With businesses facing unprecedented challenges in modern times, being able to plan a direction for your company and stick with it has never been more crucial. Few people know this better than Toyota executive of more than 27 years, Glenn Uminger. With a vast knowledge of operational excellence and decades of experience implementing the Japanese management process best known as Hoshin Kanri, we were lucky enough to spend some time with Glenn and have our members ask him some questions on how to successfully deploy Hoshin Kanri in an organisation.
Q: How to engage front line employees in developing a strategic plan?
The way to engage employees is usually through a response to your challenges as a leader. It cascades from the top-down, rather than incorporating ideas from all levels as would normally be seen as part of The Toyota Way. Instead, Hoshin Kanri is leader-level strategic planning and breakthrough activities that begin with assessments of the company’s current situation, whether it be competition within the industry, environmental factors, internal performance, or any other concern. The leaders then use these considerations to determine a shortlist of priorities that the company must focus on in order to achieve greater breakthrough levels. It really is essential for leaders to take ownership of these priorities and to create challenges for each level down throughout the company. With these challenges in mind, every team from the top down can engage in activities that contribute towards the direction set by leadership.
Within the puzzle that is continuous improvement, Hoshin Kanri is the top-level piece of breakthrough strategy. However, it’s important to remember that Hoshin Kanri does not supersede everyday ownership and engagement within the workforce. Hoshin Kanri should not seek to replace daily routines but instead act as a breakthrough strategy to take things to the next level.
The engagement of the front line does not come in creating and developing the plan. It comes in accomplishing, executing, and achieving the priorities and challenges.
Q: How to ensure adaptive and capable planning process responding to changes in the business system?
To answer this question, I’d like to start with saying that within everybody’s business there are a lot of factors to take into account at all times. There are current operational problems and crises, particularly right now with the coronavirus pandemic. All kinds of issues being sorted through, curveballs and challenges coming your way. What is most important for an effective Hoshin Kanri process is to have a steady hand and a consistent process moving as you move into the long-term. Your process cannot bend with the wind and react to every curveball.
When we talk about responding to changes in business systems, we have to think about that from a macro level. Unless the changes are hugely significant and have a large impact, it’s very important to stay true to the standardised annual Hoshin Kanri process. This way, you can continue to follow the course and direction that you set for your business in the first place.
Within every organisation, including Toyota, there is a very clear written 12-month process for Hoshin Kanri. It’s an annual cycle for achieving long-term goals and strategic objectives. There is a strategic planning group responsible for owning this process and making sure it continues as planned. Whether it’s calling meetings, setting due dates and keeping everybody on task throughout the year. Leadership owns the content and the doing of the process. Leadership doesn’t complain when meetings are called and deadlines approach. They respond to these plans and are ready with their work. The process owner is the facilitator of the process, but not the one that carries it out. It’s a partnership that makes everything come together.
Once one cycle of the 12-month process is done, there is a re-assessment that allows goals to be adjusted if necessary. New goals may enter, old goals may be modified, it’s a refresh. That’s frozen for 12 months after that, so you may ask “What if something happens in the middle of that, like a global pandemic for example?” The process does include constantly sensing what is going on outside the company. When there is a need for change because of a significant external factor, there is a filtering process to allow changes to be made to the Hoshin Kanri within that 12-month period. Things would be frozen under normal business conditions in order to avoid drifting off-course, but right now is a perfect example of why there is a mechanism in place to allow adaptation. For businesses all over the world, processes are being stopped and re-assessed, with efforts and resources being redirected in order to manage this major crisis. The same thing happened in 2009 due to the economic collapse, and again for Toyota in 2011 when the tsunami hit northern Japan.
Q: How do you address the problem where attention is paid to the selection of strategies, but not to how to deploy them?
A lot of discipline and perseverance is required to follow the process fully. Like with most long-term pursuits, setting the goal is relatively easy in comparison to reaching it. There’s no magical solution.
