Analysis of People and Leadership Management at Caterpillar

This report examines the organizational behavior issues at Caterpillar, focusing on the failures in leadership and people management that led to significant problems including employee demotivation, poor retention rates, and a decline in the company's reputation. The report highlights the negative ...Read More

People and Leadership Management
People and Leadership Management
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People and Leadership Management
Table of Contents
Introduction..............................................................................................................................3
The case at Caterpillar............................................................................................................3
Problems with Caterpillar.......................................................................................................4
Issue of Employee Motivation.............................................................................................5
Issue of Employee Retention...............................................................................................5
Issue of Leadership and People Management...................................................................6
Causes of Problem....................................................................................................................7
Recommendations....................................................................................................................8
Conclusion.................................................................................................................................8
References.................................................................................................................................9
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People and Leadership Management
Introduction
Organizations are a complex environment where people of all types of work and co-exist. It is
important for the leaders of the organization to develop an organizational culture which suits
the people best, and ensures that it is inclusive of all of them. The organizational culture of
the organization affects its behaviour to a huge extent (Gotsi, 2011). Organization behaviour
is an important aspect as it allows the understanding of human interactions in the organization
under complex situations. Organization behaviour greatly contributes to the successor to the
failure of the organization and ensures how people can be managed well to avoid the slump in
future.
This report will aim to analyze the situation of the case study organization from the point of
view of organizational behaviour. The report will analyze what all is wrong in the
organization and how it is affecting the employees, which in turn is affecting its own working
as well. furthermore, the report will aim to recommend the practices best suited for the
organization and how it can be suited the best.
Case at Caterpillar
Caterpillar is one of the US’s leading supply chain organization with clients all over the
country. The company is currently going through a major slump, wooing to which it had to
let go off around 30,000 workers. Also, the 2009 depression was responsible for this, and the
new employees being hired were hired for lower wages and this resulted in the company
falling out on people and opportunities furthermore, the overall environment of the company
was degrading as well (Cardy & Lengnick-Hall, 2011). It was reported by Bloomberg how
workers were losing jobs, pay, and benefits, CEO Oberhelman prospered. In 2011 his pay
rose 60 per cent to over $16 million, and in 2012 to more than $22 million. Because of this,
the company experienced a weakened work environment, and a lack of employee motivation
as well. Employees are no longer enjoying what all is happening in the company, and are now
dropping out by self. The employee union to has been disintegrated so that further problems
can be avoided.
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People and Leadership Management
What initially started as a money problem eventually turned into an organization behaviour
problem where employees were dropping out because of mismanagement in the organization
and the lack of sensitivity from the end of the top level leaders towards the employees
(Miller, 2018). This has resulted in a lot of losses for the company; both financial and non-
financial and have seen their image take a blow as well. to put it simply, Caterpillar has lost
out on employees, wealth and profit and thus, it is important for the company to now focus on
building these things back before the situation worsens further for the company.
Problems with Caterpillar
After analysing the above case, it is obvious that the situation is way more than just financial
trouble at Caterpillar. What initially started as a money problem eventually turned into an
organization behaviour problem where employees were dropping out because of
mismanagement in the organization and the lack of sensitivity from the end of the top level
leaders towards the employees (Barrabi, 2018)
Caterpillar CEO is the person who is at the centre of this issue as the person has been least
interested in paying attention to the problem with employees, and has rather chosen to focus
on filling his own pockets. Hence, the major problem here is of leadership and people
management hereon. The leader of the company is so corrupted that the company is falling
apart and he is barely paying any attention to the situation; showing his disinterest towards
the benefits and welfare of the employees (Alba, 2018)
The following are the organization behaviour issues identified in this case study organization,
Caterpillar which will be further deliberated upon and recommendations corresponding to
these will be given:
 Issue of employee motivation
 Issue of employee retention
 Issue of leadership and people management
 Issue of change management
These issues have been identified keeping in mind all the relevant and important factors of
well-balanced organizational behaviour. It is essential for Caterpillar to focus on improving
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People and Leadership Management
these issues and in order to get back in the market and reach similar heights of success as it
once did in the early 2000s.
