Using Hoshin Using Hoshin Planning for Six Planning for Six Sigma Project Sigma Project
SelectionSelection
Ed PowersEd Powers
ASQ Denver SectionASQ Denver Section
March 31, 2004March 31, 2004
About….Ed PowersAbout….Ed Powers
►Co-Founder and EVP Operations, Private Co-Founder and EVP Operations, Private Escapes, LLCEscapes, LLC
►Eight years experience in executive Eight years experience in executive quality management, operations, and quality management, operations, and consulting from Center Partners, Sorcia, consulting from Center Partners, Sorcia, and Hewlett-Packardand Hewlett-Packard
►Six Sigma Black BeltSix Sigma Black Belt►Examiner, Baldrige National Quality Examiner, Baldrige National Quality
AwardAward►ASQ Certified Quality ManagerASQ Certified Quality Manager
PremisesPremises
►Selecting appropriate projects is one of Selecting appropriate projects is one of the biggest challenges facing Six Sigma the biggest challenges facing Six Sigma Black Belts and ChampionsBlack Belts and Champions
►Hoshin planning is an overlooked Hoshin planning is an overlooked methodology that can be used to methodology that can be used to address this problem address this problem
►Six Sigma Black Belts and Champions Six Sigma Black Belts and Champions can be more successful using a hoshin can be more successful using a hoshin approachapproach
AgendaAgenda
► Challenges with the Six Sigma Project Challenges with the Six Sigma Project Selection ProcessSelection Process
► Overview of the Hoshin MethodOverview of the Hoshin Method► The Hoshin Planning ProcessThe Hoshin Planning Process► How to Link Strategies with Six Sigma How to Link Strategies with Six Sigma
ProjectsProjects► The Hoshin Deployment and Review CycleThe Hoshin Deployment and Review Cycle► Case StudyCase Study► Where to StartWhere to Start
The Project Selection The Project Selection ChallengeChallenge
““Some feel that project selection is the Some feel that project selection is the Achilles' heel of Six Sigma. One quickly Achilles' heel of Six Sigma. One quickly learns that if projects are not selected learns that if projects are not selected properly the Six Sigma initiative can be at properly the Six Sigma initiative can be at risk: Projects don't deliver the expected risk: Projects don't deliver the expected bottom-line results, the organization bottom-line results, the organization becomes frustrated with the effort, and, becomes frustrated with the effort, and, slowly but surely, attention and resources slowly but surely, attention and resources are focused on other initiatives.” are focused on other initiatives.”
Source: Ronald D. Snee “Dealing with the Achilles’ Heel of Six Sigma Initiatives,” Quality Progress, March 2001
A Recommended ApproachA Recommended Approach
1.1. Identify Black Belt (BB) projects to be Identify Black Belt (BB) projects to be worked on in the early stages of Six Sigma. worked on 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 Examine the project portfolio to make sure
the projects meet the strategic the projects meet the strategic improvement needs of the organization. improvement needs of the organization.
4.4. Create an improvement system that Create an improvement system that manages all the improvement efforts of the manages all the improvement efforts of the organization. Include the Six Sigma projects organization. Include the Six Sigma projects as well as the other improvement projects. as well as the other improvement projects.
Source: Ronald D. Snee and William F. Rodebaugh Jr., “The Project Selection Process,” Quality Progress, September 2002
Typical Business PlanningTypical Business Planning
Commit Funds and Resources
Develop Detailed
PlansImplement
Plans
Review Results
Determine Priorities
Collect Information
Develop Strategies
Communicate and
Delegate
The Window of OpportunityThe Window of Opportunity
Commit Funds and Resources
Develop Detailed
PlansImplement
Plans
Review Results
Determine Priorities
Collect Information
Develop Strategies
Communicate and
Delegate
Work Here!
