Hello, and welcome back to Alliance Reports! I’m Steven Ouellette, President of The ROI Alliance. At ROI, we support our customers in achieving their goals by helping them create metrics for everyone in their organization. These goals are linked together to achieve both the day to day continuous improvement and longer-term strategic plan goals. We also provide training in data-driven decision making, whether this is in Six Sigma, Lean, or how to manage with data.
The topic this month is how to use hoshin planning when you create a strategic plan in order to get everyone in your organization aligned to execute the plan.
“Hoshin” is a Japanese term that means getting everyone aligned and pointing in the same direction. Characteristic of this is a translation of what one level of management needs and how the next level of management can support this. Last month I covered how to use this technique in deploying metrics. This month it will be the first part about deploying the strategic plan.
So, let’s start off talking about what a strategic plan is. Some of you have probably seen plans, but I’d bet if you got together and talked about them, you would have some really different descriptions as to what they are and how effective they were.
The way I view it, the strategic plan is the manifestation of the leadership of an organization. It shows where the leaders intend to go and helps everyone figure out how to get there. It needs to be based on the medium-term business needs of the organization as well as its longer-term goals. In our process, the long-term goals are collected in a vision — a word description of what the business is going to look like 10 or 15 years in the future.
As you might guess, I also think that the strategic plan has to be driven by metrics and well-organized. You will see what I mean by this in the next installment.
That is called “dramatic foreshadowing…”
Companies have a wide variety of results from strategic plans — and maybe you have your own success or horror stories! Strategic plans should be designed to succeed, and every single strategic plan I have helped an organization create has been achieved. Now, that is not to say that the plan was the exact same plan that it started out as, but our process will allow you to achieve strategic plans. I have been at companies that have had decades of strategic plans, not a one of which was successful.
I have seen plans fail for a number of reasons.
One is a strategic plan that is just high-level aspirations of things that would be nice to happen. There is no translation down through the organization about how to make these things happen. A CEO at a company that is no longer in business once said that they will achieve a 15% return on investment this year across all our locations, but that plan stopped right there. There was no work by the lower levels of management to identify what exactly needed to happen where to make that a reality. If I am a manager or worker, I don’t know my role, if any, in making that happen. Around about October, all the plan managers are thinking, “Gosh, I wonder how that is going. I sure hope the other plants are making progress, because they are sure not going to get a 15% ROI from me!” Well, you can see the problem. Inevitably at the end of the year the company gets some sort of ROI and declares success, but it probably isn’t 15%, and I for sure don’t know how or if I did anything that helped support that in happening. That probably means that the company doesn’t understand how it is getting ROI either .
Sometimes so-called strategic plans are just a list of unconnected tasks. This is often a result of management asking people “what can we do to do things better” rather than setting a direction and asking for input on how to get there. One President of a company sent an email out to everyone in the company asking what they could do better. What in the world would you expect to happen? You will get a huge number of emails saying “Pay me more”, or “If only those guys over there did their jobs better.” And if everyone does participate, you now have to choose which of the thousand emails you are going to do and which ones you are going to reject. How long do you think that will take?
What you won’t get is alignment with what the business needs, or an organized approach to achieve its medium- and long-term goals. Now, your workers are going to be key in generating ideas on how to achieve your plan, but this uncoordinated mess is not how you go about doing it.
I have seen strategic plans with no metrics. This leaves open to interpretation what you mean by those plans and with no objective measurement of if you are even making progress. I mean on the one hand, in the absence of measures of success everyone wins! On the other, you are probably not actually accomplishing much that the business needs, except by accident. Sadly, this also means that there is no way to prioritize these activities either amongst themselves or with the other daily tasks, since there are no concrete results to help make these judgements.
I have also seen plans created with just a SWOT analysis. You might have heard of this acronym — Strengths, Weaknesses, Opportunities, and Threats. SWOT is a fine step in the process, maybe even essential, but it won’t help you put together a cohesive plan since it probably won’t identify what you need to do today for your longer-term goals.
I once saw a beautiful four-color brochure of a strategic plan that was created with SWOT. Each part of the organization was working on what Strengths they can leverage, what Weaknesses they can mitigate, what Opportunities they can exploit, and what Threats they can defeat. Bu the result was each area was doing their own things for their own purposes while the organization itself was not making any real progress.
Another issue I have seen with strategic plans is the feeling that “I’m not important if my stuff isn’t on the plan.” This is certainly characteristic of culture in the US, where we think that big projects are sexier than managing. However, keeping the lights on and things running smoothly is just as important as the big strategic projects, and in fact without it, the big projects don’t happen or don’t capture the stated benefits if they do.
I have also seen plans consist of so-called “stretch goals” that are actually just unrealistic. Workers will perceive this as an excuse to squeeze more out of them while management gets their stock options and blames the workers for being lazy. This is not leadership, it is lazy management not being held accountable for making or completing realistic, if difficult, objectives.
Another fun one is when leaders think it is their role to put too much detail in a strategic plan without consultation with the people managing and working that process. Most likely the people in that process can see that the plan is bogus and assume that the leader is out of touch. Depending on how much fear there is in the organization they will either ignore the plan, or do it anyway knowing it will fail to accomplish what it was supposed to do from the very beginning.
In all these cases people end up losing faith in the strategic planning process itself. It is seen as a stupid waste of everyone’s time. Let’s see if we can change that!
All right — enough of the problems. When would you use hoshin in strategic planning? Let’s assume that we have at least the top-level metrics of success created. You can review my video giving an overview of the performance excellence process for a brief discussion on how to do that. I’ll probably do a video on that sooner or later, so I’ll link to it when I do.
Ideally, we will have completed the metrics cascade as I described in the last video, so you have a complete decision support system. If you try to do a strategic plan without linked metrics being measured throughout the business, it might be difficult to know where you need to make improvements in order to complete the plan. But on the other hand, if you wait for the whole decision support system to be built, you might be waiting a long time. Usually, my clients build the plan in parallel to finishing the metrics cascade. Often, these first strategic plans are going to have some pretty obvious parts about building the infrastructure anyway. That second plan is a tough one, though…
Next, how long should your strategic plan take to execute? Well, this depends on your organization and your market. You need to balance two things: plans that are too frequent or go on for too long. Too frequent means that you have a narrow scope and are planning for short time horizons, so you probably have a hard time actually putting in some work towards your longer-term goals. Deming would call this a lack of “constancy of purpose.” I always saw this as the “book of the month club” where management would change priorities depending on what book was in fashion that month, never having accomplished whatever the previous month’s “#1 priorities” were.
If you go too long on your plan though, you might have a harder time dealing with changing markets and technology. Also, your employees need to win, then celebrate and move on to the next thing. They tend to lose personal attachment to the plan if it is a long time horizon.
I usually recommend 2–3 years for a given strategic plan. This gives you five plans to achieve your 10 or 15 year vision. That seems to be a good balance — one where you can get some solid work in, while still being able to adjust along the way to meet your vision. Of course, there are always exceptions. If you are in a turn-around situation, you might be looking at a one-year plan to stay alive. Once you achieve stability, you can move to a 2 or 3 year planning horizon. You might be looking at a 4 year plan if you have a lot of foundation-building to do, but eventually you would like to be able to react more nimbly once you do.
Well, that’s about as long as I want to make this installment. Next month I’ll get further into the process of how to make the plan itself and show you an example of how that might turn out. I’ll also let you know the secret to always completing your strategic plan, so don’t miss it!
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