Rui
Manuel Ferreira Dias
Faculdade
de Ciências e Tecnologia, Universidade Nova de Lisboa, Portugal
E-mail: rdias1263@hotmail.com
Alexandra
Tenera
Faculdade
de Ciências e Tecnologia, Universidade Nova de Lisboa, Portugal
E-mail: abt@fct.unl.pt
Submission: 10/6/2019
Revision: 12/3/2019
Accept: 1/30/2020
ABSTRACT
This paper discusses how companies can make
their Strategic Thinking, Strategic Planning, and also discusses the
integration of the Balanced Scorecard (BSC) and Hoshin Kanri (HK) approaches
and then suggests and exemplifies an integrated model that could facilitate
company’s strategic deployment and implementation. A literature review of Balanced Scorecard and
Hoshin Kanri conducted to provide a comprehensive understanding of each
approach. The article discusses six integrated Balanced
Scorecard / Hoshin Kanri models identified in the literature. The research work revealed differences
and convergence points between Balanced
Scorecard (BSC) and Hoshin Kanri (HK) approaches that the different integrated models intend to take advantage
or reinforce in order to develop more robust methodologies. The study of different integration model, the
difference between them and the know-how obtained in implementation and
deployment of the strategy in the industry were crucial to develop the proposed
model, which was conceived to overcome current identified models weaknesses. So, a new integrated framework was developed for Continuous Improvement
organizations in order to leverage and combine Balanced Scorecard robustness
and consistency for strategy development and Hoshin Kanri in order to added value in terms of short-term strategy, translating it to the
everyday job activities, conceived and performed by all in turning of the Continuous Improvement strategy.
Keywords: trategic Planning, Strategic Deployment, Balanced Scorecard, Hoshin Kanri
1.
INTRODUCTION
Strategic
thinking should not be viewed as a formal planning process only (the classical
strategic planning) but
also as a process of
discovery, innovation and creativity (strategic innovative thinking). In this way, organizations should obtain a
fast, flexible and efficient response to everyday changes.
So, currently is not enough to know
and understand the sector in which the organization operates, but also how to
create new activities and new business opportunities in a systematic and
sustainable way. If we start
from this perspective, the strategy becomes not only a mere exercise of
positioning and analysis, but also a process of discovery, in constant search
of new patterns of interaction between clients, companies, technologies and
markets that will require new supportive toolsets.
The strategy definition is one of
the most critical tasks on business management, because defining a direction to
be followed and having a sustainable market orientation and positioning is
essential to organizations success, in which should be considered the knowledge
of the external and the internal organization environment in order to make
clear decisions about what the company should do and what should not to do in a
long term.
Several strategic development
systems are described in current literature (ARMISTEAD; PRITCHARD;
MACHIN, 1999; DETTMER, 2003; YANG; YEHB, 2009; TOMA; MARINESCU, 2013) but in
this paper we will address two of the most known ones namely: Balanced
Scorecard (BSC) and Hoshin Kanri, both born and developed by the end of the
last century and in next session synthesized and compared.
2.
THE BALANCED SCORECARD APPROACH
Robert S. Kaplan, a professor at
Harvard Business School and David P. Norton, president of Renaissance Solutions
(KAPLAN; NORTON, 1992), first released balanced Scorecard (BSC) approach in
1992. Nowadays the Organization need clearly defined goals and strategies, in
order to measure its business performance through quantifiable and verifiable
indicators in a main strategic planning tool.
BSC can considered as a management
system that enables companies to translate their strategic vision and deploy
its strategic objective to the daily work of all employees. With BSC the
underlying company’s strategic logic is made explicit by a tool called
strategic map (see Figure 1), where each objective is linked in a
cause-and-effect chain, which associated indicators are related to the results
planned in the strategy and the initiatives that should lead to this result,
which logical links form the strategy hypothesis (KAPLAN; NORTON, 1996a; KAPLAN; NORTON, 2000a).
Figure1: Balanced Scorecard
Strategic Map - example
As seen in Figure 1, the strategic
objectives on the Balanced Scorecard usually focused through four main
perspectives:
·
Financial
perspective;
·
Customer
perspective;
·
Internal
business perspective;
·
Learning
and growth perspective.
