323
Hoshin Kanri: How Xerox
Manages
Barry Witcher and Rosie Butterworth
Introduction
Hoshin Kanri is an organizing framework for stra-
tegic management. It is concerned with four primary
tasks. First it focuses an organization's attention on
corporate direction by setting, annually, a vital few
strategic priorities; secondly, it aligns these with
local plans and programmes; thirdly, it integrates
them with daily management; and nally it provides
for a structured review of their progress.
The need to manage strategy as directions to
guide local decision-making and daily working
is a concern at the heart of strategic management.
This is particularly so for work which stresses
the importance of organizational transparency to
the implementation and self-management of stra-
tegic intent 1 2 3 4, and the development of core
competencies through a facilitating organizational
architecture 5. The inuence of Japanese approaches
to management seems to infuse much of this pub-
lished work. It has stirred a renewed advocacy for
enabling forms of leadership which are consistent
with ideas about the learning organization 6 and
ideas based upon incremental and emergent
approaches to strategy formation 7. Hoshin Kanri is
consistent with many of the conclusions of this
work, and it has been used in most large Japanese
companies to provide a core capability which inte-
grates strategy and daily management.
However, little is yet known about how it works,
and only a small number of Western rms have
adopted itthough interest has been growing, with
the increased use of self-assessment models. Well-
known Western practitioners include Hewlett
Packard, where it is called Hoshin Planning, Texas
Instruments, which labels it Management by Policy,
and AT&T where it is known as Policy Deployment.
Pergamon
PII: S0024-6301(99)00036-9
This article presents a case study of Hoshin
Kanri practice at Xerox (UK). Hoshin Kanri is a
form of TQM-based strategic management; it
provides a link between strategic intent and its
implementation in daily management. Xerox is
an exemplar of Hoshin Kanri best practice. Key
features include Xerox's use of vital few
programmes; the link with employee
appraisals; an active role for a network of
quality managers; a participative form of
deployment; a mature form of total quality
management; the use of a self-assessment
model to manage the business; and a
structured system of review. While
implementation has been difficult, key benefits
have been transparency and a common
language for involving everybody in the
management of strategy. # 1999 Elsevier
Science Ltd. All rights reserved
The exact meaning of `Hoshin Kanri' is confused in
the linguistic ambiguity implicit in its translation
from the Japanese. The most literal translation is
`policy management', though to Western perceptions
Long Range Planning, Vol. 32, No. 3, pp. 323 to 332, 1999
# 1999 Elsevier Science Ltd. All rights reserved
Printed in Great Britain
00246301/99 $ - see front matter

`policy' can seem more prescriptive than it appears
in Japanese practice 8. Japanese etymology suggests
a shinning light from the metal of a compass needle
which serves to light the way forward 9.
Hoshin Kanri had its beginnings in the 1960s as
the Japanese transformed statistical quality control
and management by objectives 10 into an integrative
form of organizational management, which they
called total quality control and which later came to
the West as total quality management (TQM). The
seminal Japanese text posited Hoshin Kanri as a
necessary framework for holistic forms of TQM 9: it
is argued that Hoshin Kanri provides an organiz-
ational architecture and transparency which is
necessary if strategy and daily management are to
combine in their use of TQM.
TQM provides the means and discipline for self-
management at any level of management, not just
for the management of an operational process in
daily work. Central to it is the PDCA cycle, which
prescribes good management as a cyclical process
which follows the order of plan, do, check and act.
In Fig. 1 the PDCA cycle is shown for the Hoshin
Kanri form of strategic management.
The strategic management cycle is an annual one
which begins when corporate management acts to
follow up the previous year's experience and mod-
ies the strategic focus for the coming year; this is
expressed as the `vital few objectives', or sometimes
as programmes for handing on to business unit
level. The cycle next turns to the `plan' phase when
the vital few are aligned with annual plans at local
level and are deployed through a business unit. The
`do' phase of the cycle is the integration of the vital
few into daily management. The `check' is a review
of the annual performance, and data from this are
Focus
Strategic priorities
ACT Alignment
Review
Self-assessment Deployment
CHECK PLAN
DO
Intergration
Daily management
FIGURE 1. The stages of strategic manage-
mentFAIR and PDCA.
Hoshin Kansri: How Xerox Manages
324
fed back into the `act' phase and so the cycle starts
over. FocusAlignmentIntegrationReview are the
primary tasks of centre-driven strategic management.
In Fig. 1 they are portrayed as the Hoshin Kanri
FAIR cycle of strategic management and are equival-
ent to the PDCA of good quality management. An
exemplar of good practice for Western conditions is
Xerox (UK).
