Hoshin Kari – The Japanese approach to MBO

Hoshin Kari – The Japanese approach to MBO


Hoshin Kanri is a process used in strategic management and planning. The process consists of 7 steps which mainly include communicating the strategic goals and objectives throughout the company and then taking necessary actions to achieve those goals and objectives (Hutchins, 2012). The origins of this system point to a post-war era in Japan, but it has now found its application throughout the world. Hoshin means “direction” and Kanri means “control/management”. It is often referred to as “true north”. The basic intent of Hoshin Kanri is to get every employee in an organization aligned in a way that everyone works in the same direction with one strategic intent to achieve the same strategic goals and objectives (Hutchins, 2012).

Hoshin Kanri is often compared to Deming’s Plan-Do-Study-Act (PDSA) formula. This PDSA formula is a systematic process which aims at acquiring knowledge for a product, process, or service through continuous improvement (Moen, 2009). It is often established that Hoshin Kanri and the PDSA formula of Deming are two peas in a pod. Hoshin planning process works through setting some breakthrough goals. Through this principle, the leaders have compass led by a “true north”, which guides them towards their destination via gradual improvements. The PDSA cycle is mainly related to routine improvements, but it is often a guiding compass in Hoshin Kanri. PDSA cycle relates to short term improvements and operational goals, whereas the Hoshin Kanri relates to the long-term strategic intent via these incremental improvements.

This research revolves around the principal elements and the phases of Hoshin Kanri in organizations. It also explains the practical implications of Hoshin Kanri, and the challenges related to the MBO program using Hoshin Kanri.

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Literature review

There are six key elements to Hoshin Kanri. These key elements are basically the main components of Hoshin Kanri. These elements are explained as follows:

Focus for the Organisation:

The process of Hoshin Kanri in an organization starts with setting a direction to solve a particular problem for attaining long-term success. However, it is crucial to define what the term “success” means for an organization. This acts as a starting point for the organisation as to answer the question, “Why do we exist?”. Then the specific long and short-term goals and objectives are set according to the mission, vision, and values of the organisation (Serdar Asan & Tanyaş, 2007).

Commitment to customers:

The Hoshin Kanri system puts considerable importance towards the commitment to the customers. To fulfill this commitment, Hoshin Kanri sets targets and benchmarks at all levels within the organisation. The targets are ranked according to their importance within the organization (Kesterson, 2014).

Deployment of the organization’s focus:

This element involves communicating the goals and objectives of Hoshin Kanri to the employees within the organisation. It is an important element because it helps the employees understand their role and specific contribution within the company. This acts as a bridge the connects the employees to the customers of the organisation through the needs and wants of the customers (Jolayemi, 2008).

Collective wisdom to develop the plan:

Collective wisdom can be acquired in Hoshin Kanri through a process called Catchball. This method involves disseminating the vision, mission and goals of the organisation from the top management to the managers and their subordinates so that all the levels of employees can perform accordingly and also evaluate their performance (Paraschivescu and Stoica, 2018).

Tools and techniques:

These include the specific management and planning tools that the organisation employees in the decision-making processes. These include affinity charts, tree diagrams and other tools of such nature.

Ongoing evaluation of the progress:

The feedback and evaluation of the ongoing process is important for continuous improvement which is the basic principle of Hoshin Kanri (Ghobadian, O’Regan, Howard, Gallear, Witcher and Chau, 2007).

Apart from the six key elements of the Hoshin Planning, there are five phases of Hoshin Planning which briefly explain the whole process of Hoshin Kanri.

Communicated objectives

Communicating the objectives of the organisation is the first thing a leader should be doing. Clear dissemination of the organizational intent to the employees of the organisation is the starting point for the process of Hoshin Kanri. This is important so that everyone can row in the same direction towards the “true north”.

Current state analysis

This is an important stage because it is important to know the organization’s current position relative to the position it wants to achieve in future. This gives a deep insight of how the organization is functioning and how that performance is related to the overall strategy of the organization. This phase includes the already established policies and procedures that are necessary to deploy the objectives. This shows what organizational structure does the organization already has and what are the long-term plans of the organization. The answers to these questions given an insight to the vision and mission statement of the organization.

