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Enterprise Strategic Planning

Developing the organizations strategy and


deploying it throughout the organization

Aligning Strategy with Process Metrics


This is a process for ensuring alignment among the organizations
performance measures, strategic plans, improvement projects, and
budgets. The items in grey will be covered in session 7.
1.

Establish the organizations key goals

2.

Establish KPIs associated with the organizations key goals, and measure
performance in these

3.

Develop and deploy the enterprise strategy to the process level

4.

Establish process measures (if not already existing)

5.

Enterprise KPIs are then recalibrated and aligned with process-level


metrics

6.

Once the metrics are aligned at all levels, process improvement projects
can be identified

7.

Budget must be allocated aligned with the process improvements needed


to achieve the strategic goals. This is why it is critical to align the budgeting
process with the strategic planning process

BA 553: Business Process Management

Types of Strategic Planning

What is the Purpose of Strategic Planning?

Why Undertake Strategic Planning?

To identify and define strategic gaps and breakthrough goals


which the company is committed to achieving.

To focus and motivate all employees to achieve the changes


needed to achieve and sustain a leadership position in the
marketplace.

How do you Undertake Strategic Planning?

Option 1 The Traditional Approach: Management by Objectives

Option 2 Hoshin Planning Approach: proven to be more


successful than the traditional approach

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The Importance of Employee Involvement

There are many methods for conducting strategic planning in organizations

In most cases, the strategic plans are developed by senior management, and
deployment only involves the higher management levels

Those at the lower levels of the organization are not involved in identifying their
strategic goals, and often are not even informed of the goals after they are
developed

This makes it difficult (or impossible) for employee actions to be aligned with the
organizations key goals

From: Dilbert - A Treasury Of Sunday Strips: Version 00 by Scott Adams, (Andrews McMeel Publishing 2000)
BA 553: Business Process Management

Hoshin: Definition

The word Hoshin is formed from two Chinese words - Ho


meaning method or form; and Shin meaning shiny metal
showing direction or compass

Combined together, it stands for methodology for strategic


direction setting

It is a management system that emphasizes customer focus,


process management, employee participation and knowledgebased decision making

Its aim is to align people, activities, and performance metrics,


from the highest to the lowest level in the organization, with
strategic priorities

BA 553: Business Process Management

Hoshin Planning at Texas Instruments

Improvements achieved at Texas Instruments Semiconductor


Group using Hoshin planning included:

Reduction in missed committed delivery dates by 75% in


one year.

Reduction of manufacturing cycle times by 60% in two


years.

Reduction in customer returns by 70% in two years.

Reduction in product defect levels by 65% over two years.

A significant increase in market share against some of the


toughest competitors in the world.

BA 553: Business Process Management

Characteristics of Hoshin Planning

Enables alignment of organizational goals with changes in the


external environment.

Identifies and communicates the vital few strategic gaps that


must be closed to achieve market leadership.

Provides a linking between annual objectives and strategic


priorities.

Enables measures of daily activity to be linked to measures of


strategic outcomes.

BA 553: Business Process Management

Introduction of Hoshin Planning in the U.S.

Hoshin Planning was first implemented in the United States in the


1980s by Hewlett-Packard

The success achieved using Hoshin Planning by Hewlett-Packard,


Intel Corporation, Texas Instruments and many other companies
has resulted in its increasing use by organizations seeking ways to
achieve high performance levels

Hoshin Planning was first developed in Japan and played essential


role in helping many companies achieve the coveted Deming prize

Hoshin Planning is one of many names given to this improved


strategic planning methodology. Others include management by
planning and key objectives planning

BA 553: Business Process Management

MBO vs. Hoshin Planning


MBO

Hoshin Planning

Deploys profit goals

Deploys voice of the customer

Focus on results

Focus on process

Quarterly management

Continuous management

Top-down communications only

Lower-level learning feeds back to top


of organization

Focus on individual behavior

Focus on system behavior

Individuals have little or no input to Catch-ball process enables input from


individuals to measures
their measures

BA 553: Business Process Management

Why Change From MBO?

