Hoshin Kanri and the X-Matrix: Template, Catchball and Reviews

Twenty-three years at Toyota, and never an X-matrix

Mark Reich spent 23 years at Toyota, including seven as an executive in Corporate Strategy in North America managing the hoshin kanri process ¹. When he left in 2011 and began working with other companies, executives asked him about hoshin kanri. Some had already met the X-matrix, the one-page grid that has become the method's symbol. Reich had never encountered it at Toyota ¹.

The executives believed that if they filled out the form correctly they would have aligned goals. Reich's verdict: “what they really had was management by objectives: ‘Here is what I need from you. Please get it for me’” ¹.

Hoshin kanri is a management system for strategy. Reich defines it as a system that “defines mid-term and long-term direction (objectives and targets)” and every year builds alignment to that direction, vertically and horizontally; it “manages annual execution to the direction, and develops the capability of people throughout the organization” ¹. The X-matrix is a one-page summary that links those long-term objectives to annual objectives, improvement priorities, measures and owners.

The thesis of this page: the X-matrix is the minutes of a negotiation called catchball. Filled in by the top team alone, it is management by objectives with diagonal lines, and it aligns nothing. The template below is useful only as the minutes of a conversation that went up, down and across the organization first.

Catchball is the method. The matrix is the minutes.

Where hoshin kanri came from

The origin is Japanese total quality management in the 1960s, but no single inventor or date holds up. Reich writes that hoshin kanri has existed in Japan since the 1960s as part of TQM, and that Toyota first adopted it in the early 1960s, citing Mikio Sugiura, one of three people instrumental in establishing it there ¹. Barry Witcher's review of the English-language literature reports that Yoji Akao's edited book, the most cited work on the subject, notes the term first appears in a 1962 internal document of the Bridgestone Tire Company ². Its chapters were written by a group of Japanese academics, and it was first published in Japanese in 1988 ², so it is not one inventor's account. Treat “invented by” claims with care.

The words matter more than the dates. Hoshin means direction, objective or intention; kanri means management or control ¹. Reich, who speaks Japanese, considers a common English rendering, “policy deployment,” a mistranslation that pulls one potential meaning from each word ¹. Western adoption came later: Witcher names Florida Power and Light as the first Western company to adopt it and Yokogawa Hewlett-Packard as another pioneer, with the first English-language report produced in 1989 by GOAL/QPC, a nonprofit educational institute ². For the framework in brief, see hoshin kanri.

When hoshin kanri is the right tool

Hoshin kanri is not for every strategy. Witcher reports a distinction from Kano's 1993 paper on quality management in Western organizations: some strategies take effect immediately after the decision, such as personnel changes, budgets, mergers and alliances; others take effect only with an organization-wide effort, which is where hoshin kanri belongs ². Selling a division needs a decision and a deal team. Cutting defects in half across 14 plants needs every plant to change how it works.

It also is not for running the business day to day. The literature separates daily control, the many measures each department manages as routine, from hoshin management of a few critical objectives ². Witcher reports Nomi's analogy from Akao's volume: daily control is like looking after your health every day; hoshin kanri is like attending to a critical event, such as an illness ². The hoshin covers the few things that must change. The KPI dashboard covers the rest.

• Use it when a breakthrough needs many units to change their work, over more than a year, in ways the top cannot specify in advance.
• Skip it when the strategy is a single decision (a sale, an acquisition, a price change) or when you cannot name two to four breakthrough objectives you would defend.
• Expect two or three annual cycles before it runs well. The method is a learning loop; the first year mostly teaches you how to run the second.

The X-matrix template

Thomas Jackson's Hoshin Kanri for the Lean Enterprise covers the X-matrix in its first chapter, and its later chapters follow a plan-do-check-act year, including a chapter on catchball ³. Layouts vary between companies and books. The common form puts an X in the middle of the page and four lists around it, with owners down the right side. Each corner holds a small grid where you mark which items in one list support which items in the next.

Two rules make the grid honest. No orphans: every annual objective must support a breakthrough objective, and every priority must support an annual objective. And no crowds: if one priority connects to everything, it is too vague to own; split it.

Catchball: how the matrix gets filled

Catchball is the negotiation that turns the top team's draft into plans every level believes. The GOAL/QPC model, as Witcher summarizes it, describes coordination worked out by reaching agreement on how plans can be achieved; because it involves throwing possibilities to and fro between the parties affected, it is likened to a game of catchball ². At Toyota, Reich writes, each plant and department built its own hoshin while integrating related objectives from the level above, which is “very different than handing down corporate objectives and telling people what to do” ¹. Coaches there expected fact-based plans for reaching outcomes, not just agreement on the outcomes ¹.

