Monday, May 11, 2009
question 1-4
Question 01
During the time 1965 until early 1980s Analog Devices grew at a rate of 27% percent a year. In 1983 Ray Stat recognised that ADI was having a problem with the quality of their products. The major issues they faced were the onetime delivery and process yields. The customers were complaining about the quality of products and their competitors had on time delivery records and yields above their company level. This was the ADI’s first introduction to total quality management.
By the end of 1984 and the end of 1986 the sales of the company have grown only 6.7% and the profits had fallen by 38%. They were affected by the depression in the US electrical industry and by the strong dollar. Only 15% of every 100 ICs that ADI started made it through the process. Certainly there was a problem of the quality management of the company. So ADI hired Art Schneiderman to sort out this issue. He brought the “half Life” strategy to the company. This means any fault levels subjected to any reasonable QIP decreases at a constant rate. Every process could experience a 50% reduction in faults at a consistent time interval. The teams need to identify the main causes of the faults, rank them in order of importance then propose, design, test and implement solutions using the Plan-Do- Check-Act or PDCA cycle.
What is Plan-Do-Check-Act
Here is what you do for each stage of the Cycle:
Plan to improve your operations first by finding out what things are going wrong (that is identify the problems faced), and come up with ideas for solving these problems.
Do changes designed to solve the problems on a small or experimental scale first. This minimises disruption to routine activity while testing whether the changes will work or not.
Check whether the small scale or experimental changes are achieving the desired result or not. Also, continuously Check nominated key activities (regardless of any experimentation going on) to ensure that you know what the quality of the output is at all times to identify any new problems when they crop up.
Act to implement changes on a larger scale if the experiment is successful. This means making the changes a routine part of your activity. Also Act to involve other persons (other departments, suppliers, or customers) affected by the changes and whose cooperation you need to implement them on a larger scale, or those who may simply benefit from what you have learned (you may, of course, already have involved these people in the Do or trial stage).
This is now completed the cycle to arrive at `problem solved. Go back to the Plan stage to identify the next `problem faced'.
If the experiment was not successful, skip the Act stage and go back to the Plan stage to come up with some new ideas for solving the problem and go through the cycle again. Plan-Do-Check-Act describes the overall stages of improvement activity.
Schneiderman used five year plan as a tool to improve the quality of the performances. In this he has used the critical success factors which are on time delivery, outgoing defect level and lead time as External factors and Manufacturing cycle time, process defect level, yield and time to market as Internal factors. He has proposed the reduction such as dropping process defect level from 5000PPM in 1987 to fewer than 10PPM by 1992.
2. What is Half-Life Concept?
The half life matrix summarizes the expected half-life when an improvement team utilizes best practice incremental improvement tools and methods. The half-life is not the same for all processes. Instead, it depends on the complexity of the process. There are two dimensions to complexity: technical and organizational.
What are advantages and disadvantages of that?
Half-life starts identifying the root causes of defects, rank them in order of importance, then propose, design, test and implement solutions using the Plan-Do-Check-Act. The team continues to cycle around this learning loop until the root causes of most of the faults are corrected and then move on to the next most important causes of defects. It gives the measurements of the non-financial performances and also states the realistic objectives of the company and gives a realistic measurement of the performances
Difference between half life and experience curve concept.
The experience curve states total units produced from the very beginning, not just this year, real unit cost drops by a constant percent, for example 20%. If the first million units cost $10 each, then the next million units should cost $8 each, the next two million units, $6.40, the next four million units, $5.12, etc. Because cost is driven by cumulative units produced (1+1+2+4 million in our example), the rate of decline of cost drops over time unless unit volume grows at a sufficiently high exponential rate
The half-live method, on the other hand, predicts that the rate of decline of defect level is constant over time
Half-life deals with defects not cost.
Less complex process the root causes is often larger and the improvement cycle time is shorter. For more complex process the root cause is smaller while the improvement cycle time is longer.
The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system.. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
The balanced scorecard suggests to view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:
They are
1. financial-how should the company appear to their shareholders
2 Internal Business processes- to satisfy our shareholders and customers, what business process we should excel at?
3. Learning and growth- to achieve our vision how will we sustain our ability to change and improve?
4. Customers-to achieve our vision how should we appear to our customers?
In this company the score card has only three parts. They have divisional score cards and it over laps with the overall scorecard. The company has allowed the divisions to use the same score card or unique ones. If this is the case there is a chance that the divisional managers could come up with their own strategies when creating their own score cards and it might not with the overall company’s objectives. It would be better if the company has just one score card as their vision statement and each and division follows the steps in the overall card.
