Caterpillar Cycle of Change Model Case Study

Tags: organizational change vice president leaders caterpillar power performance stakeholders engagement business responsibility culture trust money profitability insight

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Cycle of Change Model to the Caterpillar Case Study

Introduction

The process by which Caterpillar determined the nature and scope of the change needed began with understanding a very simple principle: the building blocks of an organization have to be aligned with “the overall strategy and performance objectives of the company” and its decision-making (Neilson & Pasternack, 2005). After nearly going bankrupt in the 1980s, Caterpillar reshaped its decision making process, its pathway to information, its approach to motivating, and its organizational structure. To complete this transformation it engaged in a cycle of change, which this paper will describe.

Direct the Change

To effect a change, certain ingredients are needed. These include: trustworthy leadership, systems thinking, capable champions (supporters and facilitators), followers who trust their leaders, and involved and engaged middle management (Judge, n.d.). One of the biggest of these factors is systems thinking, as it is what allows for an organizational change in the first place: unless leaders are willing to engage in systems thinking and look at how the company could be arranged more effectively as a whole, no change will occur. Caterpillar did this by tying its General Offices together around the world using “metrics and motivators to keep them pulling in the same direction” (Neilson & Pasternack, 2005). It changed the way the company’s pathways to information were provided by giving pricing G.O. staff insight into profitability by product and country, whereas before it had no such insight and operated essentially blindly with only an indication of the company’s profitability as a whole. To direct the change, leaders had to acknowledge that it needed to rethink the whole system—and that started with reorganizing the way decisions were made and how information was supplied to allow for more effective decision making.

The way in which Caterpillar determined the nature and scope of the change needed was “by inviting a rotating group of middle managers to breakfast once a week” so that “the attendees [who] understood Caterpillar’s weaknesses and were willing to talk about them” could share ideas about how to firm up the company in the coming years (Neilson & Pasternack, 2005). Communication was key to this early stage of development. The company’s leaders wanted to hear from the guys on the ground: they wanted feedback about what the issues were and what the middlemanagers thought good solutions might be. It was a dynamic period of communication and exchange, of brainstorming and open sharing of ideas—and that is what set the stage for developing the vision of how the company wanted to reorganize itself from a centrally-operated company to a more layered and diffuse company.

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As Anderson and Anderson (2015) note, engagement is a key factor in any company’s strategy for success, and it was Caterpillar’s willingness to engage its own middle managers that allowed it to see where it…

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…stakeholders would support. The culture was ready and willing to embrace the change because it had already survived a scare that threatened everyone’s livelihood and everyone knew that the company needed to do something to ensure it would never happen again. Few expected such a stark change—but once realized it was welcomed.

Conclusion: Recommendations

Some things that Caterpillar might have done differently to improve the organizational change would have been to: 1) inform certain managers who had no idea about what was coming that they would be put in a position of responsibility of figuring out why a certain division was losing money. For instance, “When Jim Despain became vice president of the track-type tractor line — the product line on which Caterpillar was founded — he was shocked to learn that “we were losing a lot of money. We had no idea how to fix it” (Neilson & Pasternack, 2005). Allowing guys like this the opportunity to have a moment of heads-up about the change that was coming would have been considerate and would have helped to avoid panic and anxiety in some divisions. 2) Having the metrics in place to measure how well everyone was performing would have been a good step, too. This would have allowed for a very smooth transition and every division could have instantly understood how it was to operate. While the change worked out overall and these were essentially small details,….....

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References

Anderson, L. A., & Anderson, D. A. (2015). Designing your engagement strategy.

Change Leaders Network. Retrieved from http://changeleadersnetwork.com/free-resources/designing-your-engagement-strategy

Judge, W. (n.d.). Focusing on organizational change. Retrieved from http://www.oercommons.org/courses/focusing-on-organizational-change/view

McNamara, C. (n.d.). Approaches and methods for managing change. Free Management Library. Retrieved from  http://managementhelp.org/organizationalchange/index.htm

Neilson, G. L., & Pasternack, B. A. (2005). The cat that came back. Strategy+Business. Retrieved from https://www.strategy-business.com/article/05304?gko=56862 

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