
annual policies in three Japanese
subsidiaries based in the UK. In
addition, case histories were also
compiled for companies belonging
to the project's practitioner
network. The project explored
hoshin kanri as a PDCA-led
strategic management process.
There are important issues
associated with each part of this
PDCA cycle with which
practitioners wrestle, but in
general there remain important
company-wide benefits.
Managerial Auditing Journal
17/7 [2002] 390±396
# MCB UP Limited
[ISSN 0268-6902]
[DOI 10.1108/02686900210437499]
[ 390 ]
Barry Witcher
University of East Anglia, Norwich, Norfolk, UK
Introduction
The failure to link the achievement of top
management goals with daily management at
an operational level is a major cause of loss of
momentum in change management. In
addition to a system for preparing strategies,
top managers need to install one which
mobilises a company-wide effort for realising
them. Hoshin kanri, translatable as policy
management, ``is a means to pull together the
forces within a company and to unite the
minds internally, to perpetually improve its
performance by adjusting quickly to change,''
(Akao, 1991, p. 174). Accounts of Japanese
practice include Akao (1991), Kondo (1997),
Koura (1990) and Koyama et al. (1996).
UK-based reviews of western applications
include Dale (1990), Lee and Dale (1999) and
Zairi (1995). This, and other work (notably
Wood and Munshi, 1991), suggested that
hoshin kanri was a PCDA managed process,
or put another way, a strategic management
by TQM principles. Thus the objective of
the project reported upon here was to
consider its practice in a TQM conditioned
environment. A study was thus undertaken
in three Japanese subsidiaries (Calsonic,
Nissan Yamato Engineering, and NSK
Bearings) over a two-year period, 1997-1998,
involving a series of up to 100 interviews in
each of the organisations. The work also
included case histories of other practitioners
that belonged to the project's hoshin kanri
network. The study used a tracer approach in
the three Japanese companies. This had been
used in research into control systems
(Woodward and Eilon, 1966) and IT adoption
(Legge et al., 1991). It involved tracing
through policies in real time, to identify how
targets and means were developed and
deployed in daily management. It was
possible to see patterns of interaction,
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0268-6902.htm
including those critical, and hard to catch,
events that are lost or misrepresented in
cross-sectional field investigations. This
approach required a demanding degree of
openness, and a substantial time was
required to win the necessary trust of the
respondent companies.
Following Akao (1991) and Woods and
Munshi (1991), hoshin kanri as a managed
process follows an annual process as shown
in Figure 1, where the PDCA annual cycle
begins with an ``Act'' stage:
. Act ± top level management acts to
determine a vital few annual policies.
. Plan ± managers plan targets and the
means based on these policies.
. Do ± involves a PDCA-led daily
management of targets and means.
. Check ± requires top management to
check the effectiveness of process and
policies.
Action ± top level management
The ``act'' part of hoshin kanri was
characterised by top level management
activity that aimed to formulate for the whole
organisation a few vital priorities for
everybody to use for the coming year. These
were expressed as annual policies (labels
differ according to companies: the Japanese
used ``hoshins'', however, in this article
English translation ``policies'' is used for
consistency). In some organisations only one
policy was used, but others had used more, to
about five in number. Any more and it was
found that organisations lost focus. The
lower the number, the easier it was for more
people to participate in the development of a
policy's targets and means (these terms will
be used, but some western practitioners use
terms such as ``objectives and strategies'').
Policies were written statements about
anything considered important enough for
company-wide attention. There were
instances where a policy was simply to beat a
competitor, others were about satisfying a
major customer, improving a critical
Barry Witcher
Hoshin kanri: a study of
practice in the UK
Managerial Auditing Journal
17/7 [2002] 390±396
Figure 1
PDCA and hoshin kanri
organisation-wide business process, or
developing an organisational competence in
the workforce. The basic idea was that as
many people as possible, and preferably
everybody, should make some contribution
to the achievement of a policy. If everyone
did so, then this would add up to a substantial
move forward for the whole organisation.
The articulation of a policy statement was
something of an art. If too much was asked
for, or it seemed too difficult to achieve, or to
understand, then people were likely to ignore
the policy. A policy had to be expressed so
that it was readily understood as necessary
and also attainable.
