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Quality Costs and Zero Defects: Are they Contradictory Concepts?” Quality
Progress. November 1986, p. 28.
article provides a mathematical proof that minimum cost can occur at a defect
level of zero. It also provides an
explanation as to why conventional calculations of optimum quality levels
overestimate these optima by failing to include many important costs associated
with producing defects and overstating the cost of prevention.
Word (52K) Adobe
Quality Goals” Quality Progress.
April 1988, p. 51.
article introduces the half-life method, a normative model for predicting rates
of improvement in processes being addressed by TQM.
It analyzes nearly 100 improvement efforts and shows that the rates of
improvement were constant over many improvement cycles and were determined by
process complexity. It
characterizes complexity along two dimensions: organizational and technical. The article discusses several applications as well as
possible misuse of the method.
Word (83K) Adobe
The application of the half-life method at Analog
Devices, Inc., a
mid-sized semiconductor company, is described by its CEO and Chairman in: Ray
Learning — The Key to Management Innovation,"
Sloan Management Review, Volume 30, Number 3, Spring 1989. This
article also describes an early versions of the first balanced scorecard
that was initially developed at Analog in 1987.
The half-life method became the subject of a Harvard Business school
S. Kaplan, “Analog Devices: The Half-life System” Harvard Business School
Case Number 9-190-061, 3/16/90 (revised 7/12/91).
Also, Teaching Notes, 05-191-103, 11/27/90. This case also appears in:
Cooper, Robin., and Kaplan, Robert S., "The Design of Cost Management
a>" (Englewood Cliffs, N.J.: Prentice Hall, 1991), ISBN 0-13-204124-3,
K. Shank of the Amos Tuck School of Business Administration at Dartmouth College
accompanied Kaplan on his site visits. His independent view of the
half-life method and its application is given in Robert A. Howell, John K.
Shank, Stephen R. Soucy, and Joseph Fisher, "Cost
Management for Tomorrow: Seeking the Competitive Edge" (Morristown,
N.J.: Financial Executives Research Foundation, 1992), ISBN 0-910586-85-3, pp.
more recent Analog Devices case study was prepared by Kirk Hendrickson of
Dartmouth College under the supervision of Professor Vijay Govindarajan.
It appears in Robert N. Anthony and Vijay Govindarajan, "Management
Control System, 9th Ed.," (McGraw-Hill Professional Publishing, January
1997), ISBN 0256168784, Case 11-1. This case not only describes the
half-life method and its application at Analog Devices, but also the development
of the first balanced scorecard and its evolution through 1997.
Govindarajan has recently revised this case and published it in Robert N. Anthony and Vijay Govindarajan, "Management
Control System, 10th Ed.," (McGraw Hill College Div., August 2000), ISBN
for the Order Fulfillment Process”
of Cost Management. Part 1:
Vol. 10, No. 2, Summer 1996, p. 30. Part
2: Vol. 10, No. 3, Fall 1996, p. 6.
2-part article defines the characteristics of good (and bad) metrics and applies
these definitions in a real case study. It
also describes the use of these metrics in the first balanced scorecard.
Word (part 1) (300K) MS
Word (part 2) (132K)
Acrobat (part 1) (137K) Adobe
Acrobat (part 2)
the Bridge between the Hard and Soft Sides”, Journal of Strategic Performance Measurement, Vol. 2, No 2,
April/May 1998, p. 14.
can be viewed from both a process and people perspective.
Unfortunately, many practitioners take this as an either/or situation.
This article attempts to bridge the gap using data as the vehicle.
Admittedly starting from the “hard” side, it defines measures of
process and organizational learning and shows real examples of how these data
can be used to drive behavioral change. It
also introduces the use of fuzzy logic as a way of dealing with degrees of truth
and language data.
Word (159K) Adobe
there Limits to TQM?”, Strategy
& Business, Issue 11, Second Quarter 1998, p. 35.
declining interest in TQM partly results from its proponent’s failure to apply
the basic principles of TQM to itself. Among
these principles are customer focus, conformance to specification and fitness
for use. But, who are the customers
of TQM and what are their explicit and latent needs?
What are the specifications of TQM?
Under what circumstances is TQM fit for use? The lack of clear answers to these questions has created
expectations among senior managers that TQM cannot currently meet.
These unmet expectations have driven managers to discount TQM’s overall
value, and to look elsewhere for solutions to their most important challenges.
This article develops a model for defining the region of usefulness for
TQM by examining the effectiveness of its evolving tool set for processes of
varying complexity. With this
distinction, managers can refocus their organization’s TQM efforts to those
areas, which still have vast potential payback.