For each one of the strategic
objectives identified from the strategic planning, company’s indicators result and/or trend and targets,
will indicate the established reach of the future situation, usually in a
horizon of three to five years. After that, strategic initiatives or major
projects that will lead to the achievement of the goals are then chosen. Thus, each strategic objective accompanied by
the following components: strategic objective, measures, targets and
initiatives (see Figure 2).
Figure 2: Balanced Scorecard Framework
Source: adapt
from Kaplan and Norton (1996a, p.76)
In the last twenty years, a lot of
academics and consultants have studied this methodology and contributed to its
evolution. The studies and papers presented by the creators of the methodology
(KAPLAN; NORTON, 1992; KAPLAN; NORTON, 1996a; KAPLAN; NORTON, 1996b; KAPLAN;
NORTON, 2000a; KAPLAN; NORTON, 2001; KAPLAN; NORTON, 2004a; KAPLAN; NORTON,
2004b; KAPLAN; NORTON, 2006; KAPLAN; NORTON, 2007; KAPLAN; NORTON, 2008a; KAPLAN;
NORTON, 2008b) were significant, fundamental and decisively contributed to its
evolution from a Performance Measurement System to a Strategic Management
System.
Table 1: Balanced Scorecard – Conceptual Evolution
Source: adapt from
Kaplan, (2010) and Madsen and Stenheim (2015)
3.
HOSHIN KANRI
Developed in Japan around 1960, in
companies like Komatsu, Toyota and Sumitomo, Hoshin Kanri is based on American management by objectives
methodology and continuous improvement cycle PDCA (Plan-Do-Check-Act) (AKAO, 1991; WITCHER; BUTTERWORTH, 1999) in which
it was proposed to ensure the effective control of the company, so that the
medium-and long-term strategies materialize in changes in the routines of
day-to-day resulting in the improvement of processes and products (AKAO,
1991).
Hoshin Kanri is a systematic system
of performance evaluation, developed to guide the day-to-day actions are
aligned with the strategic vision of the company, so that they are effective
and achieve the desired results (COWLEY; DOMB, 1997).
Hoshin
Kanri is also viewed
as a systematic and disciplined process developed to align, communicate and
implement the strategy focused on deployed organizational key objectives in
order to give an competitive advantage based on four main pillars (WITCHER; BUTTERWORTH, 1999; LEE; DALE,1999):
1.
The
entire organization is focused
on vital strategic priorities, which are essential for Organizations
sustainability;
2.
Local
plans and programs must be fully aligned with the Strategy;
3.
Strategic
plan is integrated with day-to-day management;
4.
Systematic
strategic progress review is required.
Ayano (1995) defines the Hoshin Kanri as being a systematic series of activities to
achieve priority goals for improving quality and processes of the organization.
So, one of the Hoshin Kanri underlying requirements is
that the deployment of the strategy needs to be done at all organizational
levels, from management to operations. This development should be made through
negotiation between the different organization levels (catchball), defining the
intermediate goal that will fit each division or department. As advocated by
Shigeru Mizuno (1998) Hoshin Kanri requires the participation of all employees
at all levels.
According to the Hoshin Kanri approach, there are a few prerequisites that that must followed to ensure success and the robustness of this process as:
· Organizational Vision, Mission, and Values must be
known and accepted;
· Identify in a long-term plan (Strategic Plan) the
vital objectives to the organization which must be deployed in routine
activities;
· Goals
accepted after negotiation with team (catchball);
· Hierarchical
and cross functional process definition;
· Establish metrics and measurements;
· Periodic review practices.
In the last years, many were those
who study the Hoshin Kanri methodology and developed different frameworks to
apply and implement this tool in the organizations, as synthetized in table 2, presented next.
Table 2: Hoshin Kanri – An overview of most important implementation
Models
4.
BALANCED SCORECARD vs HOSHIN KANRI
The Balanced Scorecard and Hoshin
Kanri are two analogous tools (TENNANT et al. 2002; WITCHER, 2003; ANDERSEN; LAWRIE; SAVIČ, 2004; MCCARTHY,2005),
that aims to help improving
the performance of organizations to align their strategies, objectives, targets
and initiatives throughout the organization, however there are small
differences between them as exposed.