There is no indication about employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people the only repository of knowledge are the main resource. What about the customer satisfaction. It is not indicated on the scorecard. customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.
During the time 1965 until early 1980s Analog Devices grew at a rate of 27% percent a year. In 1983 Ray Stat recognised that ADI was having a problem with the quality of their products. The major issues they faced were the onetime delivery and process yields. The customers were complaining about the quality of products and their competitors had on time delivery records and yields above their company level. This was the ADI’s first introduction to total quality management.
By the end of 1984 and the end of 1986 the sales of the company have grown only 6.7% and the profits had fallen by 38%. They were affected by the depression in the US electrical industry and by the strong dollar. Only 15% of every 100 ICs that ADI started made it through the process. Certainly there was a problem of the quality management of the company. So ADI hired Art Schneiderman to sort out this issue. He brought the “half Life” strategy to the company. This means any fault levels subjected to any reasonable QIP decreases at a constant rate. Every process could experience a 50% reduction in faults at a consistent time interval. The teams need to identify the main causes of the faults, rank them in order of importance then propose, design, test and implement solutions using the Plan-Do- Check-Act or PDCA cycle.
What is Plan-Do-Check-Act
Here is what you do for each stage of the Cycle:
Plan to improve your operations first by finding out what things are going wrong (that is identify the problems faced), and come up with ideas for solving these problems.
Do changes designed to solve the problems on a small or experimental scale first. This minimises disruption to routine activity while testing whether the changes will work or not.
Check whether the small scale or experimental changes are achieving the desired result or not. Also, continuously Check nominated key activities (regardless of any experimentation going on) to ensure that you know what the quality of the output is at all times to identify any new problems when they crop up.
Act to implement changes on a larger scale if the experiment is successful. This means making the changes a routine part of your activity. Also Act to involve other persons (other departments, suppliers, or customers) affected by the changes and whose cooperation you need to implement them on a larger scale, or those who may simply benefit from what you have learned (you may, of course, already have involved these people in the Do or trial stage).
This is now completed the cycle to arrive at `problem solved. Go back to the Plan stage to identify the next `problem faced'.
If the experiment was not successful, skip the Act stage and go back to the Plan stage to come up with some new ideas for solving the problem and go through the cycle again. Plan-Do-Check-Act describes the overall stages of improvement activity.
Schneiderman used five year plan as a tool to improve the quality of the performances. In this he has used the critical success factors which are on time delivery, outgoing defect level and lead time as External factors and Manufacturing cycle time, process defect level, yield and time to market as Internal factors. He has proposed the reduction such as dropping process defect level from 5000PPM in 1987 to fewer than 10PPM by 1992.
2. What is Half-Life Concept?
The half life matrix summarizes the expected half-life when an improvement team utilizes best practice incremental improvement tools and methods. The half-life is not the same for all processes. Instead, it depends on the complexity of the process. There are two dimensions to complexity: technical and organizational.
What are advantages and disadvantages of that?
Half-life starts identifying the root causes of defects, rank them in order of importance, then propose, design, test and implement solutions using the Plan-Do-Check-Act. The team continues to cycle around this learning loop until the root causes of most of the faults are corrected and then move on to the next most important causes of defects. It gives the measurements of the non-financial performances and also states the realistic objectives of the company and gives a realistic measurement of the performances
Difference between half life and experience curve concept.
The experience curve states total units produced from the very beginning, not just this year, real unit cost drops by a constant percent, for example 20%. If the first million units cost $10 each, then the next million units should cost $8 each, the next two million units, $6.40, the next four million units, $5.12, etc. Because cost is driven by cumulative units produced (1+1+2+4 million in our example), the rate of decline of cost drops over time unless unit volume grows at a sufficiently high exponential rate
The half-live method, on the other hand, predicts that the rate of decline of defect level is constant over time
Half-life deals with defects not cost.
Less complex process the root causes is often larger and the improvement cycle time is shorter. For more complex process the root cause is smaller while the improvement cycle time is longer.
