Hoshin Kanri

Goal

Hoshin kanri connects an organisation's strategy to the work of its teams. The executive team selects three to five breakthrough objectives, changes that take several years and several departments. Each level of the hierarchy turns its share into annual targets and projects, after negotiating them with the level above. A review at a fixed cadence, often monthly, compares progress with the targets and corrects the plan during the year.

With hoshin kanri, the executive team decides which changes the organisation makes this year. Each level then negotiates two points with the level above: who is accountable for the changes and with what resources.

The deliverable is a set of deployment documents, one per level: the objectives, their numeric targets, the projects that serve them, their owners and the review calendar. Many organisations keep it on a one-page X-matrix. Each deployed project is then run on an A3 problem-solving sheet.

Usage

When to use it

• Breakthrough that commits several departments over several years: the cascade spreads the load and holds the course beyond one financial year.
• Written strategy that does not reach the teams: deployment ties each project to an annual target.
• Overloaded project portfolio: selection forces the executive team to name a few priorities and stop the rest.
• Annual budget cycle in place: catchball runs alongside the budget.
• Middle managers free to challenge a target: catchball assumes that right, exercised in front of senior management.
• Project that needs a link to the strategy: the business analyst reads off the matrix which annual target the project serves and who is accountable for it.

When not to use it

• Strategy not yet formulated: hoshin deploys a strategy without producing it; start with a SWOT analysis or another strategic analysis.
• Environment that changes from one quarter to the next: the annual cycle reacts too late; OKRs reset at every cycle.
• No measurement on the processes concerned: the review has nothing to compare; set up the metrics and key performance indicators first.

Description

A company practice, documented later

Several Japanese companies engaged in total quality control built hoshin kanri in parallel in the early 1960s, with no single author. Toyota wrote its first company hoshin in January 1963. By 1964 Komatsu was cascading its targets by department with its "flag method". The name appeared in 1965, in a Bridgestone study of how Deming Prize winners planned.

Yoji Akao documented and taught the method a generation later. The book he edited appeared in Japan in 1988, then in English in 1991 as Hoshin Kanri: Policy Deployment for Successful TQM. It covers the principles, the control points of daily management and cases from several Japanese companies. With Shigeru Mizuno, Akao also developed quality function deployment (QFD), a product development method built on matrices. The X-matrix comes from that method.

Few objectives, only what must change

Hoshin kanri separates two kinds of work. Daily management maintains the performance of the process as it runs: lead times, quality, costs. Hoshin delivers the few changes that daily management will not produce on its own. Liker and Shook describe both as PDCA cycles. Hoshin drives the long cycle, over months and years. Daily management drives the short one.

The executive team selects the objectives. Three to five breakthrough objectives with a three- to five-year horizon, broken down into a few annual objectives, occupy an entire organisation. Each added objective takes resources from the others, since the same managers and the same analysts carry them. An executive team that lists twelve breakthroughs has not chosen.

The annual cycle

Toyota's three tiers of hoshin

Toyota's company hoshin has had three tiers since its first version. The fundamental hoshin sets the company's permanent direction and has changed little in fifty years. The long-term hoshin carries the targets and countermeasures for three to five years. The annual hoshin sets the year's objectives and measures. The president decides its content himself. He used to announce the annual hoshin in his New Year speech.

The cascade

Hoshin descends level by level. The executive team hands the annual objectives to the department heads. Each one translates them into targets and means for the department, then hands them to the section heads, who do the same. The means of one level become the objectives of the level below. If the executive team wants to cut reimbursement time, the Benefits department chooses to automate invoice checking, and the section that writes the rules receives that objective.

At Toyota, the written cascade stops at the section head. Below that, group leaders work on indicators and improvement themes aligned with the hoshin, within the daily management of the shop floor. A cascade pushed down to one sheet per person reproduces management by objectives. Peter Drucker described this method in 1954. It sets individual objectives and assesses them. It says little about the means, which hoshin negotiates.