Xerox (UK)
Xerox (UK) is the sales, marketing and support sub-
sidiary of Xerox Ltd. It is based at Uxbridge,
employs over 4000 people in 50 locations and gener-
ates an annual revenue of about 0.7 billion. Xerox
Ltd employs around 24,000 people, and manufac-
tures and sells document processing products and
services throughout Europe, Asia and Africa, which
generates an annual revenue of around 3.5 billion.
Both companies are parts of Xerox Corporation
which is based in the USA, and employs over
90,000 people worldwide with an annual revenue of
over $18 billion.
Since 1993 Xerox has been structured as four
Business Development Units based on ofce docu-
ment systems, ofce document products, document
production systems, and printing systems. These
units have responsibility from the development of
product ranges to their nal bringing to market.
There are also seven regionally-based Customer
Business Units, which are responsible for sales and
service. There is a central corporate organization,
which has legal, nancial, quality, human resources,
and corporate communications functions. In the
units, business processes are organized around tar-
get customer groups rather than specialized func-
tions.
There are functional specialists, such as quality
managers, distributed throughout the business units.
They keep in contact with each other through
specialist networks organized from the centre. In the
case of the quality network, this meets quarterly at
the centre and is administered by a Quality Ofce,
whose manager is responsible to the Director of
Group Resources (as are all the managers of these
networks). There is no organizational box for the
networks but the idea is that these specialists
should talk to and learn from one another. Thus the
networks are self-organizing and will set up sub-
groups to work around subjects of common interest
as the occasion demands. The centre does not tell a
network what to do, but they are considered by top
management to be an important part of the facilita-
tive architecture of the organization. The networks
serve to facilitate where ``the real decisions get
made; obviously we will go to the board to get a
nal decision on something, but in terms of all of
 325
the work, that gets done via the networks''
(Corporate Quality Manager, 1997).
Xerox was one of the rst Western corporations to
use TQM and its competitive success owes much to
its adoption as a strategic approach for managing, as
it was used proactively to transform Xerox from a
product-led organization, based upon separate tech-
nologies, to one driven by service and customer pro-
blem-solving. In the rst instance, TQM was
adopted as a response to a `crisis of survival' in the
face of a challenge from Japanese competition.
During the 1970s Xerox's rate of return on assets
had been stable in the region of 20%. After 1980
this declined every year to a low of less than 5% in
1984. TQM was implemented at this time, and after-
wards the rate of return rose to 10%, and for 1997
achieved 18%. Xerox's business processes have
been some of the most innovative in modern
business management, and have included pioneer-
ing initiatives such as self-directed and multi-skilled
work groups, benchmarking, and self-assessment
audits (a history of Xerox Corporation is given by
Palermo and Watson 11). Xerox Ltd was also the rst
company to win the European Quality Award (a
copy of its submission document has been pub-
lished, Rank Xerox Ltd 12).
A major review of corporate strategy by Xerox
Corporation in 1990/91 involved its Japanese joint
venture, Fuji Xerox. This company had been using
Hoshin Kanri and had won the coveted Deming
Prize for quality in Japan, and after the review
Xerox Corporation formally adopted Hoshin Kanri.
In Xerox (UK) this decision was accepted hesitantly.
``We were told `you will do policy deployment' but
there was very little guidance on what it was. The
process sort of came and went but the corporation
was very keen that we had policy deployment. As a
result it developed depending upon enthusiasm and
initiative in different areas. It was imposed'' [Xerox
(UK) Corporate Quality Manager, 1995].
Hoshin Kanri at Xerox (UK) is now in a very
developed form, where it is known as Policy
Deployment. At Xerox Corporation, however, it is
known as Managing for Results. This difference is
historical. When in 1991 Hoshin Kanri was intro-
duced, Xerox (UK) saw it as primarily a manufactur-
ing management system like management by
objectives. So to differentiate it clearly from this,
and because the UK company saw itself primarily as
a sales and marketing operation, it adopted a name
which would reect a less prescriptive approach to
the deployment of objectives. In fact there is evi-
dence that TQM took a long time to become estab-
lished as a `way of working' in the non-
manufacturing side of Xerox, where it had to be ``re-
launched several times'' 13. It now looks very differ-
ent; the rest of this article is structured in terms of
the FAIR framework, starting with focus.
Focus
Vision
Xerox Corporation sets the Vision and Business
Goals: these are than taken and adapted by the com-
panies in the Group. The Vision is a statement,
which shows a desired state. This shows Xerox
wanting to achieve success through enabling its cus-
tomers to be more productive.
The Document Company Xerox (UK) will be the leader in the
Global Document Market, by providing Document Solutions
that enhance Business Productivity 14 (p. 2).
The vision was articulated in this form in 1990 and
has remained largely unaltered since, though orig-
inally it was the `European' rather than the `global'
market, and in 1998 `Solutions' replaced `Services'
to provide a more customer-centred and less pro-
duct-oriented statement.