Issue of Employee Motivation
Employee motivation is an important issue for any organization. Every employee needs to
feel that he or she is wanted and should enjoy working in the company. If the employees feel
disengaged within the organization or from the organization, it is important to understand that
employees need to be motivated in order to work well (Shahzadi, et al., 2014). They need to
be valued and their efforts should get acknowledged. In this situation, it is essential to
understand that the employees have been grossly demotivated by the poor conduct and
management skills of the organization and add to it the mass lay off. This is creating a lot of
issues in the company and the people are thus, falling apart. Caterpillar has for long neglected
the employees and has treated them almost on zero priority. This is not healthy for the
company and this is now reflecting in its overall market reputation as well. the company has
completely forgotten its roots and how it is brand reputation has taken a severe hit as well.
The best thing to do right now is to focus on retaining the existing employees and not
focussing on hiring new ones since it is these old employees who will help rebuild the
company its reputation and brand (T.Lee, 2016)
Issue of Employee Retention
After employee motivation, employee retention is the next major issue which has gripped
Caterpillar since 2009 now. After laying off nearly 30,00 employees, the company has now
started losing on the remaining ones simply because of its poor management skills. The
company simply let go off the fact that the remaining employees needed focus and had
attention and rather, the company focused on other things. While it was important to settle the
financials of the company during the great depression, the company had enough time to focus
on developing better employee relations and focussing on improving the situation for the
ones which are currently in the company (Brown, 2011). It was required of Caterpillar to
change their employee benefit policies with time, focus on an improved compensation
package and bring in more methods of motivating the employees to constantly improve their
performance. Instead, the company chose to let the employees know how they were easily
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People and Leadership Management
irreplaceable. It was reported that senior management at Caterpillar apparently told the
employees that “You're basically expendable. For every one person who doesn't work,
there's five waiting in line.” This was a major deal breaker and demotivating for the
employees. again, this situation could have been controlled but the company did not pay
much attention to it. Instead, the company completely chose to let go of this and completely
ignored this as well. this eventually resulted in employees being frustrated and looking for
opportunities elsewhere. Eventually, the company is now left with a few people who again
are disinterested to be part of Caterpillar but are hanging around for personal reasons
(Mathimaran, 2017)
Issue of Leadership and People Management
This is the most important issue highlighted in the case study. The entire reason for the
downfall of Caterpillar was because of poor and corrupt leadership exhibited by its CEO. It is
a known fact now that In May 2013 a feature in Bloomberg Businessweek noted that while
workers were losing jobs, pay, and benefits, CEO Oberhelman prospered. In 2011 his pay
rose 60 per cent to over $16 million, and in 2012 to more than $22 million.
The very fact that the CEO of the company was taking a pay raise when the employees were
being laid off is in itself proof of the fact of how majorly ruptured the priorities of the
company are. The leadership has been a big failure and have let not just the employees, but
the shareholders down as well (Lavinsky, 2013). Amidst all the losses that the company
made, the worst was that of the employees in and every capacity. It is worth mentioning how
this example of the CEO is simple enough to understand that a good leader is nothing like
this and thinks of the employee’s welfare before his own. Thus, for Caterpillar to foster a
better environment for its employees, a better leadership team is needed; someone who is a
visionary and at the same time understands the importance of employee welfare as well. This
change will set a lot of things right for the organization and most of all, it will ensure that the
employees in the organization are happy and are able to self-motivate themselves under any
circumstance. Once this happens, the company can then focus on improving its operations
and eventually focus on improving their profits as well. This will take a long time, however,
the situation will be under control and will allow a lot of improvement in the environment of
the organization in general; without much fallouts and unnecessary stress on the people.
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People and Leadership Management
Causes of the Problem
After analysing the issue in full detail, it can be concluded that the cause of this situation that
Caterpillar is in right now is because of its faulty leadership. Leaders are supposed to drive
the company towards success and ensure that the people of the organization are taken care of.
However, in this situation, the entire opposite was observed. Here, the leader was more
concerned about filling his own pocket and his own welfare (Ingram, 2017). The entire top
management too did not bother managing the situation in a better way, rather focussed on
finding the easy way out by laying off the employees. This failure has cost the company a lot
and directs towards poor change management policies of the company.
To ensure that the company is able to retain its employee, which is the major concern right
now, the Zinger model is the apt model for this. This theory focuses on retaining the
employee by building the right kind of organizational culture and environment. This focuses
not just one employee, but on the organization as a whole. This model emphasizes that
employee retention can contribute to effective performance management and performance
demonstrates the company's engagement while engagement and retention can help companies
excel at the performance (Kaur, 2017)
Recommendations
Following are the recommendations which can be implemented here for Caterpillar:
 Bring on board a better CEO who can drive the company towards success an is able to
contain all the disaster that has happened till now
 Revamping the entire top management and bringing on board actual leaders who care
about the organization
 Creating policies which aim at employee retention and ensure that these policies are
brought to effect immediately in the organization without wasting time
 Ensuring proper employee motivation strategies are employed and the employees are
looked after well at all times
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People and Leadership Management
Conclusion
Thus, from this analysis, it can be concluded that Caterpillar has major organizational
behaviour issue and can be sorted out only when the organization has an able leadership to
take the company out from the mud. This case study has focussed on the importance of
employee motivation and employee retention and how an able leadership can play an
important role in the success or failure of the organization. The case of Caterpillar
organization has given great insights on the importance of maintaining a good balance in the
financial and non-financial aspect of the company, and how one cannot be taken for granted
while the sole focus is on the other.
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People and Leadership Management
References
Kaur, R., 2017. Employee Retention Models and Factors Affecting Employees Retention in
IT Companies. IJBAM, 7(1).
Ingram, D., 2017. Motivation Theories & Employee Turnover. [Online]
Available at: https://smallbusiness.chron.com/motivation-theories-employee-turnover-
11785.html
Cardy, R. L. & Lengnick-Hall, M. L., 2011. Will They Stay or Will They Go? Exploring a
Customer-Oriented Approach to Employee Retention.. Journal of Business Psychology J Bus
Psychol , Volume 26.
Miller, B., 2018. Caterpillar to lay off 285 employees. [Online]
Available at: https://www.bizjournals.com/chicago/news/2018/12/11/caterpillar-to-lay-off-
285-employees.html
Barrabi, T., 2018. DJIA FUTURES26,428.00-113.00-0.43%NASDAQ
FUTURES7,871.75+24.00+0.30%S&P 500 FUTURES2,931.50+0.75+0.03%Oil65.83-0.06-
0.09% Advertisement Caterpillar could lay off 900 workers amid facility closures. [Online]
Available at: https://www.foxbusiness.com/markets/caterpillar-could-lay-off-900-workers-
amid-facility-closures
Gotsi, M., 2011. Corporate reputation: seeking a definition. CORPORATE
COMMUNICATIONS: AN INTERNATIONAL JOURNAL, 6(1).
Alba, M., 2018. CAT CEO Jim's Earning in FY 2018. [Online]
Available at: https://seekingalpha.com/article/4256486-caterpillar-inc-cat-ceo-jim-umpleby-
q1-2019-results-earnings-call-transcript
Shahzadi, I., Javed, A., Pirzada, S. S. & Nasreen, S., 2014. Impact of Employee Motivation
on Employee Performance. European Journal of Business and Management , 6(23).
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T.Lee, M., 2016. Understanding employee motivation and organizational performance:
Arguments for a set-theoretic approach. Journal of Innovation & Knowledge, 1(3).
Lavinsky, D., 2013. Are You a Visionary Business Leader?. [Online]
Available at: https://www.forbes.com/sites/davelavinsky/2013/04/26/are-you-a-visionary-
business-leader/#3eb3c3777bbf
Brown, M., 2011. Putting people first: Employee retention and organizational performance.
DEVELOPMENT AND LEARNING IN ORGANIZATIONS: AN INTERNATIONAL
JOURNAL, 25(1).
Mathimaran, D. K. B., 2017. Employee Retention Strategies – An Empirical Research.
Global Journal of Management and Business Research: E Marketing, 17(2).
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