Caterpillar Inc.: Discussing The Maker Of Mining And Construction Equipment

Leadership Issues and Employee Dissatisfaction at Caterpillar Inc.

Question:

Discuss About The Maker Of Mining And Construction Equipment?

For over 90 years now, Caterpillar Inc. is enjoying continued progress in helping its customers regarding development of infrastructure, natural resource and energy assets. It is the leading maker of mining and construction equipment, diesel-electric locomotives, industrial gas turbines and natural gas & diesel engines. The company is experiencing high profits but they are also facing employee dissatisfaction from a long time (Caterpillar, 2017). An issue emerges when there is a gap between employee expectations and the actual state of affairs. It is critical to determine the issues arising from the situation encountered by this company. In this aspect, a flexible, considerate and knowledgeable leader is imperative to steer the organization out of this trouble. Employing the integrative framework to understand and apply OB, the below-mentioned outcomes have been recognized which were not attained in this case.

• Well-being/flourishing – One of the primary goals of any business is to elevate its bottom line. However, low productivity, turnover and absenteeism cost businesses billions of dollars every year (Edwards, 2010). The wages of workers in Caterpillar are meagre. Even the union strikes were not able to give them their rights back. Majority of the workers have complaints that while the company is flourishing and recording huge profits, no reward is being transferred their way, in fact, their condition is only deteriorating.
• Citizenship behaviour – Citizenship behaviours are discretionary, individual actions taken by employees who are beyond their job description. Employees who have a sense of citizenship will ‘go beyond the ordinary’ because of their personal motivation to perform well for the betterment of the company (Cropanzano and Stein, 2009). Caterpillar has certainly not been able to invoke any such behaviour in its employees because the CEO is too engrossed in elevating only his salary and the company’s profit levels while giving nothing in return to the employees who have worked so hard. Survival is the only motivation for people working there. When the company does not provide any future growth opportunities, how can its workers be expected to work for the future? When there are no rewards in the present, even the benefits and compensation they used to get have decreased, then employees cannot focus on the long term.

• Leadership – There are not many business functions more vulnerable to a credibility lacuna than the manner in which executives approach corporate life. A feeling of disbelief emerges when managers show that they are making decisions in reasonable terms while most participants and observers are aware that politics and personalities play an instrumental part. There should have been sound leadership on a group level in Caterpillar. Strong leadership is capable of channelizing employee energy in the correct direction (Zoogah and Beugre, 2012). However, in Caterpillar, the leadership of the managers was not sufficient enough to keep the workers’ morale high. The middle management overemphasized cost cutting programs which further deteriorated workers’ condition. Not only this, even the union leadership was not strong enough, and the workers had to accept terms that were way below the standard.

• Employer of choice – To become an employer of choice implies that job aspirants are keen to work for you, due to which others envy your staff and the company receives spontaneous resumes and that the high potential employees remain with the company for the major part of their careers. Individuals are considered to be idol employer of choice when their employees record high levels of satisfaction and want to keep working for their them. Such companies provide consistent opportunities for both professional and personal growth alon with job security and a friendly workplace environment (Bach and Edwards, 2013). Caterpillar certainly does not appear to be an employer of choice. Its employees, both existing and former, have negative things to say about the company. The only reason of staying within the organization is survival. There is no other intrinsic or extrinsic motivation for continuing to work with Caterpillar.

The most pressing problem in the case is of leadership. Leadership builds the foundation of a good company. If the foundation is weak, the edifice is bound to collapse. Leaders are the most important resource in any firm. It is general perception that organizations are competing on the basis of their technology or products however, they also compete based on their leaders. Good leaders develop talented people, and the combination presents better workforce which create ultimate value for business. Factors like employee de-motivation, dissatisfaction, absenteeism, high attrition are all linked to ineffective leadership (Kish-Gephart, Harrison & Trevino, 2010).  

It is critical to recognize the causes which resulted in these issues. The causes which led to the above-mentioned problems must be identified in order to eliminate them so that the company does not face the same problems again in future.