Business Goals and Direction
To progress towards this vision, Xerox sets corpor-
ate-wide goals to help it measure its performance.
These have remained the same since 1990.
{ Customer Satisfaction.
{ Employee Motivation and Satisfaction.
{ Market Share.
{ Return on Assets.
Xerox was one of the rst companies to give pro-
minence to customer satisfaction as a business goal
where it is explicitly stated as a strategic priority.
Paul Allaire, the CEO of Xerox Corporation who
introduced TQM to Xerox in 1984, observed that
``above all, [TQM] opened our eyes to the import-
ance of customer focus'' 15 (p. 1.2). Soon after the
introduction of TQM, customer satisfaction was put
on an equal footing with return on assets and market
share. This is now common practice for large com-
panies and particularly for those which use the
balanced scorecard 16. Customer dissatisfaction
often comes about because of the lack of importance
managers place on doing seemingly unprotable
tasks. Xerox linked managers' salaries to surveys of
external customer satisfaction at an early stage of
their TQM 17 (pp. 230233). Nowadays, depending
upon business needs at the time, a variable part of
managers' pay is always linked to one of the
business goals. In 1996 a loss rate bonus was linked
to pay; this measured the number of customers lost,
and was meant to reect retention (or customer loy-
alty) as a customer satisfaction priority.
In themselves the business goals only specify stra-
tegic priorities, they do not provide a general focus
or direction and as `goals' Xerox sees their purpose
as a means to measure its progress in the key areas
Long Range Planning Vol. 32 June 1999
 326
which determine the company's longer term suc-
cess. An overall direction is indicated by a Direction
to which each business goal should at any one time
be linked. The Direction for 1997 was the achieve-
ment of `Protable Revenue Growth'. This was trans-
lated at Xerox (UK) to mean to increase revenues at
margins which are protable. The `vital few pro-
grammes' for 1997 at Xerox (UK), which are its
annual strategic policies, had to be consistent with
this direction.
Vital Few Programmes
Xerox (UK) starts to determine its vital few pro-
grammes early on when the Board carries out a 2-
day planning session in July. From this meeting
comes the outline business plan as well as an out-
line for its vital few. The business plan is primarily
made up of the nancials and these are eventually
worked out and translated down in terms of targets
and measures of revenue, prot etc., in collaboration
with all the business units. The vital few pro-
grammes stand outside this and are taken separately
by the quality ofce and worked up, with senior
executives, into more detail. The aim is to have the
documentation which species the centre's vital few
programmes ready by the end of the year.
Thus the renement of the vital few programmes
(at the same time as the business plan) takes place
over the 5 months, before they are introduced at
Start Year meetings in the business units in the sec-
ond week of January. An individual senior executive
will act as a sponsor for each of the programmes,
depending on how they as individuals suit the
nature of the programme, or as someone who wishes
to champion a particular cause. In 1998 the vital
few programmes were perceived in Xerox (UK) as ``a
few things that will have a great impact'' 14 (p. 2).
The quality ofce takes the Direction and works
with the sponsors to translate in detail the vital few
programmes. During this time feedback will be com-
ing in from the XMM certication process which
will be going on in different parts of the organiz-
ation at the same time (see below).
A lot of the time is actually spent speaking to various directors,
putting the information up, rewriting it and getting all of the
information into a usable format. So we (the quality ofce)
have a role in actually dening the direction, and then a role
in deploying the direction (Corporate Quality Manager, 1997).
The vital few programmes are specied around
each of the business goals to ensure they are linked.
In 1997 the customer satisfaction goal was given its
own `vital few' programme about Customer Loyalty
and this was nally written as:
Only when we can demonstrate our loyalty to our customers
can we expect to have their loyalty in return 18.
This programme was specied to reduce customer
dissatisfaction and thus minimize revenue losses for
Hoshin Kansri: How Xerox Manages
existing customers in line with the Direction's
requirements noted above. It also called for the
introduction of new forms of customer care which
would facilitate the monitoring and management of
all customer contacts during the period customers
are with Xerox.
There is a strong degree of continuity in the vital
few programmes from year to year. The annual de-
termination of programmes takes into consideration
a longer time span than the annual strategic manage-
ment cycle implies. ``When we put vital few pro-
grammes together, we said that we were not going to
put in things which were just tactical for the year,
[but things that] we would expect to take up to ve
years to implement. So over the years the words
might be slightly different; it is a continuum, es-
pecially `skills up' [an employee motivation and sat-
isfaction based `vital few' programme, which aims
to develop Xerox's workforce as a multi-skilled
resource]. We have been talking about this for three
or four years now, although the focus each year has
been slightly different'' (Corporate Quality Manager,
1997).
