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The New Soul Of John Deere


The Corporation

THE NEW SOUL OF JOHN DEERE

For 26 years, John Soliz assembled parts for John Deere & Co.'s giant planting machines. "I always helped the company any way I could," he says, once even teaching a class on advanced manufacturing methods. But Deere managers had more in mind two years ago, when they asked Soliz, a member of the United Auto Workers, to join other workers and travel across North America explaining Deere's new products to dealers and farmers.

Deere figured assembly-line workers, with their intimate knowledge of the equipment, would make a powerful marketing team. So after six months of training, Soliz spent 1993 hustling around the Midwest as a Deere pitchman with his own expense account. He logged over 7,000 miles speaking to groups of farmers. Often, he pulled into small towns and stayed up past midnight assembling displays for meetings the next morning. But Soliz has no complaints. "I developed new skills," he says. "I got to know the customer."

UAW members acting as traveling salesmen--and on a corporate expense account? Have the managers of 156-year-old Deere lost their minds? Hardly. With long-term demand for farm equipment weakening and competition intensifying, Deere Chief Executive Hans W. Becherer believes the speediest way to adapt to the tough environment is to reach out to his work force.

Asking workers such as Soliz to improve their skills by taking on new jobs is just one of the labor innovations sweeping Deere, which is based in Moline, Ill. Hourly workers routinely offer advice on everything from cutting production costs to improving product quality. Deere hopes to improve productivity even more through expanded employee training programs. It recently concluded a union contract that bases pay increases on completing college courses and demonstrating new skills--not, as in most labor agreements, on seniority (table). "It's often the people at the root of the company, on the shop floor, who will provide the best answers," says Becherer, 58 and CEO since 1990.

THINNING RANKS. Deere's innovations are paying big dividends. Profits rebounded sharply last year. And in 1994, Deere's net income could top $385 million, up 35% from 1993, as sales climb 5%, to over $8 billion, says Ingalls & Snyder analyst Alexander Blanton (chart). Nowadays, Deere even shares the limelight with the likes of Chrysler and Motorola as a company that could serve as a blueprint for the revival of other manufacturers. "Deere is on the cutting edge," says Jeffery T. Grade, CEO of Harnischfeger Industries Inc., a Brookfield (Wis.) company that makes paper-product machinery.

Deere's management has spent years overhauling the once-stodgy company. It adopted advanced manufacturing methods, such as teamwork and partnering with suppliers, as long ago as the 1970s. Still, Deere stumbled three years ago as the recession pounded sales. Competition from rival Caterpillar Inc. also hurt, as did falling farm incomes. In 1991, Deere had a loss of $20 million, vs. 1990 profits of $411 million. Sales slumped 11%, to $7 billion. In response, Becherer stepped up Deere's push into insurance and health care. The company has already expanded its health maintenance organization to serve nonemployees. "We're going to leverage our presence in rural America," vows Becherer.

What Deere is leveraging most, however, is its work force. To some degree, it didn't have a choice. Years of downsizing to adapt to the shrinking farm market had thinned the ranks of Deere employees--including white-collar supervisors. Managers realized they had to rely more on blue-collar talent.

But Becherer also believed Deere had a lot to learn from its employees about quality and costs. Most of its blue-collar workers, largely represented by the UAW, have over 15 years' experience on the shop floor, and the company has poured vast resources into training them, including classes in robotics and cost-reduction techniques. Moreover, Becherer believed employees would be more receptive to improving efficiency if they felt part of the process.

One of the more intriguing ways Deere is trying to involve its labor force is by assigning workers to "nontraditional jobs." Soliz, for example, is one of many factory workers to be given temporary jobs elsewhere. Deere hopes to expand the program in the future. While Soliz and some of his co-workers are off selling Deere equipment, others, such as David Rowe, are instructing customers and dealers on proper maintenance. Rowe spent the last year traveling three weeks out of four to visit dealerships and customers.

DEBRIEFINGS. Besides having knowledgeable employees rub shoulders with customers, Deere gets valuable feedback. Workers are debriefed by management after every trip, and their insights are used to improve customer service or address quality problems. Sometimes these emissaries take matters into their own hands. Soliz found dealers had a hard time unloading planting equipment from trucks without damaging it. So he visited his factory mates, and they figured out how to load the machinery so that it could be taken off safely.