Catchball, the negotiation between two levels

Through catchball, two levels agree on a target and its means. The word is English, adopted by Toyota and written in katakana. The upper level sends down a direction and a target. The lower level replies with what it can commit to, what it needs to deliver it and the method it would follow. The exchanges continue until both levels have clarified the target and the means, with no number of rounds fixed in advance.

The receiving level has a duty to challenge an unrealistic target, insufficient resources or a method bound to fail. This pushback tells the executive team what it cannot see. It also makes the recipient the owner of the target. The target, the scope, the resources and the method shift from one exchange to the next.

At the first exchange, neither party held the plan agreed at the fourth. A single top-down pass followed by one feedback session does not produce it.

Horizontal coordination

Two departments that each negotiate with the executive team can commit to contradictory plans. Customer Service promises a call back within 48 hours while Benefits reassigns the same staff to invoice checking. Toyota handles these dependencies in five standing function meetings, which coordinate the hoshin from one department to another. Four cover quality, cost, production and engineering; the fifth brings sales and human resources together. An organisation without such a forum discovers its lateral conflicts at the first review.

The X-matrix

The X-matrix is a one-page form that arranges the deployment around a central X. Its four fields are filled in this order:

• at the bottom, the breakthrough objectives, for three to five years;
• on the left, the annual objectives, the share of each breakthrough to deliver this year;
• at the top, the improvement priorities, the projects that will deliver the annual objectives;
• on the right, the indicators and their targets, which show whether the projects are advancing.

At the four corners of the X, a correlation grid marks the pairs that support each other: a filled circle for a strong link and an empty circle for a weak one. A column in the margin assigns each project to an owner. Once the fields are filled, the team marks the correlations and names the owners.

Filled in honestly, the matrix questions the plan. Does each project serve an annual objective? Does each annual objective have a project that carries it? Does each project have an owner? A row without a mark signals a project without strategy or an objective without means.

The X-matrix borrows the relationship matrix of QFD. According to Art Smalley, a Toyota veteran, Akao developed the approach, and the American consulting organisation GOAL/QPC spread the format in the United States. Smalley also cites Mark Reich, who led Toyota's hoshin process in North America for 23 years: Reich never came across the matrix at Toyota. Toyota runs its hoshin on the three-tier document, catchball, the function meetings and the reviews.

Negotiation, horizontal coordination and review stay off the page. Reich describes companies that believed their objectives were aligned because the form was filled in correctly. They were practising management by objectives, in which the level above states what it needs and the level below must supply it. A correlation mark records a catchball; it does not replace one.

The in-year review

The executive team reviews the hoshin at a fixed cadence, often monthly. Each owner presents the gap between the indicator and its target, the cause of the gap and the countermeasure, on the A3 sheet of the project. A missed target triggers a root cause analysis. If the executive team punishes the owner, the next catchball produces targets calibrated to be met.

From the 1960s to the 1980s, Toyota supplemented these reviews with audits presented to the president. Four to six themes went through them each year: ten minutes of presentation on a double-sided A3, five minutes of questions, then written feedback that the president drafted himself.

Hoshin kanri and OKRs

Both methods cascade quantified objectives from one level to the next, and people confuse them. Their mechanisms differ.

Liker and Shook describe the most frequent failure of hoshin: rebranded management by objectives, sometimes labelled OKRs, with a cascade of indicators imposed from the top. This version has neither the catchball of hoshin nor the reset of OKRs.

Neighbouring techniques

The Balanced Scorecard measures a strategy across four perspectives. Hoshin kanri deploys it. The Balanced Scorecard helps choose the breakthrough objectives, and its measures feed the right-hand field of the matrix. These measures are key performance indicators, designed like any other KPI. VMOST analysis checks after the fact that the tactics still serve the vision; hoshin sets those tactics at the outset.

AI considerations

A language model checks a matrix for consistency. Given the list of objectives, projects and indicators, it flags the row without a mark, the indicator that no project moves and the owner who carries five projects. It also spots an annual objective phrased as a task, "roll out the new tool", where the page expects a quantified result.

