Building Leaders Through Alignment at Toyota with Mark Reich from the Lean Enterprise Institute

In this episode of People Solve Problems, host Jamie Flinchbaugh welcomes Mark Reich, Senior Coach and Chief Engineer of Strategy at the Lean Enterprise Institute. Mark brings a wealth of experience from his 23 years at Toyota, where he learned and led management systems, followed by 13 years at the Lean Enterprise Institute spreading that knowledge across industries.

The conversation centers around Mark's new book "Managing on Purpose," which focuses on Hoshin Kanri, a strategic management methodology that was adopted by Toyota in the early 1960s based on Deming's teachings. Mark explains that Hoshin Kanri goes far beyond typical strategy development that often ends with a PowerPoint presentation to the board. Instead, it creates a comprehensive management system that defines long-term direction, builds both vertical and horizontal alignment throughout the organization, manages annual execution, and develops people's capabilities.

Mark emphasizes that the real power of Hoshin Kanri lies in its dual approach to alignment. Vertical alignment ensures that high-level objectives are broken down meaningfully throughout the organization, giving everyone ownership of problems to solve. Horizontal alignment addresses the more challenging task of getting different functions to work together toward broader organizational goals rather than focusing solely on their individual metrics. This requires a cultural shift where leaders must reward people for leading by responsibility rather than authority, encouraging influence across the organization rather than just managing down.

The methodology serves as both a strategic framework and a leadership development tool. They compare it to learning soccer through playing the game rather than just practicing drills. Leaders develop crucial skills by working through the complex interpersonal mechanisms of what he calls "catch ball" - the process of building alignment both vertically and horizontally throughout the organization. However, Mark warns that this is high-risk work since it deals with the future of the entire organization, requiring significant investment from top leadership.

When discussing how to handle uncertainty and volatility, Mark acknowledges that plans rarely survive contact with reality unchanged. Drawing from military strategist Helmut von Moltke's famous observation about battle plans, he explains that the key lies not in the plan itself but in building the organization's planning capability. Teams that practice planning together can quickly realign when circumstances change. The focus should be on developing the skill of alignment rather than rigidly sticking to any particular plan.

Mark identifies rigor as the critical factor that separates successful Hoshin Kanri implementations from failures. This includes rigorous upfront planning, systematic processes for building alignment, and disciplined execution with monthly reviews in visual management spaces. Organizations need to establish standards around the process itself, treating Hoshin Kanri as a systematic approach rather than a one-time exercise.

The conversation reveals Mark's perspective that Hoshin Kanri is essentially company-wide problem solving. By framing strategic objectives as problems to solve, organizations can break them down into specific elements that engage everyone from leadership to frontline workers. This creates a unified approach where strategy deployment becomes a systematic way of distributing problem-solving responsibilities throughout the organization.

Mark concludes by defending his choice of the word "managing" in his book title, distinguishing management systems from leadership capabilities. While leadership involves developing people and drawing out their best abilities, management involves creating robust systems that allow organizations to function effectively even as leaders move on to new challenges.

For more information about Mark's work, visit www.lean.org or connect with him on LinkedIn at www.linkedin.com/in/markareich.

Find his book here: www.lean.org/mop