Inconsistent with a participative or empowering work environment

People have no input to the measures theyre being evaluated


against

Inconsistent with a learning organization environment

No documentation of learning about why measures were not


achieved

No sharing of learning, either up the organization or across


functional boundaries

Inconsistent with process approach

No link between daily activities of employees and strategic goals

Addresses symptoms only - no examination of root causes to


discover and eliminate systemic problems

Focuses on results, not the process used to achieve them (no


understanding of why targets werent met)

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Hoshin Planning and the Process Enterprise

Organizational success depends on the united efforts of all employees.

For employees to be partners in achieving organizational objectives, they


have to understand what the objectives are, why they are important, and
how they can help achieve them.

The traditional command and control style of management and a relatively


chaotic work environment result in employees not understanding the whole
of which they are a part.

This lack of systems thinking results in employees focusing on the tasks


they are assigned without an awareness of how their tasks relate to the
organizations objectives.

Organizations that involve the workforce in strategic planning create a


framework within which all employees can work together to optimize their
activities with the success of the whole organization in mind.

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What Does Hoshin Planning Look Like?

Hoshin Planning deploys the voice of the customer, not just


profit goals.

Hoshin Planning deploys breakthrough strategies.

Hoshin Planning controls the means and methods, not just the
results.

Hoshin Planning is a continuous management process, not a


calendar-driven system.

Hoshin Planning emphasizes frequent reviews up and down


the organization.

Hoshin Planning is not tied to performance appraisals.

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Hoshin Planning: Impact in the Trenches

Establishes priorities for local project planning and resource


allocation.

Demands active, bottom-up involvement in proposing budgets


and targets.

Resources are allocated to support plans for improvement,


not based on last year's budget.

Ensures corporate visibility at even a local level, since all


projects contribute to targets (aligning vectors).

Motivates all participating employees by making clear their


link to the core business and to customers - total involvement.

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Hoshin Planning Benefits

Deploys the company vision/mission

Achieves breakthrough by aligning vectors

Provides a disciplined process to achieve total customer satisfaction

Integrates the activities of organizational groups

Enables company-wide participation in planning

Increases communication across departments

Provides a common language

Provides a systematic process for continuous process improvement

Increases flexibility and responsiveness to change

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Hoshin Planning:
Factors that Contribute to Success

The company vision is aligned with customer needs.

One (and only one) business planning system is used.

The Hoshin Planning cycle is aligned with the budget cycle.

Resources (both people and $) are committed to implementing the


improvement plans.

Participation of all levels of the company, both in planning and in


setting targets (catch ball process).

Targets are set based upon an understanding of both how they will
be achieved and the limits of process and organizational
capabilities.

Management demonstrates a tangible commitment to open and


honest communication, on-going education, and meaningful
recognition.

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A Strategy-Aligned Process Enterprise

Imagine an organization where the president communicates the vital few


strategic priorities, and every person participates in defining how his or her work
provides a measurable contribution

Imagine an organization where everybody knows the methods to follow to


guarantee that the organization will meet its objectives

Imagine an organization where employees integrate daily management with


contributions towards the long-term strategic priorities

Imagine an organization where each manager routinely communicates


deviations from plan to enable diagnosis and timely corrective action

Imagine an organization where the key business systems and organizational


design routinely adapt to changes in the environment

Imagine an organization where every employee understands and participates in


developing plans to improve performance by improving the work processes and
the organizational culture
Bechtell, M., The Management Compass: Steering the Organization Using Hoshin Planning,
New York: AMA Membership Publications, 1995

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How to Conduct Hoshin Planning


Future Direction

Hoshin Management
(plot voyage)
All ports of call

Current Course
Next port of call
Functional Management
(set course and speed)
Daily Management (run the ship)

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Management Roles in Hoshin Planning

Daily Management

Functional Management

Necessary activities for each department within the


organization to undertake in order to operate effectively.

