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The Comeback of Caterpillar (CAT), 1985-2001

Explain to what extent leadership effectiveness is impacted by factors such as
efficiency and reliability, innovation and adaptation and human resources and
human relations in other organizations (not just industry, but any other sector
of the economy); illustrate your answer with appropriate examples.

a)         EFFICIENCY AND RELIABILITY

Cat leadership managed to respond to the market trends and threats

accordingly in order to make its products more efficient and reliable. When
EPA set strict regulation on diesel engines. It was Barton leadership and long
term strategic planning that opted the expensive technology. Time proved that
these engines are more efficient and reliable than the competitors
(McCrimmon, 2008). Similarly, Owens leadership brought number of
technological development, Cat D7E tractor which burns less fuel and can
move 25% more material than other system (Caterpillar, 2009).

b)        INNOVATION AND ADOPTATION

Throughout the Caterpillar transformation, Schaefer, Fites and Burton’s

leadership brought number of innovations to overcome rival competitors and
other external factors and motivated Cat team to be a part of the
reorganisation. For example, Schafer introduced small machines multipurpose
light bulldozers to diversify its customer base and purchasing of quality goods
for resale under the Cat brand. Fites diversified Caterpillar’s product line,
completed plant modernization program, expanding and upgrading
Caterpillar’s worldwide computer network and structurally reorganized the
company. The introduction of D9 tractor model in 1995 was so successful in
North America that Komatsu completely stopped that product at all (Neilson
and Pasternack, 2005).

c)         HUMAN RELATION AND HUMAN RESOURCES

From the case study it can be concluded that like others dynamic
organisations, Caterpillar is well aware of its human resource and its relations
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By: A. K. Khan 1985-2001 To: Mr. C. Benjamin
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The Comeback of Caterpillar (CAT), 1985-2001
with different organizations and dealers. Throughout the transformation Cat
leadership especially Schaefer and Barton emotional intelligence played
important role dealing with labour union and Cat dealership.

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By: A. K. Khan 1985-2001 To: Mr. C. Benjamin
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The Comeback of Caterpillar (CAT), 1985-2001
TASK 3
(3a1). LEARNIG ORGANIZATION:
Today, organizations are in highly volatile, ever changing, uncertain and
turbulent environment. Organizations cannot afford to stick to a planned
change program, they need to adapt to unforeseen situations and learn from
their own experiences for broader and deeper change (Rowden, 2001).
Yogesh argue (1996) that learning organization is an “Organization with an
ingrained philosophy for anticipating, reacting and responding to change
complexity and uncertainty”.
It can be concluded that leaders are responsible for creating an environment
for learning, where people can continuously expend their capabilities and
shape their future, Cat is no exception. Cat case study (Cohen, 2001)
represents that Cat strategic changes from 1985 to 2001changed it into a
learning organization; in which “everyone is engaged identifying and solving
problems, enabling the organization to continuously experiment, change, and
improve, thus increasing its capacity to grow, learn, and achieve its purpose”
(Daft & Marcic, 1998). For example, a tractor plant in East Peoria, a team of
welders on production line made a novel way of making welding lenses from
the scrap steel which always needed replacement on account of sparks
damages, this dropped the price from $60 per lens to six cents. Cat lease
program of supplying 800 road maintenance equipment to the county
government of Vancouver, Canada is an excellent example of experimenting
which won the entire order from John Deere (Nelson and Pasternack, 2005).

3a2). LEARNIG ORGANIZATION MODEL AND CATERPILLAR CHAGE MNGMT

There are four steps required for effective implementation of Learning
Organization. Constant readiness: Organization needs to be ready in a
constant state of readiness to prepare itself for any change within its
environment and always question the ‘fundamental ways of doing businesses.
Cat journey of strategic change did not stop there rather it always rebounded
successfully; whether it was the case of survival in 1985, onward recession of
1992 or formulating its sustainable development strategy 2020, in 2005.
Learning Organization characteristics
CONTINIOUS PLANNING
According to Rowden (2001) learning organization develop flexible plans
involving everyone from top to bottom all the time and play important role in its

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The Comeback of Caterpillar (CAT), 1985-2001
implementation. Cat is well known for its capabilities of interconnecting
knowledge, people, tools, systems and process resulting in competitive edge
in the market place (Banerji et al, 2009 pp7).

