Using Hoshin PlanningUsing Hoshin Planning
for Six Sigma Projectfor Six Sigma Project
SelectionSelection
Ed PowersEd Power...
About….Ed PowersAbout….Ed Powers
►Co-Founder and EVP Operations, PrivateCo-Founder and EVP Operations, Private
Escapes, LL...
PremisesPremises
►Selecting appropriate projects is one of theSelecting appropriate projects is one of the
biggest challen...
AgendaAgenda
► Challenges with the Six Sigma Project SelectionChallenges with the Six Sigma Project Selection
ProcessProce...
The Project Selection ChallengeThe Project Selection Challenge
““Some feel that project selection is the Achilles'Some fee...
A Recommended ApproachA Recommended Approach
1.1. Identify Black Belt (BB) projects to be worked onIdentify Black Belt (BB...
Typical Business PlanningTypical Business Planning
Commit Funds
and
Resources
Develop
Detailed Plans
Implement
Plans
Revie...
The Window of OpportunityThe Window of Opportunity
Commit Funds
and
Resources
Develop
Detailed Plans
Implement
Plans
Revie...
Strategic PlanningStrategic Planning
1. Strategic Direction1. Strategic Direction
2. Customers and Market Analysis2. Custo...
Business StrategiesBusiness Strategies
Market Leader
Market
Challenger
Market
Follower
Market
Nicher
Total Market Share
Ex...
Strategic PlanningStrategic Planning
1. Strategic Direction1. Strategic Direction
2. Customers and Market Analysis2. Custo...
Step 10: First Year PlanStep 10: First Year Plan
5-Year
Objectives
Development &
Introduction Plan
Creation of
New Value
K...
Japanese Planning MethodsJapanese Planning Methods
ProcessPerformanceMeasure
Time
hoshin kanri
“policy control”
kaizen
“co...
•Describes the “what” and
the “how”
•Reinforces leadership
•Objectives and goals are
process based
•Goals are set based on...
Leadership
Leadership
Leadership
Organizational AlignmentOrganizational Alignment
Implementation
Review
Planning
Customers...
The Hoshin Planning TableThe Hoshin Planning Table
OBJECTIVE STRATEGY (OWNER) PERFORMANCE MEASURENO.
TARGET/GOAL
A
B
C
D E...
Hoshin Planning CascadeHoshin Planning Cascade
ANNUAL PLAN
SITUATION:
OBJECTIVE PERFORMANCE MEASURESTRATEGY (OWNER)
TARGET...
Hoshin Planning ProcessHoshin Planning Process
Form Team
Collect
Situational
Data
Draft
Critical Busi-
ness Issues
Draft
K...
Linking to Six Sigma ProjectsLinking to Six Sigma Projects
►Identify underlying themes in statedIdentify underlying themes...
Hoshin Implementation PlanningHoshin Implementation Planning
ProcessProcess
Form Team
Refine
Strategy and
Perf. Meas.
Dete...
The Implementation Planning TableThe Implementation Planning Table
STRATEGY TACTICS
N D J F M A M J J A S O
NO.
PERF. METR...
Hoshin Review CycleHoshin Review Cycle
►Periodic, formal reviewsPeriodic, formal reviews
►““Roll up” sequence, lowest to h...
Case Study: Center PartnersCase Study: Center Partners
►BackgroundBackground
 Outsourced contact center servicesOutsource...
ANNUAL PLAN (FY2003)
HOSHIN PLANNING
Prepared By: Richard Keith Entity: Center Partners Location: Fort Collins
Date: 3/5/2...
Gross Margin “5 Why’s” DiagramGross Margin “5 Why’s” Diagram
Low G.M.
Support ratios out of line
Inadequate Agent labor co...
Hoshin 1.2 Deployment CascadeHoshin 1.2 Deployment Cascade
1.2 Improve
profitability
through
increased
efficiencies
1.2.1 ...
FY03 ANNUAL PLAN: IMPLEMENTATION PLAN
Prepared by: Ed Powers Entity: Center Partners Department: Quality Status:
Q4 Q1 Q2 ...
