Analog Devices: 1986-1991

The First Balanced Scorecard^©

by

Arthur M. Schneiderman

By August of 1987, the October 1986 presentation had evolved into the basis for our long range QIP plan (see August 1987 QIP Strategic Plan Presentation).  Customer purchase criteria were refined (see Evolution of Anaolg's "Strategy Map") and a QIP deployment strategy was conceived (6/15/87):

This slide, created in June of 1987, depicted the relationship between the basic elements of Analog's QIP strategy.  The starting point was the Corporate Objective, created by the vision of the CEO and tempered through the top-to-bottom consensus process.  This statement of purpose was articulated in the voices of our five stakeholder groups.  The Corporate QIP Council, serving as the interface between the stakeholders and the rest of the organization, was given the job of defining initiatives and metrics that would assure stakeholder delight in Analog.  We gave these initiatives names like "Customer Service" (for the order fulfillment process), "Manufacturing Excellence" (for the manufacturing process), "Innovation" (for the product/process generation process), "HR Excellence" (for the many processes that assure recruitment and retention of the best people: e.g. recruiting process, training process, performance appraisal process, etc.), and "MIS Excellence" (for the processes associated with the timely collection and conversion of raw data into actionable information).

Many of our existing improvement efforts fit well into this framework.  On-time delivery and leadtime reduction, for example, were the most leveraged elements of improved customer service.  Cycle time reduction and product quality and yield improvement were the key drivers for achieving manufacturing excellence.  On time-to-market and automation (CAD, or computer aided design) were obvious enablers of innovation.  The last two categories, HR and MIS excellence, lacked specific initiatives at that time, but were recognized as essential for the achievement of our corporate objective.

Analog had had a Technical Council for many years.  Its primary purposes were to foster cross-divisional knowledge sharing and provide a forum for the introduction of new ideas from the broader, external technical community.  In 1986, I created and chaired Analog's first Manufacturing Council.  In partnership with the Technical Council, chaired by the Chief Technology Officer, we took on the joint challenge of assuring manufacturability of Analog's leading edge products in support of both our Manufacturing Excellence and Innovation initiatives.  Our two HR committees: the HR Advisory Committee (a mixture of HR professionals and line managers) and the HR Forum (the HR managers from all business units) were assigned the task of operationalizing the concept of HR Excellence.

This cascading process, starting from the high level corporate objective, provided the proposed template for development  of our Corporate QIP Objectives.  The results of our mutual efforts was Analog's five-year QIP Goals (c. 7/12/87):

From the start, I recognized the need to limit the number of goals to a manageable set.  For several years, I had been a student of Hoshin Kanri, a Japanese approach to accelerated improvement, where careful analysis of organizational capacity leads to a realistic choice of at most two to three breakthrough initiatives.  Also, Juran had taught us the importance of focusing on the vital few.  So we chose the three most important stakeholder requirements as our externally focused metrics.  Given that our customers were our least satisfied stakeholders, it should be no surprise that all three were customer related.  Our internal focus was initially in the area manufacturing metrics: cycle time, pre-inspection quality and manufacturing yield, as well as product innovation as measured by time to market.  The last sentence, concerning cost management, was added at the request of one of our general managers who was concerned that increased inventory and inspection might be substituted for real process improvement to achieve these goals.

Our first challenge was in defining the current (1987) state.  I've written elsewhere about the many difficulties associated with this deceptively simple task.  I refer you to my contemporaneous description of this chart in my transcribed presentations (see for example January 1989 APICS/Babson Presentation).  The next challenge was in determining our 1992 goals for these metrics.  First, we used my half-life method to determine where we could be  by the end of 1992 through the effective use of QIP's incremental improvement tools and methods.  The middle column is the assumed half-life or number of months required to close the gap between current and potential performance by 50%.  We then compared these projected performance levels against our customer's perceptions of their future requirements and our expectations of competitor's performance.  Fortunately, incremental improvement could get us to where we needed to be: rated #1 by our customers in total value delivered.  Had they not, we would have turned to other approaches (reengineering or outsourcing) or been forced to change our strategy.

But we recognized the need to deploy these high level goals to the lower levels of the organization, where the actual improvements would occur.  I created the following model for Divisional QIP implementation (7/12/87):

The model was straightforward.  Corporate goals were disaggregated and deployed to the division level.  Each division general manager formed a division QIP council that was modeled after the Corporate QIP Council.  They used a combination of Steering and Problem Solving QIP teams to attack each of their deployed goals.  Steering QIP teams had the job of chartering two or more problem solving QIP teams to address the largest root causes of the gap between current and potential performance.  Membership on the various QIP teams was knowledge, not hierarchical or functionally based.  In general, however, Steering QIPs were chaired by divisional staff members.  Each deployed goal had one (or in a few cases two) owner(s) whose job it was to assure that sufficient progress was being made toward the established goal.