Strategic PlanningStrategic Planning
1. Strategic Direction1. Strategic Direction2. Customers and Market Analysis2. Customers and Market Analysis3. Competition3. Competition4. Necessary Solutions4. Necessary Solutions5. How We Will Win5. How We Will Win6. Development and Introduction Plan 6. Development and Introduction Plan 7. The Value Delivery System7. The Value Delivery System8. Risk Analysis8. Risk Analysis9. Pro-Forma Financial Analysis9. Pro-Forma Financial Analysis10. First-Year Plan10. First-Year Plan
Plan-10 Step Plan
Do-Execute
Check
ActYearly Updates & Adjustments
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
Strategic PlanningStrategic Planning
1. Strategic Direction1. Strategic Direction2. Customers and Market Analysis2. Customers and Market Analysis3. Competition3. Competition4. Necessary Solutions4. Necessary Solutions5. How We Will Win5. How We Will Win6. Development and Introduction Plan 6. Development and Introduction Plan 7. The Value Delivery System7. The Value Delivery System8. Risk Analysis8. Risk Analysis9. Pro-Forma Financial Analysis9. Pro-Forma Financial Analysis10. First-Year Plan10. First-Year Plan
Plan-10 Step Plan
Do-Execute
Check
ActYearly Updates & Adjustments
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
Japanese Planning Methods Japanese Planning Methods
Pro
cess
Per
form
ance
Mea
sure
Time
hoshin kanri“policy control”
kaizen“continuous improvement”
nichijo kanri“daily control”
•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
Leadership
Leadership
Leadership
Organizational AlignmentOrganizational Alignment
Implementation
ReviewPlanning
Customers, Suppliers, Technologies
Source: Sarv Singh Soin, TQC Essentials
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 PLANHOSHIN 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.
Hoshin Planning CascadeHoshin Planning CascadeANNUAL PLAN
SITUATION:
OBJECTIVE PERFORMANCE MEASURESTRATEGY (OWNER)
TARGET/GOAL
Strategy
SITUATION:
OBJECTIVE PERFORMANCE MEASURESTRATEGY (OWNER)
TARGET/GOALObjective StrategySTRATEGY NO. OWNER
PERFORMANCE METRICS
TACTICS
Objective
Objective
Vertical and Horizontal Problem Decomposition
Hoshin Planning ProcessHoshin Planning Process
Form TeamCollect
SituationalData
DraftCritical Busi-
ness Issues
DraftKey Success
Factors
DraftStrategies,
Goals & Owners
Document thePlan
Share, Refine& Cascade
DraftBusiness
Objective(s)
Linking to Six Sigma ProjectsLinking to Six Sigma Projects
► Identify underlying themes in stated Identify 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 Sigma Cascade and implement as Six Sigma
projectsprojects
Hoshin Implementation Planning Hoshin Implementation Planning ProcessProcess
Form TeamRefine
Strategy andPerf. Meas.
DetermineKey Success
Factors
Develop WorkBreakdownStructure
SequenceTasks
AssignOwners
& Timelines
Documentthe Plan
Brainstorm &Select BestSolutions
The Implementation Planning The Implementation Planning TableTable
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
Hoshin Review CycleHoshin Review Cycle
►Periodic, formal reviewsPeriodic, formal reviews►““Roll up” sequence, lowest to highest Roll up” sequence, lowest to highest
levellevel►Plan, Do, Check, ActPlan, Do, Check, Act►Constructive and supportive, not Constructive and supportive, not
critical and judgmentalcritical and judgmental►Results published and communicatedResults published and communicated
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
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
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 performanceNo pay caps in place
Needless promotionsLack of audits/updates
Tougher client negotiationLack of CP walk-away power
Competitive market pricingLack of strong sales funnel
Poor org. structure design Limited assumptions
Low Agent morale Current work system limits contributionPoor coaching
Poor scheduling policies
High stress High queuesLack 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 termsBad vendor contracts History of lower volumes
Low QA scores
Low SL/High AHT New Agents on floor
Client Best Practices
Poor coachingClient QA measurement issues
Client not allowing CP-paid attrition trainingSOW scope creep
(0.25%)
(0.8%)
(1.7%)
(2%)
(0.5%?)
(1%)
(?)
(2003 G.M. improvement opportunity)
Hoshin 1.2 Deployment Hoshin 1.2 Deployment CascadeCascade
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.
FY03 ANNUAL PLAN: IMPLEMENTATION PLAN Prepared by: Ed Powers Entity: Center Partners Department: Quality Status:
Q4 Q1 Q2 Q3 No. 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
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/ Concern No 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/ Concern No 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
Where to StartWhere to Start
►Learn the basics of strategic planning Learn the basics of strategic planning and hoshin kanriand hoshin kanri
►Work with Champion/Executive Work with Champion/Executive Sponsor to identify opportunities for Sponsor to identify opportunities for strategic planning participationstrategic planning participation
►Facilitate/co-facilitate annual planningFacilitate/co-facilitate annual planning►Own the deployment and review Own the deployment and review
cyclescycles
Recommended ReadingRecommended Reading
►Total Quality Control EssentialsTotal Quality Control Essentials, Sarv , Sarv Singh Soin. McGraw-Hill, ISBN Singh Soin. McGraw-Hill, ISBN 0070595488 0070595488
►Beyond Strategic Vision: Effective Beyond 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 Butterworth-Heinemann, ISBN 07506984380750698438