3. Conflict exists between the QIP measures and the measures reported by the financial system.
Continuous Quality Improvement is a key component of our corporate culture. process begins with a wide variety of annual “Inputs”, the reality is that quality services depend upon this process happening every day, not once a year. The process of “Input” → “Identify Need” → “Improvement Plan” → “Monitor Outcomes” → back to “Input” is part of every staff meeting, management meeting, team meeting, In many cases ongoing situations are identified quickly and ideas for improvement are sought for immediate implementation. This redefined process includes capturing the ongoing improvements that are identified and addressed successfully outside of the annual PLAN review and preparation. At no time will we detour from the informal, on-going improvement processes; rather, we are establishing this annual process as a way to capture the bigger issues and needs at sites and for the total agency.
Financial system
The financial system concentrates on short term results and can be manipulated by the managers. For instance managers can manipulate the figures when calculating the current ratios, bad debts and doubtful debts etc.. There could be difficulties to compare some areas in the balance sheet from year from year to year,
The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system.. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
The balanced scorecard suggests to view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:
They are
1. financial-how should the company appear to their shareholders
2 Internal Business processes- to satisfy our shareholders and customers, what business process we should excel at?
3. Learning and growth- to achieve our vision how will we sustain our ability to change and improve?
4. Customers-to achieve our vision how should we appear to our customers?
In this company the score card has only three parts. They have divisional score cards and it over laps with the overall scorecard. The company has allowed the divisions to use the same score card or unique ones. If this is the case there is a chance that the divisional managers could come up with their own strategies when creating their own score cards and it might not with the overall company’s objectives. It would be better if the company has just one score card as their vision statement and each and division follows the steps in the overall card.
There is no indication about employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people the only repository of knowledge are the main resource. What about the customer satisfaction. It is not indicated on the scorecard. customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.
Friday, May 8, 2009
Ni Uyen Huynh
This is what I have done so far. Ni Uyen Huynh
Analog Devices’ strategy in the second half of the 1980s: (1985-1990)
In 1983, Ray Stata recognized that ADI was having problems with the quality of its production, so he implemented the concept of total quality management into the company management control system. He hired Schneiderman, an expert in practicing TQM and implemented the “half-life” concept and corporate scorecard into the control system.
The “half-life” concept
Evaluation of the “half-life” concept in light of Analog Devices’ strategy
Before
After
On-time delivery
70%
96%
Cycle time
15 weeks
8 weeks
Average yield
26%
51%
Defects in products
500 PPM
50 PPM
Potential benefits
- Improvements quality of production
- Reducing waste
- Reducing cost per unit
Limitations
It is a cost reduction tool not a wealth creation tool. It has little say about business strategy. It deals with defects, not cost.
How would a company develop the half-life for difference processes?
The half-life is not the same for all processes. It depends on the complexity of the process. The complexity of the process can either be technical or organizational. The basis for the half-life dynamic is the interactive learning loop at the heart of TQM. Half-life starts identifying the root causes of defects, rank them in order of importance, then propose, design, test and implement solutions using the Plan-Do-Check-Act or ‘PDCA’ cycle. For less complex processes, the root cause is often larger and the improvement cycle time shorter, accounting for the shorter half-lives. For more complex processes, there tend to be many more causes so that the root cause is smaller while the improvement cycle time is longer. Organizations should attack less complex processes at the beginning when developing half-live.
Differences between half-life concept and the experience curve concept
Half-life Concept
Experience curve concept
A performance measures tools
As a result of increasing experience or proficiency in doing something
Theoretical basis
No underlying theory
The rate of decline of defects level is constant over time
Real unit cost drops by a constant percent and the rate of decline of cost drops over time
Longer cycle of improvement
Shorter cycle of improvement
The QIP measures and the financial measures
The goals of QIP and the company’s financial goals were in conflict. QIP is more focused on long-term plans while financial measures are more focused on short-term results. Financial measures can be manipulated by manager.
Corporate scorecard:
The usefulness of corporate scorecard:
The corporate scorecard is used as communication tools on how well ADI’s strategies are implemented in the management control system and how ADI is moving toward its goals. The scorecard measured critical success factors as well as financial performance. It provides a link between short-term results with ADI’s long-term plans.
Role of each set of measures playing in strategy execution:
What should be the relative importance of financial versus non-financial measures?
Additional information to be included in the scorecard:
The scorecard should have 4 components. ADI’s scorecard has 3 categories, which are financial, innovation and learning, internal business process. It should include the customer perspective in its scorecard as it is the most important key success factor.
