Toyota’s Obeya

Management
System
Day 2
TOYOTA’S ENGINE FOR LEADERSHIP
& OPERATIONAL EXCELLENCE
Sam MacPherson
Founder,
The Lean Leadership Academy
Faculty Fellow, The Shingo Institute
sam@theleanleadershipacademy.com
@TheLeanLeaderWay
(910) 217-LEAN 1
WHAT WE WILL COVER IN OUR TIME TOGETHER TODAY
• Red Ball
• Overview of Hoshin Kanri and Deployment
• One Voice Leadership
• Hoshin Kanri Development and Deployment Flow
• Managing Hoshin
• Lagging Indicators vs. Leading Indicators
• Overview of Toyota’s Floor Management Development System (FMDS)
• The Five Missions of Shop-Floor Management
• FMDS, Problem Solving, and Leader Development
• Team Leadership through Three Pillar Management
• FMDS Do’s and Don’t
• Your Questions
• Reflections
2
The Obeya System and Hoshin Kanri at Toyota

3
Does Everyone Understand the Direction and Priorities?
Does everyone understand this system of aligning their
goals with the company?

4
Probably Not!

5
What is Hoshin Kanri?

6
Ideal Work Environment for Enterprise Excellence

Problem Challenge a better way

Solving
Process Chronic
Problems GOAL

Contain Abnormality Management

PRODUCT Leader Highest

Board Customer
1 2 3 4 Satisfaction
Standard Processes

Engaged Staff
Clear Roles

One Voice Leadership

7
Hoshin Planning Seeks to Align Resources and
Insure Unity of Effort
After Hoshin Kanri
Company Planning with PDCA

8
Key Points
1. What is Hoshin Kanri?
2. Points of each step in Deploying Hoshin
Kanri
1. Hoshin Establishment and Deployment
2. Hoshin Checks
3. Actions
3. Associate’s Role in Hoshin Kanri
4. Hoshin Kanri Process Simulation (Activity)
5. Summary

9
Hoshin is Management Kaizen for BREAKTHROUGH

10
Hoshin Breakthrough Vision: Bring Lexus to Kentucky!

11
Mid-term Hoshin Vision at TIEM: with A3 Visual Thinking

12
Overview of Toyota’s Hoshin Process

One Voice Leadership

Executive and Senior Leaders must align their Hoshin plans before
deployment through the organization to ensure consistency of direction

13
Hoshin Kanri Requires One Voice Leadership
Consistent Principles Applied Via Every Day Behaviors

One Voice Leadership

Principles
Behaviors
Methodology

Engaged Staff

Processes & Tools

Continuous Improvement

14
Toyota’s Thinking on the Role of Leaders
The person in the process
is in the best position to improve the process
Company
Customers Product
From To
This… This…

Partners Customers

Product Stakeholders

‘You do not work for me; I work for you!’

15
Chairman Fujio Cho to TMMK Team
The Hoshin Process

• Long term goals are achieved via a series of 12-month plans

• The Annual Hoshin process reviews the long term goals, adjusts as needed,
then sets the next actionable 12 month plan

12 Month Plan

16
Total Problem Solving Culture

Breakthrough
Hoshin Improvements
(Long Term
Top Strategy
and Plans)
Management
Challenge
Management led
Problem Solving

Operations Problem Solving

(Staff)

17
Hoshin Kanri System – Annual Hoshin System

Company Vision and

mid to long-term
management plan etc.

Company Hoshin of Hoshin of Individual

Dept. A Group１ Theme
Hoshin
(Activities/Targets) (Activities/Targets) (Activities/Targets)

Hoshin of Hoshin of Individual

Dept. B Group 2 Theme

Hoshin of Hoshin of Individual

Dept. C Group 3 Theme

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Hoshin Must Incorporate “Catchball” back and forth
between the levels?

Company Company Hoshin

Direction/Activities & Targets
Catchball

Department
Department Hoshin
Direction/Activities & Targets

Group Implementation Plan

Direction/Activities & Targets

Individual Individual Priorities

Direction/Activities & Targets
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How is Hoshin Different?

