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