The Balanced Scorecard is a
performance-based approach that considers results very important. On the
contrary, Hoshin Kanri is a process-based approach which concentrates not only
on the results but also the means (or how) to reach them. In this respect, the Balanced Scorecard
is perceived to be target-oriented and Hoshin Kanri as means-oriented (SERDAN; TANYAS, 2007).
Both systems have strengths and
weakness, some literature presents the Balanced Scorecard as a
non-participatory methodology, top-down (KANJI; SA, 2002) that can perfectly develop the strategy but has
difficulty in communicating and implementing it (LOHMAN;
FOURTUIN; WOUTERS, 2004); providing
a strong conceptual
framework for developing the strategy (KANJI; SA, 2002), but not presenting an implementation methodology (MALINA; SELTO, 2001).
On the other hand, Hoshin Kanri
presents many difficulties in identifying the objectives that are vital for the
organization and in presenting a structured model. Hoshin Kanri strongest
contribution is catchall, the methodology for implementing the strategy for
operational initiatives across the organization.
Thus, the Balanced Scorecard and
Hoshin Kanri could be used perfectly in the Organization's strategic planning
cycle with the following functions: Balanced Scorecard ensured that the
strategy was translated, tested and monitored with long-term focus, while
Hoshin Kanri would support the annual deployment and execution of priorities
identified as strategic in the Balanced Scorecard.
So, the integration of the two
methodologies can explore the best of each of them (see Table 3) and develop a
system using the Balanced Scorecard for strategy development and Hoshin Kanri
framework for strategy planning, communicating, implementing and documenting
the strategy (SERDAN; TANYAS,
2007).
Table 3: BSC
vs HK
Source: Adapted from Kanji and Sa (2002) and Serdan and Tanyas
(2007)
In fact, several authors have
made proposals for the integration of these two strategic planning
methodologies (REDI, 2003; YANG; YEHB, 2009;
WITCHER; CHAU, 2007; SERDAN; TANYAS, 2007; ARBABSHIRANI; MUOSAKHANI, 2012; THOMAZ,
2015), following discussed in tables 4 to 9.
Table 4:
Redi’s Corporative Model – BSC and HK
Model |
Corporative Model – BSC and HK |
Author /Year |
Renata
Redi - 2003 |
Contributions |
|
This integrated
model has three phases, long-term planning, short-term planning, and review
to ensure a dynamics discussion of the chosen strategy. This integration
comprises three organizational levels: corporate, unit and team. This model is draw according to the principles of the
organization toward the strategy presented by Kaplan and Norton (2001). ·
Translate the strategy into
operational terms – development
of Corporation Strategy map, ·
Align the organization to the strategy
– develop the unit strategic map aligned with the
Corporate map with the Balanced Scorecard ·
Make strategy everyone`s everyday job
– apply Hoshin Kanri to select and deployment the vital few objectives (select for the Board)
for all teams and integrate its in daily routines for operationalization of the strategy ·
Make strategy a continuous process – the periodic evaluation of the
strategic performance, its deployment and a cycle review of the strategic
maps it`s the assurance that the process of
development, planning, deployment of the strategy is an ongoing process. ·
Mobilize change through executive
leadership - the success of implementation of
the model requires to senior management to lead a participatory process of
negotiation to implementation the strategy in the organization. This model has three steps ·
Long-term planning - the aim of long-term planning phase
is to translate the Corporation and Units strategy in a structured and
synthetic form in objectives, indicators, targets and projects in order to
facilitate their understanding, monitoring and evaluation, by senior management and
teams. ·
The long – term planning is doing with Balanced Scorecard. ·
Short-term planning – the aim of this step is to bring
the organization (Corporation and Units) to focus in annual objectives
according to long-term planning. In this step the model select and
communicate the vital few objectives, with the Catchball, define initiatives,
project and targets and communicate to the teams · Review – the model also contain a review
step. This phase is very important and
focus the organization in the strategy specially to make the strategy
a continuous process. |
|
Model |
|
|
Source: Adapted from Redi
(2003)
Table 5: BSC
and HK with Fair model
Model |
Balanced Scorecard and Hoshin Kanri (with FAIR
model) |
Author /Year |
Barry J. Witcher e Vinh Sum Chau -
2007 |
Contributions |
