Matthew Lorber. In 1996 the company operated predominantly in one industry segment: the design, manufacture and marketing of a broad line of high-performance linear, mixed-signal, and digital integrated circuits that addressed a wide range of real-world signal processing applications. The company's principal products were divided among four classifications: general-purpose, standard-function linear, and mixed-signal; special-purpose linear and mixed- signal; digital signal processing; and assembled products. Special-purpose linear and mixed- signal (SLICS) were the largest product segment for the company, accounting for 65 percent of total sales. Almost all the company products were components that typically were incorporated by original equipment manufacturers in a wide range of equipment and systems for use in communications, computer, industrial instrumentation, military, aerospace, and high- performance consumer electronics applications.
Analog Devices Inc. (ADI) was a leading manufacturer of integrated circuits that convert between analog and digital data. From 1981 through 1996, ADI experienced periods of development and stagnation, both achieving record profits and sales and experiencing its first loss ever. Management at ADI established a number of different management tools to meet the requirement of the changing market. One of the implementation was corporate scorecard. The management was encouraged to change the scorecard to best fit the needs specifically, how fast to change it and how best to use it focused management attention in the future. One aspect of
Analog Devices Inc. was that the new planning system encompassed of teams, rather than a centralized planning group. These teams included individual contributors, line managers, and mid-level managers the very people responsible for implementing the plans they developed.
Sixty teams were set up in 1997 to work on topics such as business plans and competitor analysis
ADI management believed the teams would be highly committed to the business plans because they had developed them. Compensation system Analog Devices did not link incentive compensation to performance on the scorecard measures.
Compensation for corporate officers such as senior management was based on appreciation in stock prices. Compensation for all other employees was based on an equally weighted combination of two factors: growth in company revenues and operating profits for the company before taxes. After Suttler, "We do not tightly link managers compensation to scorecard performance. We are in an industry that is moving like the wind. We've got to change our scorecard every year to respond to that environment. Our compensation philosophy is based on cross-functional coordination and the highest degree of teamwork."
Analog Device Inc. strategies in the second half of the 1980s: having innovative, high- quality products and being a reliable, responsive supplier are as follows:
A: benefits of the “half-life”: it will encourage the company to reduce cost and defective rates.
The total quality of the production has been improved. B: limitations of the “half-life”: it focuses only cost, not revenues. The quality goals and the company’s goals were in conflict. Half-life made the whole company centered on the quality improvement, while other key factors were ignored. C: the half-life is not the same for all processes. It depends on the complexity of the process. There are two dimensions to complexity: technical and organizational. Technical complexity is high for new technologies, where part of learning process is related to understanding and refining that technology. Over time, as the technology matures and its use becomes more routine and familiar, technical complexity declines. Organizational…