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Craig Fry
"Outside of the manufacturing
realm, it's amazing how many people still don't know anything about the
lean process or the impact is has had on their life." |
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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