|
The
model
integrate Balanced Scorecard, Hoshin Kanri and what authors call dynamic
capabilities throughout the strategic management process. The model combines
long and short-term activities of the organization into a framework so that
strategic management can link top management goals with day-to-day goals. Balanced Scorecard, core competences and dynamic capabilities needed to
leverage business success used to make long-term strategic planning, on the
other hand Hoshin Kanri to deploy and implement strategy in the short term. The Hoshin Kanri, group this objectives in four perspectives, similar
to Balanced Scorecard – Q –
Quality; C – Cost; D – Delivery and E – education, which will be suitable as a basis for setting the
annual priorities to deployment to all levels of organization. The authors use the FAIR model (Focus,
Alignment, Integration, and Review) for the deployment of the annual
objectives grouped in QCDE. The FAIR is an execution model of priorities in a descending sequence
of four distinct phases: 1. Focus The Senior Management team defines its priorities for the coming
annual planning cycle. The priorities are based on the needs of the strategic themes and medium – term plans, and
reflect the strengths and weaknesses in relation to the firm`s core capabilities. 2. Alignment In this phase, called Catch ball is used to deploy the where the QCDE
for all levels of the organization in an interactive way in order to building
the targets and the necessary measures to achieve the objectives set. 3. Integration The Hoshin and QCDE integrated in a form of daily management through
of Deming Cycle – PDCA (Plan – Do – Check – Act). 4. Review The review phase of the FAIR model is the annual input to the global
review of all planning strategic cycle. It is a senior level review of how
the firm, as a whole, is managing its core capabilities. |
|
Model |
|
|
Source: adapted from
Witcher and Chau (2007)
Table 6: HK
and BSC for Strategic Management
Model |
Integrating Hoshin Kanri and the Balanced
Scorecard for Strategic Management |
Author /Year |
Seyda
Serdan Asan eMehmet Tanyas - 2007 |
Contributions |
|
The
model suggest an
approach based in six steps, where Balanced Scorecard and Hoshin Kanri are
integrated which focused on the vision and the deployment of strategies throughout
the organization. According
to the authors, a combination between a performance-oriented approach like the Balanced
Scorecard with a process-oriented approach like Hoshin Kanri creates synergy. The model use the Balanced Scorecard to build a
robust framework and a Hoshin Kanri for planning, implementation and
documentation. 1.
Preparation
activities – this
step involves environmental analysis, definition of mission, vision and the
definition of strategic concepts: values, competencies, customers, products,
market, competitors, resources, and processes; 2.
Building
the scorecard (the model use a BSC) – The scorecard construction should facilitate balancing the
organization’s strategy formulations into four perspectives; 3. Strategy map (the model use a BSC) – the strategy map is a visual draw
of an organization`s strategies and represent the vital relationships among
them that drive organizational performance; 4.
Deployments
of strategies
(the model use a HK) – the
strategic objectives defined in the Balanced Scorecard are the vital few
objectives to the Hoshin Kanri. These are the objectives to be deployed with
the Catch ball tool; 5.
Implementation
of plans (the
model use a HK) – target and means
deployed at tactical level are the base for the developed implementation
plans. After the
plans have been completely deployed down to implementation plans, they are
rolled back, from bottom to top – catchball tool - to check inconsistencies,
resource shortages and constraints; 6. Review (model use BSC and HK) – this step is crucial to do an
evaluation of the performance of the planning cycle and it`s taken as the input for the next
cycle. |
|
Model |
|
|
Source: adapted
from Serdan and Tanyas (2007)
Table 7: Strategic planning, BSC and HK model
Model |
Integrated implementation model of strategic
planning, BSC and Hoshin management |
Author /Year |
Ching-Chow
Yang e Tsu-Ming Yeh - 2009 |
Contributions |
|
The authors building your model based on the BSC model proposed
by Kaplan and Norton (2004a). 1.
Top management sets: Vision, Mission and Values,
vital to define the orientation and the strategy; 2.
Identify
the KPIs and conceive the strategy; It`s important for the
success organization identify the vital KPIs in base on your core competences
and yours Critical Success Factors (CSF) it will enhance its competitive
advantage. 3.