Top level management determined policies.
This required feedback from an organisation-
wide review of the present policies, which
was done in the context of longer-term
priorities, and with regard to directional
statements of organisational identity and
purpose. These latter statements were
variously a combination of values (how an
organisation should conduct its business),
vision (an organisational aspiration), and
mission (organisational purpose). Most
weight was given to a consideration of
progress in objectives expressed in a
medium-term plan (usually three years long).
In the Japanese companies, these plans were
called challenges, though in other companies
they were referred to as programmes. For the
main part, these plans aimed to improve and
stretch performance in critical areas of the
business ± these were not ``policies'' as such,
but typically objectives taken from one year
of the medium-term plan, which were
translated directly into annual objectives as
control items (or metrics). So these would be
presented to a workforce alongside the vital
few policies. In the Japanese companies and
at Hewlett-Packard, these control items were
grouped in QCDE categories:
. quality (customer concerns);
. cost (financial concerns and resources);
. delivery (logistical matters and
innovation); and
. education (employee concerns).
QCDE was considered a common language
for policy and objectives management, and
the annual adjustments to the control items
were the primary drivers for continuous
improvement in daily management. So,
where possible, QCDE organisations always
strove to express the vital few annual policies
also in the language of QCDE. Figure 2 gives
an example of an annual policy, for an
organisation to become a leading supplier to
a major car company. This was derived from
a three-year challenge designed to improve
the organisation's ability to respond quickly
to changing model requirements. An annual
policy statement and objective was
developed, and then these were taken by the
workforce to develop targets (some of these
are shown as QCDE targets). The principle is
that top level management should not
identify the means to achieve policies, but
sometimes it did provide statements of
clarification to point the way. In some
companies, top management expressed
annual policy in forms that allowed a wide
degree of translation. At Xerox for instance, a
policy was designed to impact upon employee
motivation and satisfaction; called ``the
accelerated skills up vital few programme'', it
was expressed thus:
Xerox business lies at the intersection of two
rapidly changing worlds ± one is paper based
and the other electronic. The first is 400 years
old and is not yet spent, the other is barely
20 years old and has yet to really start. Do we
really have the competencies in both these
worlds? (Xerox, 1998).
Xerox personnel were asked to understand
the relevance of a range of technologies and
how these blend together to produce the
products and services that solve customers'
document-handling problems. Xerox had put
a considerable investment in training to
develop multiple-skills, and the accelerated
skills up policy was designed to ensure that
people knew how to apply this new
knowledge ``through competency assessment
and recognition for demonstrated ability to
apply the skills in the work environment,''
(Xerox, 1998). In fact, Xerox was enhancing a
core competence.
Issues
A recurring trap had been a tendency for top
level managers to expect too much from
hoshin kanri. This resulted in policy overload
[ 391 ]
Barry Witcher
Hoshin kanri: a study of
practice in the UK
Managerial Auditing Journal
17/7 [2002] 390±396
Figure 2
Translation of objectives
[ 392 ]
where the numbers of policies were too
many, when targets and means multiplied
out of control. In one instance, a large multi-
national electronics company had attempted
to use hoshin kanri to develop and deploy all
its strategy-related and key annual
performance targets, and there was no sense
of a vital few priority in this company:
It has taken three months to write a hoshin
plan for the following year. Too many
objectives, ten objectives, results in non-
achievement; plans that are unwieldy. There
is possible success with two or three key
objectives. Hoshin is about breakthrough
objectives, not just daily operations ± just
keeping the ship on track, but changing the
course of the ship. Have reduced this to five,
three, two, and this year there is one specific
key objective; it's quite specific and concerns
a competitor (general manager).
Long experience of practice did not
guarantee that mistakes would be avoided. In
another more experienced company, a new
chief executive had insisted on increasing
the number of policies from five to eight,
with the result that they all failed. The lesson
there was that senior management
enthusiasm should be grounded in an
understanding of the process.
