Hoshin Kanri: Making Organization-Wide Metrics (Transcript)
This is based on a transcript of a video you can find here: http://www.roi-ally.com/index.php/en/blog/hoshin-kanri-making-organization-wide-metrics
Welcome back to our monthly blog. Today’s topic is hoshin kanri for generating metrics for the whole organization.
Let me start off by defining what hoshin kanri is. This is a Japanese phrase — it might be directly translated as “the point of the compass” but what it really means is that everybody in an organization is aligned in the same direction — they’re pulling towards the same objectives.
We use this tool in two different ways when we’re working at companies. One is to make sure that we create the right metrics for the organization, and that’s we’re going to focus on today. The second way is in deploying a strategic plan throughout the organization. So, in either case it’s a negotiation or a translation from one level of the company to the other, and it’s a mechanism whereby the lines of communication up and down in an organization are open so that things are aligned and we’re all going to end up pointing in the same direction.
For context when would we use this? If we’re using this hoshin kanri for creating metrics, the top of the organization has created a vision: a long-term idea of where we’re taking this organization. Maybe it’s 10, 15, 20 years out in the future. And this provides what Deming used to call “constancy of purpose” so even though we may take some detours along the way we know where our end point is and that’s what we’re all working towards. This month we might be building a base to our foundation to build upon so that we can make progress in that direction. Next year we might be doing something else.
They’ve also created at least a value proposition. The value proposition is just a description of what value it is that you create with your organization that your customers and your clients experience, and that they value as well. We define this via words so that we understand how it is we’re creating value and why people are giving us money.
Now we’ve taken these words for the vision, we’ve taken these words for the value proposition and some other optional things that we could have done earlier, and we turn these into high-level metrics of success for the organization. This is the definition of success if we were correct in defining our long-term vision and defining our value proposition then that’s what we ought to be measuring to making make sure that we’re being successful, right?
Okay so that’s what we have at this point is those high-level metrics of success or measures of success. So, what are we trying to do here? Well the top-level metrics are not enough. If we stop there just at the top level with a CEO or with the president, nobody really knows what they need to do or how they contribute to achieving those metrics. So, we need to kind of cascade this down to every level of management in the organization.
Why do we need to do that? These high-level metrics of course are the output of every individual in the company working on what they work on their day to day job. And as they continue to make progress everyone needs to know what role they play in supporting the company and achieving its long-term objectives and achieving its short-term objectives and they need to manage to achieve company objectives on a day to day basis on a month-to-month basis and over time, right?
So how do we do this? How do we link or deploy these metrics from the very top of the organization, which we’ve defined as success, all the way down? It’s really not a difficult concept for an individual. Each individual, each level of management communicates their metrics to their direct reports. Their direct reports then propose metrics back that they should be measuring that link to and affect their managers metrics. Now there’s a discussion back and forth to negotiate what those might be, to come to consensus as to what they are, but that’s the basic idea.
There are a couple of different ways to do this but it’s really just a discussion between these two different levels of management to get consensus on what needs to be measured so that the higher level of management can understand how their metrics are an output of those who work for them. This actually appropriately distributes the responsibility from the manager to the managed to do their jobs.
What I find interesting is that most organizations don’t do this at all, and if you think about it, if you don’t put any logic into what metrics you’re creating or what metrics you’re holding yourself responsible for, or what relationship they have back up into the organization, what would you expect the results to be?
Well one thing I’ve seen is kind of a “metric of the day.” Somebody reads about a metric and they focus on that one metric to the exclusion of all others. In the Six Sigma world this is not infrequently the “sigma” metric where if that’s the only thing you’re measuring, if that’s the only thing you’re focused on, is how many defects that you’re making or how many errors that you’re making, you can drive that number to pretty much anything you want but it’s going to hurt the business as a whole. It tends not to be a whole picture of what it is that is going on in the organization. So that you begin to think that this one thing is the most important thing and you do all sorts of other things which may be more expensive or may be a bad business decision in order to achieve that one metric.
Maybe these are metrics that they’ve used before you in a previous job or before they got promoted into this job. And these metrics may have a place and in fact, they may be important in this organization, but if we haven’t gone through the logic of making sure that these metrics are all related and linked up, we don’t know for sure that they are that useful in the in the very first place.
And of course, this ends up being an incomplete set: if we’re missing major components of what it is that it’s important in order to achieve whatever our value propositions are, whatever our measures of success are at the highest level, if there’s a break anywhere in that chain from the very top of the organization down to that front line worker, then there’s something that we’re not measuring that we needed to measure in order to achieve what it is we’re trying to achieve.
Now once you’ve done this, once you’ve created your top-level metrics and deployed those down into the organization, we call this a decision support system. This means that there are metrics at every level of management that help them know when a management intervention is needed and when it is not, as well as monitoring the results of these interventions on an ongoing basis. It also makes sure that the work each level does relates to the next level up, and that all the work is getting done.
It’s sometimes really tough for managers to give up ownership to those below them in the hierarchy. They want to hold on to that relationship they want to hold on to that responsibility, but we need to deploy it down because a single person cannot manage an entire corporation. That responsibility needs to be allocated down to the other levels of management.
Also, sometimes managers take their metrics from the previous level with them as they get promoted up. In both of these cases that leads to the potential of micromanagement which is when a manager skips a level of management and goes directly to the person doing the work and then they’re telling them how to do the work instead of allowing the managers who report to them to perform their function, which is to manage.
So, in order to prevent that, what we have is this decision support system and that provides a rational system that allows us to do two different things: manage and lead.
Managing is finding out what your people need in order to accomplish their day-to-day work and supporting them and continuously improving it over time. And that’s real work, right? We need to understand what’s going on in a process before we really understand what it is, they need and how we can make it better. This uses local resources and “local” depending on how you defined as whatever level of management we’re at, it uses local resources to track, monitor, control and improve their own areas. This is accomplished via something we call “daily management.” We’ll probably do a blog on that one later on. Okay, but we need these metrics before we can have a really good shot at making sure that the things are happening on a day to day basis that need to happen.
The second thing we can do is leading. So, what is leading or leadership? Well it’s taking an individual or an organization where they otherwise would not have been able to go. For an individual of course, this is developing them as an individual, as a manager, as a worker, whatever. But for an organization this is going to require special resources, right? This isn’t something that we can get to by just working harder every day. This is going to require us to change the rules to take a step back and look at how we do things and apply some really deep thinking to try and change how we do that thing in order to really change the game. And this leadership component, this idea of taking an organization where it can’t go without some sort of special allocation of resources is documented on a strategic plan.
Now this idea of a decision support system, of metrics at each level in the organization is a core objective of achieving business performance excellence. It creates metrics that allow for both management and leadership, and that’s a really important aspect of what it is we’re trying to accomplish. Sometimes people get so enamored of doing the strategic plan that they forget that the whole point of this was actually to have metrics. And if you have a plan but if you don’t have any metrics measuring the rest of the organization, then sometimes what you find is the day-to-day stuff isn’t getting done, people are focusing so much on those big hitters that they’re not doing the day-to-day, which means you’re losing any advantage that you’re actually getting at the end of the day from working on those really big projects.
So, the core concept, the core enabler for doing the activities associated with achieving business performance excellence is actually this metric system. This system that’s linked throughout the organization that allows people to make decisions at all these different levels such that the overall objectives of the organization are actually being achieved.
Okay well that’s it for this blog. Remember to subscribe. Post any questions that you might have about this or anything else that’s business management related, and we’ll see you next time. Thank you!