Strategic map – this the way to convert its
various assets into desired outcomes. These desired outcomes measured by the
KPI, which correspond to the strategies considered in the strategy map. (Kaplan
& Norton, 2000 b); 4.
Scorecard - On developing its scorecard it is necessary to: (a)consider the
cause-and-effect chain on the different items across four linked
perspectives; (b) balance the lag indicators (profitability, market
share and Customer retention) and lead indicators (performance drivers); and
(c) identify the driving indicators (sometimes similar to lead indicators)
and the derived indicators; 5.
Department objectives, measures, target and KPI –
deployment the strategy
objectives to
all organization utilizing the “Catchball”
methodology of the Hoshin Kanri. The department objectives, measures, target
and KPI should
be aligned with the objectives of the Business Unit. Resources allocation and
Action plan initiatives - departments and business units must therefore
develop their action plans according to the organization’s initiatives in a
given department’s area of responsibility. 6.
Implementation – critical step of this model which needs to be
monitored and controlled; 7.
Review and evaluation (strategic
outcomes) -periodic meeting
for monitoring the implementation, but more effective is a quality audit used
in Hoshin Management; 8.
Annual Review - includes the following:
(1) assessments of achievements and lessons learned in the past year; (2)
identification of any gaps between targets; (3) recognition of any problems
(and their root-cause analysis) in the implementation process; (4)
identification of any changes in the environment; and (5) consideration of a
future plan for the organization (Lee
& Dale, 1998). |
|
Model |
|
|
Source: adapted
from Yang and Yehb (2009)
Table 8: BSC and HK model based on TQM
Model |
Incorporated model of
Balanced Scorecard and Hoshin Kanri based on TQM |
Author /Year |
Behrouz
ArbabShirani e Hamid Reza Muosakhani - 2012 |
Contributions |
|
The model combining Balanced Scorecard and Hoshin Kanri,
and propose a different balanced approach which try to eliminate some
Balanced Scorecard weakness like
insufficient
organizational infrastructures; definition of quantitative indicators and the
influence of each group of indicators in achieving objectives problems in
order to assist companies to work and produce with better performance. The model consists of main following elements: ·
Identify of mission, core values & vision of
organization; ·
Identify long term objectives & strategies; ·
Describe of operational objectives by Hoshin
Kanri model; ·
Transfer operational objectives to Balanced
Scorecard model; ·
Verify the strategies alignment with managerial
and executive reviews; ·
Continuous reflection of effectiveness of
activities done by Hoshin Kanri model. |
|
Model |
|
|
Source: adapted
from ArbabShirani, Muosakhani (2012)
Table 9: Alignment and Strategy Deployment through the Integration of
the BSC and HK
Model |
Organizational
Alignment and Strategy Deployment through the Integration of the Balanced
Scorecard and Hoshin Kanri |
Author /Year |
Manuel Fernandes Thomaz - 2015 |
Contributions |
|
The author proposes a methodology
which preparers the strategic plan and the definition of strategic objectives
according to the Balanced Scorecard. Then the strategy deployed by Hoshin
Kanri methodology through the implementation and action plans. After the
implementation of the plans, the strategic planning cycle it moved back to
the Balanced Scorecard to do the strategy review and preparing a new cycle. · Strategy Vision, Mission and Values
are the conceptual base to do a Strategy. Strategic Plan and Strategic objectives
defined with the Balanced Scorecard methodology. To deployment the Strategy, Thomaz propose the
Hoshin Kanri methodology, and adapt the FAIR model developed by Witcher and
Butterworth (2001) and an implementation methodology similar to a proposed by
Jackson (2006). · Focus The Strategic Objectives
defined for the Balanced Scorecard is now the Vital Few Objectives fundamental to define the first level of
the strategy. To define this level of the
strategy, the author recommended the creation a Hoshin team (top Management
and first level Directors), and the utilization the X A3 Matrix, to start the
discussion of the tactics and the improvement projects essential to achieve
the strategies. ·
Alignment Department leaders, team
leaders, operators, all employees who contribute to the organization's growth
convert the Vital Few Objectives in
work programs, implementation plans and daily activities. The catchball is the tool
for this step, to create a negotiation environment between all levels of
organization in order to achieve a consensus deployment strategy in ambitious
plans, but achievable. The X A3 Matrix drawn in the
Focus step is now deployment, through the catchball process. · Integration This is the integration of
the strategy with the daily activities. The outputs of this
integration are the inputs to the review step. · Review The review step has now to
do with the Balanced Scorecard approach, because the author thinks scorecard
should ease the indicators and measures documentation, which are essential
for the evaluation of the targets achievement defined for strategic
objectives indicators. |
|
Model |
|
|
Source: adapted from Thomaz
(2015)
All
models presented justify their creation as a necessity to eliminate the
weaknesses evidenced by both the Balanced Scorecard and Hoshin Kanri models
mentioned above. As exposed, in the proposed models,
most authors use the Balanced Scorecard for medium-long term strategy
development and planning due to its robust structure and Hoshin Kanri for
short-term strategy deployment using one of its powerful tools. catchball,
mentioned by all models described.
