"Unless structure follows strategy, inefficiency results." — Alfred Chandler
Traditional planning methodologies focus on steering an organization in the direction desired by top management. Often referred to as management by objective (MBO) since top management establish the objectives, targets, evaluate whether employees meet these targets. Unfortunately, as we know, you can’t achieve the desired results by just dictating individual targets.
Hoshin kanri translates the strategic intent into the required day-to-day behavior. It is not another attempt to improve MBO. While hoshin kanri and MBO both aim to deploy company goals and encourage employees to achieve them, there are several radical points of departure. Specifically,
- Hoshin kanri deploys the voice of the customer, not just profit goals. More than the traditional MBO description of projected market share, profit goals, and revenues, hoshin kanri maps and controls the path to a new design based on customer priorities. It describes the behaviors needed to achieve the policies that support the strategic vision.
- Hoshin kanri depoys breakthrough strategies. It concentrates resources on strategic priorities and chronic problems by going after root cause(s) of obstacles to achieve dramatic improvements in performance.
- Hoshin kanri controls the means and methods, not just the results. It manages cause and effect linkage of supporting strategies, measures, and targets to ensure that employee efforts are realistic, synergistic, and add up to the total effort required to meet corporate objectives.
- Hoshin kanri is a continuous improvement management process, not calendar-driven system. MBO typically establishes a set of quarterly and annual goals. In contrast, hoshin kanri identifies a few critical breakthrough objectives that require coordinated and focused effort over an extended period of three to five years. Annual objectives are established within the context of these longer term objectives.
- Hoshin kanri emphasizes frequent reviews up and down the organization. In MBO, the performance review, often an annual event, does not capture or communicate valuable feedback to inform future rounds of planning. Hoshin kanri uses an explicit inter-level communication system to continually distill local lessons and channel them upward to the leaders of the organization. It routinely tracks performance, reviews the capability of the entire planning system, and modifies it accordingly.
- Hoshin kanri is not tied to performance appraisals. Authentic hoshin kanri separates the evaluation of personnel from the evaluation of the strategy. It focuses not on personnel, but on the quality of the strategic assumptions and the discipline of the planning system.
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