It was pretty obvious that the QIP Strategic Plan, by itself, was insufficient to assure achievement of our overall strategic objectives. It would be too tempting, because of the daily press of other business, to delay QIP implementation, given that the only checkpoint was years away. So in August of 1987, I proposed a modification to our traditional annual planning process whose output we called the "Benchmark Plan." Where it got that name, no one seems to know. It had nothing to do with benchmarking as practiced today. The plan was typical of most companies annual business plan and dealt principally with the financial budgets of the various business units.
One of the key elements of the Quality Improvement Process, evaluation of results, was conspicuously absent from Analog’s traditional annual planning process. Consequently, there was no mechanism for systematically improving the planning processes itself. So my first objective was to close the planning loop by intruding feedback from self-analysis of the previous years variance between plan and actual results. In this way we would start each annual planning process by determining what worked and what didn’t in the previous planning cycle and what we would do differently this time around.
Since we had determined that we would use my half-life method to set intermediate (annual and quarterly) goals for our 1992 targets, it was also essential that each business unit identify both the internal and external resources required and that those resources be made available.
These were the proposed steps in changing the planning system to a closed-loop process with corrective feedback.
You can see the idea of a balanced scorecard beginning to emerge in this slide. For the first time, Analog’s financial goals were supplemented with a set of non-financial QIP goals.
It was important to me to understand what external resources would be required by the business units in order to achieve the goals we agreed upon in their annual plan. This would provide the fact base I needed to determine the required support staffing levels.
Well this is the granddaddy of today’s balanced scorecard. I originally called it the “Quarterly Performance Audit.” But Analog’s no-nonsense GM’s quickly renamed it the scorecard.
The basic idea in creating the balanced scorecard was to integrate financial and non-financial metrics into a single system in which they did not compete with one another for management airtime. Prior to this scorecard, the financial and non-financial results were reviewed in separate meeting agenda items. Whichever came first on the agenda was perceived as the higher priority. By combining them this unproductive tension was greatly reduced.
Last modified: August 13, 2006