The only model that does not present
this structure is the model developed by ArbabShirani and Muosakhani (2012).
In this model and after having defined the strategic objectives by the Board,
grouped in four perspectives of Hoshin Kanri and the Balanced Scorecard namely
relating Q (quality) with Customers; C (cost) with Financial; D (delivery) with
Internal Processes and E (education) with Learning and Growth, these go to the
operation phase through the Hoshin Kanri structure and then pass to the
Balanced Scorecard. The authors don`t clearly define the purpose for which this
is done, as they do not give an objective reason.
Witcher and Chau (2007) and Yang and
Yehb (2009) understand that the Organization's Core Competencies and Critical
Success Factors are essential characteristics to keep in mind when developing
the strategy so that the company can achieve success
The FAIR model (F-Focus;
A-Alignment; I-Integration; R-Review) developed by Witcher and Butterworth
(2001) is used in the integrated Balanced Scorecard/ Hoshin Kanri models in the
strategy deployment phase through Hoshin Kanri by Witcher and Chau (2007) and
Thomaz (2015) with the aim of making this phase more systematized and more
focused structures.
The models by ArbabShirani and Muosakhani (2012) and Thomaz (2015) recommend that the
implementation of the measures necessary for the execution of the strategy be
supported by improvement programs
Without reference to continuous
improvement benchmarks, the Witcher and Chau (2007) model uses the PDCA (Plan,
Do Check, Act) to operationalize its structure, as does Thomaz (2015). Thomaz
(2015) for strategy deployment used, besides catchball, the X matrix developed
by Jackson (2006), so that it`s made in a more structured and more visual way.
Renata Redi (2003) develops her
model so that it can applied to large Organizations in which there are several
business units with a corporate strategy that deployed to local strategies. Of
all the models presented, only one clearly defines how to move from the
medium-term strategic objectives to the vital objectives to deploy annually,
Renata Redi (2003) indicate that this responsibility assigned to the Board,
which can identify one or more strategic objectives to deployed annually.
On the other hand, Thomaz (2015)
deployed all the medium and long-term objectives identified in the Balanced Scorecard and the
result was a very heavy system that was difficult to operate and to monitor.
5.
A STRATEGIC DEPLOYMENT WITH BSC AND
HK – A CONCEPTUAL FRAMEWORK PROPOSAL
In order to help organizations whose Strategic Thinking is
Continuous Improvement oriented, an integrated BSC and HK framework is
next proposed and detailed
So,
in order to establish and operationalize Continuous Improvement Strategic
Planning the classical logic of Balanced Scorecard will proposed supported by Hoshin
Kanri methodology and catchball cycles involving all organizational classical
levels on and Hybrid Framework (see Figure 4) in which:
The revision of state of art about
integration of Balanced Scorecard and Hoshin Kanri detected a recurring difficulty
in all the evaluated frameworks: as from the Balanced Scorecard objectives
(long-term strategies), determine the vital objectives, which will be the
subject of short-term strategies that will be part of the daily activities of
organizations.
To make this work more objective and easier is
possible using tools to help in prioritizing the objectives set by long-term
strategy in the vital objectives for one year.
·
Strategic thinking: this task
will be the only responsibility of senior management, where we are, where we
want to go and how we go, having nothing tactical or operational.
At this stage, the company`s Values, its Mission and Vision are
defined or reviewed establishing the company's competitive advantages, which
will differentiate it from its competitors.