Reform line that is written from

corporate needs
Constitution Level
←Achievement / Corporate
Gap (Setting Type Problems)

Hoshin Kanri
Bridges the Gap
Line representing what
Daily Operations /Work
Kaizen can achieve

Now Achievement Date Time→ 20

Hoshin Kanri Process
I

BUSINESS
ASSESSMENT

V II
ESTABLISH
ACHIEVE
HOSHIN
RESULTS
DIRECTION

IV III
IMPLEMENT DEVELOP
THE THE
HOSHIN HOSHIN

21
Hoshin Kanri Flow
PLAN
Hoshin Strategies
and Deployment

Company Hoshin of Hoshin of Individual

Hoshin Dept. Ａ Group１ Theme
(Activities/Targets) (Activities/Targets) (Activities/Targets)

Hoshin of Hoshin of Individual

Dept. Ｂ Group ２ Theme

ＤO Implementation of Hoshin
P P P
A D
P A D A D P
C
P A D
C C P C
A D A D A D
P P C P
C C A D
A D A D P
C
A D
C C C

Check Implementation of Hoshin Check（Mid term , end of term , etc.）

Act Standardization and Reflection on Hoshin for the Following Year

22
Hoshin Management Flow and Timeline for Planning
and Review

Toyoda Precepts - Basic Philosophy - Five Values Continuous

Midterm Vision
Design and Goal of Business Model 3-5 Year

as a whole Company

Environmental Annual President Business Annual

Change Policy Task

Hoshin in each division & department Annual

Activity / Implementation Check:

Monthly, Weekly, Daily
Department, Section, Group

Following up：Division General Manager Check Half Year

⇒President Check

23
Grasping the Current Situation during Problem Identification

Top Department
management mission
thinking Dept.
Hoshin
Environmental Department Candidate
changes / vision
forecast (with (with mid-long
benchmarks) term issues,
plans) Kaizen issues
(from Workplace
Review result of previous year Management
review)
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 Annual Review:
Determine the Reflection and
Current State of Learning Points
Performance Envision Your Ideal
against Objectives State

Recognize
Strengths, Define the
Weakness, Required and/or
Opportunities and Desired State
Threats (Future State
Objective)
Select and
Prioritize Review Plan
Breakthrough Progress
Objectives Create Flight Plan
and Allocate Mid-year
And Targets Quarterly
Resources; Define
Priorities of Monthly
Support
Create a Deployment
Plan
Chain of Confirm and
Responsibility and Define how you
will Manage the Implement Plan:
Communication
Loop Progress of the A3 Report
Plan How will you 25
Check?
SWOT Analysis of Hoshin Missions

 S-O: Pursue opportunities

that are a good fit to your
strengths
 W-O: Overcome
weaknesses to pursue
opportunities
 S-T: Identify ways to use
strengths to reduce
vulnerability
 W-T: Establish a defensive
plan to minimize threats
26
Critical Annual Priorities

• Which processes will be impacted by the Critical Few?

• What will be changed in these processes to achieve the goals?

Business Process CAP

Breakthrough Objective
CAP
Business Process
CAP

27
Now, It’s Your
Turn
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Example of Hoshin Breakdown
Maximize Effectiveness
President of TPS & TQM Target

Direction/
Executive Improve Kaizen Activity Activity ＝ Target

Dept. Direction/
Manager
Improve Employee Ability Activity Target

Group Direction/
Leader
Level-up Employee Training Activity＝ Target

1. Conduct Needs Assessment

Direction/
Member 2. Identify Skill Gap Activity
3. Develop Training
4. Conduct Training
etc.. 29
Setting Hoshin Items

Expressions that are easily understood are used for

specific procedures.
(1) Why “Purpose”
(2) What “Target Problem”
(3) How “Method”
Note：Do not use ambiguous expressions.
Example
NG: Enhance the education curriculum for different ranks.
OK: Promote the internalization of shared values (why), by
reviewing the education curriculum for different levels
(what) based on trainee and management needs (how).
30
Setting Hoshin Targets
Perspective on Setting Targets
When Issues are solved, exactly how things will be
changed should be clarified.
(1) What “Evaluation Standard
/Performance Indicator”
(2) How Much “Target Level”
(3) When “Deadline for Accomplishment”
Example of What:
Issues Evaluation Standard Performance Indicators
Review A. Amount Reviewed A. % of Courses Reviewed
education
curriculum in B. Trainee Eval. B. Trainee Survey Eval. Score
order to share
values C. Manager Eval. C. Manager Survey Eval. Score 31
What Should You Measure? Only the Most Important
1. Define what must we improve
 Voice of the Business: What must we improve for our stakeholders and shareholders?
Are we part of the growth plan for the organization?
 Voice of the External Customer: If we had your Top 5 Customers here, right now,
what would they say you need to improve to gain more of their business? How would
they measure these improvements?
 Voice of our Operation: People, Processes, Performance?
2. Set Targets “State what you really need to accomplish without prejudice”
3. Prioritize Measures: Top Five/Hot Five:
“If you fail these measures, will you will be fired?”
-Takashi Tanaka
4. Catch-ball – Determine who will lead. Ask: How can we? What can we
do?
5. Check alignment: Tie in Company Hoshin to Plant Hoshin to Shop-floor
Hoshin: Set SQDCP-HRD KPI
6. Manage Progress: How will you check and mentor? How often? 32
Hoshin Planning