Frequent contact with customers also makes Deere workers more quality-conscious. Groups of workers from the East Moline plant routinely use a company van to make unsupervised day visits to local farmers. Last year, paint-shop employee Paul Laird visited farmer Cliff Warkins, who, Laird says, explained how a good paint finish prevents rust, a link Laird hadn't thought much about. "I pay a lot more attention now," he admits.

Deere has also tapped its work force to help it reduce product cost. At its Davenport (Iowa) plant, it has grouped workers into cost-reduction teams that meet weekly to figure out ways to simplify parts or eliminate production problems. The teams are encouraged to visit the design office and deal directly with engineers. Recently, one such team pointed out that two engine brackets could be eliminated from a new line of earth-moving equipment. The suggestion will speed assembly and save Deere $16 per vehicle. Thanks in part to such suggestions, Deere has cut its design times by 33% over the past three years.

Deere also relies on insights from the shop floor to improve its manufacturing process. At many plants, the company has turned over control of production to so-called self-directed work teams. One group putting together straw-disposal attachments for harvesting equipment in the East Moline factory helped overhaul its assembly-line methods by bringing together 12 manufacturing steps at a single site. Previously, the steps had been scattered through the factory. They also took charge of scheduling overtime and vacations. The upshot: The team cut assembly costs by over 10%.

NOVEL CONTRACT. Suppliers are also benefiting from Deere's work force. Consider Evans Manufacturing Co., a Rock Island (Ill.) company that makes rear-axle parts for Deere combines. Company President William Evans used to deal with a Deere manager who was far removed from the shop floor. Delivery foul-ups were common, he says. Now, his main contact is Gary Versluys, an hourly employee who assembles rear axles. And since Versluys spearheaded a project to adopt a just-in-time system to cut down on inventory, Evans says he has speeded up deliveries to twice a week from twice a month. That in turn has cut his own inventory by about 20%. "It has worked out great," Evans says.

As he expands the responsibilities of hourly employees, Becherer is stepping up training to equip them for those new roles. On average, Deere's East Moline work force logged 28 hours learning about advanced manufacturing techniques in 1993, up from 15 hours in 1988. Deere also sponsors 50 continuing-education programs for employees on subjects such as activity-based costing.

And the training effort doesn't stop there. In 1992, Deere implemented a novel contract with the International Association of Machinists to tie pay increases to skill levels. As part of the deal, Deere teamed with nearby Black Hawk Community College to offer 65 IAM workers a two-year degree in electromechanical technology design. Deere looks on this contract as a model for future labor deals. "This is job security," says IAM training coordinator Brian Mumma. "With an education like this, we've got the ability to do anything."

Of course, Deere's high degree of labor and management cooperation requires exceptional harmony. And both sides have taken steps to maintain a good relationship. UAW leaders and managers at Deere's Davenport facility, spent three days last June huddled at a rural resort with a human relations consultant trying to forge better ties.

OBSTACLE COURSE. When relations remained strained on the final day, the consultant forced the two sides to work together to traverse an outdoor obstacle course. "Suddenly, we had to trust each other," says plant manager Richard Poterack. "That broke down a lot of walls." Agrees UAW Local 281 President Jeff Middleton: "It was the most positive thing I've been associated with." To spread the good will, Deere has built its own obstacle course at its Davenport plant and has required many of its employees to complete it. Deere's labor tranquility stands in sharp contrast to the turmoil at Caterpillar, whose UAW employees have worked without a contract for two years. Deere hopes the striking difference will turn out to be a selling point with customers who are concerned that labor strife could interrupt production and delivery.

Still, while productivity and profits are rising, Deere isn't out of the woods yet. Record farm income and a rebound in demand for construction equipment have helped the company lately. But Deere is stuck in slow-growth markets. And with ailing rival JI Case reviving, profits may be harder to come by later in the decade. Moreover, the UAW isn't at total peace with Deere. Jim Hecker, the union's coordinator at Deere, complains that the company is outsourcing too much work, which could cost employees their jobs and undermine the current cooperation. "Overall, the relationship could improve," he says.

If he's worried, Becherer's not showing it. He believes expansion into Eastern Europe, combined with branching into new businesses, will keep Deere growing. "We have damn good employees," Becherer says. "We can compete with anyone in the world." An idle boast? Rivals may wish to believe so. But for now, Becherer has the profits to prove it.Kevin Kelly in Moline, Ill.


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