IMPROVISED IMPLEMNETATION
Learning organization, instead of executing by numbers, always follows the
humanistic approach by rewarding, encouraging, modifying the formal
structures, procedures and institutionalizing success throughout the
organization (Rowden, 2001).
According to Despain as quoted by Nelson and Pasternack (2005) Cat
division vice president “we just changed the way people worked together; by
putting their own creativity into opportunities. They forgot about themselves
and started looking at the bigger picture”.
ACTION LEARNING
Learning organization takes actions, reflect, and adjust as it goes, enhancing
its speed and effectiveness in response to change (Rowden, 2001). For
example Caterpillar remanufacturing engines division, generating $1 billion
per year in sales and growing by 15%, by recycle old diesel engine into new
one (Flower, 2009 pp 5).

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The Comeback of Caterpillar (CAT), 1985-2001

3b1). EMPOWERMENT AND CATERPILLAR CHANGE MANAGEMENT

The strategic performance empowerment model provides a sound base for an
organization to empower the employees for decision making, creativity, job
satisfaction and to improve overall productivity and profitability. Empowerment
is a process where necessary skills and guidance is provided to employee so
that he/she can take decision on their own under the organization parameter
and culture. Blanchard (1997) stated that empowerment provides the authority
to the person closest to the problem for solution by breaking the traditional
bureaucratic structure. In other words empowerment is “training employees to
offer each other trust, support, education, ideas, respect and motivation with
the aim of developing each other skills (Morales, 1997).

For example under the new reorganized structure, each product business unit
has equipped with new product introduction team fully equipped with
functional talent. These teams are empowered to make all decisions
regarding product development, by responding promptly with all available
resource to any opportunity. The updated D9 tractor model introduction is an
excellent example of empowered team in North America, as a result Komatsu
withdraw completely from market at the time in this particular model of tractor.
Similarly, the movement of entire production capacity of the Decatur plant for
two months from America to Vancouver, Canada for just only one customer,
after winning the entire deal from main competitor John Deere, (Nelson and
Pasternack, 2005, p 13).

3b2). EMPOWERMENT MODEL AND CATERPILLAR CHANGE MANAGEMENT

The strategic performance empowerment model consists of three variables;
coaching or mentoring, peer and supervisor modeling, and career path
development. By having all these variables in an organization, means that
organization is providing employee with skills and guidance to become
empowered employee. All of these three variables are interlinked and must be
utilized to optimize employee empowerment. If these variables do not interact
with one another and if they are not optimized than the employee will not be
fully empowered (Geory et al, 1998). This empowerment has great potential
for any organization, Cat is no exception. Cat management has already
applying these variables; but empowerment model indicates that if all of three

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The Comeback of Caterpillar (CAT), 1985-2001
variables should be interacting during its application in a situation than it will
improve the productivity of employees and organization.

 COACHING AND MONITORING

According to Peters (1996) that if manager coach subordinates and peers

coach peers, crossing the traditional hierarchy and ‘functional boundaries’
this will provide a conducive environment so that all employees become part
of the change process and can adapt it quickly. Schaefer emotional
intelligence and social skills won the hearts and minds of employees. This
produced confidence in employees to take decisions. As Oncken (1997)
linked coaching with empowerment through confidence building in oneself and
others.

 MODELING

According to Byham (1996) “modeling is the most effective means of

developing skills and changing behavior”. It means that modeling provide an
environment where employees follow their good managers and peers as role
model. It can be concluded that modeling affect the behavior bringing
conductive environment for development and accepting the change in
organization. Throughout Car reorganization in the last 15 years, the top
management provided role model for smooth transition.

 CAREER PATH DEVELOPMENT

According to Miller (1997) career advancement promote a sense of

commitment and job satisfaction. The career development path meeting
individual needs but make ready the organization for future opportunities and
threats. Cat structural reorganization opened the door for employees to run
the business on their own, for the first time, since each division is accountable
for their return. The figure below shows the interaction among these variables.

Caterpillar
By: A. K. Khan 1985-2001 To: Mr. C. Benjamin