The Evolution from Taylorism to Employee Gainsharing: A Case Study Examining John Deere's Continuous Improvement Pay Plan

Abstract

With over $15 billion in annual sales, John Deere is one of the largest equipment manufacturing and distribution organizations in the world and is widely known as the world's premier producer of agricultural equipment. In the wake of significant downturns in the U.S. agriculture industry during the 1980s, John Deere believed it needed to change the manner in which employee performance was measured and rewarded. Specifically, after decades of using an individual-based, standard-hour compensation plan in its manufacturing facilities, John Deere decided to install a teambased gain-sharing plan that it believed would encourage more cooperation, innovation, and higher levels of motivation from its employees. This case provides students the opportunity to experience real-world conflicts of interest between employees and employers and the integral role that accounting-based performance measurement and reward systems play in resolving these conflicts. This case also provides students the opportunity to critically evaluate the theoretical strengths and weaknesses of two common compensation plans from the perspectives of both John Deere and its employees. Such juxtaposition allows students to see the inherent trade-offs in designing compensation systems, thereby improving students' understanding of optimal control system design.