FY03 HOSHIN REVIEW TABLE—JANUARY 2003
Status:  = On Track      = Behind Plan        = Far Below Expectati...
Where to StartWhere to Start
►Learn the basics of strategic planning andLearn the basics of strategic planning and
hoshin ...
Recommended ReadingRecommended Reading
►Total Quality Control EssentialsTotal Quality Control Essentials, Sarv Singh, Sarv...
Using hoshin planning for six sigma project selection
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Using hoshin planning for six sigma project selection

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I gave this presentation in 2004 to the American Society for Quality (ASQ) Denver Section on the subject of using Hoshin planning to select business-critical improvement projects. This is a great approach to build support and alignment on Lean Six Sigma projects from the top down.

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  • Source: Adapted from Kotler, Marketing Management 1997
  • Using hoshin planning for six sigma project selection

    1. 1. Using Hoshin PlanningUsing Hoshin Planning for Six Sigma Projectfor Six Sigma Project SelectionSelection Ed PowersEd Powers ASQ Denver SectionASQ Denver Section March 31, 2004March 31, 2004
    2. 2. About….Ed PowersAbout….Ed Powers ►Co-Founder and EVP Operations, PrivateCo-Founder and EVP Operations, Private Escapes, LLCEscapes, LLC ►Eight years experience in executive qualityEight years experience in executive quality management, operations, and consultingmanagement, operations, and consulting from Center Partners, Sorcia, and Hewlett-from Center Partners, Sorcia, and Hewlett- PackardPackard ►Six Sigma Black BeltSix Sigma Black Belt ►Examiner, Baldrige National Quality AwardExaminer, Baldrige National Quality Award ►ASQ Certified Quality ManagerASQ Certified Quality Manager
    3. 3. PremisesPremises ►Selecting appropriate projects is one of theSelecting appropriate projects is one of the biggest challenges facing Six Sigma Blackbiggest challenges facing Six Sigma Black Belts and ChampionsBelts and Champions ►Hoshin planning is an overlookedHoshin planning is an overlooked methodology that can be used to addressmethodology that can be used to address this problemthis problem ►Six Sigma Black Belts and Champions canSix Sigma Black Belts and Champions can be more successful using a hoshinbe more successful using a hoshin approachapproach
    4. 4. AgendaAgenda ► Challenges with the Six Sigma Project SelectionChallenges with the Six Sigma Project Selection ProcessProcess ► Overview of the Hoshin MethodOverview of the Hoshin Method ► The Hoshin Planning ProcessThe Hoshin Planning Process ► How to Link Strategies with Six Sigma ProjectsHow to Link Strategies with Six Sigma Projects ► The Hoshin Deployment and Review CycleThe Hoshin Deployment and Review Cycle ► Case StudyCase Study ► Where to StartWhere to Start
    5. 5. The Project Selection ChallengeThe Project Selection Challenge ““Some feel that project selection is the Achilles'Some feel that project selection is the Achilles' heel of Six Sigma. One quickly learns that ifheel of Six Sigma. One quickly learns that if projects are not selected properly the Six Sigmaprojects are not selected properly the Six Sigma initiative can be at risk: Projects don't deliver theinitiative can be at risk: Projects don't deliver the expected bottom-line results, the organizationexpected bottom-line results, the organization becomes frustrated with the effort, and, slowly butbecomes frustrated with the effort, and, slowly but surely, attention and resources are focused onsurely, attention and resources are focused on other initiatives.”other initiatives.” Source: Ronald D. Snee “Dealing with the Achilles’ Heel of Six Sigma Initiatives,” Quality Progress, March 2001
    6. 6. A Recommended ApproachA Recommended Approach 1.1. Identify Black Belt (BB) projects to be worked onIdentify Black Belt (BB) projects to be worked on in the early stages of Six Sigma.in the early stages of Six Sigma. 2.2. Create a project hopper.Create a project hopper. 3.3. Examine the project portfolio to make sure theExamine the project portfolio to make sure the projects meet the strategic improvement needs ofprojects meet the strategic improvement needs of the organization.the organization. 4.4. Create an improvement system that manages allCreate an improvement system that manages all the improvement efforts of the organization.the improvement efforts of the organization. Include the Six Sigma projects as well as theInclude the Six Sigma projects as well as the other improvement projects.other improvement projects. Source: Ronald D. Snee and William F. Rodebaugh Jr., “The Project Selection Process,” Quality Progress, September 2002
    7. 7. Typical Business PlanningTypical Business Planning Commit Funds and Resources Develop Detailed Plans Implement Plans Review Results Determine Priorities Collect Information Develop Strategies Communicate and Delegate
    8. 8. The Window of OpportunityThe Window of Opportunity Commit Funds and Resources Develop Detailed Plans Implement Plans Review Results Determine Priorities Collect Information Develop Strategies Communicate and Delegate Work Here!
