Cummins - Julie Amiot and Lindsay Laubaugh

Blue (Compete) Quadrant:

Leaders’ Values & Behaviors:

· Due to the growing use of cell phones for business purposes, industry experts have predicted a growing number of liability threats for businesses whose employees are involved in accidents. Therefore, Cummins banned employees’ use of two-way communication devices while driving. This eliminates the threat and associated costs of legal action.

· In 2010, CEO Tim Solso recommitted to Cummins’ goal of reaching $1 billion in business with diverse suppliers by 2012, a goal that was originally made before the recession began.

o Diversity Procurement helps increase the number of companies competing for Cummins’ business, which will ultimately result in lower prices and better service for the Company.

§ Diverse suppliers must be competitive in quality and price, or they will not get Cummins’ business.

· Company took decisive actions to meet financial commitments in the midst of the global recession:

o Reduced its global workforce by 15% from late 2008 through mid 2010 (approx. 1,000 professional employees & 3,200 hourly employees).

o Froze merit pay.

o Instituted salary cuts for officers and directors.

o Reduced expenses in every category across every part of the company.

Organizational Culture (Norms, values, practices, & processes):

· As a result of its employees becoming more efficient in the midst of a global recession, Cummins posted its 4^th best EBIT as a percentage of total sales in 2009 through the last 25 years ($774 million or 7.2% of sales).

· Focused on three key priorities in 2009 with a goal of emerging from the recession an even stronger company, well positioned to take advantage of the economic recovery. Those priorities, which remain in effect in 2010, are:

o Continuing to invest strategically in new products and technologies that will create long-term growth opportunities.

o Generating positive cash flow.

o Maintaining a realistic estimate of demand and then aligning our cost structure and manufacturing capacity to that demand.

Outcomes (Bottom-line Value):

· 13% average annual sales growth per year expected by Cummins from 2010-2014, about twice the annual growth rate over the last 30 years.

· Took aggressive steps to cut costs during economic downturn which resulted in profit of $428 million in 2009.

· Lowered inventory level by more than $400 million last year, which improved cash position by more than $500 million over the course of 2009.

o The Company ended the year with just over $1 billion in cash and marketable securities.

· Cummins’ stock appreciated 75 percent in 2009.

· Company ranked in the top 25 among the Fortune 500 companies for total return to shareholders for the five-year period of 2005–2009.

Green (Create) Quadrant:

Leaders’ Values & Behaviors:

· The company's founder, Clessie Cummins, created the US's first diesel powered car in 1929-30.

· Managers work together with frontline employees to improve processes and efficiency.

o After analysis, employees estimated that operators collectively walked approximately 15 km for each alternator they assembled. Employees developed and implemented a new system that reduced operator movement by almost 90%.

Organizational Culture (Norms, values, practices, & processes):

· Opened its first international manufacturing facility in Scotland in 1956, and by the end of the 1960s Cummins had expanded its sales and service network to 2500 dealers in 98 countries.

o Currently, Cummins has more than 5,000 facilities in 197 countries/territories.

· Forged strong ties with emerging countries such as China, Brazil, and India before most other US multinational companies.

o Has grown into one of the largest engine makers in both India and China in recent years.

o 60% of Cummins’ workforce live & work outside of the US.

· Mission, values, & ethics:

o Mission: Exceeding customer expectations by always being first to market with the best products; demanding that everything we do leads to a cleaner, healthier, safer environment.

o Values: Innovation: apply the creative ingenuity necessary to make us better, faster, first.

o 10 Statements of Ethical Principles: We will demand that everything we do leads to cleaner, healthier, and safer environment.

· The research and development (R&D) program is focused on product improvements, innovations, and cost reductions for its customers. Cummins invested $362 million in R&D in FY2009. Overall R&D investment as a percentage of sales increased to 3.4% in FY2009 from 2.9% in FY2008. For FY2009 and FY2008, approximately 42% and 27%, respectively, were directly related to compliance with 2010 EPA emissions standards.

o Although innovation is a green characteristic, product improvements and cost reductions could be categorized in the red quadrant as well.

· Added a new strategic principle this year: Lead in Critical Technologies.

o Re-enforces the importance of being first to market with the best technology.

Outcomes (Bottom-line Value):

· Received nearly $54 million in funding from the Department of Energy for two projects aimed at improving fuel efficiency in heavy-duty and light-duty vehicles.

