Case
Supplementary Resources
Abstract
In 1991, Tom Cleveland, CEO and owner of the Caterpillar dealership, H.O. Penn Machinery Company, Inc., found himself contemplating the sale of his poorly performing business, which had been in his family for nearly three decades. After he was unable to reach an agreement with a particular buyer, however, Cleveland re-committed himself to H.O. Penn, determined to turn around its fortunes. He introduced a management system called ‘Managing by Values’ (MBV), with the objective of infusing explicitly stated values and goals into every facet of the company's operations. At first, employees embraced the new system. Over the next 15 years, both company morale and financial performance improved markedly. Perhaps nothing demonstrated H.O. Penn's emerging cohesiveness more powerfully that the firm's nationally recognized work to rapidly supply and support heavy equipment and generators in the rescue, recovery, and restoration efforts in the aftermath of 9-11.
In 2006, Cleveland faced pressure to grow the business over the next five years. In view of H.O. Penn's recent performance, Caterpillar had high expectations for future growth, pressuring the company for even faster expansion of market share. Cleveland considered a number of options to meet Caterpillar's and his own growth expectations, and speculated which one(s) would best fit with ‘Managing by Values.’
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: H.O. Penn Values Statement
Exhibit 2: Consolidated Statements of Income – H.O. Penn and PennRents
For Years Ended December 31, 1991–December 31, 2005 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Sales | 150,364 | 152,526 | 176,581 | 206,940 | 209,083 | 184,393 | 209,196 | 205,243 | 241,216 | 322,315 | 360,463 | 275,761 | 285,107 | 340,191 | 327,527 |
Cost of Sales | 118,393 | 120,591 | 144,525 | 169,257 | 173,753 | 147,253 | 165,979 | 162,539 | 190,358 | 258,377 | 280,133 | 206,365 | 213,895 | 257,505 | 243,686 |
Gross Profit | 31,971 | 31,935 | 32,056 | 37,683 | 35,330 | 37,140 | 43,217 | 42,705 | 50,858 | 63,938 | 80,330 | 69,396 | 71,212 | 82,686 | 83,842 |
% of Sales | 21.3% | 20.9% | 18.2% | 18.2% | 16.9% | 20.1% | 20.7% | 20.8% | 21.1% | 19.8% | 22.3% | 25.2% | 25.0% | 24.3% | 25.6% |
Expenses | 34,061 | 30,339 | 29,841 | 32,304 | 31,160 | 31,267 | 36,582 | 34,474 | 40,333 | 47,584 | 58,419 | 61,060 | 58,213 | 65,242 | 70,764 |
% of Sales | 22.7% | 19.9% | 16.9% | 15.6% | 14.9% | 17.0% | 17.5% | 16.8% | 16.7% | 14.8% | 16.2% | 22.1% | 20.4% | 19.2% | 21.6% |
Operating Income | (2,090) | 1,590 | 2,214 | 5,379 | 4,171 | 5,872 | 6,635 | 8,231 | 10,524 | 16,353 | 21,912 | 8,319 | 12,999 | 17,444 | 13,077 |
% of Sales | −1.4% | 1.0% | 1.3% | 2.6% | 2.0% | 3.2% | 3.2% | 4.0% | 4.4% | 5.1% | 6.1% | 3.0% | 4.6% | 5.1% | 4.0% |
Exhibit 3: Pathfinder Survey Results
2005 Higher Strengths | |||
---|---|---|---|
2005 Rank | Item | 2005 % All | 2004 % All |
1st | I know what actions are expected of me in my job as an employee in our company. | 97% | 96% |
2nd | I normally understand what I am expected to do when assigned a work task. | 95% | 96% |
3rd | I know who is responsible for supervising and evaluating my work performance. | 94% | 93% |
4th | I usually understand what is required of me. | 93% | 93% |
5th | People in our area consistently try to do the right thing. | 90% | 86% |
6th | I enjoy working for an organization like ours by comparison with other ones. | 90% | 88% |
7th | I believe most supervisors and managers in our organization are primarily interested in results. | 90% | 86% |
8th | My present job responsibilities keep me fully occupied in meaningful contributions to our company's goals. | 90% | 92% |
9th | My work is personally satisfying to me. | 89% | 90% |
10th | Employees in my work unit genuinely care about providing good performance. | 89% | 88% |
2005 Higher Concern Items | |||
---|---|---|---|
2005 Rank | Item | 2005 % All | 2004 % All |
1st | I perceive many people in my work unit who are frustrated. | 46% | 53% |
2nd | Our work are is congested and difficult to effectively work in. | 41% | 41% |
3rd | Major variations in my workload are not reduced because of ineffective planning. | 40% | 45% |
4th | Changes in my area are not typically well planned. | 39% | 49% |
5th | A backup individual or process does not exist that can satisfactorily perform my job functions in an emergency (such as illness, work overload). | 35% | 37% |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved