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George Schaefer takes control of Caterpillar Inc

There seemed to be many trials facing Caterpillar Inc at the end of the 1980's. Not only was there no clear cut strategy for future development, but overheads were too high and new ways to restructure cut costs were needed with a poorly effective PWAF plan. Another problem was the crushingly conservative stance of employees and unwillingness to embrace a forward thinking culture, alongside poor risk mitigation strategies.

Firstly and most importantly, Caterpillar Inc requires a definite and comprehensive strategy for improvement. The company is in a highly competitive industry, and because of this a strategy needs to be made quickly to ensure the competition does not take advantage. A strategy can be formulated from a top down or bottom up approach , with either a collaboration from employees at all levels, or from the CEO. A CEO's advice that sticking with a strategy takes courage is very apt for the situation and as such, a CEO will need to make a clear cut decision, and if it favors any reintegration or reorganization, then this is usually better than not having any and so should be followed further (Harvard Business School, 1991, p.19).

The plan of attack needs to be far reaching, and should reach to the distribution of outsourced products. Quality control is of the upmost importance for outsourced products, and protecting it while transitions are being made is crucial for the preservation of Caterpillar Inc's brand image. The consumer can tell when a label is trying to hide the fact that the product does not provide the quality that should come with it, and when the same product can essentially be brought somewhere else for a lower price, it is obvious what choice the consumer will make. In fact, quality control should be monitored more closely than anything else, and a good practice for updating strategy would be to ask why it is more costly to produce at Caterpillar than elsewhere. For example, a common strategy would be for Caterpillar to outsource production to other countries where costs for labor are lower.

Given the plan to cut costs, it would be a good idea to conduct marketing within the company so that the changes are known to employees and managers, and so that the changes appear as attractive as possible. Given the demise of previous implementations of PWAFII, it is advisable to conduct a detailed analysis or the organization. Since PWAF is now associated with failure, the plan should be rebranded, or not used altogether. This would be risky however as this may cause the organization to be a third party for another's products, which would make it difficult to control costs.

Changes such as this can be time consuming and painful for the company's culture. But the need for the improvement of risk mitigation among the higher echelons has been needed for a long time. Shaefer has a hands-on style of management, and this could be a useful way to get managers lower down to follow the same style. It would also be apt to bring in new managers with experience in risk, to help bolster the low managerial skills of current managers to bring about the needed changes. The importance of changing culture and employee mentality within the organization should not be overlooked however. A good place to start would be to introduce reward schemes, and to listen to ideas from all levels with a reward initiative, to help lower level employees speak out. Additionally, independent ideas and new initiatives should not be penalized if they do not bear fruit. This will ensure that employees have the courage to make their ideas heard, and give chances for such employees to flourish and get promoted.

In conclusion, there is a large scale shift occurring at Caterpillar Inc, and in order for the organization to compete effectively against competitors in a market that is quickly evolving, Caterpillar should make redefining its culture, and identifying its market its primary target. This would include a comprehensive strategic plan with new objectives born out of restructuring. Changing the mentality within Caterpillar, and ensuring that these changes last needs to fit with new strategies and initiatives.


Harvard Business School. (1991, July 31). Caterpillar Inc.: George Schaefer Takes Charge. Boston, MA, Harvard Business School Publishing.