    9. 9. Strategic PlanningStrategic Planning 1. Strategic Direction1. Strategic Direction 2. Customers and Market Analysis2. Customers and Market Analysis 3. Competition3. Competition 4. Necessary Solutions4. Necessary Solutions 5. How We Will Win5. How We Will Win 6. Development and Introduction Plan6. Development and Introduction Plan 7. The Value Delivery System7. The Value Delivery System 8. Risk Analysis8. Risk Analysis 9. Pro-Forma Financial Analysis9. Pro-Forma Financial Analysis 10. First-Year Plan10. First-Year Plan Plan-10 Step Plan Do-Execute Check Act Yearly Updates & Adjustments
    10. 10. Business StrategiesBusiness Strategies Market Leader Market Challenger Market Follower Market Nicher Total Market Share Expand •New users •More usage Defend •Position •Flank •Preemptive •Counteroffensive •Mobile (broaden/diversify) •Contraction (divest) Attack •Frontal •Flank •Encirclement (blitzkrieg) •Bypass (diversify, leapfrog) •Guerrilla (price wars, legal moves) Subvert •Clone •Imitate •Adapt Coexist •Specialize •Partner Source: Kotler, Marketing Management, 1997
    11. 11. Strategic PlanningStrategic Planning 1. Strategic Direction1. Strategic Direction 2. Customers and Market Analysis2. Customers and Market Analysis 3. Competition3. Competition 4. Necessary Solutions4. Necessary Solutions 5. How We Will Win5. How We Will Win 6. Development and Introduction Plan6. Development and Introduction Plan 7. The Value Delivery System7. The Value Delivery System 8. Risk Analysis8. Risk Analysis 9. Pro-Forma Financial Analysis9. Pro-Forma Financial Analysis 10. First-Year Plan10. First-Year Plan Plan-10 Step Plan Do-Execute Check Act Yearly Updates & Adjustments
    12. 12. Step 10: First Year PlanStep 10: First Year Plan 5-Year Objectives Development & Introduction Plan Creation of New Value Key Business Strategies Steps 1-7 Hoshin Business Fundamentals Key Process Improvement Plans Breakthroughs Process Control Strategic Process Improvement Step 10
    13. 13. Japanese Planning MethodsJapanese Planning Methods ProcessPerformanceMeasure Time hoshin kanri “policy control” kaizen “continuous improvement” nichijo kanri “daily control”
    14. 14. •Describes the “what” and the “how” •Reinforces leadership •Objectives and goals are process based •Goals are set based on required process performance •Encourages cooperation •Comprehensive and integrated •Describes the “what,” not the “how” •Reinforces authority •Objectives and goals are functionally based •Goals are set arbitrarily •Encourages competition •Fragmented and disjointed Management By Objective Hoshin Planning MethodologiesPlanning Methodologies
    15. 15. Leadership Leadership Leadership Organizational AlignmentOrganizational Alignment Implementation Review Planning Customers, Suppliers, Technologies Source: Sarv Singh Soin, TQC Essentials
    16. 16. The Hoshin Planning TableThe Hoshin Planning Table OBJECTIVE STRATEGY (OWNER) PERFORMANCE MEASURENO. TARGET/GOAL A B C D E WHY WHAT HOW Tied to HOW ANNUAL PLAN HOSHIN PLANNING TABLE PREPARED BY: PAGE OF DATE FISCAL YEAR DIVISION LOCATION/DEPARTMENT SITUATION: Tied to WHAT A. Describes the business situation and WHY we are here. B. WHAT objective is to be reached (1 - 1.5 years). C. What Target/Goal is to be reached (one year). D. HOW we are going to reach the OBJECTIVE (strategies). E. How we will measure progress of each strategy.
