Does Toyota Use Hoshin Kanri? | Gemba Coach

Short answer: Yes. Toyota has practiced hoshin kanri (方針管理) company-wide since January 1963, when the first written Company Hoshin was committed to paper, and it remains the core management system of the company. What Toyota practices, however, differs in important ways from most descriptions of hoshin kanri: the written hoshin has three nested layers, the president personally owns the content, the documented review mechanism included operational audits reporting to the president, on top of regular reviews, and there is no X-matrix anywhere in the system.

When did Toyota start using hoshin kanri?

Toyota adopted Total Quality Control formally in June 1961. In July 1962 the company conducted its first company-wide TQC audit: five audit groups went through the entire organization listening to department and section managers describe the actual state of their management. The audit surfaced four structural problems, among them that managers did not share a common understanding of where the company was going and that horizontal coordination between departments lagged behind vertical control.

The answer to that diagnosis was the first written Company Hoshin, produced in January 1963. From the beginning it had three layers: Basic Hoshin, the permanent foundational direction, which barely changed over the following fifty years; Long-term Hoshin, targets and countermeasures over roughly three to five years; and Annual Hoshin, the current year’s goals and measures. By 1967 the document had grown to six categories organized by function. Toyota won the Deming Prize in 1965, which reinforced the discipline.

The primary source for this history is Mikio Sugiura, the responsible manager for hoshin kanri in Toyota’s Corporate Planning Department in the late 1970s, whose firsthand account was published in Japanese in 2017 (Toyota Global 10, under the pen name Masaji Shibaura). It is the most detailed insider record of how the system actually operated.

What does hoshin kanri look like inside Toyota?

Company Hoshin are the president’s hoshin, and at Toyota that is literal. Sugiura borrowed President Eiji Toyoda’s 1978 New Year’s speech manuscript, the vehicle through which each year’s Company Hoshin was delivered, and found eighty corrections in the president’s own red pen, down to the punctuation. During the 1977 planning cycle, Sugiura walked into Toyoda’s office to find three time-series graphs on the desk, realized volumes in blue pencil and forecasts in red: the president personally working the trade-off between restraining exports amid trade friction and supporting dealers with domestic volume. The top of the hoshin cascade is a person weighing decisions only the top can weigh, not a document generator.

That 1978 speech also shows the system carrying real strategy. In it, Toyoda declared: “Currently our share in the global production is 7%, but I sincerely wish to raise this to 10%. I call this challenge: ‘Global 10.’” Global 10 was pursued across more than a decade of hoshin cycles and reached in 1990, at 10.6%.

From the president, hoshin cascade to department managers and then section managers, negotiated at each handoff through catchball (キャッチボール). Catchball is a real term inside Toyota, said in English and written in katakana. The image of throwing a ball back and forth is accurate as far as it goes, but the point the metaphor misses is that the content improves with every catch and return: each round of the exchange sharpens the goal and the methods, and the rounds continue until both are clarified. The documented cascade stops at the section manager level: there is no individual-employee hoshin at Toyota. But the direction itself does not stop there. It changes form. Toyota essentially has hoshin at the supervisor level, implemented through the FMDS floor management system and 3 Pillar activity, where group leaders work hoshin-aligned KPIs and improvement themes as daily management rather than as personal hoshin documents. These are specific, prescriptive methods, not general-purpose boards. FMDS carries defined certification levels, bronze, silver, and gold, reached through audits that examine both the method and the results: whether the standard practices are actually being followed, and whether the measures demonstrate it.

Horizontally, standing Function Meetings organized by Quality, Cost, Production, Technology, and Sales/HR coordinate hoshin across departmental boundaries. Global 10 required Product Development, Production Engineering, Manufacturing, and Sales to move together, and the Function Meetings were where those interdependencies were negotiated.

How does Toyota review hoshin progress?

Toyota reviews hoshin progress through the year, and in the period Sugiura documents, from the 1960s through the 1980s, it also ran a distinctive audit layer on top of that regular rhythm. Each year Corporate Planning proposed audit themes, four to six per year, and the president decided which advanced. Presenters prepared a double-sided A3 and delivered a ten-minute presentation followed by five minutes of questions. After each audit the president provided written feedback in his own words. Sugiura was asked more than once whether Corporate Planning ghostwrote it; it did not, “which made them all the more valuable.”

The audits had organizational teeth. At a 1982 audit covering distribution cost kaizen at the Tahara plant, Eiji Toyoda observed: “It’s like distribution is just a thing in the shade, but that is a big mistake.” Within months, scattered distribution functions were consolidated into a new Head Department of Distribution Management, ranked on par with seven other head departments. Whether this presidential audit practice continues inside Toyota today in the same form, I cannot confirm; the documented record is the system as it ran through the 1980s. A fuller treatment is in Operational Audits: The Missing Feedback Loop in Hoshin Kanri.

Does Toyota use the X-matrix?

No. The X-matrix originated in the Quality Function Deployment community, developed by Yoji Akao and popularized in the United States by GOAL/QPC. It is not part of Toyota’s practice. Mark Reich, who managed the hoshin kanri process at Toyota North America for 23 years, writes in Managing on Purpose that he never encountered the X-matrix at Toyota. Sugiura’s insider account likewise contains no X-matrix. Toyota’s hoshin runs on the written three-layer document, catchball, Function Meetings, and disciplined A3-based review.

So the full answer to the question is: yes, Toyota uses hoshin kanri, has for over sixty years, and the documented record shows it as the president’s own management system. What Toyota does not use is much of what Western hoshin material presents as standard, starting with the X-matrix.