Hoshin Kanri - Directing and Motivating Organizational Learning

The adage that “you get what you measure” is in a sense true at Toyota as well. Toyota long ago realized that the key to organizational learning is to align objectives of all of its employees toward common goals. The underlying value system of Toyota’s culture does that to a great degree. But to get everyone involved in continuous improvement in a way that adds up to huge corporate improvements requires aligned goals and objectives and constant measurement of progress toward those objectives. The important insight here is that simply setting specific, measurable, challenging goals and then measuring progress is highly motivating—even when there is no tangible reward associated with success. It’s approached like a game or sport. Playing tennis or even solitaire is simply not as much fun if you are not keeping score.

Toyota managers have become masterful at setting challenging goals jointly with their subordinates and are passionate about measurement and feedback. This is the basis for hoshin kanri (also discussed in the Trim Masters case example, Find Solid Partners and Grow Together). Hoshin kanri, sometimes called “policy deployment,” is Toyota’s process of cascading objectives from the top of the company down to the work group level. Aggressive goals start at the executive level and then each level in turn develops measurable objectives for the year, designed to support the executive-level goals. At Toyota, these objectives must be measurable and very concrete. Vague goal statements are not acceptable. Figure 20-4 shows how the process cascades down throughout the organization and follows the PDCA process.

For instance, all of Toyota’s service parts facilities use hoshin kanri to develop three-year stretch goals to support the goals of Jim Press, COO of Toyota Motor Sales, who is ultimately supporting the objectives of Toyota’s CEO. At the Hebron, Kentucky, facility, when you walk into the lobby, one of the first things you see on the wall is a big matrix that shows all of the target metrics for the facility for this three-year period. For the three-year period ending 2003, the baseline measures were taken in 2000 and targets are expressed as percent improvements over the baseline. You can see the annual targets through 2003 as well as monthly targets and actual achievements. The targets are all aggressive stretch objectives like the following:

  • Reduce packaging costs as a percent of sales by 47%.
  • Reduce transportation costs as a percent of sales by 25%.
  • Reduce inventory by 50%.
  • Reduce parts per million defects by 75%.
  • Reduce OSHA recordable incidents per 200K hours by 50%.

At the bottom of the chart, you can see at a glance how the facility is doing on each metric. Red is less than 50% achieved, yellow is 50%-89% achieved, and green is over 90% achieved. The matrix I saw was as of June 2002, about halfway into the process, and they had achieved many of the three-year targets ahead of schedule. I also met with a group leader who showed me his objectives and measures for the day, which included detailed measures to support the overall facility-level objects that a computer program tracked. Unlike many companies I visit, where the posted performance metrics are months out of date, everything the group leader showed me was updated daily.

The policy deployment measures and actions become more specific as you move down the hierarchy from senior executives to working level team members, while progress reports flow upward from the lower levels to the senior executives. Every team member knows his or her small number of specific objectives for the year and is working on them throughout the year. The process of hourensou we discussed in Go and See for Yourself to Thoroughly Understand the Situation is one way senior managers are updated. They go to the source and talk to the workers as well. There are also formal review sessions. At the Toyota Technical Center, each team member has meetings three times per year to review progress toward the hoshin kanri objectives. The check and act part of PDCA are critical to turn the planned goals into effective action.