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CASE FOR ANALYSIS

Encouraging Learning at Baxter International

To change the culture and attitudes, CEO Loucks rewarded

managers on company not divisional performance. This new

environment promoted learning.

1. What factors impeded organizational learning at Baxter?

Until 1990, division managers had complete decision-making

authority and received rewards based on the performance of their

divisions. They focused on their divisions and did not take a

company wide perspective. This environment did not foster

innovation. Divisions lacked any incentive to cooperate with one

another.

2. What steps did CEO Loucks take to promote organizational

learning at Baxter?

Loucks changed the reward system to promote organizational

learning. He rewarded managers on company, not divisional,

performance. He mandated that top managers purchase seven times

their annual salary in stock. Middle managers received stock

options tied to company performance. This new environment

promoted learning because divisions shared knowledge. Decision-

making was improved because divisional managers questioned

decisions. New ideas were discussed, and everyone contributed

opinions. This new approach resulted in a stock price that has

doubled since 1990.

3. How could it have made use of IT and knowledge management?

Loucks has most of the systems in place that would allow them to

focus more on learning. The final step in getting the divisions

to take a company wide view would seem to be to take advantage

of a knowledge management system. This would allow managers

across divisions to share ideas and insights, resulting in

faster, high quality decisions.