Analog Devices, Inc. (A)
Time Frame: 1986-90
Q1A. What was Analog Devices’ strategy in the second half of the 1980s?
Answer: Problems faced in mid 80’s Growing inventory Increase in defect level of product ADI’s strategy in 2nd half of 80’s Emphasis on quality QIP: Half-life by implementing TQM Scorecard.
TQM OUTCOME Parameter Measured improvement On time delivery Increased from 70% to 96% Cycle time Decreased from 15 weeks to 8 weeks Average yield Increased from 26% to 51% Defects in products shipped Decreased from 500PPM to 50 PPM.
Q2A. Critically evaluate the “half-life” concept, in light of Analog Devices’ strategy. What are the ...view middle of the document...
Which numbers should we believe? Can they be reconciled?
Answer: The major conflicts between the QIP and the financial measures are:- ADI’s incentive and performance evaluation systems were based on the financial measures only QIP measures emphasized on the cost reduction whereas the financial measures were more inclined towards revenue enhancement QIP measures were more useful for evaluating the performance of the cost centers whereas financial measures could more effectively capture the performance of the profit centers QIP measures were not given much importance as these are mere avenues to achieve higher financial measures.
Q4A. Critically assess the usefulness of the information contained in the corporate scorecard in exhibit 3 as a way to implement Analog Devices’ strategy. What role does each set of measures play in strategy execution? What should be the relative importance of financial versus nonfinancial measures? What additional information would you like to see include in the scorecard?
Answer: Scorecard is a blend of financial v/s non-financial measures. ADI’s corporate scorecard assesses the performance of the company on Financial, New products and QIP measures by comparing targeted value with the actual value. Role of each measure:- Financial Revenue Help determine the financial performance of a company and also how effectively assets are employed Revenue Growth Profit ROA.
Non-financial measures are used at low levels for task control Financial measures are used at high levels for management control New Products NP introduced Help determine the pace of innovation at ADI NP bookings NP breakeven NP peak revenue Time to market QIP On time delivery Help measure the operational and human resource effectiveness of ADI Cycle time Yield Defects Employee productivity Turnover.
Time Frame: 1990-96
Q5A. Evaluate the evolution of the corporate scorecard and related management planning and control systems at Analog Devices during the period 1990-95 in light of Analog Devices’ strategy in the first half of the 1990s.
Answer: In period 1990-95 the emphasis shifted from cost reduction (QIP) to wealth creation New dynamic measures were introduces to measure performance Hoshin became a guiding philosophy Complementing ADI’s scorecard, key success factors were introduced to measure milestones related to companies business plans New planning system was introduced where planning was done by teams rather than being done centrally
Q6A. Do you agree with the compensation philosophy of Analog Devices?
Answer: Compensation not linked to the performance on the scorecard ,as the performance measures change quickly owing to the dynamic environment Senior management compensation was based on stock price performance For all other employees compensation linked to revenue and the operating profit Hence, individual performances were not appreciated So we do not agree with the compensation philosophy.
Q7A. Describe Analog Devices’ strategy as of...