Activities at the corporate level needed to achieve


company objectives for quality, cost, delivery, etc.

Hoshin Management (Hoshin Planning)

Coordination of corporate level activities to achieve the


president's annual policy and meet organizational longterm objectives.

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The Seven Principles of Hoshin Planning


Participation by
all managers
Individual
initiative and
responsibility

Focus on
process

Catch ball
understanding
Focus on
root causes
No tie to
performance
appraisals

Quality
first

King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989.
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Hoshin Planning Principles Defined


Participation by all managers

Every manager is asked to give his/her input to the company's five-year


vision

Participation in planning helps create ownership and acceptance of the plan

Process gives top management valuable insights from lower organizational


levels, and often sufficient cause to adjust the plan

Individual initiative and responsibility

Managers are responsible for setting and evaluating their own personal
goals

The goals that are established are aligned with the goals of the rest of the
organization

Each manager knows what to expect of related functions in measurable


terms

Reduces the likelihood that unrealistic commitments will be made which


might negatively influence organizational performance

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Hoshin Planning Principles Defined (Cont'd.)


Focus on root causes

As problems are identified, their root causes are sought

As root causes are identified and eliminated, the process is improved and
standardized, leading to a sustainable increase in process effectiveness

No tie to performance appraisals

The assumptions upon which Hoshin Planning is based is that system


performance is a function of the system and not the individual, and is thus
not tied to individual compensation

Quality first

Quality in the process is stressed over profit

The rationale is that profit will follow from emphasizing quality

Hoshin Planning is based upon the viewpoint that providing customer value
by means of quality is the basis for long-term success

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Hoshin Planning Principles Defined (Cont'd.)


Catch ball

A communication analogy used to encourage open and accurate


exchange of ideas

In catch ball, information flows both vertically and horizontally, i.e.,


the receiver catching a communication tosses it back to the sender
to ensure correct interpretation and understanding

Focus on process

Monthly and yearly numerical targets are used to evaluate


processes

Factors which help the process better achieve the targets are
enforced

Factors which hinder the process are examined for elimination

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The Hoshin Planning System

5-year vision

1-year plan

Plan
Presidents
annual
audit

Audit

Monthly
diagnosis

Execute

Deploy to
departments

Detailed
implementation

King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989.
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The Six Steps in Hoshin Planning


Step 1: The Five-year Vision
The five-year plan sets the strategy the organization will use to achieve
its long-term vision. It includes a few key objectives. A draft is created
by top management, and then all other managers provide input to the
plan. In this way, the plan is understood by all who will act on the plan.
The five-year plan is reviewed and adjusted, sometimes as often as
each year, to assure that it remains on target.
Step 2: The One-year Plan
Specific activities are outlined in the one-year plan. These activities
flow from the five-year plan based on feasibility, environment, customer
requirements, and past performance. The top activities are then
reviewed by various subjective and objective means to determine the
appropriate integrated plan of activities.
Step 3: Deployment to Departments
Measurable targets and methods are determined at this step.
Prioritization of plans is accomplished by methods which maximize
likelihood of success. Baseline measurements and expected goals are
put
in place
using standard charts.
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Process
Management
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The Six Steps in Hoshin Planning (Cont'd.)


Step 4: Execution
Simple tools are used at this step to provide detailed implementation
and contingency plans. Because the individuals doing the work are
putting the plan in place, they are being empowered to guide it to
completion. Employees are thus encouraged to take remedial action
when necessary based upon their own anticipation of contingencies.
Step 5: Monthly audit
Progress is assessed at this point to determine help and hindrances to
the process. Workers review the control charts for trends in quality,
cost, delivery and other key aspects. If necessary, problem diagnosis
takes place to determine and eliminate root causes.
Step 6: Presidents annual audit
This review of the previous year's results looks at target indicators of
the process effectiveness. The annual audit focuses greatly on the
processes, rather than the numerical targets. The purpose of the audit
is improvement of the previous year's results. The updated vision
and/or annual plan will incorporate the findings of this review.
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Hoshin Planning Example


The following example is from a power generation
utility where the Professor led a project

Hoshin Planning Example

This module provides an overview of a training session that was


conducted by the Power Generation Division to help introduce
Hoshin Planning to key stakeholders and to initiate the Hoshin
Planning process.