1. Top team drafts, and labels it a draftThe executive team writes the breakthrough and annual objectives and a first list of priorities, with a short reason for each. Nothing is assigned yet.
2. Throw it down one levelEach next-level leader answers in writing: what can my unit contribute, what would it take, what will we stop, and what is wrong with the draft? Allow two to three weeks.
3. Throw it acrossUnits that depend on each other trade drafts. A priority that needs three units has three names on it, or it goes back up.
4. Throw it back upThe top team revises targets and priorities in light of what came back. If nothing changed, catchball did not happen.
5. Repeat one level downEach unit builds its own one-page plan from the agreed objectives, through the same exchange with its own teams.
6. Freeze the matrixOnly now fill in the X-matrix, as the summary of what was agreed, with owners named.

A filled-in example

The company below is invented. It makes precision plastic components for medical-device manufacturers, from four plants.

That last sentence is the method working. A target moved because the people closest to the work had facts the top team lacked, and the reason is written down where next year's planners will see it.

Running the year: monthly check, annual reflection

Hoshin kanri is plan-do-check-act applied to strategy. GOAL/QPC's 1989 report, as quoted by Witcher, describes hoshin planning as “simply PDCA applied to the planning and execution of a few critical (strategic) organizational objectives” ². The check is where most Western versions go soft. See the PDCA cycle for the loop itself.

Run the monthly review on exceptions: owners present only the targets off plan, with cause and countermeasure. The annual reflection is the step that makes it a system rather than a form. Witcher notes that reviewing the hoshin process itself is unusual in conventional strategic planning ². It is also why the second year runs better than the first. The quarterly strategy review page covers the agenda for the executive-level check.

Why it so often stalls outside Japan

The strongest objection is that hoshin kanri is too slow and too heavy for markets that move fast. Weeks of catchball, monthly reviews, annual reflection: by the time the matrix is frozen, the competitor has moved. Witcher states the objection fairly. To an outsider, he writes, hoshin planning looks systematized to a degree that is probably unprecedented for most organizations, and some have described its world as one of “tool heads” ². He also cites Richard Whittington's broader observation that from around 1990 the fast, flexible strategizing of the Anglo-Saxon economies looked better suited to the times than the careful instrumentalism of Germany and Japan ².

The objection is right about strategies that are single decisions; those should not go through hoshin at all, per Kano's distinction ². It is wrong about strategies that need hundreds of people to work differently. Those move at the speed of the organization's learning whatever the method, and the choice is between learning on a schedule and learning by accident. A fast decision implemented through an unaligned organization is not fast.

Three failure patterns show up at scale. First, the method gets parked with operations. Witcher's research found that senior strategists often see hoshin kanri as an activity for operations, and that at some companies, Ford among them, there was little real connection between business strategy and the hoshin work done at plant level ². Second, too many objectives: the matrix fills every cell, and the vital few become the trivial many. Third, the form replaces the conversation, which is Reich's complaint ¹. The fix for all three is the same. The chief executive chairs the hoshin review, the matrix holds no more than five annual objectives, and every target on it can be traced to a conversation in which someone below could have changed it.

Before you freeze the matrix

• No more than four breakthrough objectives and five annual objectives.
• Every annual objective supports a breakthrough objective; every priority supports an annual objective.
• Every priority has one owner and a named contributing team.
• Every target has a baseline, a number and a date.
• At least one target changed during catchball, and the reason is written down.
• The monthly review dates are in the calendar, with the chief executive chairing the hoshin review.

Monday morning: take your current strategic plan and try to draw its X-matrix on one page. Wherever the corners are empty, a priority supports nothing or an objective has no priority behind it. Those gaps are the agenda for your first catchball round.

The X-matrix looks like the method because it is the only part you can photograph. The method is the conversation behind it: the plant manager who pushed a target back with data, the department that wrote its own plan instead of receiving one. Skip that, and the matrix is a well-drawn list of orders.

Questions

What is hoshin kanri?

Hoshin kanri is a management system for strategy that sets mid- and long-term objectives, builds alignment to them every year up, down and across the organization, manages execution against them and develops people along the way. It grew out of Japanese total quality management in the 1960s and runs on plan-do-check-act. In English it is often called policy deployment or strategy deployment.

What is an X-matrix?

An X-matrix is a one-page hoshin kanri summary. Around a central X it lists breakthrough objectives, annual objectives, improvement priorities and targets, with owners down the side. Small grids in the corners mark which items support which. It summarizes the outcome of planning; it does not replace the catchball conversations that produce it.

What is catchball in hoshin kanri?

Catchball is the back-and-forth negotiation that turns a top team's draft objectives into plans each level agrees to. Drafts go down a level, across to dependent units and back up, with each exchange adding facts and changing targets where the facts warrant it. If no target changes during catchball, the organization has run a cascade, not catchball.

Who invented hoshin kanri?

No single person. It developed in Japanese companies in the 1960s as part of total quality management. Toyota adopted it in the early 1960s, and Yoji Akao's edited book notes the term in a 1962 Bridgestone Tire document. Akao's influential book was an edited collection of chapters by several Japanese academics, not one inventor's account.

Where to go next

• OKRs vs. KPIs vs. Goals
• Quarterly Strategy Review: Agenda and Template
• Strategy Execution: Where It Breaks Between the Offsite and Monday
• PDCA Cycle: Plan, Do, Check, Act Explained
• Cascading Objectives