Plan ± targets and means
The ``plan'' part of the hoshin kanri annual
process occurred at the start of a planning
year, when policies were explained to
managers by senior management at formal
meetings. Policies were presented against a
background that included references to
longer-term priorities and presiding
circumstances. These meetings began an
iterative communication activity called
``catchball'' that translated policies into
targets and means. This was largely
informal, where draft targets and means
were exchanged (like passing a ball in a game
of catch) between the involved parties in
order to reach agreement about what might
be achieved. It took into account routine
work, as well as the state of available
resources, and existing budget allocations. It
typically lasted a month. The principle was
that communication should be a process of
consultation and agreement. Figure 3
indicates how the draft target and means of
one team can affect those of another team.
Each target and the means to achieve it were
agreed with everybody who was likely to
make a contribution. It meant that targets
and their means had to be achievable; a test
of this was that targets should be designed to
meet only a particular policy's needs. Means
included their own control items to check
progress, such as dates and timelines. Each
target had a named individual who would
take ownership for its review and progress.
The discipline of prioritising in the selection
of targets and their means was a special
feature of hoshin kanri and was important to
ensure that targets and means were
manageable. It required effective problem
solving and a strict adherence to Paretian
principles to keep teams focused on those
targets and means that would significantly
impact on policy. It was also necessary for
catchball to close agreements in a reasonable
time, and the degree to which operatives
were involved depended upon the structure
of the organisation. Catchball was effective in
closing within a month if only about four
levels of hierarchy were involved; beyond
that, managers and their teams typically
became involved with operational detail. At
this point, an implementation plan was
drawn up by departmental management to
highlight the implications of the agreed
targets and means in terms of the use and
timing of resources, and the dates for
periodic review.
Issues
Catchball was considered a participatory and
empowering vehicle for planning, but it
involved very close collaborative and cross-
functional understanding among managers.
The involvement of everybody was limited,
and some managers did not think a full
involvement was necessary:
I presented it down, and I said this is what I
need to achieve, and this is how you can help
me do it. You are looking at it from a bottom
up perspective, from the point of view of say
an operator who questions his contribution.
The target holder sees the link, it is important
Barry Witcher that people see the link, but I question
Hoshin kanri: a study of whether now it has got as far as the shop
practice in the UK floor. Say within a small group, to reduce
Managerial Auditing Journal material usage the target holder is going to
17/7 [2002] 390±396 see that he has reduced material usage and
how he has done it, whether the man in the
group knows that I doubt. It would be nice if
he did know that, because it would help his
understanding of the hoshin, but it hasn't
hurt us his not knowing. Would it help his
performance? Probably not; I would describe
it as a nice to know rather than a need to
know (senior line manager at
Hewlett-Packard).
Generally, there came a point when catchball
turns to a more prescriptive form of
deployment activity; this was primarily
about detailing responsibilities and making
action plans at an operational process level.
The three Japanese companies involved their
managers in a very close cross-functional
and iterative form of communication for the
development of the targets and means. This
did not directly involve operators, although
their supervisors and team leaders did
consult them. Operators played a fuller part
in determining shopfloor responsibilities and
daily activities. They also served as members
of project teams on policy-related work when
their expertise was required. This was often
perceived by the individuals concerned as a
normal part of their duties to help solve
questions about their part of a business
process. A related issue concerned how to
link targets and means at an individual level
in performance appraisal. This was not done,
except at Xerox where the inclusion of policy-
related targets and means in an appraisal
was a powerful support for making policy-
related objectives a priority to the individual
concerned.
Figure 3
Catchball interactions
Do ± PDCA daily management of targets
and means
Figure 1 depicts daily management as a cycle
where processes at an operational level are
managed subject to PDCA. The aim of daily
management was to have standardised
processes under control, where work is
continuously checked to ensure it conforms
to expectations so that, if necessary,
corrective action can be taken and
improvements made. Policy-related targets
were incorporated into process management
and managed using PDCA principles. In
essence, daily working without the addition
of policy targets is reactive, but policy targets
are strategic and often required a re-thinking
and, sometimes, a re-engineering of
processes. Where a policy was complex and
its requirements uncertain, a project-led
approach was used. This typically began with
data gathering to clarify issues, and then
continued, often with different project
members, to examine alternatives and the
means to implement them. This kind of work
took unexpected turns, involved mini-
projects, side issues, and work that
overlapped with pressing daily management
issues. Typically, daily management and
project work were reviewed at a routine
general management meeting, when follow-
on work could be initiated and assessed.