WHY : WHAT : Evaluation Standard

Purposes
Hoshin Items /Performance Indicators

Targets
WHAT :
HOW MUCH : Target Level
Target Problem
HOW : WHEN :
Measure/Method Deadline for Accomplishment

Hoshin
Plan
WHERE :
WHO :
Which departments
Person
Responsible
WHEN :
Implementation Plan 33
Example of a Hoshin Plan

34
EX. Hoshin A3 to Improve Productivity for Mold Dept.

35
Hoshin Must Incorporate “Catchball” back and forth
between the levels?

Company Company Hoshin

Direction/Activities & Targets
Catchball

Department
Department Hoshin
Direction/Activities & Targets

Group Implementation Plan

Direction/Activities & Targets

Individual Individual Priorities

Direction/Activities & Targets
36
Beware of “Tunnel” Management

Company Hoshin

Department Hoshin

Group Hoshin
Human
Development Individual
Human
Development
Human
Development

There is a danger that orders will just be

passed on down the line without any idea
for specific actions.
37
The Purpose of Hoshin Checks

Purposes of Checks:
 To turn over the Kanri Wheel (ＰＤＣＡ)
Make Corrections on the Implementation Plan for each
Theme and Set New Action Plan.
Grasp Kaizen Issues at the Management level that include
Establishment of Hoshin and Deployment Methods

Check Points:
 Check not only results, but also processes.
 Check not only implementation processes for each theme,
but also Workplace Management processes.
38
Rapidly Turning Over The Check Cycle
Rapidly turning over the check cycle and immediately taking Action is Important

Check Results
Day Week 6
Month Year
months

Check results on Monthly, Company ○ ○ ○

Quarterly, Half Yearly, Yearly for
company and department Department ○ ○

Group ○ ○ ○
＋ Individual ○ ○ ○
Process Management (Action)

・Grasping the gap between the daily plan and actual performance
・Analyzing the gap causes and clarification of actions to be taken the
following day
39
Visual Management for Hoshin Check
Visualization Awareness
of progress sharing of Quick
situation issues action
Example of Visual 60 Number of widgets produced
Management 40

1. Numerical
20
presentation
0
2. Numerical data Jan. Feb. Mar. Apr.
compiled into
Progress study start check confirm delay
graphs.
3. Qualitative data
Sticker ● ● ● ● ●
color coded and Theme PIC April May June
progress Multi-processing
through the
evaluated creation of Tim
widget pro- ● ● ● 40
cessing jig
Hoshin Evaluation Format

41
Example of Hoshin Plan

42
Ex. Department Hoshin in Support of Company Hoshin

43
Things to Keep in Mind about Actions

Hoshin
Establishment and
Deployment (Plan)
Action
Hoshin Satisfied Points
Implementation (Do) Standardization

Unsatisfied Points
Check Recurrence Prevention
and further Kaizens
44
Orientation

• Carry on in principle;
• Standardize processes and
Target Achievement Level

standardize highly effective

High
transition to daily operation
processes and
• Bring out issues to achieve an even
• Review target setting method and
higher target level
resource allocation method

• Review current methods • Review activities

Low

• Review the importance of theme • Target Setting Review

Low High
Strategy Implementation Level
45
The Hoshin Distillation Process
Define 25% Market
Idea Space
Focus!
Understand VOC
What Constitutes
Breakthrough?
Idea
A3 Diagram
Idea
Owner: Date: Feb 12, 2009

1. Theme: Westborough capacity is constrained due to seasonal and weekly demand variation and the related work

THE CRITICAL FEW!

content. Inbound status calls comprise a significant portion of total claim work content.

