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Analog Devices: 1986-1991

The First Balanced Scorecard

by

Arthur M. Schneiderman

Phase 3: Continuous Refinement

Evolution of Analog's balanced scorecard: 1987-1990
Analog's commitment to TQM had a direct impact on how its balanced scorecard evolved.  From its original creation in 1987, it underwent annual review, where various management teams addressed the question "Are we measuring the right things?"  The first operational scorecard covered Analog's FY 1988 (see Evolution of the First Balanced Scorecard for examples of actual scorecards).  Some of the measures that we put on that scorecard had been tracked for several years (e.g. on time delivery and new product booking ratio).  Others were in the process of being defined (e.g. cycle time and yield).  But cost and employee productivity were there as goalless "place-holders" as we labored to find good operational definitions.  The last one, labor turnover, was the best measure that we could think of at the time of how well we were satisfying our employees.

The major change in the 1989 scorecard resulted from our recognition that although the results metrics: delivery, outgoing quality and leadtime (as seen by customers) applied equally to all of our products, the process metrics: processes defect level, cycle time and yield differed significantly for our two major businesses of ICs and assembled products.  It made no sense to aggregate these on the corporate scorecard, and so we tracked them separately.  Although we persisted with cost and productivity place-holders, good metrics defied our discovery.  We also recognized that direct and indirect turnover had very different business implications and so we decided to track them separately.

The 1990 scorecard reflected our conscious decision to start the transition from measuring delivery performance against our promise date (FCD), to measuring it against the customer's requested delivery date (CRD).  A detailed revenue model had shown us that our existing new product metrics were poor predictors of our future performance and so we decide to replace these metrics with a detailed product tracking system.  However, the desire to have some metrics associated with innovation on the scorecard led to the inclusion of two measures of how well we were on track to our 1988-1992 strategic plan.  We therefore included absolute bookings of products introduced post-1985 and the aggregate forecast of third year bookings for the current vintage of new products.

The scorecard remained unchanged for 1991 and 1992.  I left Analog at the end of 1992 and so I have no firsthand knowledge of its subsequent evolution.  However, it is still in use today and looks very similar to its earlier ancestors.  One area that has continued to evolve is the set of metrics associated with the new product generation process.  More than a third of the metrics on the 1996 scorecard dealt with this process.  Of the eight new product metrics on that scorecard, half are process (vs. results) metrics dealing with issues of cycle time, WIP and rework.

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1999-2006, Arthur M. Schneiderman  All Rights Reserved

Last modified: August 13, 2006