Deere thrives by values others just claim
- Article by: Fred Zimmerman
- March 14, 2006 - 12:08 PM
Feb. 6 was a wonderful day. My wife, Joanell, and I had the great privilege of visiting the John Deere Pavilion in Moline, Ill.
Deere is not just an ordinary company. At the ripe age of 169 years, this unionized company has retained remarkable vigor, a reputation for superb quality and a world-class competitive position.
The Deere story contains some valuable lessons that could be applied by other companies today.
I've been following Deere since working for the Moline branch of IBM earlier in life. Later I wrote a case study on the company for the book, "The Turnaround Experience." My purpose here is to draw attention to the critical need for deeper and much more extensive critiques on what we mean by "good management."
Quality, innovation, integrity and commitment have been the core values at Deere & Co. since founder John Deere articulated them in the mid-19th century.
Too important to be relegated to mere plaques or published documents, those values were reinforced by Deere's everyday behavior.
Reinforcing values by behavior is harder, of course. It takes little effort to whip up mission, vision and value statements. It is much more time-consuming and expensive to live those missions, visions and values in ways that enlist the willingness of organization members to serve in the causes being articulated.
Living values creates meaningful involvement. Publishing values often is synthetic window dressing.
Throughout its history, Deere's values were integrated with the interests of the company's employees. Deere developed its first employee pension program in 1907. It hired people on the basis of moral character and good personal habits, including a sound work ethic, sobriety and thrift. Deere's management steadily urged employees to save money against a reversal in the farm economy.
The Great Depression dealt very harshly with Deere & Co. Losses reached nearly 40 percent of revenue in 1932, and the company was only one-eighth the size of International Harvester, which dominated the industry at the time.
During the Depression, Deere's stock tumbled from $690 per share to $3.50. Dividends on preferred stock were cut from $7 to 20 cents and common dividends were eliminated. Executive compensation was cut by 25 percent, managers' salaries were cut by 10 percent, and employees' hourly wages were cut by 4 percent. Elaborate schemes were worked out to give each family some work. Yet it was in this atmosphere that Deere's management and owners elected to use their personal resources in a manner that illustrates what living values really means.
Many Deere employees had deposited sizable amounts of their savings in the People's Savings Bank of Moline. But during the Depression, the bank was hit by a disgraceful embezzlement of $1.25 million. The bank seemed destined to fail -- and with the failure, much of the savings of the Deere employees and the community would vanish.
So top management and members of the Deere family gathered together with the company directors. Collectively, they decided to levy an assessment on themselves and put the money back into the bank to preserve the savings of the community.
Compare that with Northwest Airlines' actions.
Nearly every company has a mission statement that says the company exists to serve the community, and nearly every value statement lauds the value of employees. Unfortunately, in too many cases, that's where it ends.
For instance, Enron's values statement before bankruptcy included the following: "We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment." Or so it said.
Deere's successful record as a responsible company is not merely because of its good will. Deere plants are modern in their methods, well-equipped and well-staffed with competent employees -- many of whom are unionized. Deere's management historically has avoided the counterproductive embarrassment of obscenely high executive compensation.
Good management invests wisely, encourages efficiency, spawns innovation, insists on quality, operates with integrity and keeps commitments.
However, very few of those qualities necessary for success get much attention in the major business periodicals. Instead, we read about the latest resource-wasting acquisition or sophomoric cost-reduction programs implemented without integrity, cooperation, efficiency or commitment.
Good management is stable. In 169 years, Deere has had only eight CEOs.
Shouldn't we wonder what the world would be like if the leadership of Northwest Airlines, Control Data, Enron, WorldCom, Qwest and many others could have managed with the quality, innovation, integrity and commitment exhibited by Deere?
Maybe they would have lasted longer. Maybe there are some lessons here that other companies could use. Or, maybe companies should just start doing what their mission and value statements say.
Fred Zimmerman retired as a professor at the University of St. Thomas at the end of 2005. Since that time, he and his wife, Joanell, have been visiting children, factories, and presidential libraries. She likes presidential libraries and he likes factories. Both like their children, of course. His e-mail is email@example.com.
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