    17. 17. Hoshin Planning CascadeHoshin Planning Cascade ANNUAL PLAN SITUATION: OBJECTIVE PERFORMANCE MEASURESTRATEGY (OWNER) TARGET/GOAL Strategy SITUATION: OBJECTIVE PERFORMANCE MEASURESTRATEGY (OWNER) TARGET/GOAL Objective Strategy STRATEGY NO. OWNER PERFORMANCE METRICS TACTICS Objective Objective Vertical and Horizontal Problem Decomposition
    18. 18. Hoshin Planning ProcessHoshin Planning Process Form Team Collect Situational Data Draft Critical Busi- ness Issues Draft Key Success Factors Draft Strategies, Goals & Owners Document the Plan Share, Refine & Cascade Draft Business Objective(s)
    19. 19. Linking to Six Sigma ProjectsLinking to Six Sigma Projects ►Identify underlying themes in statedIdentify underlying themes in stated strategiesstrategies  Revenue enhancementRevenue enhancement  Cost reductionCost reduction ►Sort into “knowns” and “unknowns”Sort into “knowns” and “unknowns” ►Decompose “unknowns”Decompose “unknowns” ►Cascade and implement as Six SigmaCascade and implement as Six Sigma projectsprojects
    20. 20. Hoshin Implementation PlanningHoshin Implementation Planning ProcessProcess Form Team Refine Strategy and Perf. Meas. Determine Key Success Factors Develop Work Breakdown Structure Sequence Tasks Assign Owners & Timelines Document the Plan Brainstorm & Select Best Solutions
    21. 21. The Implementation Planning TableThe Implementation Planning Table STRATEGY TACTICS N D J F M A M J J A S O NO. PERF. METRICS A B C D E WHAT HOW WHEN FY 99 ANNUAL PLAN: IMPLEMENTATION PLAN PREPARED BY: DATE FISCAL YEAR DIVISION LOCATION/DEPARTMENT No. Tied to WHAT A. WHAT objective is to reached (Strategy assigned) B. What Performance Measure is to be reached. C. HOW we are going to reach the objective (Tactics). D. WHO is responsible for what. E. WHEN we are going to complete each Tactic. OWNER WHO
    22. 22. Hoshin Review CycleHoshin Review Cycle ►Periodic, formal reviewsPeriodic, formal reviews ►““Roll up” sequence, lowest to highest levelRoll up” sequence, lowest to highest level ►Plan, Do, Check, ActPlan, Do, Check, Act ►Constructive and supportive, not critical andConstructive and supportive, not critical and judgmentaljudgmental ►Results published and communicatedResults published and communicated
    23. 23. Case Study: Center PartnersCase Study: Center Partners ►BackgroundBackground  Outsourced contact center servicesOutsourced contact center services  Young company, rapid growthYoung company, rapid growth  Acquired by WPPAcquired by WPP ►Challenges:Challenges:  Shrinking top lineShrinking top line  Pressure on bottom linePressure on bottom line
