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ANALOG DEVICES INC Part  A
<ul><li>Leading   manufacturer of Integrated circuits  </li></ul><ul><li>Technology leader and was first to market many in...
Q1. WHAT WAS ADI’S STRATEGY IN THE 2 ND  HALF OF 1980’S?
<ul><li>Problems faced in mid 80’s  </li></ul><ul><ul><li>Growing inventory </li></ul></ul><ul><ul><li>Increase in defect ...
TQM OUTCOME Parameter Measured improvement On time delivery Increased from 70% to 96% Cycle time Decreased from 15 weeks t...
Q2A. EVALUATE HALF-LIFE CONCEPT. Q2B. WHAT ARE ITS BENEFITS & LIMITATIONS? Q2C. HOW IS IT DEVELOPED FOR DIFFERENT PROCESSE...
<ul><li>Benefits of half – life: </li></ul><ul><li>Limitations of half life concept  </li></ul><ul><ul><li>Difficult to de...
IMPLEMENTATION OF HALF-LIFE
Half Life Learning Curve Rate of decline of defect level is constant over time  With doubling of cumulative experience the...
Q3A. IDENTIFY THE CONFLICTS THAT EXIST BETWEEN QIP MEASURES AND THAT REPORTED BY FINANCIAL SYSTEMS? Q3B. WHICH NUMBERS SHO...
<ul><li>The major conflicts between the QIP and the financial measures are:- </li></ul><ul><ul><li>ADI’s  incentive and pe...
Q4A. CRITICALLY ASSESS THE USEFULNESS OF CORPORATE SCORECARD. Q4B. WHAT ROLE DOES EACH MEASURE PLAY IN STRATEGY EXECUTION?...
<ul><li>Scorecard is a blend of financial v/s non-financial measures. </li></ul><ul><li>ADI’s corporate scorecard assesses...
<ul><li>Non-financial measures are used at low levels for task control </li></ul><ul><li>Financial measures are used at hi...
Q5. EVALUATE THE MANAGEMENT PLANNING & CONTROL SYSTEMS AT ADI DURING 1990-95 IN LIGHT OF ADI’S STRATEGY IN 1 ST  HALF OF 1...
<ul><li>In period 1990-95 the emphasis shifted from cost reduction (QIP) to wealth creation  </li></ul><ul><li>New dynamic...
Q6. DO YOU AGREE WITH THE COMPENSATION PHILOSOPHY OF ADI?
<ul><li>Compensation not linked to the performance on the scorecard ,as the performance measures change quickly owing to t...
Q7A. DESCRIBE ADI’S STRATEGY AS OF 1996. Q7B.HOW SHOULD SCORECARD & OTHER MANAGEMENT SYSTEMS CHANGE IN 1996 TO BEST FIT TH...
<ul><li>Analog was pursuing a four pronged strategy in 1996  </li></ul><ul><ul><li>Expand traditional SLIC business  </li>...
Managerial compensation can be linked to EVA.
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Analog Devices A Inc

