Question 35

15 points

Save Answer

Case Study

Deere & Company, one of the world's leading producers of agricultural, construction, forestry, and turf care equipment, has a rich history of dedicated employees, quality products,

and loyal customers. When Robert W. Lane, an 18-year veteran of Deere, became Chairman and CEO in August of 2000, however, economic and organizational problems were

threatening this tradition. The company's operations were capital intensive, extremely decentralized, and spread across adversity of products with highly cyclical business cycles

This meant that overall company profitability required constant vigilance and comparison of profit margins across products with an eye to reducing cyclical swings and to optimizing

the whole business and not just a particular business unit. Moreover, Deere was having problems keeping pace with a rapidly changing and demanding global business

environment. With the support of a unified senior team, Lane immediately created a plan to manage assets more efficiently, to make a new generation of products geared to

emerging market demands, and to reduce the firm's vulnerability to cyclical swings and uncertain agriculture and construction markets which together accounted for about 70% of

Deere's sales. To make the plan work over the next several months, Lane made a number of related changes in the company's management and information systems, structure,

and human resources practices. Deere's redesign effort started with a simple yet powerful approach to measuring firm performance: shareholder value added (SVA), which is net

operating profit after taxes minus cost of capital. Because this value-based metric is straightforward and intuitive, it was easily understood and embraced by operating people

throughout the firm. SVA became the central tool for managing the company's business.

Next, Lane introduced an online performance management system to align goals and rewards with SVA. All 18,000 salaried employees now had to develop goals that were

explicitly linked to the firm's goals. Specific SVA targets were set for each product line at various points in the business cycle. High expectations for improvements in operating

performance and SVA growth were set and widely communicated. Then, rewards were tied directly to progress on meeting those objectives. The simplicity and consistency of this

system focused employee behaviors on the economics of the business and reinforced the need to continuously improve performance and raise SVA.

Finally, Lane made significant changes in Deere's talent mix to better meet the higher performance standards and the increasing demands of global competition.

Question 1 (5 Grades)

Deere & Company implemented a strategic change to develop the organization

2- sustaing the change for deere , company is an important