The 60 participants in the training meeting included:


Division vice presidents
Corporate legal representatives
Corporate finance department representatives
Corporate human resource representatives
Management teams from all generation division plants
Front-line supervisors from selected departments
The trade union business manager
Trade union stewards
Plant planning group members

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Meeting Purpose

To provide participants with an understanding of Hoshin


Planning principles and processes.

To understand the divisions strategic goals and establish


primary plant level hard and soft objectives.

To identify concerns of all stakeholders associated with


implementing Hoshin Planning.

To establish a top-level division Hoshin Planning


implementation process.

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Meeting Agenda
Session 1 - Leadership Group Guidance

In this session, division vice presidents provide information on


the divisions strategic objectives and general guidance on the
areas in which they recommend power generation plant
objectives be established.

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Meeting Agenda (Contd.)


Session 2 - Overview of Hoshin Planning

The objective of this session was to provide participants with a


general training on of the principles and process associated with
Hoshin planning and an understanding of the way in which process
management tools can be used to help in designing a plant level
Hoshin planning process.

Session 3 - Establishing Preliminary Hard and Soft Objectives

This session provided an opportunity for both plant working groups


to identify preliminary plant objectives and review these with
meeting participants.

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Meeting Agenda (Contd.)


Session 4 - Designing a Hoshin Planning Process

This session provided participants with knowledge and skills


to support their Hoshin planning process design effort.

Session 5 - Working Groups to Establish Top-Level Hoshin


Planning Implementation Process

This session provided participants with the opportunity to get


started with their Hoshin planning process design effort.

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Workshop Topics
Session Topic
A
0. Purpose and Agenda
1. Leadership Guidance
B
2. Hoshin Planning
3. Systems Diagram
4. P2DCA - The Learning Cycle
5. Understanding Organizational Capabilities
6. Seeing the Organization as a Network of Processes
7. Employee Interest in Participating in Process Improvement Efforts
8. Vision of the Future
C
9. Working Groups to Establish Preliminary Hard and Soft Objectives
D
10. Organizational Improvement Planning Overview
11. Deploying Key Objectives - Case Examples
12. Multi-level Learning Cycle
13. The Deming Improvement Cycle
14. Organizational Change Model
15. Planning Process Overview
16. Performance Indicators Case Example
E
17. Hoshin Planning Implementation Workshop Groups
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Session 1: Leadership Group Guidance


Plant Vision
Develop and implement a quality improvement plan that will enable
our plant to become the best combustion turbine plant in the
country, recognized for its high employee morale, teamwork, and
unsurpassed customer satisfaction.
Business Priorities

Increase employee value

Increase plant asset value

Increase customer value

Increase shareholder value

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Session 9: Establishing Preliminary


Hard and Soft Objectives
Plant Priorities
Employee safety
Protect the equipment
Generate megawatts
Environmental compliance
Plant Goals
Zero reportable accidents (hard)
Optimize availability (hard)
Optimize employee training (hard)
Change management style to reduce the level of fear in the
work environment (soft)

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Session 11: Deploying Key Objectives Utility Case Example

Imagine you are a planning team for a power plant

Senior management has established a set of priorities for


improvement over the next year, using feedback from all types
of customers

One area needing improvement is the reliability of power to


ratepayers.

How do you move from this high level goal to establish


department objectives and specific targets for process
improvement teams?