2. Background 6. Countermeasures/Plan
Expansion from single pilot cell to eight additional cells within Westborough operations (initial deployment) was conducted Week of:
during October and November (pre-Thanksgiving). Post-Thanksgiving weather driven claim volume, combined with What Who
seasonal FTO requirements and learning curve challenges, as well as the addition of FNOL demand (previously handled 1
within the call centers) have generated capacity issues. The overcapacity situation has generated increased status calls thus 2
further straining resources and resulting in high abandonment rates. 3
4
5
6 Include:
7 DTP, appraisal kaizen, supplements
3. Current Condition 8
kaizen, etc.
9
10
Daily Demand Variation 11
& Staffing Surplus/(Shortfall) Average Work Content/Claim 12
13
0.4 ISO 14
0.35 EDM's 15
0.3
Payments 16
0.25 17
0.2 COA
18
0.15 EXT In Calls 19
0.1 Outbound Calls 20
@3.4 I/B per FNOL

Idea
0.05 21
I/B
0

Critical Objective #1
Monday Tuesday Wednesday Thursday Friday
FNOL

0 5 10 15 20 7. Effects Confirmation
% FNOLs % I/B Status Calls

A3
4. Target

Start Target
a. Reduce # of I/B status calls by 35%.
b. Reduce I/B work content by 25%.
c. Reduce abandonment rate by __%.

5. Root Cause Analysis (Inbound Status Calls)

I/B Callers
7% 4%
I/B Call Distribution
4%
5%
4% 4% 19%
8. Follow-up Action
Critical Objective #2
14%

Critical Objective #3
6%
51% 15%
6%

11% 14%
24% 12%
Other App Sched/Resched
Insured Shop Claimant
Pmt Info Rental Issue
3P Carrier Rental Co. Liab Decision App Issues
Supplement Status/Next Steps
Policy Info Settlement

Idea
First Call

Critical Objective #4
EDM, payment and ISO work content reduction will be pursued as part of the 60 day quality "Blitz." See relevant A3 report
for detail.

Idea Critical Objective #5

Define Competitors
Understand
Strengths &
Weaknesses

46
Key Elements of Hoshin Deployment
Critical to Success! Annual
Review
Top Level Planning

Disciplined
Vision Monthly
Review

3-5 Year
Breakthrough Implement
Objectives

Deploy
Critical
Projects/
Throughout Lean Tools
Organization
Activities

Team Development Annual

& Ownership Improvement
Priorities 47
Deploying Policies at Toyota

CEO/COO Policy Five-year & Annual corporate policies

Mgmt “Councils” Policy Policy

People, Cost, NPD, Quality etc.

Division Policy Policy Policy 200+ Divisions

Plant A3
strategies

Department or
Section Action plans

Work Group or
AP AP AP A P
Team Members CD CD CD CD 48

48
Hoshin Process and FMDS Activity
Company Hoshin Toyota Hoshin
Management
Main KPI Plant 1 Hoshin
Department/Section By Shift through
Sub Sub Sub
KPI
Plant 1
KPI
Plant 2
KPI
Plant 3
Main KPI Hoshin FMDS
Sub Sub Sub
KPI
GM 1
KPI
GM 2
KPI
GM 3
Main KPI Group FMDS
Sub Sub Sub
KPI
MGR 1
KPI
MGR 2
KPI
MGR 3
Main KPI
Sub Sub Sub
KPI KPI KPI
Factor 1 Factor 2 Factor 3

Process Process Process

KPI KPI KPI
Toyota (TIEM) Activity Activity Activity

Hoshin Vision Toyota (TIEM)

K21 Annual Hoshin Activity Activity Activity

FY ‘18
Result Result Result
“Breakthrough” Toyota (TIEM)
Initiatives Hoshin
Only Management
By Department/
Section
“A3 Management” 49
Hoshin Process and FMDS Activity

Company Hoshin

Main KPI Plant 1 Hoshin

Sub Sub Sub Department/Section
KPI
Plant 1
KPI
Plant 2
KPI
Plant 3
Main KPI Hoshin
Sub Sub Sub
KPI
GM 1
KPI
GM 2
KPI
GM 3
Main KPI Group FMDS
Sub Sub Sub
KPI
MGR 1
KPI
MGR 2
KPI
MGR 3
Main KPI
Sub Sub Sub
KPI KPI KPI
Factor 1 Factor 2 Factor 3

Process Process Process

KPI KPI KPI
Activity Activity Activity

Managing at the Process Level

1. Upper Hoshin Achieving Activity Activity Activity Activity
Result Result Result
2. Vision Achieving Activity
3. Daily Control; Sustainment Management Activity

