How Deere & Co manage business performance

According to a recent piece in Time magazine ( Deere’s Harvest Mar 22nd, 2010), Deere & Co – the US agricultural and construction equipment manufacturer- reported strong earnings and profits in 2009, despite a continuing global recession. The good results are due in part to increased sales in developing economies (crops have to be grown for an increasing population to eat) and tight cost control coupled with lean manufacturing at Deere.

In fact, in recent years Deere has seen continued strong results and its share price has increased five-fold. While some increased sales and tight cost control contribute to these results, a novel performance measurement systems introduced by former CEO Bob Lane may also help explain things. Lane introduced a system whereby by a 1% per month “charge” was taken into account before any profit could be reported by managers. In simpler terms, a 12% per annum profit was viewed as breakeven by Lane and Deere managers. Although not reported, I’m sure Deere managers strove to exceed this – maybe to be rewarded with a bonus payment?. Nonetheless, this is a really useful idea. You would look at it another way in that 12% of the target “profit” could be lost before a real accountning loss happens. Either way, this approach might be useful to your business, large or small.