5. Evaluate the evolution of the corporate scorecard and related management planning and control systems at ADI during 1990-1995
6. Compensation philosophy of ADI
ADI did not link incentive compensation to performance on the scorecard measures and compensation was based on stock price for senior management and growth in revenue and operating profits before tax for all other employees. There was no correlation between the non-financial measures and financial results. This can disrupt goal congruence as managers are more concerned about financial measures than any other measures which are not benefits for the company as a whole.
It should link incentive compensation to performance on the scorecard.
7. ADI’s strategy’s in 1996
Analog Devices’ strategy in the second half of the 1980s: (1985-1990)
In 1983, Ray Stata recognized that ADI was having problems with the quality of its production, so he implemented the concept of total quality management into the company management control system. He hired Schneiderman, an expert in practicing TQM and implemented the “half-life” concept and corporate scorecard into the control system.
The “half-life” concept
Evaluation of the “half-life” concept in light of Analog Devices’ strategy
Before
After
On-time delivery
70%
96%
Cycle time
15 weeks
8 weeks
Average yield
26%
51%
Defects in products
500 PPM
50 PPM
Potential benefits
- Improvements quality of production
- Reducing waste
- Reducing cost per unit
Limitations
It is a cost reduction tool not a wealth creation tool. It has little say about business strategy. It deals with defects, not cost.
How would a company develop the half-life for difference processes?
The half-life is not the same for all processes. It depends on the complexity of the process. The complexity of the process can either be technical or organizational. The basis for the half-life dynamic is the interactive learning loop at the heart of TQM. Half-life starts identifying the root causes of defects, rank them in order of importance, then propose, design, test and implement solutions using the Plan-Do-Check-Act or ‘PDCA’ cycle. For less complex processes, the root cause is often larger and the improvement cycle time shorter, accounting for the shorter half-lives. For more complex processes, there tend to be many more causes so that the root cause is smaller while the improvement cycle time is longer. Organizations should attack less complex processes at the beginning when developing half-live.
Differences between half-life concept and the experience curve concept
Half-life Concept
Experience curve concept
A performance measures tools
As a result of increasing experience or proficiency in doing something
Theoretical basis
No underlying theory
The rate of decline of defects level is constant over time
Real unit cost drops by a constant percent and the rate of decline of cost drops over time
Longer cycle of improvement
Shorter cycle of improvement
The QIP measures and the financial measures
The goals of QIP and the company’s financial goals were in conflict. QIP is more focused on long-term plans while financial measures are more focused on short-term results. Financial measures can be manipulated by manager.
Corporate scorecard:
The usefulness of corporate scorecard:
The corporate scorecard is used as communication tools on how well ADI’s strategies are implemented in the management control system and how ADI is moving toward its goals. The scorecard measured critical success factors as well as financial performance. It provides a link between short-term results with ADI’s long-term plans.
Role of each set of measures playing in strategy execution:
What should be the relative importance of financial versus non-financial measures?
Additional information to be included in the scorecard:
The scorecard should have 4 components. ADI’s scorecard has 3 categories, which are financial, innovation and learning, internal business process. It should include the customer perspective in its scorecard as it is the most important key success factor.
5. Evaluate the evolution of the corporate scorecard and related management planning and control systems at ADI during 1990-1995
6. Compensation philosophy of ADI
ADI did not link incentive compensation to performance on the scorecard measures and compensation was based on stock price for senior management and growth in revenue and operating profits before tax for all other employees. There was no correlation between the non-financial measures and financial results. This can disrupt goal congruence as managers are more concerned about financial measures than any other measures which are not benefits for the company as a whole.
It should link incentive compensation to performance on the scorecard.
7. ADI’s strategy’s in 1996
Li Jinmao
Hi everyone, sorry for that i dont have much time to type all my ideas coz i am busy working these days, below are the main ideas for me to share with all you guys, regarding any further discussion we will meet on Sun. sorry but i am really sleepy, and thank everyone for their excellent post you all have prepared so well, i am grateful. and best wishes to our presentation!
1，They established the quality improvement programme(QIP) As ADI called the total quality programme focusing on half life, scorecard, applying the scorecard and analyzing performance and so on. These contribute to the reduce their cost and improve their efficiency which represents the cost leadership.
2，
The linear graph may not be able to present every possible complex variarions
After most of The defects are corrected, then move to the next most important source of defect, in this way the company can reduce most of the source of defects
Linear is easy for someone to see the line indicating the improvement rate.