Alignment
The Blue Book
The alignment of the vital few programmes at local
level in the business units and teams begins with
the distribution of documentation known as the
Blue Book and the Employee Guide to Policy
Deployment. This goes to the unit quality managers
at the beginning of the year. This `book' is primarily
intended for managers since they have the responsi-
bility for cascading the information it contains about
the vital few programmes to their teams. The 1997
edition listed the details of each of the vital few pro-
grammes, its sponsor, the scope of each programme,
including its main activities and the stratagem to
operationalize the programme. There was also a sec-
tion which covered the key business activities and
policies of each of the major business units. Finally,
there was a section which claried the role of man-
agers in communicating the programmes to individ-
uals and teams. Unit and team managers are
expected to produce a local translation of the book,
so that it includes local objectives, and these are
issued to individuals to keep by them in their work.
This goes with their own personal development or
appraisal plan, known as the roles, responsibilities
and objectives document (RRO).
Roles, Responsibilities and Objectives
The Blue Book is translated for every employee as
the Employee Guide to Policy Deployment. This is
designed as a folder and concisely explains what
 327
policy deployment is, gives a description of the pro-
grammes, and provides a place at the back where in-
dividuals may attach their team, or their personal,
RRO which summarizes their role in contributing to
the vital few. It may also include a summary of their
primary job function (or that of their team), which
will include their ongoing work as well as that relat-
ing to the vital few programmes. Thus it will con-
tain those key activities and projects for which an
individual is accountable, and the standards, targets
and measures which determine the criteria for suc-
cessful progression and completion of work.
All employees are expected to have an RRO,
including senior managers and executives. Since the
RRO is used for appraisals it provides a direct link
between an individual's performance and the pro-
gress of the vital few programmes. ``[This link] is
the strong point of it all. So they are also doing their
appraisals for the previous year and they are build-
ing this into their objective documents. They are
actually taking two or three inputs: they are taking
input from the company direction which is policy
deployment; they are taking input in terms of what
they did last year, how well they did it and do they
need to improve, etc.; and thirdly what the job
requirements are for that role'' (Corporate Quality
Manager, 1997).
People's RROs are updated annually as a part of
the deployment process and are linked to employee
development. Thus self-managed teams do their
own appraisals and individuals within the team
will use the team's RRO to set their own individual
plans. ``They will use their RRO in their appraisal.
That enables them, when they review, to say, `What
development do I need in order to achieve my objec-
tives and further myself?' So at that point they say,
`These are my performance objectives, but in order
to do that I may need to develop new skills, compe-
tencies etc.', so they do a development action plan
at the same time. This again gets reviewed towards
the end of the year, and then a formal review at the
end of the year asks have you developed and have
you achieved'' (Corporate Quality Manager, 1997)
Deployment
The alignment process begins with Start Year meet-
ings when managers explain the Blue Book to their
units and teams. At any of the six customer business
unit meetings there may be up to 400 people pre-
sent, though for smaller units it will be fewer, as
would be the case of the quality ofce that has only
35 people. Each senior manager will have line man-
agers reporting to them and after the start up meet-
ings they will go through it again with their teams,
and so on, until everyone has been involved. All
these subsequent meetings usually occur throughout
January with the aim of nalizing the local Blue
Books and RROs by February, though teams are
likely to begin working on the programmes before
the documentation is nished.
The Start Year presentations basically go through the Blue
Book and Employees' Guide but what they then do is to go
into detail on the vital few. What they will then do is to say
`this is what we are going to do as an organization' and focus,
say, on customer loyalty. Then what they will say is `this is
what we are going to do in West London to focus on customer
loyalty'. The manager will then take that information away
with his people, because they will be all in this forum, and
take that and translate that to the individual's objectives for
the year. They will have an objective for a sales person to get
their sales target, but they will also have an objective to im-
plement the initial care programme that we are putting in
which ts into the customer loyalty programme.
It actually goes through several strands of deployment; one is
at a very large Start Year meeting, deployed through the line
manager, through his/her team, and the third way is through
the company, or local communications like a newspaper. So
the newspaper at the beginning of the year presented where we
wanted to go in 1997. We use every media tool that we have to
make sure the message gets through (Corporate Quality
Manager, 1997).