    24. 24. ANNUAL PLAN (FY2003) HOSHIN PLANNING Prepared By: Richard Keith Entity: Center Partners Location: Fort Collins Date: 3/5/2003 9:12:00 AM Dept: Headquarters Situation: After a very strong 2001, 2002’s financial results have been disappointing. Top-line revenue growth, especially with new clients, has been slow to materialize. Improvements have been made in the sales and marketing effort in 2H ’02, but further investments and improvements in strategy, structure, and process are needed to sustain top-line growth. Furthermore, continuing operational improvements are also required to grow operating profit because of lower, “commodity” pricing and higher benefit costs that have pressured gross margins. OBJECTIVE NO. STRATEGY (OWNER) PERFORMANCE MEASURE 1.0 Grow operating profit, gross margins, and diversify and strengthen our revenue stream. TARGET/GOAL  O.P. improved >= $x  Pipeline >= $y  Close new business with recognized revenue of >= $z 1.1 1.2 1.3 Create a high-powered sales and marketing process. (Martha) Improve profitability through increased efficiencies. (Kären) Identify value of WPP connections and implement revenue generation. (Richard)  8 direct mails  12 PR placements  5 magazine editorials  2 consultant events  8 trade shows  Realize $a million of GM planned for in the budget  Reduce monthly client performance penalties to $0  Reduce Attrition to <4%/mo.  Improve GM:Revenue by b% over current budget by yearend  Win 2 deals with WPP in 2003 Hoshin Plan File Name: 2003 Hoshin 3/5/2003 9:12:00 AM Page 1 of 1
    25. 25. Gross Margin “5 Why’s” DiagramGross Margin “5 Why’s” Diagram Low G.M. Support ratios out of line Inadequate Agent labor cost management Performance penalties Lower contract pricing Non-value added support costs High attrition Unpaid scope creep Unrepaid pass-through costs Bad contract terms (SS8/9) Variability in Agent billing High attrition dynamics Tenure and history of raises Labor market and where work is located 2nd level Agent pay does not match function Agent pay linked to tenure, not performance No pay caps in place Needless promotions Lack of audits/updates Tougher client negotiation Lack of CP walk-away power Competitive market pricing Lack of strong sales funnel Poor org. structure design Limited assumptions Low Agent morale Current work system limits contribution Poor coaching Poor scheduling policies High stress High queues Lack of client’s customer focus (QA) Pay not competitive Recent pay cut Company downsizing Can’t say no Cost of doing business Bad client contract terms Bad vendor contracts History of lower volumes Low QA scores Low SL/High AHT New Agents on floor Client Best Practices Poor coaching Client QA measurement issues Client not allowing CP-paid attrition training SOW scope creep (0.25%) (0.8%) (1.7%) (2%) (0.5%?) (1%) (?) (2003 G.M. improvement opportunity)
    26. 26. Hoshin 1.2 Deployment CascadeHoshin 1.2 Deployment Cascade 1.2 Improve profitability through increased efficiencies 1.2.1 Develop and implement self-directed work teams 1.2.2 Implement world-class coaching 1.2.3 Reduce unscheduled absences and schedule our operations more efficiently through Absence Management 1.2.4 Develop consistent, understandable guidelines for compensation. 1.2.5 Imagine, develop, and deploy company-wide desktop tools that provide measurable performance improvements. 1.2.6 Provide information to internal and external decision makers in a format they prefer to use in sub-second response time.
