Deere's International Board
Deere (DE), the maker of John Deere agricultural equipment, may be based in Moline, Ill., in the heart of the American Midwest, but it has created a board on which three of its 13 directors are non-American, a much higher proportion than for most U.S. companies.
Chairman and Chief Executive Officer Robert Lane says he has been able to tap the expertise of those non-American directors to shape his company's international strategy, which has become increasingly important as about 50% of the agricultural division's sales are now outside the U.S. Here are edited excerpts from a recent conversation with Lane:
Just how international is your board?
We have people born and educated on most of the continents of the world. Our business is very global. When I went to invite BMW Chairman Joachim Millberg to join the board, we found that we have a lot in common with BMW (BMW). We both have a global brand. We build diesel engines. We have high-productivity machines. But we don't compete against each other in the slightest.
How were you able to draw him in?
I also speak German. I never spoke with him in English until the day he showed up at our first board meeting, and I suspect he liked that. I confirmed everything in writing in English just to make sure there wasn't any confusion. I first called on him in Munich on behalf of my board because…as CEO, I am an agent of the board. But we sat and talked about our global businesses. He recognized that the two companies face many common issues even though they have very different end markets.
Did you create this international board or inherit it?
Deere has a history of having an international board. When I came on the board, Tony Madero, the CEO of the SanLuis Corporation (SANLUISA.MX), was already on the board. He's from Mexico. I also was able to recruit Dipak Jain, dean of the Kellogg School of Management at Northwestern, who was born and educated in India.
We've had a recognition in our company of the importance of the international view. I'm only the eighth CEO in Deere's 171-year history. The last of the founding family was William Hewitt, who later become an ambassador of the United States. But while he was still chairman of Deere, the Deere private airplane was only the second private aircraft to go over Chinese airspace after the famous Nixon-Chou Enlai meeting in the early 1970s. When China opened up, Bill Hewitt was there. We have a history of being linked to these opportunities around the world.
Isn't it difficult to manage an international board because of the different languages, cultures, and travel requirements?
It is challenging. But the members really enjoy our board. About every three years, we make a major international trip to expose the board to different countries. In November, we had the board in India to show them our factory there, which is exporting to 52 countries. We have a technology and engineering information center there as well. A few years before that, back in 2004, we took the whole board to see the huge opportunities for Deere in Brazil, particularly with sugarcane harvesting machines.
Just a few years ago, we were building close to zero of these in Brazil, but today we're building hundreds of them. And we have a brand new tractor factory.
Most U.S. boards have a distinct culture. How have you adapted your board culture to welcome or accept the non-Americans?
Since Dipak came on the board, our menus have really improved. We now have vegetarian food at all meals.
I often choose that myself because it's so tasty.
How have these directors contributed?
They've enriched our thinking. They are interested in the global issues that we face. As we sit there at a board meeting, we ask ourselves, how do we take advantage of the great opportunities in Russia, Kazakhstan, Turkmenistan, and the Ukraine, people from all these countries who are on our board are interested in that.
Do the international directors tend to lend expertise about their particular geographies—like relations with a government—or do they offer something broader?
All of them consider themselves to be global businesspeople. They see the world through a different lens, but they see the same world. Take the chairman of BMW. He deals with the same pollution-control issues that we do. He deals with the same branding and distribution issues in multiple countries as we do. Sometimes if you turn your lens just slightly, you get a different perspective. The ultimate objective is to get the right questions asked. What we're anxious to obtain is the board's help in exercising judgment and considering all the aspects of business in a very disciplined and comprehensive way.
In the U.S., we've brought in Aulana Peters, who used to be a commissioner of the Securities and Exchange Commission. She sees the world through a different lens, but that's very useful. And we've added Gen. Richard Myers, former chairman of the joint chiefs of staff, who has a very global perspective. He was responsible for an extensive organization worldwide and sees the world through yet another lens.
Do you use some of your directors to open doors with governments?
Not at all. They are there to help us consider and make the right judgments and give management oversight and appropriate advice so that we make the right decisions to build a great sustainable business that will take us into the future. We're approaching our 200th birthday. We don't want short-term-itis. We aim to deliver financial results in every quarter, but the long term is made up of lots of short-term bets.
What specifically have you learned from a non-American director?
I'm not going to be able to disclose specifics in that regard, but very definitely I would be able to list insights from each of them. They often have more knowledge about issues related to their own geographies, but they also know a lot about other parts of the world.
If about half of your agricultural sales are outside the U.S. now, where do you see that number going?
We continue to see a lot of opportunities outside the United States, in particular in Brazil these days, and Argentina, because of their role in feeding the growing appetites of the world. There are enormous growth opportunities in Russia, Ukraine, Kazakhstan, and Turkmenistan. That's not to take away from the countries of Eastern Europe or Asia by any means.
Will the percentage of sales outside the U.S. hit 60% or 70%?
We don't predict a certain percentage. But our business in Brazil, Russia, India, and China—the so-called BRIC countries—doubled in 2007, compared to 2006.
Is one of the keys to creating a more international board having a CEO who has international experience? If you hadn't spoken German, you might not have persuaded Millberg to join.
It may not be essential but it's helpful. Before I came to Deere 26 years ago, I was a banker and lived in Europe, and I also have had the chance to live in Europe for Deere. I've been responsible for all parts of the world at various times in my career.
Does that experience help you create the right culture on your board and assist in "onboarding" of non-Americans?
For Joachim Millberg, we gave him some important tours of our operations in Germany. As we do with all our directors—we just brought Charles Holliday of DuPont onto our board—we take them out to our operations, without me, by the way. They have an extensive orientation program that takes them out to all our divisions. And traveling together as a board to places like India and Brazil, that's a huge deal.