Some of the vital few programmes are more rel-
evant to some employees than others. Thus while
some will concentrate on one particular programme,
other employees may address them all in different
ways, depending upon the nature of their work and
circumstances. In practice it is difcult to generalize
about how the vital few will be taken up and trans-
lated. For example:
One of the things that we're going to do across the board is
customer rst training, so everybody will need to know that is
there. We are also doing digital skills, which will hit a very
small community, so that will be different. It will all go
through the various networks that we have got, to get it out to
the eld. For the individual, say the engineer, [they] probably
won't have much of a clear idea about what is in the docu-
ment. They will know that `accelerate skills up' is one of the
vital few programmes; they may translate that into, say, learn-
ing about PCs as an individual skills gap. Some of it will be a
conceptual translation, which isn't a detailed plan. Others will
be, `well here is the detailed plan that is part of your job role,
so go away and implement it'. These are all change initiatives
so they may evolve over the year (Corporate Quality Manager,
1997).
There is a crucial need to be realistic about what
can or cannot be achieved. If there are too many
deployed secondary programmes and the cascade is
very wide, then things can get quickly out of control
and people lose focus. However, if teams are work-
ing to TQM problem-solving principles then priori-
tizing is built into the translation process and
deployment is manageable. The Customer
Satisfaction Management Group provides an
instance of problem-solving priorities. This unit is
in charge of the company's total satisfaction guaran-
tee; it also tracks customer satisfaction and is the
custodian for customer satisfaction company-wide.
At its Start Year meeting this unit focused on the
customer satisfaction and loyalty `vital few' pro-
Long Range Planning Vol. 32 June 1999
 328
gramme and worked rst on a situation analysis of
the present position of the unit's performance. This
involved everyone in a series of brainstorming meet-
ings where SWOT analysis was used to determine
the unit's existing strengths and weaknesses, oppor-
tunities and threats, in relation to a contribution to
the programme. These were used to think up
actions, one of which included the use of the voice
of the customer in distribution channels, another
how to improve customer retention, and others con-
cerned communications and query resolution. These
were assessed for their impact and relation to each
other by cause and effect analysis (a quality tool
which is called root cause analysis at Xerox), and
then the actions were prioritized using Pareto analy-
sis (another quality tool). In this way four actions
were selected and each one was ascribed a desired
state with the means for achieving it. Thus the unit
decided upon action to understand the link between
retention and customer satisfaction, and agreed a
desired state and means:
{ Desired state: A customer retention programme
is implemented in conjunction with a customer
satisfaction communications programme,
designed to demonstrate links between loyalty
and retention.
{ Means: A customer loss programme with a rev-
enue target of around $4 million; loss measures
by team; loss bonus payments; internal market-
ing of loyalty results.
Catch Ball
When units and teams rst work out a programme
like this it is provisional. This is because the full
implications have to be worked out by a process of
iterative communication with other units and teams
affected by the unit's programme. The involvement
of others sometimes leads to conict about means,
but in the end units and teams must prioritize what
is possible within existing budgets. In Japan this
iterative communication process is known as `catch
ball' after a children's game of throwing a ball back-
wards and forwards. Catch ball continues until a
consensus about what can be achieved is reached.
At Xerox this alignment activity is not called catch
ball but it is known as deployment. The discussions
are not about the correctness of the purpose of the
corporate vital few programmes, but centre on the
practical issues about how to achieve them. At
Xerox (UK) catch ball is conrmed as an informal
process, which is embedded in knowledge of every-
day working:
We don't have a formal catch ball process but we have a lot of
discussion and interaction between, and negotiation between,
manager and employee. There is so much feedback from
Hoshin Kansri: How Xerox Manages
employees in terms of what we should do. In the end the man-
agers don't sit in isolation in a room and say, `Oh, I think that
we will do this tomorrow'; it is based on all of the input that
has been ongoing through the year (Corporate Quality Manager,
1997).
Even so there has been some disquiet in the qual-
ity network about the sufciency of linked resour-
cing and perhaps some feeling that Xerox has not
translated the programmes ``very well into cost ben-
et investment plans, etc.: we don't get everything
right rst time. With the customer rst training
nobody has set aside any budget for it'' (an obser-
vation of a manager during 1996). The alignment of
actions must take place within existing budgets,
though there is a degree of exibility in practice.
The role of unit quality managers in providing feed-
back to corporate management is important.
The Role of the Quality Network
Quality managers have a pivotal role since they help
facilitate deployment for their local management,
and help translate corporate strategic priorities into
local actions. They have an active role at Start Year
meetings and informally oversee the progress of the
vital few programmes. For 1997 the quality network
agreed as a group how to follow up the deployment
of the vital few programmes, and this was done
more robustly than for the previous year. Quality
managers do not own the planning process but they
are regarded by the centre as the conscience of the
organization for all of the company's Hoshin Kanri
processes, and the network has a remit to make sure
that the vital few are followed throughout the organ-
ization. To an important extent they act as friendly
overseers.