Experience curve is empirical observation and not based on underlying theory. And the half life curve is focusing on defects not costs.
3，
Both the financial and the QIP numbers should be looked at. They just concentrate on different areas which are important for Analog Devices to make decisions and look at the performances.
the QIP measures combine financial and non-financial measures. financial system only focus on the financial measures, QIP measures promote long-term. financial measures contribute to short-term action
4,
Through the financial data,executives may see whether the business is on the right track in which mainly about revenue
Coming to the new product, company may recognize the situation of the product in the market such as which stage is it in, and whether it is an accepted product or not.
QIP is more about providing the whole company’s performance
Additional:
Customer satisfaction and other field in customer
Learning and growth of the company
5,
changing
customer orientation, wealth creation
6,
Only focusing on the performance regardless of the other factors
7,
Apply the generic strategies into the company’ four field customer satisfaction, new product development, organizational capabilities and financial expectations.
1，They established the quality improvement programme(QIP) As ADI called the total quality programme focusing on half life, scorecard, applying the scorecard and analyzing performance and so on. These contribute to the reduce their cost and improve their efficiency which represents the cost leadership.
2，
The linear graph may not be able to present every possible complex variarions
After most of The defects are corrected, then move to the next most important source of defect, in this way the company can reduce most of the source of defects
Linear is easy for someone to see the line indicating the improvement rate.
Experience curve is empirical observation and not based on underlying theory. And the half life curve is focusing on defects not costs.
3，
Both the financial and the QIP numbers should be looked at. They just concentrate on different areas which are important for Analog Devices to make decisions and look at the performances.
the QIP measures combine financial and non-financial measures. financial system only focus on the financial measures, QIP measures promote long-term. financial measures contribute to short-term action
4,
Through the financial data,executives may see whether the business is on the right track in which mainly about revenue
Coming to the new product, company may recognize the situation of the product in the market such as which stage is it in, and whether it is an accepted product or not.
QIP is more about providing the whole company’s performance
Additional:
Customer satisfaction and other field in customer
Learning and growth of the company
5,
changing
customer orientation, wealth creation
6,
Only focusing on the performance regardless of the other factors
7,
Apply the generic strategies into the company’ four field customer satisfaction, new product development, organizational capabilities and financial expectations.
Notice about Sunday's meeting etc
Sunday meeting:
Time: 1 p.m.
Place: Front of Library
Theme: Discussion of answers and summary, decision about the presentation structure, and allocation of presentation roles
N.B. For those who may not be able to come to the meeting on Sunday, please name a proxy so that you would be fully aware of what is going on with our presentation. They will have a vote to the allocation of the roles, so please make sure the proxy that you appointed know which part you are good at, which will help make your presenting easier and our presentation better.
Acknowledgement:
Thank you for your on-time posting guys, please have a look on other people's answers and summary. Feel free to make comments please.
Sharon Summary
My summary about the case is way too long to be posted on the blog. I've put down notes on my book and I will discuss it through with you guys on Sunday's meeting.
question 6 and 7 charles
6. Do you agree with the compensation philosophy of Analog Devices?
I am quite agreeing with the compensation philosophy of ADI: based on cross-functional coordination and the highest degree of teamwork. Comparing the performance on the scorecard, coordination and high degree teamwork are more important for the development of ADI. It is also more useful to motivate employees to perform.
7. Describe Analog Devices’ strategy as of 1996. How should the corporate scorecard and other management systems change in 1996 to best fit the strategic needs of the company?
In 1996, ADI developed Vision 2000, which set forth three major objectives. And through the Hoshin process, these goals had been translated into specific and measurable objectives for every function of ADI. It also divided the critical measures into four business drives: customer satisfaction, new product development, organizational capabilities, and financial expectations.
I am quite agreeing with the compensation philosophy of ADI: based on cross-functional coordination and the highest degree of teamwork. Comparing the performance on the scorecard, coordination and high degree teamwork are more important for the development of ADI. It is also more useful to motivate employees to perform.
7. Describe Analog Devices’ strategy as of 1996. How should the corporate scorecard and other management systems change in 1996 to best fit the strategic needs of the company?
In 1996, ADI developed Vision 2000, which set forth three major objectives. And through the Hoshin process, these goals had been translated into specific and measurable objectives for every function of ADI. It also divided the critical measures into four business drives: customer satisfaction, new product development, organizational capabilities, and financial expectations.
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