Widespread engagement:

According to the Hoshin Kanri principle, the success of the organization lies in the team sport. This implies that the interests of the employees should be aligned with the overall interests of the organisation. The employees should understand how their work contributes to the overall success of the organisation. The phase of widespread engagement is easily accomplished through a culture of continuous improvement within the organization. This phase is often associated with the implementation of objectives using different approaches appropriate to the organization. For example, Lean Method Group’s five step methodology – SCORE involves similar steps, i.e., Select, Clarify, Organize, Run and Evaluate (Nicholas, 2016).

Prioritization of resources:

This phase holds its importance in the fact that prioritization of goals and objectives is necessary because it highlights the opportunities that the organisation should grab immediately in order to align its strategic objectives and their efficient execution. For this reason, it is important to develop the breakthrough and the monthly and annual objectives for the organization according to their relative importance. For this reason, a variety of tools and techniques are employed to recognize the growth opportunities for the organization (Melander, Löfving, Andersson, Elgh, and Thulin, 2016).

Performance insight:

This phase of Hoshin Kanri involves the use of performance metrics and benchmark scales to evaluate the performance levels. Mostly, revenue is a common indicator to judge the performance of the organization. The long-term goals of the organization can also be measured through the metrics set by the organization (Witcher, 2014).


I learnt a great deal about Hoshin Kanri and other strategic management styles in comparison. The comparison taught me how important it is to align the goals of the organization with the individual goals of the employees working in it. This is essential in the long term as it breeds a culture of teamwork and collective wisdom within the organization. My understanding is that this alignment of goals not only helps in building a friendly, innovative and motivating culture in an organization but also helps the top management in achieving strategic goals of the organization and make better and more beneficial decisions in the future as well. Apart from the relative importance of Hoshin Kanri in the management systems of the organizations in comparison to the other management styles, I learnt about the integration of Hoshin Kanri with other management styles such as Management by Objectives, Cross Functional Management and Total Quality Management. Another important learning that took place during this research is the practical application of Hoshin Kanri in real life in automobile industry. Most appropriate example of this scenario is management system of Toyota.

The Toyota Production System (TPS) is an example of Hoshin Kanri method. It is famous for its ideal improvements in production processes, space utilization lean management and exceptional customer focus. The most important characteristic of this TPS is that it is not easily imitated by the competitors. The secret to the success of TPS is associated to its deep alignment with Hoshin Kanri principles (Mothersell, Moore and Reinerth, 2008). The TPS focuses mainly on superior quality through continuous improvement. The quality requirements at Toyota are extreme and sometimes unrealistic. The Hoshin Kanri guiding principles make these unrealistic requirements achievable for Toyota.

Cross Functional Management (CFM):

I learnt that the cross functional management is important for employment of Hoshin Kanri steps within any organisation. Cross functional management aims to achieve cross functional goals such as innovation, cost efficiency etc. through the management of business process in the functional areas of the organization. For this purpose, an actual goal of the organization is passed from person to person in a process called Catchball. It requires continuous communication and a thorough integration of all the processes within the organization. The objectives of cross functional management include measuring the performance levels through efficiency in processes rather than targets. The management technique also focuses on individual assessment just like Hoshin Kanri (Gemser & Leenders, 2011).

Diagram Description automatically generated

Figure 1: Comparison between extremes of management style (Hutchins, 2012).

Management by Objectives (MBO):

Through a comprehensive analysis, I came to know that management by objectives is a strategic management model. It explains that the performance can be improved via clearly defined objectives that are previously set by mutual understanding of the management and the employees (Lunenburg, 2011).


Hoshin MBO
Aim Organizational problem-solving for innovations Management of personal execution
Core Competencies in achieving consumer anticipations Individual successes
Implementation Charge Teams Individuals
Approach Value principles/tools Not detailed
Time Yearly goals supported with long-standing target Final assessments on outcomes
Evaluation Sporadic progress evaluations on method and outcomes Final assessments on outcomes
Goals Important for competitive advantage Abundant
Decision Basis Facts and numbers Data not needed

Table 1: Comparison between Hoshin Kanri and MBO (Ennals, 2010).