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Deploying Key Objectives:


Utility Case Example (Contd.)
Mid-term Plans

Short-term Plans

1. Achieve customer satisfaction

1. Improve the reliability of electric


service

2. Shape the environment

2. Strengthen effectiveness in dealing


with regulatory agencies

3. Strengthen organizational
effectiveness

3. Improve the Corporate Planning


process

4. Effectively utilize resources

4. Establish and achieve reliability


targets

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Deploying Key Objectives:


Utility Case Example (Contd.)
President

Achieve customer satisfaction

Coordinating
Executive

Improve the reliability of electric service

Functional
Management

Reduce service unavailability

Department
Management

Reduce the duration of customer outages

First Line
Management

Reduce customer minutes interrupted


to 48.0 by 1989

Modify
distribution
substation
operations

Change
transmission
switching
priorities

Improve
field crew
response
times

others

others

others

Reduce
generation
forced
outages

Upgrade
equipment
and
facilities

King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989.
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Deploying Key Objectives:


Utility Case Example (Contd.)
Utility Division
(UD) Level

Power Plant
(PP) Level

Improvement
Spec
Reduce forced
outages

Integration

Improvement
Plan
(Plant 1)

Improvement
Plan
(Plant 2)

Additional
Plants

Improvement
Plan
(Plant 3)

Integration

Work Process
(WP) Level

Measures
amount of
equipment fixed
work orders
completed

Additional
WP's

Improvement
Spec
Improve
maintenance

Improvement
Spec
Improve
fuel supply

Improvement
Spec

Improvement
Plan

Improvement
Plan

Improvement
Plan

overtime costs
cost of expedited
parts

Etc.

Integration

Work Process
Improvement
Section (IS)
Level

Measure - EFOR

Measures
wait time for
parts

Additional
IS's

Improvement
Spec
Improve parts
availability

Improvement
Spec
Improve predictive maint.

Improvement
Spec

Improvement

Improvement

Improvement

# of times parts
not available

Etc.
Measures
# of parts in
warehouse

Implement
Improvement Plan
Parts
availability
BA 553: Business Process Management

Implement
Improvement Plan
Predictive
maintenance

Implement
Improvement Plan

correct min/max for


parts in material
management system

Etc.
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Session 15: Planning Process Overview


Leadership Group

Plant Strategic
Planning Groups

Dave, Mark,
Dept. managers and some
represented workers
Buddy, Trudy
Identify plant objective categories
and preliminary objectives
(what and why)

Department
Managers

Department
Planning Groups

All Department
Employees

Department
managers and PTC's

Prepare information package,


communicate plant objectives
to departments
Meet to surface department
objectives, barriers, and
improvements needed to
achieve plant objectives
Sort out employee input using
process improvement tools,
identify high-leverage dept.
objectives, align with plant obj.

Support

Prepare department's
strategic plan as a draft
document
Review/comment on
departments
strategic plan

Review

Update department strategic


plan as needed, review
with Leadership Group
Finalize and issue departments
strategic plan

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Session 16: Performance Indicators Case Example


Last Years Last Years Current Year
Measurement Area Objective
Actual Objective
Start Failures ( S.F.) *
Start Unreliability (GTUR) *
Start Unavailability (GTUA) *
Trips off-line (T.F.) *
Maintenance Outage Rate
Planned Outage Rate
Equipment Availability Factor
Heat Rate
Generation
Lost-time Accidents (Hours)
Medical Treatment Rate
First-aid Case Reductions
Vehicular Accident Rate
O&M Budget
Headcount
Outage Budget
Capital Budget
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Session 17: Hoshin Planning Implementation


Deploying Goals to Department Objectives
Plant Objective

Operations Department Objectives

1. Zero reportable accidents

1.1
1.2
1.3
1.4

2. Optimize availability

2.1 Improve use of AMPS to input work requests


2.2 Improve use of available technology
2.3 Establish a committee to study trips and reliability

3. Optimize employee
training

3.1 Improve computer training


3.2 Establish training on new procedures
3.3 Provide plant experts to train others

4. Change style of
management to reduce
fear in the work
environment

4.1 Increase communications from management on


plant decision-making

BA 553: Business Process Management

Increase input to safety meetings


Reinforce clearance procedures
Improve housekeeping
Attend at all safety subcommittee meetings by team
representatives

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Operations Department Objectives Linked


to Business Priorities and Plant Priorities

Legend

Business Priorities

Plant Priorities

+++
++
+
o

B1.
B2.
B3.
B4.

