A new Statement on Management Accounting (SMA) from IMA® (Institute of Management Accountants) explains how organizations can use Hoshin Kanri – the seven-step strategic planning system – to link lean initiatives with business strategy.
The SMA, titled “Strategic Alignment for Driving Superior Business Results: Using Hoshin Kanri to Link Lean Initiatives with Business Strategies” explains the essential elements of Hoshin Kanri, which provides a disciplined process to flow strategic objectives into organizations’ functional areas, develop operational performance indicators, and assign appropriate resources to initiatives. It was authored by Gary Cokins, IMA executive in residence; Pem Smith, CMA, CFM, long-time IMA member and retired finance and business operations executive and certified Six Sigma Green Belt; and Jd Marhevko, senior vice president for Accuride and American Society for Quality (ASQ) Fellow.
The authors of the SMA recommend that organizations develop a strategy map, one that links strategic objectives with cause-and-effect relationships. Also imperative: Communicating strategy throughout the organization and aligning departmental and individual objectives with that strategy. Using a simplified Hoshin Kanri matrix, the authors explain how to link:
- Strategy and initiatives
- Initiatives and tactics
- Tactics and KPIs (key performance indicators)
- KPIs and the balanced scorecard
To demonstrate how to implement lean concepts, the authors present a Hoshin Kanri functional example and discuss the business case for incorporating lean initiatives with strategies. These include:
- Faster response to changes in the market demand signals with shorter cycle times
- More competitive pricing with reduced unit costs
- Internal capacity to meet new opportunities through increased productivity of existing resources
Hoshin Kanri is a seven-step strategic planning system that originated from post-war Japan and that has since spread around the world. Translated from Japanese, Hoshin Kanri aptly means “compass management.” The individual words “hoshin” and “kanri” mean direction and administration, respectively.
To view a full copy of the 34-page SMA, please click on this link.