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Analog Devices: 1986-1991

The First Balanced Scorecard

by

Arthur M. Schneiderman

Appendices

Pilot: Using an Executive Information System (EIS) for Scorecard Deployment

One of my earliest lessons learned was to avoid creating the appearance of competition between traditional financial measures and their new non-financial siblings.  It therefore seemed logical to integrate the scorecard into Analog's existing financial reporting system.  This took on two forms: inclusion in the "Red Book" and Analog's online Executive Information System (EIS) called "IMAGE."  The Red Book was the quarterly financial report (in a red binder, of course) that was prepared principally for the Board of Directors.  IMAGE was a mainframe based data warehouse and graphics system, used almost entirely by headquarters personnel, that could be accessed through hardwired remote color terminals.

Starting in February, 1988, we included in the Red Book and IMAGE our corporate and divisional scorecards as well as our delivery performance metrics.  In a January 20, 1988 memo announcing this change, Analog's Corporate Controller (who was also a member of the Corporate QIP Council) explained:

"The Red Book will also be the medium for hard copy distribution of the QIP measures as they evolve.  Initially this will mean displaying the improvement curve [n.b.  half-life curves] for the on-time delivery measure for customer service which is our only implemented measure so far.

The final section will contain the entity scorecards or quarterly performance audits.  These track the key measures of success on a quarterly basis with comparison to the benchmark goals for each measure.  This report is designed to fit on one page and to provide for comments as to the reasons for missing the goal."

But the IMAGE system had five major drawbacks:

  1. Since it was a mainframe based, dumb terminal system, people who were not hard wired to the mainframe could not access it in graphics mode.

  2. It was very slow and user unfriendly.  Navigation required mastery of a large number of indecipherable acronyms and command line instructions.

  3. Hard copy printout required special hardware.

  4. It was written in APL, which required the use of an outside consultant for all program changes.

  5. It was not easily movable to a lower cost hardware platform (a minicomputer, at that time).

I therefore successfully (well maybe not so successfully, as you'll see) spearheaded an effort to purchase a commercial software package that would mitigate IMAGE's drawbacks.  A careful search led to the selection of Pilot Executive Software's Executive Information System (EIS).  PILOT maintained all data on the mainframe but the bulk of the graphics were done on local PC's which could connect to the mainframe using modems over local phone lines.  By the end of 1988, we had completed the transition from the IMAGE to PILOT delivery platform.  To the user, the transition was transparent with regard to content and the various displays.  However, navigation was now by mouse click and hardcopy was generated at the PC's printer.

I've recreated a demo of the PILOT system (see: PILOT demo and recommended viewing note) which allows you to view examples of all of the information that it made available.  It is identical to the original except that all possible hot buttons are not active.  Clicking those outlined in yellow allows you to realistically navigate as in the original.  Several rules were maintained throughout:

  1. Variances were noted throughout the entire system using a color coding standard:  a result shown in red represented an unfavorable variance, while a green entry denoted a favorable variance.

  2. Clicking on a number produced a graph of its time history.

  3. Clicking on the name of a metric produced a table of its disaggregation.

  4. Clicking on the name of an entity produced its relevant scorecard.

  5. All metrics were defined so that a decreasing y-axis value represented improvement.  

  6. 3s control limits were placed on all appropriate charts to define the region of statistically insignificant month-to-month changes.  The most recent three data points were colored red or green depending on whether they were above or below the control limits.

  7. The improvement half-life was calculated and appeared at the bottom of all time histories.  Clicking on the half-life produced its time history, our principal metric of process learning.

  8. Clicking  on a statistically significant variation (red or green colored) produced a commentary, written by that metric's owner, that  identified root cause, corrective action, accountability and timeline information.  These commentaries remained active until the variance was eliminated.

Plans for expansion of the IMAGE/PILOT system included drilldown to lower level scorecards (the system only drilled down one level below the corporate scorecard) which would be inputted and maintained by its owner.  We also planned to link PILOT to Lotus Notes for further expansion of the scorecard commentaries and integration into our meeting agendas and agenda item preparation materials.

Unfortunately, in March of 1990, while I was away on a business trip, the Executive Committee decided to terminate any further development of PILOT under the guise of a cost reduction effort.  My view of what happened does not belong here, but it's in the queue for a future Art of PM essay which will be entitled "The Politics of Information."

Ironically, PILOT's death was concurrent with its birth outside of Analog.  In a February 1990 interview that appeared in ComputerWorld, I described our adaptation of a traditional financial EIS to non-financial metrics and the balanced scorecard and my expectation that it would eventual replace our traditional financial-only management system.  Shortly after that, I was invited to be a plenary speaker at the Institute of Management Sciences DSS-90 conference (see: May 1990 SS-90 Presentation) held in May, 1990.  

One of the other speakers at DSS-90, Jack Rockart, the Director of MIT's renowned Center for Information Systems Research (CISR), came to visit me on June 21, 1990 for a first-hand demo of PILOT.  Jack was often referred to as the "father of EIS" so his visit and compliments were much appreciated and helped mitigate our posthumous blues.  Jack invited me to speak at a CISR seminar held in December 1990.  A month earlier, I made a similar presentation at a seminar sponsored by Decision Support Technology, Inc..

PILOT's final tribute came in the fall of 1991 with Bob Kaplan's acceptance of my offer to set up a full working version of our system on the Harvard Business School's computer so that students could use it in conjunction with the Analog Devices case that he had recently written.  David Friend, CEO of Pilot Executive Software, agreed to provide support and a free copy of his software.  The three-way team of ADI-HBS-PES personnel did a masterful job of creating a working demo, which from all reports added significant value to the student's learning experience.

I have recently seen a number of demonstrations and actual applications of current balanced scorecard support software and I would welcome comments about how they have improved over our 1990 PILOT implementation.

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1999-2006, Arthur M. Schneiderman  All Rights Reserved

Last modified: August 13, 2006