Running head: M4 CASE 1

M4 Case

Author

Trident University
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Introduction

In their article “The Cat That Came Back Neilson and Pasternack (2005) identify four

key organizational building blocks. The building blocks are as follows decision rights,

information, motivation, and structure. These building blocks also form part of the organization,

which Neilson and Pasternack (2005) call organizational DNA. In the article the authors argue

that the journey towards changing organizational performance does not start with blaming

individuals, but by realigning the building blocks that form the organizational DNA with the

business strategy, as well as with the performance goals of the organization. This is an important

strategy in the present discussion of cycle of change model. Cat presents an organization that was

successfully able to reorganize its organizational DNA or building blocks by applying the cycle

of change model to achieve high performance in an uncertain and highly competitive business

environment (Neilson & Pasternack, 2005). In his book, Judge (n.d) points out that the pressure

for businesses to change in order to deliver value is immense. On that note, the capacity for a

company to change is an important aspect of leadership that must continually reflect on the

leadership strategies in the organization. It is in the backdrop of these arguments that this case

analyzes how Caterpillar transformed itself in the face of competition during economic

uncertainty and positioned itself as the best performing company in the heavy equipment

manufacturing sector.

Applying The Cycle of Change Model to Caterpillar

There are four phases in the cycle of change model namely direct the change, drive the

change, deliver the change, and prepare for the change. Cat realized that its problems lay in the

culture of the company especially the manner in which decisions were made and changing that

would change the company’s fortune. In directing the change, Caterpillar’s CEO Mr. Scheafer
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started by putting in place a group of young junior managers and constituted them into a

Strategic Planning Committee (Neilson & Pasternack, 2005). The SPC was tasked with

determining the current position of the company and where the company ought to go in future.

Here the company recognizes that there is need for change and assigns responsibility to a group

of young managers that would be responsible for directing the company in the change process.

although a centralized company, Mr. Scheafer the president let the young managers think freely

and openly and propose the changes they thought the company should adopt (Neilson &

Pasternack, 2005). The ideas were also introduced to the other leaders gradually so that the

culture would eventually be changed and the new changes would merge seamlessly with Cat’s

organizational culture. To drive the change, the leadership of the company first recognized the

need to overhaul the structure of the company (Neilson & Pasternack, 2005). The leaders

recognized that for the change to take effect restructuring the company was necessary. The

overhaul of the structure would allow the organization to handle relationships internally and

externally more efficiently, and it would also allow the business to handle business more

efficiently. In the third stage of the cycle, Caterpillar delivered the change. The change was

delivered by overhauling the functional general offices that were responsible for decision-

making so that decision making could be easy. The business units were also allowed to make

decisions regarding product design and prices at the business unit level. The company also

established accountability at this level (Neilson & Pasternack, 2005). Caterpillar prepared for the

change by selecting a group of visionaries and constituting them into a Strategic Planning

Committee to drive the change. The company also identified people who would be responsible

for driving the change. Cat also identified change ambassadors who would be responsible for

overseeing the change (Neilson & Pasternack, 2005). According to Campbell (2014), successful
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organizations disseminate change or propagate change. Propagation requires energy to keep the

change going after implementation. After restructuring the company, Caterpillar propagated the

change by bringing about autonomy such that the divisional leaders could make decisions about

the future of those divisions. On the same note, the organization also enhanced the flow of

information in the entire organization for the ease of decision making. The person who was

responsible for the change Mr. Scheafer also stayed on for seven more years to ensure that the

change took effect (Neilson & Pasternack, 2005). To propagate the change completely, Cat also

changed its culture by changing how the pricing decisions were arrived and the communication

style which became more open. The company also disseminated the change by building the

company’s capacity to change, which was achieved through restructuring the company and

overhauling the decision making process. also appointing people to drive the change, who were

the face of the change made the change strong.

The benefits that Caterpillar achieved by incorporating the change included better

decision making and accountability with the decision making autonomy level. The company also

became more competitive because it could plan for short and long term periods through budgets,

balance sheets, and profit and loss statement. The performance of the company across various

markets. The company was also able to perform efficiently and smoothly especially with better

and independent decision making on prices, materials and labor. These outcomes were consistent

with what Caterpillar had intended to achieve in the outset of the change process because the

company was eventually able to report profits from various divisions and markets using the

profit and loss statements from those divisions which was impossible to do in the past because of

centralization.

Impressions on Caterpillar’s Adherence to the Cycle of Change Model

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Caterpillar extensively and strictly adhered to the cycle of change. In her book Campbell

(2014) identifies 5 steps in the cycle of change model which are paramount in delivering positive

outcomes in form of profits. Caterpillar was able to apply the five cycles of change successfully,

which were directing, driving, delivering, preparing, and propagating the change (Campbell,

2014). From the case study, Caterpillar first identified the problem and then systematically went

ahead to change solve the problems thereon. In the change management process, the four

building blocks of organizational DNA discussed by Neilson and Pasternack (2005) are apparent.

It is also clear that caterpillar was aware of the fact that true success could only be achieved if

the company changed the four building blocks.

Where Caterpillar Did Well

From the case, the first identifiable problem that was affecting Caterpillar’s performance

was the in ability to make important pricing decisions when it mattered due to centralization. By

creating decision making autonomy by changing the decision rights the company was able to

take advantage of the market and become competitive. The company also changed the

information flow, which was crucial for the coordination of activities across the organization.

Another building block that Caterpillar manipulated to achieve change was the motivators.

Motivators in this case included the objectives of the change which involved turning around the

company’s performance. Promotions whereby younger junior managers were elevated to

decision making positions and to head entire business units. Participatory style of leadership was

also an important motivator. The final building block that Caterpillar manipulated to effect the

change was structure. Traditionally, the organizational was highly centralized and hierarchical,

which affected the decision making process, as well as the competitiveness of the organization.

The centralized structure also affected the relationships. Changing the structure was important
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for the propagation of the intended changes. Accountability structures at the divisional level also

made the divisional managers responsible and accountable for the performance of their

decisions, which was important in turning around the company’s performance.

Conclusion

Caterpillar’s organizational transformation was satisfactory according to the above

analysis. The case was an excellent execution and application of the cycle of change module.

From the onset, the change manager was aware of the outcomes that were ideal for the company

and went ahead to include the rest of the people in the change process. Based on that approach,

there would be no need for a different approach in the change process.

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References

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

Campbell, H. (2014). Managing organizational change: A practical toolkit for leaders.

Philadelphia, PA: Kogan Page. Retrieved from EBSCO—eBook Collection. Retrieved

from https://library-books24x7-

com.ezproxy.trident.edu/assetviewer.aspx?bookid=65154&chunkid=198978306&rowid=

348

Judge, W. (n.d.). Focusing on organizational change. Retrieved from

http://www.oercommons.org/courses/focusing-on-organizational-change/view