WHAT IS HOSHIN KANRI METHODOLOGY – MANAGEMENT BY OBJECTIVES? AND HOW TO APPLY TO YOUR BUSINESS?
Performing in management is a task that requires discipline, commitment and technique. However even the most dedicated managers can sometimes be viewed with some discomfort on the part of colleagues and staff because of being obsessive or strict.
It’s a situation that is very common and occurs in many workplaces. Therefore, a lot of managers and directors have adopted MBO in their companies, the management method by objectives.
The policy deployment methodology that helps improve management and makes the role of management easier to be understood by the whole company.
In this post, you’ll be able to understand what is hoshin kanri methodology for businesses and how to apply it to your company.
What is MBO?
To understand what is Hoshin Kanri methodology and what is MBO, it’s important to understand that it is a fundamental of total quality management.
MBO, also known as the unfolding of a company’s objectives, was developed by Yoji Akao. The method was widely proclaimed in Brazil by one of the most renowned consultants in the management area: Vicente Falconi.
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Among its guidelines, management by objectives deals with a policy deployment methodology that can develop planning in a practical way. As well as the need to perform step by step and act sensitively to possible changes during this process.
Hence, it is not surprising that it includes in its technique the adoption of the PDCA method (Plan-Do-Check-Act). Resulting in MBO also having a strong relationship with quality control and a continuous improvement process.
In its make up there are three pillars that establish the reason for the great success of the method. It is impossible to understand what MBO is without knowing these three pillars:
- The first is the belief that the results are directly affected by the dedication and creative action of the people involved in the process.
- The second pillar is innovation, which must be present in tasks and always be encouraged.
- Finally, the third pillar says that the changes to be realised are acted upon. After all, there is no point in making so much effort if the framework does not include the willingness to evolve and improve.
Management by a company’s objectives
In order to be able to function in a positive way and provide expected results, MBO understands that it is necessary to be able to align all the levels of management within a company. Only through this communication flowing in the same direction will it be possible to really succeed.
Therefore, the method tries to unfold activities that go through the strategic (top management), tactical (intermediate management, departments and areas) and operational areas (supervision and coordination related to production) .
Only in this way can it be guaranteed that the whole company will be truly involved in its intended objectives.
Seeking to make the application of this method at all three levels of management more practical, MBO presents two management systems:
- The first is interfunctional management, which envisages as a priority, the future of the company. It is directly linked to the top management and to the unfolding of the company’s guidelines and its division among departments.
- The second is the functional management, which is focused on continuous improvement and maintenance of the organization’s routines. It is directly linked to the administration and quality control of daily and routine tasks of the company.
Following the operating structure of the MBO, it is necessary to identify the separation that is made from all strategic planning. There are three types of complementary plans that will dictate the pace of work of the company in the immediate future and also in the years to come.
- The annual plan details the steps of the next few months and also includes the budget. It is thereby more detailed than the others.
- The medium-term plan seeks to list the strategies that will be the basis for the longer term. It is the intermediate vision between the other two and is designed to include a period of time, usually around three years.
- The long-term plan seeks to work to achieve the company’s vision of the future, contemplating a period ranging from five to ten years. It focuses on the structural changes of greatest impact within a company.
The MBO application
As a strategic business tool, MBO needs to be flexible for any type of company or market. It is a Japanese system that uses individual capacity, stimulating creativity so that concrete results can be sought in an organized and strategic way.
In brief, it unfolds goals and action plans for each level of the company with a routine checking of facts and results.
Based on this cyclical functioning and guided by objectives and well-structured planning, it is possible to follow a path that is clear to all involved. In addition, it is possible to harness the benefits of continuous improvement, which are intrinsic to the PDCA.
4 benefits of the MBO method
- Achieve results and goals: The method incentivizes innovation. It must be present in the tasks and the belief that results are directly affected by the dedication of people.
- Organization of management operations: Consists in trying to join all levels of management within a company. Unfolding activities that go through strategic, tactical and operational areas. Beyond this there are three types of complementary plans that will dictate the pace of the company’s work. The annual plan, the medium term plan and long term plan.
- Better plans: MBO also encourages the PDCA method and believes that the changes to be realised are acted upon. After all, there is no point in making so much effort if the framework does not include the willingness to evolve and improve.
- Clarity and objectivity of work: As each process is fulfilled in a transparent way, it is possible to understand what improves the company. Stability is achieved by the long term and well structured steps that avoid repeated mistakes. For efficiency the process seeks continuous improvement and manages to be objective, thereby avoiding repetition due to errors
In practice, the main advantages of management by the objectives are good results. As each process is done in a transparent way, it is possible to understand very clearly what benefits the business.
Two additional outstanding benefits of MBO in companies are stability and efficiency. Stability is achieved through a well-structured and systematic way of acting that avoids the repetition of errors.
As for efficiency, it ends up occurring naturally since wasted resources, whatever they may be, are avoided. The process therefore always seeks continuous improvement and manages to be completely objective, thereby avoiding the necessity for reworking.
Finally, it is important to consider that the MBO needs to be completely structured to be established within a business. Throughout the process as the goals end up being highlighted and therefore there is a greater transparency, some people may feel pressured to always be able to offer improved results.
This type of pressure can end up inhibiting the creativity of these individuals and even reducing their productivity, which is something harmful for the company and also stressful for the employee since their self-confidence can be undermined.
In any case, the management method by the objectives is a management strategy that has great potential. It helps in the development of processes and consequently, in the company’s results.
It is a practical solution and applicable to all types of business that, if conducted with discipline and focus, can positively change the organizational culture and guarantee better chances of success for the entire company.
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As you saw, MBO in companies uses PDCA, so download our free infographic: How to apply the PDCA Cycle
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