• Personal attitudes and behaviour – The CEO of the company and other individuals in leadership position seem to have a very domineering attitude. They do not think of their employees at all and are only interested in personal gains. Listening to workers as frequently as possible is highly imperative in developing a faithful and loyal team. All people need to be part of the bigger picture and process. Listening and interacting with the workers is something which the CEO of Caterpillar and other managers do not entertain. In addition to this, the CEO does not believe in being completely transparent and honest with his people. There is no reason why he should not be transparent (Wagner and Hollenbeck, 2014). His employees will only appreciate comprehending the exact position of the company. As there is no transparency, workers are distrustful. This is clearly evident from the responses of the workers where they state that the firm is making profits, but no rewards are coming their way. The CEO also lacks empathy toward his people as he is so ruthless in laying off workers for the sake of making more money. The CEO clearly has no interest in leadership development. Educating and building a progression plan for the employees is one thing that must never be neglected (French and Spears, 2011). However, the attitude of the CEO is such that he is only concerned about his power, position and salary.

• More Supply than Demand – The market scenario of the industry is such that there are five candidates available to replace one. With such excessive supply of talent pool, the company is not concerned about retaining its existing employees. Moreover, it is in a strong position to negotiate its terms. Evidently, Caterpillar was able to tough out a strike at its Illinois plant, and all the workers had to agree to a six-year wage freeze and reduced benefits. The market condition gives the CEO the power to dictate his terms and lay off anyone as per his wish (Schermerhorn et al., 2011). He can also get more people at reduced wage rate which places him in a very advantageous position and his workers in a disadvantageous place.

The CEO Oberhelman should try to understand and apply leadership principles for addressing the problem. He certainly needs to change his attitude and approach toward dealing with his people. Servant leadership is one of the concepts that can be applied here. A servant leader is known to share power, placing the needs of his people first and helping them grow and perform as high as possible (Griffin and Moorhead, 2013). When leaders and managers shift their perspectives and serve first, they unlock ingenuity and purpose in the people around them leading to higher performance and motivated employees. Situational leadership theory can also be applied in the present context. Oberhelman’s leadership style must match with the requirements of the situation. ERG theory of motivation is also applicable here. The CEO can tie performance with rewards and incentives to keep his people satisfied and enthusiastic (French, 2011).

1. Leadership Development – The CEO must issue a policy under which leaders at all hierarchical levels will create a proper growth plan for their subordinates. Having an education and growth path will not just increase worker motivation and retention but will also make a competitive and smarter team. Leadership pipelines must be developed at all levels. The focus should be to educate and retain employees rather than incessant layoffs (Hiriyappa, 2009).
2. Rewarding both individual and team performance – Reward and recognition serve as a great motivator for employees. When they see their good performance is being rewarded, they will strive to work harder. The CEO must devise a real incentive and benefit plan. This way it can also attain the position of Employer of Choice (Zoogah and Beugre, 2012).

Conclusion

To conclude, the main problems identified for Caterpillar are poor leadership and employee dissatisfaction. The causes of these problems are designated as the attitude and leadership style of the CEO and other managers who focus only on their interests and do not pay attention to the development of their employees. The ways to improve this situation have been recognized as the CEO adopting servant leadership style and rewarding both individual and team performances.

References

Cropanzano, R. and Stein, J., 2009. Organizational Justice and Behavioral Ethics: Promises and Prospects. Business Ethics Quarterly, 19, pp.193-233.

Edwards, M., 2010. An integrative review of employer branding and OB theory. Personnel Review, 39(1), pp.5-23.

Bach, S. and Edwards, M., 2013. Managing Human Resources: Human Resource Management in Transition. John Wiley and Sons.

Zoogah, D. and Beugre, C., 2012. Managing Organizational Behavior in the African Context. Routledge.

Caterpillar. 2017. About Caterpillar. [Online]. Available through: <https://www.caterpillar.com/en/company.html>. [Accessed on 12^th September 2017].

Kish-Gephart, J. J., Harrison, D. A., & Trevino, L. K. (2010). Bad apples, bad cases, and bad barrels: Meta-analytic evidence about sources of unethical decisions at work. Journal of Applied Psychology, pp. 95, 1-31.

Wagner, J. and Hollenbeck, J., 2014. Organizational Behavior: Securing Competitive Advantage. Routledge.

Schermerhorn, J., Osborn, R., Bien, M. and Hunt, J., 2011. Organizational Behaviors. John Wiley & Sons.

Griffin, R. and Moorhead, G., 2013. Organizational Behavior: Managing People and Organizations. Cengage Learning.

Hiriyappa, B., 2009. Organizational Behavior. New Age International.

French, R., 2011. Organizational Behavior. John Wiley & Sons.

French, S. and Spears, L., 2011. The Spirit of Servant-leadership. Paulist Press.