Since retiring from Toyota, I’ve seen a lot of companies with different approaches to strategic planning. There are things coming at you, so it’s easy to just tack it on as another part of your plan. But did you really stop and think “Where do we need to achieve breakthroughs in addition to what we’re already doing?” The differentiation needs to be made between these two levels of focus. Once you broadcast the areas of special attention and breakthrough efforts, you have to back them up with individual plans from the leader of each individual function. As a leader, you need to use your plan to carry out your responsibilities in a way that best supports the priority and direction of the company as a whole. Your plan won’t have all the answers, but it will outline how you plan to approach things on a daily basis, as well as where you want the focus to be and how to allocate that amongst your staff.
A key step that leaders go through before challenging their respective teams is bringing their plans together and synchronising them. This ensures that there will be no conflicting plans or schedules on any level throughout the organisation, allowing leaders and their teams to work efficiently. This step aligns high-level plans and is a major component in the how-to. Some divisions may be reliant on others to complete certain aims and that’s fine as long as everyone is aware and aligned and everything has been agreed upon.
As an example, let’s say I have five general managers within my division. I would challenge each of those five with the specifics of where they fit into my plan. Sometimes called the catchball process, they would make their drafts and proposals for how to carry out improvements and we can go back and forth making sure everything makes sense and works holistically. I can push back on their ideas and they can push back on mine. This isn’t a boss and subordinate step, this is a process of cooperation and collaboration with the ultimate goal of deploying a solid plan that fits our goals and has actionable steps. This process of discussing plans and making proposals continues throughout the levels of the business, eventually forming into assignments that are direct tasks to be carried out. With this part of the Hoshin Kanri process, the focus is placed on exactly how things will be deployed and so it’s something that cannot be missed.
As time goes on and these plans are put into action, the PDCA format of plan, do, check, act keeps everyone engaged and locked into their plans. These PDCA cycles are extremely frequent once the planning stage is over. Checking could be daily, it could be weekly. People manage their own work along with supervisor check-ins, instilling ownership and responsibility. As people need help, they can raise a flag and everything is dealt with fluidly. In Toyota, there is a semi-annual, formal stop-and-review of the Hoshin Kanri process. Every six months we assess how the leadership plans are going, what is working and what is not working, and what can be improved on in the second half of the year. This improvement mentality is something we should always be acting on, but every six months we have this formal assessment also. If at this point of assessment everything is green and all goals are being met, that is not a good thing. There should be honest struggles to show that we’re really reaching to make significant breakthroughs. What is especially looked for is what comes as a response to these struggles. Perseverance is shown in what is learned from these struggles and what changes are made in order to excel. We hope to achieve the goals we set at the beginning of the year, but this does not always happen. You may not achieve the final goal you had set for that year, which acts as a built-in performance review, but sticking to the solid plan and execution process will yield the best possible results.
Q: How to ensure alignment between individual objectives and the strategic goals of the organisation?
This was largely mentioned in my previous answer, but I’ll provide a precise answer to this question here. In summary, the Hoshin Process works like this: Alignment comes from the leader level which then cascades down via planning and execution. Something I want to emphasise is the role of the leader. As someone at the top level, it is your responsibility both to challenge and to coach your teams. Your success as a leader depends on the success of your staff, so you can’t just set challenges then attend to something different. As a coach, it’s not about giving answers to people and telling them how to do things. You should be encouraging and offering thoughtful advice to your staff.
Q: What would you say are unique elements of success to Hoshin Kanri?
I’m going to cover each element point by point. Some have been mentioned already, but all are huge factors in why Hoshin Kanri is such a powerful process.
I cannot emphasise enough discipline and perseverance. Sometimes people read about Toyota and they hear that it is the perfect company and that everything works 100% of the time. This isn’t true and there is no such thing as a perfect company. But what I can say is that the level of discipline and perseverance is a really important ingredient. Leadership take a very active role in the driver’s seat, encouraging their teams and really driving the mentality of consistently striving for improvement. Setting an example at the top-level will ensure that these values cascade down and create a business-wide culture of excellence. Actively engaging with staff, being open to discussion, there’s a lot to it. You own your processes, you don’t simply delegate.
