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. 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 could change.

Drive the Change