They are really inspecting without people realizing what is
happening. What they do is to ensure that each team has gone
through some sort of policy deployment cascade, whether they
help the manager by actually presenting, or just checking. And
they will this year do a spot check to ensure that people have
RROs, that is, their objective documents. They also do a
sampling in a non-structured way to test understanding at a
unit level of the vital few programmes. So in a formal way they
will check that the documentation has occurred and also, in an
informal way, whether the message is through and clear. The
quality managers own the management process as to how
things are reviewed in each unit, so they build into that unit
reviews for the year. They will make sure that happens and
will have monthly business meetings with the management
team (Corporate Quality Manager, 1997).
Integration
The essence of Hoshin Kanri is that people should
work on those activities in their daily work which
are vital to strategic success. This is not simply a
question of how the vital few programmes are
deployed but is also about how they are managed
day-to-day. It means that daily processes must be
 329
managed in suuch a way as to ensure that they are
under control. Thus TQM is fundamental to daily
management.
Leadership through Quality
Called Leadership through Quality, TQM was intro-
duced into Xerox (UK) in 1984 and at its heart was
the Xerox Quality Policy. This is now regarded
within the Group as Xerox's Values Statement. The
strategic intention in 1984 was to create and main-
tain a competitive advantage through quality and
this remains true today.
Xerox is a quality company. Quality is the basic business prin-
ciple for Xerox. Quality means providing our external and in-
ternal customers with innovative products and services that
fully satisfy their requirements. Quality improvement is the job
of every Xerox employee 15 (p. I).
Its early days were uncertain. ``TQM started with a
sheep-dip approach where everyone was trained.
This was a waste of time: the boss said, `you've had
your training but this is how it really works'. There
was a loss of morale and frustration among those
who realized we had the tools to make change hap-
pen, but not the management acceptance of that. It
really began to work when we switched from think-
ing about the management of quality as such, to the
quality of the way Xerox manages'' 13. A key el-
ement came along later with the introduction of the
Xerox Management Model that claried and dened
the `way Xerox manages'.
The Xerox Management Model
The Xerox Management Model (XMM) is a method-
ology used to deploy Xerox's vision, goals and
objectives, and to manage the business 15 (p. 1.3).
Introduced in 1994 in a corporate-wide update of
TQM called Xerox 2000, its purpose was to make
Leadership
Human Resource Management
Information
Business Customer
Utilization
Process and
Management Market and Quality
Tools
Business Results
FIGURE 2. The Xerox Management Model.
quality Xerox's general approach to management.
The XMM provided a framework for managers to
identify the key processes used by Xerox to manage
the business. It was Xerox's switch from `doing
TQM' to TQM becoming the `way we do business'.
The XMM is constituted in terms of ve categories
of management. These are leadership, human
resource management, business process manage-
ment, customer and market focus, and information
utilization and quality tools. The denition of good
practice in these areas leads to a good performance
in a sixth category-business results, expressed in
terms of the four Xerox business goals.
In order to get the results you have to have the right sorts of
leadership, you have to manage your people, you have to have
the right sort of processes in place, the right information and
use the right sorts of tools, and all of this should focus on
what the customer expects and wants. If you get the ve
enablers right that should drive out the results (Corporate
Quality Manager, 1997).
In Fig. 2 the directions of the arrows convey the
central importance of the customer and market
focus category: here all the other elements come
together and their impacts ow out to business
results. The categories of business process manage-
ment, customer and market focus, and information
utilization and quality tools are enabled through
people, hence the over-arching prominence of the
human resource management category. Management
leadership at the top of Fig. 2 illustrates that man-
agement commitment and leadership drives all the
other actions. The double-ended arrows emphasize
the need for a continuing dialogue between manage-
ment and other employees. Within each category are
listed subsections called elements, and each of these
has a desired state and core metrics and processes.
Thus for the Customer and Market Focus category
the elements are as follows.
XMM Subsection 4: Customer and Market Focus
{ 4.1 Customer First
{ 4.2 Customer Requirements
{ 4.3 Customer Database
{ 4.4 Market Segment
{ 4.5 Customer Communications
{ 4.6 Customer Query and Complaint Management
{ 4.7 Customer Satisfaction and Loyalty
{ 4.8 Customer Relationship Management
{ 4.9 Customer Commitment 15
In 1996 a large group of representatives from
Xerox Corporation worldwide was brought together
to review this model. The overall shape and the cat-
egories remained but the elements were reduced
from 42 to 31. The primary role for the XMM
remained the same.
Long Range Planning Vol. 32 June 1999
 330
Review
Periodic Reviews
There are three levels of management review. The
rst two are in essence similar to management meet-
ings anywhere, and apply at two different levels: the
business unit level and the company level. Thus
each business unit has a management team which
does a monthly management review where short-
term action is sanctioned. At Xerox (UK) the quality
managers own these to ensure that they are happen-
ing and that the right things are being reviewed.