It prepares catchball. Before replying to the level above, a department head gives the model the target, the headcount and the figures for the year. The model lists the constraints and lateral dependencies to put on the table. During the year, it condenses the project A3s into a review note, provided that every figure comes from the records.

The negotiation is beyond it. Catchball makes the recipient the owner of the target, and a counter-proposal drafted by a model belongs to nobody. The choice of breakthrough objectives is beyond it too, because that choice commits people and a budget for several years. Finally, the company hoshin contains the organisation's unpublished strategy. It goes into an assistant only with the executive team's agreement, on a tool whose data retention is known.

Examples

A health insurer in French-speaking Switzerland finalises its 2026 X-matrix at the end of catchball.

The filled circles trace a breakthrough objective across the page. Breakthrough P1, reimbursement within five working days, leads to annual objectives A1 and A2. These two objectives lead to projects I1 and I2, automatic capture and the checking rules. These projects move indicators M1 and M2, and the margin assigns them to IT and to Benefits. The 55% rate on the left comes from the fourth catchball exchange; the executive team had opened with 60%.

Visualisations

The X-matrix fits on one page, with its filled and empty circles. A table of rows and columns would lose the corners, which carry the correlations. The A3 sheet of each project carries its target, the root cause analysis, the countermeasures and the follow-up.

The monthly review reads from an indicator table that lean practice calls a bowling chart: one row per indicator, one column per month, the target and the actual in each cell. Each indicator shows its baseline, without which a percentage says nothing about the effort required. Each missed target carries a sign that reads without colour, because colour-blind readers cannot tell red from green.

Cost

Tooling

An A3 sheet posted in the review room is enough for the hoshin of a department. It makes the targets public, and the team corrects it in pencil during the meeting.

A spreadsheet holds the X-matrix, whose corners become grids of cells. It also holds the monthly series of indicators, which the year-end review rereads.

A digital whiteboard such as Miro or Mural holds an X-matrix template when the negotiating levels do not share a room.

Strategy deployment software such as i-nexus or KPI Fire links objectives, projects and indicators in one database. It pays off when several levels and several sites feed the same review. It risks reducing catchball to a form-approval workflow.

At team level, visual management boards carry the indicators aligned with the hoshin. There, hoshin meets daily management.

Sources

• Akao, Yoji (ed.) (1991), Hoshin Kanri: Policy Deployment for Successful TQM, Productivity Press: the reference work on the method, its principles, the control points of daily management and case studies from Japanese companies. Japanese edition 1988.
• Dennis, Pascal (2006), Getting the Right Things Done: A Leader's Guide to Planning and Execution, Lean Enterprise Institute: the components of strategy deployment, among them catchball, the PDCA cycle and the A3 sheet.
• Liker, Jeffrey and Shook, John (2025), "Hoshin Kanri as a Foundational Piece of a Lean Management System", Lean Enterprise Institute: hoshin as the long PDCA cycle beside the short cycle of daily management, as well as its most frequent failure, rebranded management by objectives.
• Smalley, Art (2026), "Who Invented Hoshin Kanri?", Art of Lean: the chronology of Toyota, Komatsu and Bridgestone as well as the role of Akao.
• Smalley, Art (2026), "Does Toyota Use Hoshin Kanri?", Art of Lean: the three tiers of hoshin, the cascade down to the section head, the function meetings and the audits presented to the president, from the account of Mikio Sugiura.
• Smalley, Art (2026), "What Is Catchball in Hoshin Kanri?", Art of Lean: catchball, its purpose and the duty of the receiving level to challenge.
• Smalley, Art (2026), "What Is the Hoshin Kanri X-Matrix?", Art of Lean: the four fields, the correlations and the origin in QFD and at GOAL/QPC, as well as the account of Mark Reich (Managing on Purpose, 2025).
• Smalley, Art (2026), "What Does Hoshin Kanri Mean in Japanese?", Art of Lean: the meaning of the characters of hoshin and kanri.