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Run to an annual cycle, Hoshin Kanri emerged in the 1960s in Japan out of the total quality movement and is based very much on the Shewhart/
Deming plan-do-check act cycle.
Catchball
Hoshin uses a process called “catchball” to align all efforts across the organiza-tion. First, the catchball process translates strategies into increasingly lower- level objectives in a “cause-and-effect” way. Catchball then ensures that all the objectives at every level are well coordinated across process and functional lines.
A Strategy Map (in particular, at the theme level) can be used to guide the annual Hoshin Kanri process.
Thai Carbon Black Case Illustration
Palladium Hall of Fame inductee Thai Carbon Black—TCB—the largest single-plant producer of carbon black, the fine powder used in rubber manu-facturing, chiefly for automobile tires, used both the Balanced Scorecard and Hoshin Kanri in a cascading strategy.
How to Formulate Strategies for the
Digital Age
Getting Results through Agile and Adaptive Strategy Execution
How to Build an “Agile,” and
“Adaptive,”
Balanced Scorecard System Unleashing the
Power of Analytics for Strategic Learning and Adapting
Driving Rapid Enterprise Alignment
• Map the enterprise strategy
• Develop a causal hypothesis
• KPI and Target identification
• Identify breakthrough strategic initiatives.
• Identify strategic risks
• Vertical enterprise alignment
• Horizontal enterprise alignment
• Devolve ownership and responsibility
• Agile cross-enterprise collaboration
• Align financial planning systems with the strategy
• Driver-based rolling forecasts
• Identify key operational drivers of strategic goals
• Strategy-aligned process improvement
• Strategy-aligned project management
• Clarify enterprise sense of purpose
• Test the business model
• Disruptive innovation management
• Co-create strategies with stakeholders
• Create a Quantified Vision Stage 1
Stage 2
Stage 3 Stage 4
• Leadership for execu on
• Align the culture with strategy
• Strategy-focused value statements
• Create a culture of learning
• Strategic Communica on Continually test the strategic
hypothesis Master advanced causal analytics Analytics-driven strategy reports and
reviews Aligning operational analytics with
strategic analysis Apply an adaptive learning feedback
loop.
Stage 5
Strategy-Aligned Leadership and Culture
Create a Strategy-Aligned Workforce for the 4th Industrial Revolution
• New employer-employee contract employee engagement
• Two-way performance conversations
• Individual sense of purpose
Fig. 6.1 Stage 3. Driving rapid enterprise alignment
TCB’s Quality Council (a senior executive team) decided to adopt the Balanced Scorecard, making it the central tool in its management arsenal. The Balanced Scorecard helped define and map strategy. Together with Hoshin- Kanri and Total Quality Management, it would help set goals and execute strategy. (Later, Six Sigma was used tactically within strategic initiatives).
The executive team sets a five-year strategic plan that it assesses and refines each year—along with the Strategy Map—in the Management Review and Quality Council meetings. The result is a one-year plan, known as the Presidents Policy, which contains key performance targets that align to each of the four Balanced Scorecard perspectives. Using catchball, TCB sets targets and supporting measures.
Senior managers set high-level strategic measures, targets, and “managing points” (key objectives, which must be approved by the president).
Through a dialogue with their direct reports, managers identify support-ing measures for the level below, down to the supervisor level. “Checksupport-ing points,” components of the managing points, are in turn the responsibility of subordinate managers. At each level, action plans are launched to drive performance.
Balanced Scorecard
The corporate system serves as the steer for the divisional, strategic business unit and functional scorecards—or variations thereof. For more conventional Balanced Scorecard users, cascading (which, as we explain below, is not syn-onymous with alignment) is typically delivered through building Balanced Scorecard systems at a devolved level—a devolved approach.
Conventional Scorecard Shortcomings
Although widely used, and seemingly sensible for making “strategy everyone’s everyday job,” over the last couple of decades, practice has uncovered some potential shortcomings of the conventional scorecard cascading approach.
First, it is common for the cascade process to take an inordinate and ener-vating amount of time, especially when a large suite of scorecard systems is being built. By the time the final piece of the enterprise-wide scorecard jigsaw is in place, the picture the puzzle shows no longer accurately describes the strategy, or more usually, the required approach for its delivery. However, given the amount of time it takes to build, (sometimes up to a year—and even longer on occasions) there is little appetite to start again.
Secondly, the conventional cascade has always come with a suspicion of conforming to classical Tayloresque thinking. This well-crafted plan by lead-ers (as described in the top-level Strategy Map and Balanced Scorecard) is handed over “as is” (or close to) for departmental managers to implement.
The classic scorecard approach is to cascade themes, objectives, and KPIs according to three dimensions—identical, contributory, and unique.
Identical
Relevant elements are identical to those on the enterprise strategy map and scorecard.
Contributory
Some elements are translated to articulate the unique and direct contributions of the specific unit.
New
Unit develops new elements that describe indirect contributions to the enter-prise scorecard.
To be fair, Kaplan and Norton recommend (and as taught in the Palladium Balanced Scorecard certification boot camp—which the authors of this book have delivered on numerous occasions) that cascaded identical elements (from themes to initiatives) should only reflect shared priorities—and that this is most often seen in the financial and learning and growth perspectives. Too often, this is not the case, and everything from the top level is cascaded.
“Here’s your objectives, KPIs, etc., – get on with it” (in keeping with the beloved Tayloresque diktat that managers think and reports do). After a while, the scorecard architects scratch their heads wondering why no one is taking this scorecard stuff seriously!
Too Cascade or Not
Before starting a cascade process, a useful question to ask is “do we need to cascade?” It is not always required, and usually not early in the scorecard jour-ney. What precisely will cascading achieve? The stock answer of “aligning the organization to the strategy” is not enough, at least at the outset. Be clear
about the tangible outcomes, in terms of results, working practices, structure, behaviours, and so on.
Also, consider whether the capabilities are in place to manage a suite of scorecard systems and how quickly the organization could change elements of the system if required.
There might also be times when a cascade is simply not required, which might be for specific organizational reasons, such as described in the Saatchi
& Saatchi case study in Panel 1, where commonality and standardization across the globe (and in a very short timeframe) was a key reason for scorecard adoption.
Moreover, even if a cascade is required, it might be appropriate to pilot in a unit or function first, communicating progress and impact to the rest of the organization. During the pilot, the strategy team will also become more knowledgeable on what works, doesn’t work, and likely resistance triggers.
This might save a lot of pain later.