Continuous checks in daily work, combined
with periodic review to monitor policy-
related work, so that it was neither delayed,
nor allowed to go by default. Minor issues
and difficulties were typically dealt with as
they occurred on the processes, but where
they persisted they were taken up at
management meetings, investigated, actions
implemented, and the changes reviewed.
There was also a form of periodic review
oriented to senior management and its need
to oversee the overall progress of policies.
At these, target owners made formal
presentations on quarterly progress, and
explained changes and corrective activity.
This was especially important for emergent
policy-related issues and which demand
immediate attention; if they are not managed
they can crowd out annual policy activity:
Things come along, so say, for example, the
company makes an acquisition and in
personnel you then have one hundred people
to integrate into the company, pensions to
sort out etc. There are always things that
come along which try to push you away from
your focus. The idea is not to drop the ball at
the slightest provocation. In times of
instability there is a greater need for focus
and the hoshin process does help in
identifying what is really important (Straker,
1997).
[ 393 ]
Barry Witcher
Hoshin kanri: a study of
practice in the UK
Managerial Auditing Journal
17/7 [2002] 390±396
[ 394 ]
Thus unforeseen issues were reconciled and
tackled with a clear understanding of their
impact on the annual policies. Typically the
aim was to keep to existing targets wherever
it was possible, but change or modify the
means. A key element was ownership:
In my experience, you very rarely find a
target that does not work because it has been
written by the person who is implementing it,
even if they do not quite follow what is
written as means, they will work around it
(senior manager, NSK Bearings).
Ownership was organised around the nature
of the work being tackled rather than tied to
a functional area. When work was split
between departments, one owner was agreed
and the work was led by a need to take the
best action to achieve the target. Vested
interests were ignored. Where a review was
confined to a meeting within a functional
area, then something of the collaborative and
learning nature of hoshin kanri was lost.
Issues
PDCA-conditioned daily management was
part of TQM. All the hoshin kanri companies
applied a process-based TQM. Some Japanese
companies make a distinction between total
quality control (TQC) and TQM, to
distinguish their form of policy conditioned
form of quality management. In general
though, quality management worked well for
all the hoshin kanri companies. PDCA
process management was well understood as
the platform for improvement and policy-led
change. However, TQM had not been
achieved easily, and its processes had to be
reviewed and managed continuously.
Top-level management had to continually
demonstrate not only commitment but also
understanding and patience. Sometimes
there was evidence of impatience in senior
managers whose style was prone to
individualism and the achievement of short-
term performance. This was made worse by
the job mobility of senior personnel and the
loss of managers who were experienced with
TQM ways of working. There was an obvious
need for senior management to ensure that
review took place, and was conducted
properly, and that follow-up action was
successfully closed. In the words of a
manager at a Calsonic business:
Somebody has to keep their finger on the
pulse. I think that if I began to show that I was
not interested or not involved in it, it would
start to deteriorate. I feel that it is one of my
key tasks in the job. In America we have a
guy in the TQC office who is a director on the
board who co-ordinates the process.
At its North American plants, Calsonic had
introduced a Japanese committee based
approach to managing objectives. Called
QCDE committees, these are a top-level
management driven activity. The aim is to
drive cross-functional periodic review across
the organisation in each of the QCDE
categories. A central TQC office is typically
used to administer the committees. In the
UK, periodic review was found to be a fragile
part of hoshin kanri. There was evidence that
some managers had cancelled review
meetings when it had proved expedient to do
so. In these cases it had been argued that
monitoring had continued, so that key people
had been aware of a target's progress. It was
also evident that cancellations had signalled
that a lower priority had been given to the
management of a policy. This influenced the
attention people gave to monitoring targets
and related work.
Check ± effectiveness of process and
policies
The annual check by top level management
on the overall effectiveness of the annual
policies provided important information that
was used to help determine subsequent
annual policies. It was also used to evaluate
any unfinished project work to determine if
it should continue. Typically the annual
check involved rolling up information
from periodic review meetings. Some
managements argued that review was an
on-going activity, so current status and the
overall state of the organisation was known.
