Hoshin Kanri, OKR and BSC comparison

Hoshin Kanri, OKR and BSC comparison

Every leader is aware that unless their company has a way to track and steer the progress of strategy deployment, the strategy is worth zero. Coordinating strategy deployment is challenging, especially in larger companies, because leaders have a table full of diverse responsibilities and fires to extinguish, which makes it challenging to maintain the necessary focus on the future.

Our customers are frequently concerned with whether they are applying a suitable strategy deployment method. There are several strategy deployment methods and they all have the same goal: to support organizations in executing strategic plans. In order to choose the most suitable method, managers need to consider the company’s organizational structure, maturity, and the business it operates in. Each method is top down driven; however, the biggest differences between methods concern how strategy is cascaded down and how the internal alignment is handled.

In this blog we take a closer look at the three most used strategy deployment methods – Objectives and Key Results (OKR), Hoshin Kanri (HK), and Balanced Scorecard (BSC) – and we compare how they support strategy execution. OKR, HK, and BSC are not cookbooks that lead to a 100% certain outcome, but rather frameworks for actions that are adjusted to company needs when executing strategies.

Objectives and Key Results (OKR)

OKR is a goal-setting framework has gained lot of publicity due to well known users: Google and Amazon. In OKR method teams and managers are expected to define objectives (goals, typically qualitative) and 3–5 key results (quantitative indicators that would prove the objectives have been reached) after defining a company’s mission and strategy. Thus, key results are measures by which achievement of the objectives is tracked. Objectives should also be followed by initiatives, which are the activities that help achieve the objectives and move towards key results.

OKRs at the company level are yearly, but at the team and individual levels OKRs are quarterly. In this case, strategic initiatives can be reached by fast-paced, tactical objective setting relevant to the upcoming quarter. The purpose behind the OKR framework is to set specific hard goals that drive towards a higher level of output. In order to succeed, the organization must be ready to accept that all goals aren’t met.

Hoshin Kanri (HK)

Hoshin Kanri is less known in Europe, but there are many successful companies using it like; Tesla, Toyota, HP and Bank of America. HK has roots in lean philosophy, which is well-known among production industries. Like OKR, HK is also a powerful method for organizations to closely connect strategic objectives with the organization’s functions and activities, but HK unfolds strategic actions over a longer period of time. HK includes long-term objectives (3–5 years), and a specific annual plan that is defined with the yearly goals, improvement actions, with responsibilities. HK utilizes X matrix to ensure teams maintain focus in strategic objectives and limited set of improvement projects.

With HK, lower organizational levels are actively involved in objective setting and strategic improvement project planning. The procedures for this involvement are clearly specified ensuring a high degree of ownership and commitment. Managers and their teams are asked to review strategic objectives from the upper level and submit suggestions suited to their organizational level. Improvement proposals are further considered by the top management team. With such a process not only do people know what is expected of them, but they also feel that they have had the opportunity to contribute with their ideas and feel committed to the organization. HK strives to get every employee pulling in the same direction at the same time and feel ownership of the company’s activities.

Balanced Scorecard (BSC)

The Balanced scorecard is a strategy method which is present in most management trainings. BSC combines financial and non-financial objectives within four main areas: finance, customers, internal processes, and learning & growth. Once the strategy is defined, it is then linked with the portfolio of KPIs (Key Performance Indicators), specific targets for a defined period of time, and projects that are expected to lead to the desired performance.

Building a Balanced Scorecard should encourage business units to link their financial objectives to corporate strategy. The financial objectives serve as the focus for the other objectives and measures. In BSC the important aspect is to find suitable leading indicators, which result in financials at the end. The Balanced Scorecard should tell the story of the strategy and how it will deliver the desired long-term performance.

Table: OKR, Hoshin Kanri and Balanced Scorecard method comparison.

It is important to remember that these methods and processes require both embedding in the culture and continuous nurturing through the management process. Once rooted in the organization, strategy execution management helps to accelerate growth and bring alignment and accountability across the organization.

Amplon.io and strategy deployment

Amplon.io has been inspired by HK’s simplicity to visualize strategy and engage managers and employees of all levels in strategy execution. However, Amplon.io went a step further and addressed the shortcomings of the HK method. This means that companies using Amplon.io do not need to stick to the lean philosophy (unless they want to); companies can design a bottom-up strategy and can easily adapt this software to their culture and processes. Amplon.io makes it easy to share common development projects and activities ensuring focus in the organization. Instant monitoring of strategy through software dashboards allows immediate reaction to any deviation.

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