Figure
4: Integrating BSC and HK to Strategic Thinking and Strategic planning a hybrid
framework
To
support the Strategic thinking process, following aspects must
considered:
·
Surroundings
analyses – SWOT analysis (Strengths, Weaknesses, Opportunities, Threats);
·
Competitive
Context characterization – considering the Porter’s 5 main forces (Competitors,
Suppliers, Customers, Substitute products, New entries);
·
Capabilities
& Competences identification and characterization;
·
Critical
Success Factors identification and characterization.
·
Strategic
Planning: this task will be the strategic thinking operationalization based on
the Balanced Scorecard methodology. For each of the four classical pillars
(Financial, Costumers, Internal Business and Learning & Growth), Top
Management and Middle Management will define objectives, measures, targets and
initiatives, for a period of three five years.
·
Hoshin
Planning: from the BSC using a priority matrix, Vital Few Objectives and
correspondent`s measures and target are selected, to be deployed to current
year.
·
Organization
define the essential criteria, the weight of each them (for example):
ü rapid achievement;
ü financial impact vs investment;
ü low resource requirements (human or financial);
ü precedence over other objectives;
ü degree of importance for the final
implementation of the Strategy.
And apply de priority matrix to
define de vital few objectives to deployed for the current year.
For each vital few objective, we
define a: measures, targets and initiatives using a Catchball methodology.
To deploy, operationalize and monitoring the vital few objectives for all
level of organization, we use an X Matrix (JACKSON, 2006).
Quality, Lean, TOC (Theory of
Constraints) and Six-Sigma tools can also be used to support the short-term
operationalization of the strategy (see Table 11)
Execution of these activities should
be aligned with long-term strategy, must have the support
of everyone, especially middle managers and shop floor employees, organized in
Kaizen teams, which implement, analyze and monitor the day-to-day activities.
This exercise repeated annually after a review of the work done and the results
obtained.
·
Catchball: This activity will be essential for the
involvement, deployment and monitoring of the strategy throughout the
organization because it follows the entire cycle from thinking the strategy, planning,
implement, analyze the strategy performance and it`s review.
·
Review of Business Performance: In defined periods, the resulting
implementation performance of the strategy must be audit and evaluated at
various levels of the organization. The day-to-day execution performance
resulting will be evaluated in a weekly audit of each Kaizen teams, which
evaluates the performance of the KPIs defined for each team, analyze
deviations, identify the causes and promote the necessary corrective actions if
needed.
The Hoshin audits information results will
analyzed in monthly audit meetings between the Manager of Departments and Top
Management. According to the performance of each, one suggested a corrective
action plan to correct the deviations.
The Board meets quarterly. At each of these
board meetings, it reviews one of four strategic pillars, the degree of team
involvement, the implementation of the annual plan, deviations, and corrective
actions proposed by the teams. (see Table 10)
·
Executive Review: The board should meet every year in order to
analyze, in detail, every pillar of the strategy.
For this meeting there are some
inputs like:
o
Level
of objectives, measures and initiatives implemented;
o
Results
of different Hoshin audits;
o
Level
of resources (people, equipment and facilities) performance;
o
KPI`s
results;
o
Business
performance;
o
In
addition, some outputs like level of achievement of the strategy and next
annual cycle needs.
·
New annual cycle: Coming to the end of annual cycle is necessary to prepare a new cycle.
In order to help preparing the new cycle the following supporting documents can
be used:
o
Company`s
Executive Border Report of the review;
o
Long-term
strategic planning (according with the four pillars of the Balanced Scorecard);
o
Hoshin
Plan of the previous cycle.
During the preparation of the new
Hoshin plan, the three essential requirements shouldn´t forgotten:
ü be aligned with long-term plan;
ü covering all the Organizational vital few
objectives;
ü be
directed to the Company’s day-to-day activities.
For
the preparation of the new cycle, the Catchball approach to collect inputs from
all levels of the organization is used again.
