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Analog Devices: 1986-1991

The First Balanced Scorecard

by

Arthur M. Schneiderman

Phase 1: 1986/1987 - The Gestation Period

Refining the Story
As we approached the completion of our planning process, I sensed uncertainty among some of my colleagues as to the completeness of the set of metrics that we had developed for our scorecard.  In January of 1988, I attempted to more rigorously test this by proposing the following template (see January 1988 Goals Deployment presentation):

For each of our stakeholders, I started by identifying their most important needs.  Next, I asked the question: "How are we doing?"  For those important needs that require improvement, I tried to identify the vital few "levers" for their improvement.  Once identified, I made sure that there were specific things that we could do to "actuate" them.  Finally, I asked the question "How do we know that we are improving?".  This type of logic path is still the best way I know of for linking scorecard metrics to strategic objectives.

Let's look at an example, ADI's communities:

Analog's communities want businesses that provide stable employment for their citizens, support worthy local causes, encourage employee involvement in community activities, and provide financial aid to local schools and institutions of higher learning.  To be rated #1 by them, is to be first on their list of businesses whose expansion they would like to encourage and whose needs they are willing to accommodate.  How do we get to that position?  First, we must be successful as a business, next we need to communicate with them effectively, and finally, all other things being equal, we should share our success with our communities through local preference in selecting our suppliers.  These things don't happen on their own, so we need to develop a partnership program analogous to the formal partnership programs we have with our other stakeholders.  How will we know we're doing those things necessary to achieve our objectives?  We measure taxes and other required benefits paid to communities, voluntary expenditures, and employee participation rates.

Now which of these belong on the scorecard?  NONE!!  Why?  Because our worldwide communities already rate as at or near the top of their list of Corporate Citizens.  We need to monitor these measures, but they are not among the vital few whose improvement are critical to our future business success.  By repeating this virtual dialog with each of our stakeholders, we generate the list of POTENTIAL metrics, but winnow that list down to the manageable, vital few.

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1999-2006, Arthur M. Schneiderman  All Rights Reserved

Last modified: August 13, 2006