    27. 27. FY03 ANNUAL PLAN: IMPLEMENTATION PLAN Prepared by: Ed Powers Entity: Center Partners Department: Quality Status: Q4 Q1 Q2 Q3No. Strategy No. Tactics Owner D J F M A M J J A S O N    Complete Design X X  1 Map process and details Ed w/team 18  2 Document process Jason 19  3 Refine metrics and goals Ed 19  4 Run financial models and determine compensation Ed w Tommy and Jenny 19  5 Do site Ops review Rick 20  6 Get executive approval Ed w/ Rick & team 20 6  7 Revise training to fit mentoring model Todd 27  8 Revise Spring Training program (incl. Checklist) Todd 27  9 Revise Mentor training program Todd 8  10 Revise Coach’s Checklists Rita 13  11 Develop Major League and Coach curricula Todd 3  1.2 .1 Create a production environment that promotes high performance and Agent self- sufficiency, and optimizes leadership and support resources. Pilot with AT&T Bay X X X X 12 Identify Mentors Jason 20  13 Determine Coach assignments Robert 28 14 Run stats to determine team assignments Jason 22  15 Determine Major League and All Star teams Robert 28  16 Train and certify Mentors Todd 9  17 Run Spring Training Todd 16- 30  18 Set up promotions and hand-outs Rick 24 19 Check HRMS and Payroll issues Tanya 24  20 Train Coaches Todd 7  21 Conduct awareness sessions (all participants) Todd 7  Performance Metrics  Reduce 90- day Attrition by 3%  Reduce Agent Time to Norm by 20%  No increase in net labor costs  Improve employee satisfaction by average of 22 Train All Star players Todd 7 
    28. 28. FY03 HOSHIN REVIEW TABLE—JANUARY 2003 Status:  = On Track      = Behind Plan        = Far Below Expectations     = Metrics or strategy change Trend:    Concern: H = High, M = Moderate, L = Low Prepared by: Richard Keith Date:2/18/2003 Entity: Center Partners Dept: Headquarters Status/ Trend/ ConcernNo Hoshin Objective (Plan) Performance Target / Goal Actual Performance (Do) Oct Nov Dec Jan Root Cause of Deviation (Check) Corrective Action (Act) 1.0 Grow operating profit, gross margins, and diversify and strengthen our revenue stream.  O.P. improved >= $x  Pipeline >= y  Close new business with recognized revenue of >= z  2 strategies in the green  O.P. improved in January over budget  Pipeline at $w  No new business closed  Metrics refined       Late 2003 budget approval and changes in targets have slowed progress in some areas  Marketing and sales misalignment  Need to better align marketing and sales efforts to build revenue at a faster rate Status/ Trend/ ConcernNo Hoshin Strategies (Plan) Performance Metric(s) Actual Performance (Do) Oct Nov Dec Jan Root Cause of Deviation (Check) Corrective Action (Act) 1 Create a high- powered sales and marketing process. (Martha)  8 direct mails  12 PR placements  5 magazine editorials  2 consultant events  8 trade shows  Funnel growing; lots of RFPs now  BOOST opportunities being acted on  New products defined      2 Improve profitability through increased efficiencies. (Kären)  Realize $a million of GM planned for in the budget  Reduce monthly client performance penalties to $0  Reduce Attrition to <4%/mo.  Improve GM:Revenue by b% over current budget by yearend  2 strategies in the green (See Hoshin 1.2 Review Table)       Lingering 2003 budgetary concerns are causing milestones to slip and scope to change  Need to identify additional  Resolve budget questions as soon as possible 3 Identify value of WPP connections and implement  Win 2 deals with WPP in 2003  Progress linking with WPP on financial segment opportunities,      Richard and Martha to develop implementation plan to include WPP summit conference by late March  Need to resolve if internal
    29. 29. Where to StartWhere to Start ►Learn the basics of strategic planning andLearn the basics of strategic planning and hoshin kanrihoshin kanri ►Work with Champion/Executive Sponsor toWork with Champion/Executive Sponsor to identify opportunities for strategic planningidentify opportunities for strategic planning participationparticipation ►Facilitate/co-facilitate annual planningFacilitate/co-facilitate annual planning ►Own the deployment and review cyclesOwn the deployment and review cycles
    30. 30. Recommended ReadingRecommended Reading ►Total Quality Control EssentialsTotal Quality Control Essentials, Sarv Singh, Sarv Singh Soin. McGraw-Hill, ISBN 0070595488Soin. McGraw-Hill, ISBN 0070595488 ►Beyond Strategic Vision: EffectiveBeyond Strategic Vision: Effective Corporate Action with Hoshin PlanningCorporate Action with Hoshin Planning,, Michael Cowley and Ellen Domb.Michael Cowley and Ellen Domb. Butterworth-Heinemann, ISBN 0750698438Butterworth-Heinemann, ISBN 0750698438
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