P1.
P2.
P3.
P4.

Strongly supports
Moderately supports
Mildly supports
Unrelated

BA 553: Business Process Management

Increase employee value


Increase plant asset value
Increase customer value
Increase shareholder value

42

Employee safety
Protect equipment
Generate megawatts
Environmental compliance

Hoshin Planning Implementation


Deploying Goals to Department Objectives
Plant Objective

Maintenance Department Objectives

1. Zero reportable accidents

1.1
1.2
1.3
1.4
1.5

2. Optimize availability

2.1 Improve treatment of tools to keep in good order


2.2 Ensure right parts are available in the warehouse
2.3 Ensure training and manuals are available for any
new equipment installations
2.4 Improve use of software in maintenance process

3. Optimize employee training

3.1 Increase availability of hands-on training


3.2 Improve employee computer skills
3.3 Increase cooperation and provide cross-training

4. Change style of
management to reduce fear
in the work environment

4.1 Improve communications between works and


management

BA 553: Business Process Management

Increase input to safety meetings


Establish training on new clearance procedures
Reduce short cuts - use right tool for the right job
Re-evaluate safety incentives
Increase thinking of safety when planning jobs

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Maintenance Department Objectives Linked


to Business Priorities and Plant Priorities

Legend

Business Priorities

Plant Priorities

+++
++
+
o

B1.
B2.
B3.
B4.

P1.
P2.
P3.
P4.

Strongly supports
Moderately supports
Mildly supports
Unrelated

BA 553: Business Process Management

Increase employee value


Increase plant asset value
Increase customer value
Increase shareholder value

Employee safety
Protect equipment
Generate megawatts
Environmental compliance
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Input to One-Year Plan:


Admin Services Department Objective #2
Prepared by:

Date:

Fiscal year:

Plant:

Location/Dept:

Ray Vogel

2/10/2004

2004-05

Clark

Administrative Services

Objective:
Subobjective:

2. Optimize availability
2.1 Analyze causes of every trip/failure to start event and
communicate results to plant team.

Performance measures:
Number of events by unit, cause, crew, and remedy
Number of unexplained events by unit and team
Number of corrective actions approved/completed
Situation (as is)
Trip and failure to start events are logged and reported. This data is not used
consistently in an organized process to identify and correct root causes, nor to
inform team members of their role in preventing future events.
Strategic plan for achieving 2004 objective:
Design a process for operations, maintenance, and administrative services to
cooperate in data gathering, analysis, reporting and corrective actions of all events.
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Hoshin Planning Implementation


Deploying Soft Goals to Department Objectives

Commitment to Customer Satisfaction

Use of Systems Thinking

Process Improvement

Employee Involvement and Participation

Employee Training and Development

Plant and Systems-Level Measurement

Regular Quality Reviews and Assessments

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Example Soft Goal Deployment


Commitment to Customer Satisfaction

Establish measures and measurement systems to help the plant develop the capability to
meet and exceed internal and external customer requirements
Use of Systems Thinking

Apply concepts of systems thinking to planning and measurement as well as


understanding basic plant work processes and system interfaces
Process Improvement

Focus on understanding and improving key plant processes - initial focus areas to be the
maintenance and fuel systems
Employee Involvement and Participation

Train Process Improvement Teams in systems thinking and process improvement, and will
be encouraged to participate in key improvement efforts
Employee Training and Development

Train employees and managers in Change Readiness, Customer Focus, Malcolm Baldrige
Award Criteria, Systems Thinking, Process Improvement, Leadership, Hoshin Planning
Plant and Systems-Level Measurement

Establish a plant-level measurement system focused on identifying how the plant is


operating against customer requirements, and how plant work processes are performing to
support overall plant efforts to meet customer requirements
Regular Quality Reviews and Assessments

Schedule regular sessions with all employees to review performance and status of goals
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