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Analog Devices: 1986-1991

The First Balanced Scorecard

by

Arthur M. Schneiderman

Epilogue

ADI Results
I hope by now that you have recognized the immense organizational effort that went into the creation, deployment and management of the first balanced scorecard.  I would not be surprised to find, had we tracked the effort, that the number of man-years associated with its development and use, and the development of the supporting non-financial performance measures, totaled more than ten.  And this involved everyone from the CEO down.  So what was the return on this very significant investment?

Well, I don't know the answer, and I wouldn't even venture a guess.

But I can tell you that in 1989, Analog was ranked by HP as their number one IC supplier, up from eighth among its linear IC suppliers in 1986.  And that in 1990 and again in 1991 Analog won Dataquest's mid-sized semiconductor "Supplier of the Year" award for "exhibiting extraordinary dedication to product quality and customer service" (starting in 1992, the previous year's winner was not eligible).  That award was based on a survey of several hundred purchasing decision makers.  And these were not isolated examples of honors that would have been unheard-of at our 1986 performance levels.  Why these accolades from our customers?  Let's look at the scorecard results for 1990 in the context of the five-year plan:

Analog had achieved significant improvement in all of its strategic plan QIP goals.  In the process of doing so, we learned many important lessons, that had they been known in 1987 would have led to less ambitious 1992 goals.  Most of these lessons were business rather than improvement related.  For example, customers may not want you to redesign old product for improved manufacturability.  Shorter time to market may not produce a higher return on R&D investment.  I refer you to my University of Dayton presentation (see: October 1991 University of Dayton presentation with transcript) for a more detailed explanation.

Now let me forewarn you: do not take what I'm about to say too seriously.  But if you are one of those people who don't mind confusing correlation with causality, I'd like to throw this into the arena of unsubstantiated claims of the miracle curative powers of the balanced scorecard.  We all are willing to agree that there is some lag between most non-financial scorecard metrics and the bottom line.  There is much debate about the length of that lag.  But I've argued that it's measurable in years rather than months; how many is unclear.  But if you're a believer, I'd like to point out that Analog's market value increase one hundred fold since 1990!  That's more than $25B in value creation.  I'll let you decide what part of that is assignable to its balanced scorecard implementation.  But be fair, apply the same criteria to those other claims.

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1999-2006, Arthur M. Schneiderman  All Rights Reserved

Last modified: August 13, 2006