· Cummins leads in developing technologies to reduce diesel engine emissions.

o The company is one of the first diesel engine manufacturers to have an engine certified by the Environmental Protection Agency (EPA) as being in compliance with the current EPA standards.

· Strong R&D capabilities allow Cummins to attain competitive advantage over its peers, maintain technological edge over its competitors, and to stay ahead of industry trends. In addition, it allows the company to differentiate its products from those of its competitors.

Red (Control) Quadrant

Leaders’ Values & Behaviors:

· In 2007, CEO Tim Solso was awarded the Six Sigma CEO of the Year award by the Global Six Sigma Awards. At the time, Solso was quoted as saying, "Six Sigma is one of the best things we have ever done. Last year we saved $340 million and since its inception in September 1999, we've saved or avoided spending a total of $1.4 billion.”

· March 2011: CEO Tim Solso expected to be named to President’s Management Advisory Board.

o The PMAB was established in April 2010 to provide advice on how to implement best business practices to improve management and operation of the federal government.

Organizational Culture (Norms, values, practices, & processes):

· The introduction of Six Sigma principles into the manufacturing process almost ten years ago. Out of nearly 4000 six sigma projects completed in 2009, the best 40 of them saved Cummins and their customers an estimated $75.6 million.

· Continuous improvement in the quality of products lends itself to certain industry accreditations. Worldwide, Cummins Turbo Technologies plants are all ISO/TS16949:2002 certified. The aftermarket group in this division is ISO9001 certified.

· 10 Statements of Ethical Principles: We will demand that our financial records and processes are accurate and that our reporting processes are clear and understandable.

Outcomes (Bottom-line Value):

· Cummins strives to improve their vehicle engines to meet or exceed EPA emissions targets prior to the mandatory effective date. In fact, Cummins generally works with the EPA to develop new regulations and therefore has a significant advantage in terms of product development.

· Cummins consolidated the management of its former International Distributor business with the North American distributors to create its Worldwide Distribution Business in 2005. The combined group shares best practices from its operations around the world and operates more efficiently, allowing Cummins to benefit even more from this business.

Yellow (Collaborate) Quadrant

Leaders’ Values & Behaviors:

· Cummins was the first public company in the state of Indiana to offer domestic partner benefits for both straight and homosexual couples. In the mid-1970s, the Human Resources director approached the current CEO, J. Irwin Miller, about this program. When Miller asked why this program should be introduced, the response given was “Because it’s the right thing to do.” The policy was enacted within a few months.

· Current Chairman and CEO Tim Solso released an updated Business Case for Diversity, which highlights four goals:

• Create a workplace population with representation that is similar to the markets in which the Company operates.
• Demand that the workplace at Cummins is safe and inclusive for all individuals and organizations.
• Develop a collective behavior at Cummins that encourages all individuals and employees to best use their talents.
• Capitalize on a diverse workforce to enhance the Company’s competitive position in the marketplace.

Organizational Culture (Norms, values, practices, & processes):

· Every employee in the company is expected to volunteer in their community for a minimum of eight hours per year, with a maximum of 20 hours. Employees are paid their normal pay, since they are volunteering during normal work hours, and can choose which organization will benefit from their service. In addition, the company will match up to a certain amount of money that employees donate to organizations of their choice.

· In Columbus, Indiana, which is the headquarters for Cummins, the company shows its focus on diversity and inclusion in the community by bringing in architects from around the world to design and build different houses. Cummins covers the cost of the construction and maintenance of the facilities.

· Recently Cummins has launched a multi-faceted implementation strategy to connect employees with the findings and goals in their Business Case for Diversity.

o Translated into multiple languages and posted on a new internal web site.

o Includes case studies on the benefits of a diverse workforce and how diversity is fueling innovation at Cummins:

§ Attracting & retaining best talent.

§ Creating a safe & inclusive work environment that fosters innovation.

§ Promoting differing viewpoints to enhance problem solving and decision making.

§ Developing a positive reputation in the communities where Cummins does business.

Outcomes (Bottom-line Value):

· “Sixty percent of our revenues come from international markets,” says Chairman and CEO Tim Solso. “We manufacture more outside of the United States than inside the United States. So recognizing different cultures, different languages, hiring people from those backgrounds, making sure that they’re included, (that) they have an opportunity to develop to their full potential, is really important.”

· The financial bottom line of the company, while a blue quadrant metric, exists because of the company’s emphasis and commitment to diversity.