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Analog Devices A Inc

  1. 1. ANALOG DEVICES INC Part A
  2. 2. <ul><li>Leading manufacturer of Integrated circuits </li></ul><ul><li>Technology leader and was first to market many innovative products </li></ul><ul><li>From 1981 through 1996 company experienced both growth and stagnation achieving record profits and first ever loss </li></ul><ul><li>Extremely robust MCS </li></ul><ul><li>Total Quality Management (TQM) </li></ul><ul><li>ADI’s corporate scorecard was recognized as management best practice </li></ul>
  3. 3. Q1. WHAT WAS ADI’S STRATEGY IN THE 2 ND HALF OF 1980’S?
  4. 4. <ul><li>Problems faced in mid 80’s </li></ul><ul><ul><li>Growing inventory </li></ul></ul><ul><ul><li>Increase in defect level of product </li></ul></ul><ul><li>ADI’s strategy in 2 nd half of 80’s </li></ul><ul><ul><li>Emphasis on quality </li></ul></ul><ul><ul><li>QIP : Half-life by implementing TQM </li></ul></ul><ul><ul><li>Scorecard </li></ul></ul>
  5. 5. 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
  6. 6. Q2A. EVALUATE HALF-LIFE CONCEPT. Q2B. WHAT ARE ITS BENEFITS & LIMITATIONS? Q2C. HOW IS IT DEVELOPED FOR DIFFERENT PROCESSES? Q2D. HOW IS IT DIFFERENT FROM EXPERIENCE CURVE CONCEPT?
  7. 7. <ul><li>Benefits of half – life: </li></ul><ul><li>Limitations of half life concept </li></ul><ul><ul><li>Difficult to determine half life as it is dependent on technical and organizational complexities </li></ul></ul><ul><ul><li>Calculated based on historical data which may not give a very clear picture </li></ul></ul>HALF-LIFE AS A TOOL BENEFIT Goal setting tool Rational determination of future performance Diagnostic tool Benchmarking improvement efforts against best practice for processes of similar complexity Measure of organizational learning To make comparisons with alternative methodologies.  
  8. 8. IMPLEMENTATION OF HALF-LIFE
  9. 9. Half Life Learning Curve Rate of decline of defect level is constant over time With doubling of cumulative experience the unit cost drops by a constant percentage Concept generally deals with defects Concept generally deals with cost Defect reduction owing to a root cause being eliminated and subsequent tackling of the next root cause Cost reduction owing to the same action being performed repeatedly
  10. 10. Q3A. IDENTIFY THE CONFLICTS THAT EXIST BETWEEN QIP MEASURES AND THAT REPORTED BY FINANCIAL SYSTEMS? Q3B. WHICH NUMBERS SHOULD WE BELIEVE ? Q3C. CAN THEY BE RECONCILED ?
  11. 11. <ul><li>The major conflicts between the QIP and the financial measures are:- </li></ul><ul><ul><li>ADI’s incentive and performance evaluation systems were based on the financial measures only </li></ul></ul><ul><ul><li>QIP measures emphasized on the cost reduction whereas the financial measures were more inclined towards revenue enhancement </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>QIP measures were not given much importance as these are mere avenues to achieve higher financial measures </li></ul></ul>
  12. 12. Q4A. CRITICALLY ASSESS THE USEFULNESS OF CORPORATE SCORECARD. Q4B. WHAT ROLE DOES EACH MEASURE PLAY IN STRATEGY EXECUTION? Q4C. WHAT SHOULD BE THE RELATIVE IMPORTANCE OF FINANCIAL VERSUS NON-FINANCIAL MEASURES?
  13. 13. <ul><li>Scorecard is a blend of financial v/s non-financial measures. </li></ul><ul><li>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. </li></ul><ul><li>Role of each measure:- </li></ul>Financial Revenue Help determine the financial performance of a company and also how effectively assets are employed Revenue Growth Profit ROA
  14. 14. <ul><li>Non-financial measures are used at low levels for task control </li></ul><ul><li>Financial measures are used at high levels for management control </li></ul>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
  15. 15. Q5. EVALUATE THE MANAGEMENT PLANNING & CONTROL SYSTEMS AT ADI DURING 1990-95 IN LIGHT OF ADI’S STRATEGY IN 1 ST HALF OF 1990’S
  16. 16. <ul><li>In period 1990-95 the emphasis shifted from cost reduction (QIP) to wealth creation </li></ul><ul><li>New dynamic measures were introduces to measure performance </li></ul><ul><li>Hoshin became a guiding philosophy </li></ul><ul><li>Complementing ADI’s scorecard, key success factors were introduced to measure milestones related to companies business plans </li></ul><ul><li>New planning system was introduced where planning was done by teams rather than being done centrally </li></ul>
  17. 17. Q6. DO YOU AGREE WITH THE COMPENSATION PHILOSOPHY OF ADI?
  18. 18. <ul><li>Compensation not linked to the performance on the scorecard ,as the performance measures change quickly owing to the dynamic environment </li></ul><ul><li>Senior management compensation was based on stock price performance </li></ul><ul><li>For all other employees compensation linked to revenue and the operating profit </li></ul><ul><li>Hence, individual performances were not appreciated </li></ul><ul><li>So we do not agree with the compensation philosophy. </li></ul>
  19. 19. Q7A. DESCRIBE ADI’S STRATEGY AS OF 1996. Q7B.HOW SHOULD SCORECARD & OTHER MANAGEMENT SYSTEMS CHANGE IN 1996 TO BEST FIT THE STRATEGIC NEEDS OF THE COMPANY?
  20. 20. <ul><li>Analog was pursuing a four pronged strategy in 1996 </li></ul><ul><ul><li>Expand traditional SLIC business </li></ul></ul><ul><ul><li>Increase the market share in the DSP IC market </li></ul></ul><ul><ul><li>Pursue growth opportunities for system level signal processing IC’s </li></ul></ul><ul><ul><li>Leverage core technology to develop innovative products </li></ul></ul>
  21. 21. Managerial compensation can be linked to EVA.
  22. 22. THANK YOU

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