A second key point: that there be a written, standard annual process and clear process owner in the organisation. I mentioned this previously too, but you need to ask yourselves who is responsible for your strategic planning process. Is there a written standard 12-month process in place? It doesn’t have to be annual, it could be another timeframe that works for your business. Who is the one beating the drum and ensuring that everybody is playing their role and coming to the table on time? This is extremely important.
Next is making sure that the Hoshin Kanri priorities are a shortlist of high priorities that are breakthrough needs for your business in its current position. The breakdown assessment I mentioned earlier has to be very thorough. External factors like the economy, governmental regulations and industry competition need to be considered, plus an internal reflection. Ask yourself: “Where are we weak internally?” Add all of this together and create a shortlist of maybe three or four major topics that are as clear as a beacon from the top of the company. Everything else will continue as it was, but these new breakthrough goals will be worked on as new high priorities.
Another unique element that I’ve also already mentioned is the alignment and synchronicity of planning across the top-level leadership team. This is a real differentiator that I’ve seen in my time at Toyota compared to other companies. As you deploy and challenge the organisation, nobody is stepping on each other’s toes or feeling overwhelmed. The synchronisation at the leader level before deployment makes the plans more efficient and actionable.
All challenges within Hoshin Kanri have to be breakthroughs that will move you forward as a company. If you don’t have a mechanism to achieve breakthroughs, someday, sooner or later, a competitor will. This is your motivation to keep moving forward, staying fresh ahead of the pack. You might be doing well for now but eventually, you can flatline and someone else hungry enough will overtake you in your industry. In Toyota’s case, I hear from around the world, to my surprise, about well-respected professors speaking about how “Toyota’s system only works for small incremental changes. They cannot do bigger changes and can’t handle major things.” It’s clear to me that they don’t understand Toyota well enough. Yes, incremental improvements are being made every day. But Toyota also has the Hoshin Kanri process for handling bigger long-term goals and large breakthroughs. Toyota is very conservative about the products chosen to be released and developed. It’s not that they “don’t have it” or they’re “lagging behind”. People say “Toyota is late in automotive electrification.” Toyota is very ahead in the R&D of electrification, but it’s careful decision making by Toyota that decides when products are developed in response to the market wants and needs. A thorough process allows Toyota to slowly release what they feel is most practical and beneficial. The Hoshin Kanri process allows Toyota to decide how aggressive or conservative they want to be with their product releases, as new technologies and breakthroughs are constantly being worked on.
Serious implementation of PDCA is next. Well thought out plans come first, and doing is the execution of that plan as I’ve already mentioned. When you get to the check stage, having a high frequency of checking meetings really gets everyone thinking deeply about what has worked, what has not worked, and what was learned in order to adjust in future? Constantly be using this checking cycle to improve. A clever act or adjustment is the crucial final step of PDCA. The first action you can think of is really not bringing your best thinking forward. As a leader, you need to challenge your staff to be clever and think beyond the simple, basic answer. PDCA is very well known and even if you’ve heard it a million times, I want to emphasise the quality of each step is enhanced as a result of using it within Hoshin Kanri.
None of these processes are easy and it’s often uncomfortable because you’re going into the unknown with huge challenges and goals ahead of you. However, this is the nature of Hoshin Kanri: it should not feel comfortable or easy. But know that when you follow the process, you engage your staff, and you challenge and coach to the best of your ability, people do incredible things. If you stay true to the course of your objectives, people will find confidence in your leadership. I have found that people can come through with answers and ideas that work incredibly well, allowing you to look back after the work is done and feel good about what that uncomfortable feeling made possible. It wasn’t made possible by any one individual but by a system and a culture where everyone is learning and being challenged.