50
Hoshin Process and FMDS Activity

Company Hoshin

Main KPI Plant 1 Hoshin

Sub Sub Sub Department/Section
KPI
Plant 1
KPI
Plant 2
KPI
Plant 3
Main KPI Hoshin
Sub Sub Sub
KPI
GM 1
KPI
GM 2
KPI
GM 3
Main KPI Group FMDS
Sub Sub Sub
KPI
MGR 1
KPI
MGR 2
KPI
MGR 3
Main KPI
Sub Sub Sub
KPI KPI KPI
Factor 1 Factor 2 Factor 3
The Department or Section
Manager gathers direction Process Process Process
from upper level Hoshins and KPI KPI KPI
communicates to Section to Activity Activity Activity

create Section Hoshin

The Assistant Mgr understands Activity Activity Activity
Result Result Result
Goals, Plans Actions to
support Mgr Hoshin and
Communicates to Groups or
Shift Supervisors
51
Hoshin Process and FMDS Activity
Group
Company Hoshin
Leaders/Supervisors
Main KPI Plant 1 Hoshin Grasp the Area Plan,
Sub Sub Sub Department/Section Plans Group actions to
KPI
Plant 1
KPI
Plant 2
KPI
Plant 3 Main KPI Hoshin support Hoshin Targets,
Sub Sub Sub
and Communicates to
KPI
GM 1
KPI
GM 2
KPI
GM 3
Main KPI Group FMDS Group Members targets
and collaborates to
Sub Sub Sub
develop Sub-KPI and
KPI
MGR 1
KPI
MGR 2
KPI
MGR 3 Main KPI Process Activities
Sub Sub Sub
KPI KPI KPI Team Leaders implement
Factor 1 Factor 2 Factor 3 group plan components,
secure resources,
Process Process Process supports team-members
KPI KPI KPI and Group Leaders
Activity Activity Activity
through standards and
suggest improvement
Activity Activity Activity
activities to achieve
Result Result Result targets
Team members follow
implementation plan and
standards, suggest
improvement activities
and participate in problem
solving
52
Hoshin Process and FMDS Activity

Company Hoshin

Main KPI Plant 1 Hoshin

Sub Sub Sub Department/Section
KPI
Plant 1
KPI
Plant 2
KPI
Plant 3
Main KPI Hoshin
Sub Sub Sub
KPI
GM 1
KPI
GM 2
KPI
GM 3
Main KPI Group FMDS
Sub Sub Sub
KPI
MGR 1
KPI
MGR 2
KPI
MGR 3
Main KPI
Sub Sub Sub
KPI KPI KPI
The General Manager Factor 1 Factor 2 Factor 3

establishes the Plant

vision through Hoshin Process Process Process
and communicates KPI KPI KPI
Activity Activity Activity
targets and expectations

Activity Activity Activity

Result Result Result

53
Catch Ball Process Steps

• Level II
• Review Level III A3’s,
matrices, and bowling charts
• Modify/refine level III and II
documents
• Approve red-yellow-green
• conditions for each project
• Level I
• Review Level II A3’s and
matrices
• Modify/refine level II and I
documents

• Create visual “Line of Site” charts for each Level III and integrate
into management standard work
54
Line of Site Exercise
Think of your responsibilities in Company Plan – Macro Level – Company
this upward cascade.
Values and Principles
Your direct responsibility is
your cost center or section, MACRO vs. MICRO
which supports your
department, which supports Plant Business Plan PDCA Thinking–
the Plant Business Plan. What does that
mean?
Are you aligning your
responsibilities properly?
Department Business Plan
In other words is what your
doing on a daily basis “value
added” to the company’s
goals? KPI=Key Performance
Section KPI’s and Standards Indicators' – S, Q,D C,
You must establish and HRD
share the direction you
are heading in!

Without a plan we keep

Individual Responsibilities Micro Level – You!
covering old territory! 55
Summary of Hoshin Activity
Vision and Strategy of Company

By PDCA being cultured,

important problems are Top’s will is permeated
solved & throughout the company
business objectives can be Hoshin Kanri
attained certainly Positioning and the role
& effectively. of the business
Daily in their charge of
Management each post become
clear.
Activation of workplaces,
Human Resource Development

・The quality of business and the level of management are

improved and then human resource are developed. 56

・Workplaces are activated by good communication.

57