Table 10: Integrating BSC and HK in the proposed model
PDCA |
Operation |
Tools
and Documents |
Who |
When |
PLAN |
Strategic
Thinking, Vision and Mission |
·
5 Forces of Porter ·
SWOT ·
Critical Success Factors ·
Capabilities and Competences ·
Revision Document |
·
Top Management |
Every three
years |
Strategic
Planning (long-term) |
·
Balanced Scorecard ·
Catchball |
·
Top Management ·
Middle
Management |
Every three
years |
|
Short-term
operating strategy (one year) |
·
Thinking Process (TOC) ·
Hoshin Kanri – X Matrix ·
Catchball |
·
Top Management ·
Middle Management ·
Kaizen
Team |
Every year |
|
Definition
of KPI, targets and initiatives |
·
Hoshin Kanri – X Matrix ·
Catchball |
·
Middle Management ·
Kaizen
Team |
Every year |
|
DO |
Hoshin Plan
Implementation |
·
Quality Tools ·
Theory of Constraints Tools ·
Lean Tools ·
Six Sigma Tools |
·
Middle Management ·
Kaizen
Team |
Daily |
CHECK |
Review of
Business Performance |
·
Hoshin Audit ·
Middle Management Audit meeting ·
Top Management Audit meeting (one pillar of BSC) |
·
Daily Kaizen Manager ·
Executive committee ·
Board |
·
Weekly ·
Monthly ·
Every three months |
Executive
Review |
· Top
Management Audit ( all pillar of BSC, ) |
·
Board |
Every year |
|
ACT |
New Annual
Cycle Short-term
operating Strategy (one year ) |
·
Documents of revisions ·
Long-term Strategic Plan ·
Balanced Scorecard ·
Hoshin Kanri ·
Catchball ·
Thinking Process |
·
Top Management ·
Middle Management ·
Kaizen
Team |
Every year |
In
order to help the implementation of Hoshin Plan we present next a table 11 with
some tools who can used during the day-to-day activities.
Table 11: Hoshin Plan – package of some tools to help implementation
|
Quality |
TOC |
Lean |
Six Sigma |
Defining a problem,
improvement opportunity, or requirements |
·
Quality Function Deployment (QFD) ·
Ishikawa diagram |
·
Thinking Process |
·
VSM |
·
Project Charter ·
Voice of the Costumer |
Measuring Process
performance |
·
Pareto Chart ·
Histogram ·
Scatter Diagram |
|
·
OEE |
·
Process Map ·
Capability Analyses |
Analyzing
processes to determine root causes of variation, defects or poor performance |
·
Failure Mode and Effects analysis |
|
·
3C ·
5W |
·
Root Cause analysis ·
Multi Var Charts |
Improving process
performance by addressing root causes |
|
·
Five Focusing Steps ·
Throughput Accounting |
·
Kaizen events ·
SMED |
·
Design of Experiences |
Controlling
process and future performance |
|
|
·
5S ·
Poka-yoke ·
Standard Work ·
Visual Management ·
Daily Kaizen |
·
Control Plan Statistic Control Process |
Controlling
Working – Process |
|
·
Drum-Buffer-Rope (DBR) |
·
Kanban |
|
Others |
·
Flow Charts ·
Brainstorming ·
Check Sheet |
|
|
|
6.
MAIN CONCLUSION
For companies to remain competitive
in today's globalized marketplace, it is essential to ensure proper strategy
planning and implementation.
This should reflect the
Organization's mission and vision, the surrounding environment, the wishes of
its shareholders and the involvement of all employees.
Balanced Scorecard and Hoshin Kanri
both are used to perform this task. However, the different applications of each
methodology in various organizations and in different contexts have shown some
weaknesses. Integration may be a response to overcome the weaknesses found when
they applied separately.
The integrated framework presented
attempts to leverage and combine the best of each approach: BSC as a robust and
consistent approach to developing strategies and defining its long-term
objectives, indicators, initiatives, and Hoshin Kanri for deployment and
implementation of the strategy in the daily activity.
The developed framework differs from
existing models by presenting a tool for prioritizing strategic objectives
(priority matrix) to be implemented annually as well utilizing continuous
improvement tools, namely Quality, TOC, Lean and Six Sigma to help
implementation and monitoring the strategy in day-to-day activities.
In a Continuous
Improvement context, the integration of these two approaches in the proposed
hybrid model supports the involvement of the entire organization from top
management to the GEMBA, making strategy a working shared effort.
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