There is also a similar meeting at the centre where
the Managing Director and his team (heads of units,
network heads) review progress overall. Both these
forms of review concern general matters and are not
solely about the vital few programmes. There is also
an Operations Review and this is entirely centred
on the status of the vital few. Senior managers
review performance every quarter with each unit's
general manager and staff. The agenda is a standard
one aimed to achieve consistency in strategic direc-
tion. Unit representatives present current status
against plan, and make an assessment of the pro-
gress of their action plans so that amendments and
additions to local plans can be agreed at these meet-
ings.
More generally, progress is reported through the
specialist networks and the company's communi-
cations media are used to relay information about
best practice and success stories. Thus the networks
in tandem with communications media play an im-
portant learning and proactive role in disseminating
the lessons from what is happening across the or-
ganization. Of course all review is important to or-
ganizational learning, not least in daily
management, where performance is constantly being
checked and any divergence from plan being acted
upon as PDCA dictates. Where `vital few' pro-
grammes have been translated directly into oper-
ational targets, these will be monitored and
managed daily in a routine way.
XMM Certication
In the nal months of the year Xerox conducts an
annual audit of business unit performance to pro-
vide feedback into the reformulation at the centre of
the vital few programmes for the coming year. Once
called Business Excellence Certication, this activity
it is now called XMM Certication. In Japanese
forms of Hoshin Kanri this is termed a President's
Diagnostic and will involve members of a board of
directors as assessors. At Xerox a senior director
and senior line managers from other units validate
the appraisal. The desired states and metrics of the
XMM are used to appraise each unit's contribution
to the company's vision and objectives including
Hoshin Kansri: How Xerox Manages
the vital few programmes, as well as the way a unit
has been managed and has performed more gener-
ally. Where the vital few programmes and the
desired XMM states have been achieved certication
is approved. This ags up to the other parts of the
company that a unit has demonstrated a high level
of operational command of the XMM enablers, and
has produced good business results based on con-
tinuous improvement. The XMM Certication is in
essence an external audit and it represents a major
event for the unit concerned.
Learning about Hoshin Kanri
Hoshin Kanri is an organic management framework
and varies over the years in its nature and outcomes,
depending upon how top management see it and
use it to enable the participation of others. The 1996
Policy Deployment turned out badly at Xerox (UK)
and failed to have an impact. This was a result of
too many vital few programmes. Eight had been set
for 1996 and these programmes had in turn been
split into 24 `critical elements'. These 24 were
designed to make the programmes' relevance clearer
to the maximum number of employees, and to help
prompt them to think about how a programme
might be carried out. The 1996 Blue Book was very
complex. It went into descriptive detail of the
XMM, gave templates for quality tools and deploy-
ment procedures, gave a lot of detail of the pro-
grammes, and listed the RROs of the major business
units. All this meant a large document of 35 pages,
compared to its equivalent in 1997 of 15 pages.
[This is] why we have struggled so much with the vital few [in
1996]. I think with other companies they tend not to do so
much with the `how'. We have objectives where the focus is
broader (compared to manufacturing organizations) and so we
will give you a few more of the `hows', and what you do in
support of that is for you to decide. The previous MD could
not agree to fewer than eight and would not countenance two
or three. Problem was that by the time you get to 24 critical el-
ements you are beginning to lose focus. My argument is that
[in 1996] we do not have Hoshin Kanri, we have something
which is well recognized, and used for communicationbut
what we actually communicate with, it would be debatable.
We introduced elements because we used to have eight vital
few programmes, but they were then so broad that to try and
get anything out of it at an individual level was difcult
(Corporate Quality Manager, 1996).
Many units simply failed to consider the vital few
distinctly enough from the things they were doing
anyway, and they had designed their programmes
more to suit local rather than corporate centre pri-
orities. A new corporate quality manager commen-
ted in 1997, ``I don't think that there was a single
vital few programme that anyone could useit was
very confusing. This year [1907] we said we were
going to go out with one story on direction and
everybody is going to buy into it. It was hard work
to get all of the directors singing from the same
 331
hymn sheet, to link the communications with the
direction and then to link the management pro-
cess''.
A change in the Managing Director and a move to
simplify the vital few and the documentation, and a
renewed purpose by the quality network to oversee
deployment, improved results markedly for 1997,
and a similar approach was taken for 1998.
Hoshin Kanri is back on course. The company has
recently summarized what its sees as the key attri-
butes of Policy Deployment and these are as fol-
lows.
{ It is holistic in approach (covering all aspects of
the business and key stakeholders).
{ It manages the closed-loop delivery of predict-
able and sustained improvement.
{ It is facts-based, using measurements and analy-
sis as the drivers for target setting and improve-
ment action setting.
{ Plans are nalized only when what is to be
achieved is supported by how improvements
will be achieved.
