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H.O. Penn

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Yale School of Management
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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 turnaround 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 were comfortable with the concept, but as Cleveland implemented the process he encountered a great deal of resistance. He persevered, convinced that MBV could have positive and enduring benefits for all of the company’s stakeholders. Eventually, 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 than 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 fit best with ‘Managing by Values.’

Published Date: 06/02/2007

Suggested Citation: Alexandra Barton-Sweeney, Joel Podolny, James N. Baron, and Jaan Elias, "H.O. Penn," Yale SOM Case 07-013, February 6, 2007