Another thing I want to add is not to overload the Hoshin Kanri bucket. Make it the right size for your organisation, because you likely already have your hands relatively full with your regular daily operations. You want a healthy level of challenge that allows everyone’s daily plan becomes a combination of daily operations and Hoshin Kanri priorities. The higher the level, the higher the percentage of Hoshin Kanri priorities. For myself at a leader level, and every leader level at Toyota, 100% of our performance evaluation comes from measuring Hoshin Kanri priorities. Normal operations are expected to continue at an excellent level regardless of Hoshin Kanri. My role is to be the catalyst to drive breakthrough to the higher performance levels. By not overloading the Hoshin Kanri bucket, what you do can be done effectively and can work harmoniously with your regular operations.
Lastly, you might think about tying individual performance and promotions to the Hoshin Kanri in order to drive results. I’ve seen this at other companies: there are many ways to twist people’s arms into getting things done, but these methods are simply not sustainable or repeatable. So what have you done? You’ve achieved a short-term goal that is driven by a personal reward and the business gains very little in the long-term because of the lack of a valuable process. Tying performance into the Hoshin Kanri process is far more valuable as you are showing how you got the improvement, thus creating repeatable results. While the end goal is important, it means little to the future of the company without being able to show how you got there. My bosses at Toyota would not be impressed by being presented with merely a successful result. They would say: “You have brought me simply a result which means nothing to me. You know that Glenn. You could have got lucky, you could have used force. You know that what we need to see is how you got that result to believe it is repeatable. Only this information is what will inform me that you have done your job as a leader.” It’s undeniable to tie performance into that, as that’s exactly what drives a company to success and breakthrough performance. Let me say that this performance is measured many times throughout the year rather than at one annual performance review. I’m constantly working with my boss and we share what is and isn’t working. Now, performance tied to Hoshin Kanri without all the surrounding support systems can be detrimental or dangerous, but it’s still something I wanted to bring that up as something worth incentivising.
These are the factors I’ve seen that differentiate Toyota from other companies. While Toyota isn’t perfect, these are the first-hand things I’ve witnessed regarding Hoshin Kanri that create success.
Q: What were some of the first steps of introducing Hoshin Kanri across Toyota in North America?
As we started operations in North America in 1987, we didn’t know what Hoshin Kanri was for the first ten years. We didn’t have a foundation or a stable business yet. We were building plants and security stability before we could even begin considering breakthrough.
As far as a number one challenge, it’s very difficult to say because there were so many. North American quality was one of the biggest challenges because in Japan the quality levels and requirements are so extreme and severe. After the safety of employees, quality overrides all other priorities. Creating an early focus for everyone to put all-hands-on-deck and achieve a Japanese level of quality in vehicle production was a difficult one for us. It’s a level that North American manufacturing is not used to and this extended to our suppliers too. As we first started introducing Hoshin Kanri, quality was one of the first major goals that we sought to find a breakthrough in. Don’t get me wrong, we were producing very high-quality manufacturing work, but I mean the fine-tuning and very extreme pursuit of perfection. This pursuit really had to carry through the company so it’s something we focused on at an early stage.
Working with new North American suppliers instead of purely Japanese was challenging because they thought our quality requirements were crazy. Their first impression was to say “This is not what we do. You are just one customer among many others and the level you are asking for is unrealistic.” The patience to slowly upgrade supplier quality was a difficult one that Honda also went through. We were two voices in the large crowd of automotive manufacturers. However, as market shares shifted in Toyota’s favour over the first 30 years in North America, the suppliers would come back to us and ask us: “What was it you were asking to be supplied again?” In the early days, achieving our quality objective was a real challenge. In the early days with Japanese staff being stationed overseas in the new North American sites, there would be friendly rivalries between the Japanese and North American teams as they would strive to have the highest level of quality. At first, there were many challenges that stemmed from the quality difference but the end of the process definitely went well as a result.
For more advice on deploying Hoshin Kanri in your organisation, sign up for Leading the Toyota Way Masterclass here.