{ It involves all employees in an interactive pro-
cess to agree their contribution to the Business
Direction.
{ It is integrated with the total company manage-
ment process including the reward and recog-
nition system 19.
Strategic Thinking
Hoshin Kanri at Xerox (UK) provides a strategic
management framework for senior executives at the
centre, the managers who are managing the compa-
ny's business units, and the rank and le working
in teams and managing their contributions to stra-
tegic priorities as part of daily management. The
part played by review and feedback, the nature of
deployment, and the use made of RROs and the
XMM, means that virtually everybody is taking part
in managing strategy. TQM and the XMM bring to
strategic management a common language and a
way of working. These things also place a premium
on process as well as performance, where the stress
is on participative involvement in determining the
`how' of strategy. It directly links corporate purpose
with means at an operating level. As such Hoshin
Kanri and TQM provide a missing link between pur-
pose and the substance of process and people man-
agement.
On the surface Hoshin Kanri strategic manage-
ment has those characteristics which are so strongly
criticized by emergent theorists (see the commentary
in Mintzberg et al. 7), in particular, the conceptualiz-
ation of the strategy process as a series of sequential
stages where the formulation of deliberate corporate
strategy comes rst, and is then followed by a top-
down implementation by others. Hoshin Kanri is
about a deliberate top-down deployment of annual
programmes, where employees are expected to nd
the means to implement them. So strategy, it seems,
is deployed to local management, where, as emer-
gent theorists might argue, it is clawed to pieces by
conict and vested interest, bent out of shape by
contingency and changing circumstances, and in the
end, made into something else. This may be true of
traditional corporate strategy and strategic planning,
but there are important differences in the instance
of Hoshin Kanri at Xerox.
Hoshin Kanri is based on TQM, and in particular
it addresses the primary FAIR tasks of strategic man-
agement according to PDCA principles. Strategy is
deployed as strategic intent and corporate strategy is
presented as statements which are very limited in
number and which are designed for a participative
form of alignment. There is no elaborate formulation
of actions and targets for others to achieve. The
approach is organic and is based on continuous
improvement and breakthrough change, which is
rooted in what is possible and open to discussion.
In terms of core competencies Hoshin Kanri pro-
vides a core capability, or architecture, for strategic
responsiveness. Thus a core competency, such as an
ability to nd solutions for customers and to build
loyalty, may be developed and sustained over time
through vital few programmes, which everybody in
the organization must address and accommodate.
Hoshin Kanri can provide capability.
Of special importance is the concept of the `vital
few'. Xerox's case illustrates the difculties that too
many programmes bring in terms of loss of focus.
The essence of Hoshin Kanri is its transparency of
direction. The vital few must be understood by and
be translatable for everybody. It is not that a corpor-
ate centre has prescribed detailed policy for others
to carry out, but rather that following Hamel and
Prahalad 4, a corporate challenge is specied for all.
In the Xerox case there is room (perhaps too much
room) for a great deal of interpretation in the trans-
lation of the vital few, but Hoshin Kanri is also
about alignment with local objectives and the inte-
gration of these with the vital few for daily manage-
ment. There must be room for accommodation. The
issue is one of balance and it seems likely that
much must depend upon facilitation and, in the
example of the quality network at Xerox, the collec-
tive infrastructure or organizational architecture that
administers support for learning.
The problem for those organizations which may
be thinking of adopting Hoshin Kanri, is that it
takes a long time to get right. This is especially true
of achieving the collaborative forms of cross-func-
tional management that `catch ball' and TQM
require. It is not often realized how different Hoshin
Long Range Planning Vol. 32 June 1999
 332
Kanri is in practice from its progenitor, `manage-
ment by objectives',which is prescriptive, individua-
listic and driven by performance outcomes 8. In the
early years implementation of Hoshin Kanri can too
easily lapse into a human relations-friendly sort of
management by objectives. Mature forms of Hoshin
Kanri in practice are very uid and interconnected.
To understand it, it is better to think of it as an orga-
nizing approach rather than an organizational or
administrative approach per se. Hoshin Kanri is an
organic management system based on a TQM-con-
ditioned environment for working, and it probably
becomes more responsive with use, though it must
be continually reviewed and changed. Its true pur-
pose is to build strategic change into how people
manage. Its essence is in the contribution of all
members of the organization so that everyone buys
into strategic management.
This article is based on a two-year research programme conducted
at the University of East Anglia into `the use of Hoshin Kanri as a
planning tool to implement and align strategy in operations', and
funded by the Innovation Programme of the Economics and
Social Research Council. The ultimate aim of the project is to
construct a generic model for Hoshin Kanri under UK conditions.

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Hoshin Kansri: How Xerox Manages