Business Performance Excellence

Jeffrey T. Luftig, Steven M. Ouellette

• Publisher: Bloomsbury Information
• Year: 2012
• Print ISBN: 9781849300438
• eBook ISBN: 9781849300605
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Is your business as profitable as it could be? How can you rise above your competition, and stay there once you have? Most management tools only look at one part of the picture, but Business Performance Excellence (BPE) is the complete model, integrating revolutionary new techniques with tried and tested approaches, covering the strategic, financial, systems, and human factors. The editors are experts in business performance improvement, and this approachable book presents the latest thinking and developments in the BPE model that has been enhanced and refined over the course of 30 years. The comprehensive case studies and worked examples presented can be applied to your business whatever your industry, benefiting your bottom line. Detailed coverage includes:
* Strategic planning and hoshin kanri * Customer product rationalization
* Restructuring and recalibrating
* Customer quality assurance systems
* The balanced scorecard
* Critical performance measures
* Benchmarking
* Financial performance turnaround
* Lean manufacturing
* Creating value through people

Strategic Planning and Policy Deployment

Hoshin Kanri: Deploying Your Strategic Intents to Achieve Business Excellence

by Jeffrey T. Luftig and Steven M. Ouellette

Lockheed Martin Engineering Management Program, College of Engineering and Applied Science, University of Colorado, Boulder, USA

This Chapter Covers

Introduction to hoshin kanri, a technique to align a company to achieve its strategic goals.

Strategic planning in the absence of hoshin.

The strategic planning process.

A real-world case study of hoshin planning in a turnaround crisis.

Introduction

Many companies strive to be the best in their market. Most never succeed. Many of those that do, do so only temporarily, and subsequently lose their position through misunderstanding how they got there and what is needed to stay there. Very few, as Jim Collins (2001) has stated, are capable of going from “good to great.”

Companies that achieve, and subsequently maintain, business excellence have a number of traits in common. One of the most fundamental, though, is that the company has a vision of where it is going and everyone there knows what they need to do in order to support the company’s objectives.

This does not happen by accident. The first phase in attaining business performance excellence is the process of strategic planning and policy deployment. In this chapter we will demonstrate a proven method called hoshin planning (also referred to as “policy deployment”), a process that is designed for identifying and deploying activities in order to make progress toward business performance excellence.

The outcome of an effective hoshin planning process is hoshin kanri, a Japanese phrase that means “controlling the compass” and which is interpreted to refer to the actions needed to align everyone in an organization to achieve the company’s goals (Akao, 1991). In the absence of companywide direction, cascaded through the organization, each person in the company has no alternative but to guess at what they should work on to add value. Using hoshin planning, employees know exactly what to do and how that supports the company’s objectives.

Strategic Planning in the Absence of Hoshin

In our experience, most companies perform strategic planning in exactly the reverse order that they should. The second author has experience of an organization that had just been through a large-scale and expensive strategic planning session. The results certainly looked impressive—a 20-page brochure with beautiful four-color photographs and a professionally designed layout on glossy paper. On closer examination, however, although each page corresponded to what each area or discipline was going to work on that year, there was no unifying theme and no direction for the organization as a whole.

Contrary to conventional wisdom, the last step in the strategic planning process is the strategic plan. The strategic plan is an output of all the preceding work, not a starting-point to figure out what to measure.

In this case, the strategic planning had been done by first asking each discipline to identify its SWOTs—strengths, weaknesses, opportunities, and threats. Each disparate division had done so, and from there found a number of strengths to leverage, weaknesses to improve, opportunities to exploit, and threats to avoid—and metrics to measure all of that. There was, however, no integration showing how these divisions were going to work toward a common goal, or how they would support one another on their path to excellence. Instead, each area focused on its own expertise, working on what it thought it should rather than on what the organization as a whole needed. With disparate goals such as these, divisions compete for resources and upper-level attention and the organization as a whole makes little or no progress toward an objective. In fact, in such a situation there is no objective for them to make progress toward.

We will define the proper strategic planning process in general terms first, and then follow up with a real-world case study of a business in need of a major turnaround in order to survive.

The Strategic Planning Process
Step 1: Who Are We?

In order to arrive at a destination, it is a good idea to know where you are going first. Yet many businesses have, at most, a plan for the future that consists of trite phrases that no one really believes influences policy. At worst, these statements are a cruel joke: for example, “People are our most important resource” in the face of downsizing. Is it any wonder that companies fail to arrive at success if they have never defined what success looks like?

The first step of strategic planning is to answer the questions: “Who are we, where are we going, what will we look like when we arrive, and how are we going to get there together?” These four questions are answered by four main statements: the vision, the mission, the value proposition, and the method of strategic differentiation.

The Vision

In our terminology the vision is not an empty statement of ideals, but a statement of how we define our success. The vision is a word-picture of where the organization will be in 10 or 15 years—a description of the destination that will result in the measures that will let us know if we are there.

The Mission

The mission is a statement about what milestone(s) we will accomplish and measure over the next three to five years in order to make progress toward the vision. If the vision is the destination, the mission identifies signposts along the way that will tell us we are on track.

The Value Proposition

The value proposition is why our customers give us money. This requires a clear-eyed understanding of what exactly our customers expect and how we get it to them. A value proposition should be focused on and be appealing to your customers. A value proposition that resonates with management more than with customers is a recipe for disaster.

The Method of Strategic Differentiation

The authors favor Treacy and Wiersema’s (1993) model of how companies differentiate themselves from their competition. This provides a clear objective for the company: excel in one area while maintaining parity in the others.

Step 2: What Do We Measure?

Now that we know where we are going, we can examine the words that we used to identify what to measure so we can know the current performance of the company in those areas that are necessary to achieve the vision.

Construct Analysis

Construct analysis is the means we use to identify themes in the words chosen to describe our destination and turn them into measurements. Constructs describe—even to an external observer—how the company will appear if successful. Words or terms such as “recognized (as),” “dominate,” “safe(ty),” “reliable,” and “quality” describe common constructs in vision, mission, and value proposition statements. This step prevents empty slogans, since measurements drive behavior and the flow of resources. This encourages the organization to use the vision, mission, and value proposition statements to make management and resource decisions.

Metrics Cascade

Once the construct analysis has defined the measures of success for the organization (level I metrics), these measures must be translated to every level of the organization. A CEO is not likely to achieve his or her metrics if no one else in the company knows how what they do relates to those metrics. A useful tool for this translation is a control matrix that shows the relationship of each management level to the next level down, similar to a quality function deployment (QFD) matrix.

During the creation of the metrics, the owner of the companywide level I metrics challenges his or her direct staff (level II) to come up with measures for their areas of responsibility and within their span of control that relate to the level I metrics. This negotiation takes place at each level of the company, until every individual has an opportunity to propose output metrics for their area of responsibility. This step ensures that everyone knows what to measure and how it ...

Table of contents

• Cover
• Title Page
• Contents
• Introduction: The Origins and Structure of the Original Model for Business Performance Excellence (BPE) by Jeffrey T. Luftig and Steven Ouellette
• Contributors
• Strategic Planning and Policy Deployment
• Finance and Cost Reduction
• Systems and Tools in Business Performance Improvement
• Ethics and Creating Value through Employee Management
• Imprint