In other cases, the check process was
elaborate, and companies reviewed annual
policy as part of a larger audit of their critical
management processes and performance.
This enabled senior management to reflect
on best practice and use the audit as a
learning vehicle. Sometimes senior and
outside managers were used as auditors. In
these instances, management felt it
demonstrated leadership and helped
legitimise methods of work, including hoshin
kanri. In Japan, the annual check is called a
``president's diagnosis'' where it can involve
board level executives as auditors.
Issues
With one exception (Xerox ± it used a
business excellence model) there was no
audit of how the process of hoshin kanri had
been used. Audits tended to focus on the
achievement of the annual policies. There
were divergent views about what hoshin
kanri was. This is illustrated in these
contrasting views of two senior managers;
the first saw it as essentially a culture or a
way of working that developed organically,
and the second saw it as a managed process:
Hoshin is not a system. Hoshin is a purpose.
The purpose is to ensure that everybody is
pulling together in the same direction.
Barry Witcher People have a better understanding of what is
Hoshin kanri: a study of expected of them, they know what their role
practice in the UK is. Because of this it is easy for me to manage
Managerial Auditing Journal and control the system. Because it is well
17/7 [2002] 390±396 targeted, I can measure it, and so can
determine success and build upon that. I have
rolled policy into personal objectives for the
first time this year directly. After I have put
my original thoughts down, my plan, they
will all think of their own objectives and they
all have a policy ± they are all policy driven.
The view that hoshin kanri is a way of
working is right, but it tells only half the
story. It is a managed framework that focuses
an organisation through annual policies,
aligns targets and means, integrates these
into daily management, and involves top
management in periodic review. A PDCA
approach as an organisation-wide annual
process requires that an organisation learn
from its experience, not just in terms of what
it achieves from its management of its
policies, but also in terms of the improvement
of the process itself.
An organising framework
Despite an association of hoshin kanri in
Japan with TQC practice, it has not held a
central place in western TQM thinking (for a
recent review, see Lee and Dale, 1999); nor
has it been prominent in the extensive
literature about the Japanisation of western
organisations (Lillrank, 1995). This may be
because it can resemble management by
objectives (MBO) and, as such, is so
routinised and ingrained in practice that
hoshin kanri is not easily recognised by
western observers. MBO was developed early
in the twentieth century at DuPont and at
General Motors where it was called ``MBO
and self-control'' which suggests a
participative approach to developing and
deploying objectives (Drucker, 1955).
However, it came to be used typically to set
numerical performance goals for
subordinates, and is blamed in the literature
for a variety of ills: for example, the
promotion of individualism, vested interest,
functionalism, inertia, and short-termism
(Lynch and Cross, 1991). In Japan, on the
other hand, MBO was developed in harmony
with nemawashi, an informal and intensive
form of consultation that paves the way for
open meetings and formal decisions. A senior
Japanese executive at NSK Bearings defined
catchball as a process of consensus building
that develops understanding about what is a
right course of action for a particular policy:
The development (of targets and means) is
nemawashi, this is everybody understanding
what is going on and agreeing that it is the
right thing before you do it. If you want
something done you have to do nemawashi in
the background, so that when you come to do
it you are straight in with no problem.
Nemawashi, in combination with the
discipline brought to problem solving by
TQC, made the process of development and
deployment of targets and means subtly
different to MBO. In western organisations
informal communications do help prepare
the way for formal discussions and decisions,
but they are rarely managed and facilitated
as they are in hoshin kanri. The project found
hoshin kanri to be, in essence, a policy-led
organising framework for managing. It
provides a co-ordinated framework for
review which is based on PDCA principles.
Managements claimed important benefits in
this respect. Notably, top management goals
were made visible in terms of their daily
management, so that organisational
members were able to self-manage their own
targets and means in ways that enabled
effective agreement with all concerned. In
other words, policy had been built into work
and this had enhanced commitment to top
management goals.
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Hoshin kanri: a study of
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17/7 [2002] 390±396
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View publication stats
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