Word (250K) Adobe
Balanced Scorecards Fail!”, Journal
of Strategic Performance Measurement, January 1999 Special Edition, p. 6.
Balanced Scorecards fail because they lack a sound foundation.
Basic structural requisites include processes to guarantee that the right
things go on the scorecard, with properly defined metrics and rational, time
based goals. To assure successful
implementation, the scorecard must be deployed throughout the organization,
teams equipped with state-of-the-art improvement tools, and learning and
refinement formally embodied in scorecard management. Executives who underestimate the long time lag between
non-financial and financial results may prematurely abandon good Balanced
Word (496K) Adobe
System Profit", Journal
of Cost Management,
Vol. 14, No. 5, September/October 2000, p. 33.
Focusing on cost by product and customer
through Activity Based Cost (ABC), or production bottlenecks through the Theory
of Constraints (TOC) are two of the many possible ways of viewing the profit
equation. Another, “System Profit,” (product profit minus
opportunity cost), combines ABC and TOC considerations and adds
competition-based market constraints to provide different, often initially
counter-intuitive, strategies for true long-term maximization of shareholder
resulting changes in optimizing product mix can have significantly longer
implementation times than occur in most cost management initiatives and produce
short-term signals that require unconventional management responses.
Adobe Acrobat (K)
to Build a Balanced Scorecard", Handbook
of Performance Measurement, Mike Bourne, Ed., Gee Publishing Ltd.,
London 2001 Chapter B2, ISBN 1 86089 824 6 (CD and looseleaf), 1 86089 940 4
successfully create and use a BSC an organization must translate its
strategy into the language of its various stakeholders and then identify the
critical process improvements that will lead to their satisfaction and
delight. This three-part e-article describes how to do it using a
is an edited version of the material appearing elsewhere on this
to Build A Balanced Scorecard
to Unbalance Your Scorecard", strategy+business,
Issue 24, Third Quarter 2001, p. 12.
its very name, the Balanced Scorecard mandates a “balanced” set of
performance measures. To meet this requirement, scorecard are often
populated with unessential measures. This article argues that in order
to have a manageable set of metrics that are the vital few keys to strategic
success, metrics must be selected based in strategic impact, not
balance. As a consequence, good scorecards will be unbalanced;
containing mostly non-financial, internal, leading, short-term measures.
text (5K) Adobe
First Balanced Scorecard", Journal
of Cost Management, Vol.15, No.5, September/October 2001, p. 16.
The first Balanced Scorecard was developed at
Analog Devices in 1988 as part of their 5-Year Strategic Plan. It
resulted from a logical process that started with Analog’s written Corporate
Objective, which articulated its strategic commitment to its five major
stakeholder groups: communities, customers, employees, stockholders and
suppliers. Gaps in stakeholder satisfaction provided the external
perspective, and were mapped into required process improvement to provide an
actionable internal perspective. The resulting Corporate
Scorecard provided a rallying flag for efforts that led to dramatic
improvements in customer satisfaction and operating efficiency, the focal
points of Analog’s strategic objectives, and contributed in part to a
hundred-fold increase in shareholder value.
edited article is based on The
First Balanced Scorecard that appears elsewhere on this website. It focuses
on the period of 1986-1988. This BSC is still in use today.
Ahead ... To the Past", Journal
of Cost Management, Vol. 15, No. 6, November/December 2001, p.43.
on old saying that the key to success is "doing the right things
right." Much of today's focus is on identifying and measuring the
right things for an organization to do in order to achieve its strategic
objectives. But success is not assured unless an organization can follow
the trail to its "pot of gold" faster than its competitors and
before the terrain has significantly changed. To do this, it must be as
facile in doing things right as it is identifying the right things to
do. And the key to this lies in the past.
Goals the Half-Life Way", Encyclopedia of Social Measurement,
Academic Press, to be published in Fall, 2003.
Half-life Method is a normative model for predicting the rate of incremental
improvement of non-financial performance measures.
It can be used both as a diagnostic tool and for goal setting
purposes. Because it identifies
the fastest rate at which a measure can be improved using current
incremental improvement tools and methods, it is particularly valuable in
testing the achievability of strategically significant Balanced Scorecard
goals without major process redesign/reengineering or outsourcing.
and Structural Requirements for a Successful Balanced
Scorecard", MBA in a Box, Crown Publishing, to be published in
BSC, like any change initiative must satisfy a general set of requirements
shared in common by any change initiative as well as those unique to it.
This article describes seven general cultural requirements and seven more BSC
specific structural requirements that must be satisfied for successful