Quality management in Hoshin Kanri:

From the real life industrial examples and various case studies, I learnt that Total Quality Management refers to the overall management in order to evaluate the quality of the policies, responsibilities, and their implementation through effective planning, controlling and continuous improvement. It has been established through my research that quality management is the responsibility of all the levels of management however, the decision-making responsibility lies on the top management within the organization. Implementation takes place with the help of coordination among all the members within the organization (Sallis, 2014). The Hoshin Kanri method is a validation of the Quality management in the organizations because it corresponds to continuous improvement (Ennals, 2010).


To implement Hoshin Kanri in the organizations effectively, it is important to consider the vision and mission of the organisation first. Some of the recommendations that make the implementation of Hoshin Kanri within an organization successful are given as follow:

Hoshin Kanri is a management system of Japanese origin. Therefore, there has been a reluctance in the implementation of this management system in the western world which is not very welcoming to the Asian culture due to geographical and other differences in the demographics. The cultural challenges are apparent when it comes to the implementation of Hoshin Kanri in the western organization. Therefore, there is a need for establishing a universal set of guidelines through which such cultural barriers can be overcome by indulging deeper into the conceptual fundamentals of management system concepts such as Hoshin Kanri (Giordani da Silveira, Pinheiro de Lima, Gouvea da Costa and Deschamps, 2017).

There are some other limitations that emerge with regards to the implementation of MBO by Hoshin Kanri. Some of the most apparent ones are the lack of support of top management or the resistance that comes from the subordinates or sometimes both. The challenges that emerge when working to achieve the goals and objectives set in a management by objectives system, lack of adequate skills and training of employees, and time and financial constraints are other set of challenges that are faced during the implementation of MBO by Hoshin Kanri (Larsson and Hanberger, 2016).

Another recommendation to companies is to train the employees about the management approach being employed within the organization. This shapes the outlook of the employees accordingly. The employees can fit into the workplace culture in a better way because they know what to expect from the organization and what their organization expects from them. They understand the importance of their contributions within the organization.

Teamwork is the fundamental concept of Hoshin Kanri, and it is important to communicate the importance of teamwork among the employees of the organization. This helps in aligning the interests of the employees with the interests of the organization.

Another challenge that is faced by the top management in the implementation of Hoshin Kanri comes from the external environment. The external environment has become extremely turbulent and dynamic. The customer preferences are continuously changing. This affects the operations of the company such as employee turnover, relationships within the organization and outside the organizations. The pace of information has become accelerated multiple folds and it becomes hard to keep focus on the long-term goals of the organization. An effective way to deal with this challenge is Catchball effect through which the flows of information can be made smoother and faster.

In order to make the implementation of Hoshin Kanri principles within the organization beneficial for the organization, it is important to select the breakthrough goals with considerable insight. This is very important to prioritize the goals accordingly as well so that the organization can grab the growth opportunities in a timely manner without wasting necessary resources on unnecessary operations.

It is important that the organization employs effective feedback mechanisms and software which show effective goal management within an organisation. The strategic management is beneficial for an organization to carry the processes so that the strategic objectives of the organization are met.


Hoshin Kanri is a process for effective strategic management and planning. The 7 main steps of the management planning process are establishing the focus of the organization, development of breakthrough goals and objectives, identifying and explaining the annual objectives as well the short-term objectives, the communication of these goals and objectives from the top management to the employees within the organization at all levels of the organization, implementation of these long-term and short-term objectives and the last stage involving the reviews needed for continuous improvement within the organization. The principles of Hoshin Kanri involve the communication of these goals and objectives throughout the organization so that a spirit of teamwork and loyalty to the organization can be stirred. Hoshin Kanri is a concept that is often related to other concept of benchmarking and continuous improvement such as Plan Do Study Act Formula given by Deming. Another striking similarity is seen with the principles of Total Quality Management (TQM), Cross Functional Management (CFM), and Management By Objectives (MBO). There are many examples of organizations in real life that employ the concepts of Hoshin Kanri such as Toyota and Nissan which are well known for their unique management styles.

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