Task1 1.1.

Leadership Styles

According to Tannenbaum and Schmidt Continuum of leadership styles (tells, consults, tests, suggests, consults, joins, delegates) at one extreme there is autocratic/boss centred leadership style and at other end democratic/follower centred leadership style, these styles depends on the degree of authority used by the leaders. Higher, the authority used by the leaders lower will be the area of freedom for the followers and vice versa Mullins L (2010).

Continuum of manager-non-manager behaviour Area of freedom for managers

Area of freedom for non- managers

Leaders

Lead;

Leaders

Lead; presents Lead; presents group decision leaders allow

Make decisions. Sells Dec;

Tells decision Tentitive dec; problems gets making Subject to change solution take decision

followers to function within limits

Adopted from: Mullin L(2010), Management and organizational behaviour.

1.1.a George Schaefer Leadership Style

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George Schaefer, CEO 1985-1990 was a leader with boss centred style, under his leadership all the decision making was done at top level i.e. centralized decision making with functional structure. Although he has promoted open communication and free flow of information at all levels, under the leadership of George officers, managers and production staff were allowed to communicate openly at all levels but all in all his leading style was autocratic i.e. tell.

1.1.b. Donald Fites Leadership style Donald Fites was follower centred leader (1990-1999), before his leadership there was no concept of power delegation at CAT, he was the first who broke the CAT into seventeen divisions and delegate power of decision making, decision making was done at divisional level. Under his leadership decision making was no longer limited to the top management, it was decentralized.

1.2.

Transactional Leadership

According to Mullins L (2010) transactional leadership focuses on making goals and objectives clear and clear outputs, it explains link between goal achievement and rewards and focus is on deviations from planned. It also deals with existing problems, takes corrective action in case of any deviation and mistakes.

1.3.

Transformational Leadership

According to transformational leadership theory of Bass, leaders transforms and motivates their followers, according to this theory others are developed by motivation, vreation of understanding of organizations importance and focusing on a long-term perspective, its all about transforming performance of a business. It can be said a process of creating motivation and commitment of followers Mullins L (2010).

1.4.

Charismatic Leadership

According to Mullins L (2010) charismatic leadership is visionary leadership, its based on persona; qualities e.g. confidence, goal accomplishment and provides mission and vision of what lies ahead, it is also based on how leadership influenced others. The Comeback of Caterpillar (CAT), 1985-2001 Page 2

1.5.

George Schaefer Leadership style and leadership theories

George Schaefer as a leader exhibited mixture of behaviours described in transactional, transformational and charismatic theories. The company had face losses of $1 billion during 1982-84, and become weaker than its competitor Komatsu. George response to the problems of 1980s by taking different corrective actions and through different strategies and solution was his transactional leadership behaviour. Through his transformational leadership behaviour he had motivated the employees by launch of ESP (employee satisfaction program). Implementation of new strategies e.g. outsourcing, improved labour relations and plant modernization are examples of his transformational and charismatic leadership qualities. 1.6. Donald Fites Leadership and leadership theories

Donald fites had mixture of transformational, transactional and charismatic leadership qualities. Division of functional structure to seventeen divisions and delegation of authority at divisional level, results employees motivation and represents the transformational leadership behaviour. Donald Fites placed percentage of return on investment on each division, was transactional leadership behaviour. 1.7. Jimm Collins 5 levels of leadership

According to Jim Collins 5 levels (n.d) managers at level 1 are technical, at level2 are human relation skills, at level three managers have management plus conceptual skills, on fourth level managers have strategic conceptual skills and on level five leaders inspire others by placing service to others and accepting their mistakes Collins lecture(2010)

1.7.a Glen Barton & Jim Collins levels of leadership Glen Barton was new leader of CAT in 1999, his characteristics, qualities and competencies match with fourth level of Jim Collins leadership. During 1999 he had faced heavy losses at CAT, in order cope with that situation and for the purpose of the companys long run benefits, he had launched four new strategies, these strategies were diversification, development of new distribution channel, new market expansion and alliance with competitors. Bartons strategic skills and conceptual skills helped him in implementation of new strategies.

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1.8.

Relevance of Collins 5 levels of Leadership today9

Rapidly changes in technology, internet, globalization and knowledge and fast business processes, all these have made business environment more complex and more competitive. For competition, sustainability and growth, it has become very important for businesses to have competent and skilled leaders. According to Jim Collins five levels of leadership, at level 1 leaders have technical competence, leve2 leaders can manage effective human relations, on 3rd level leaders have strategic conceptual and operational skills and level 5 leaders are highly developed leaders who can inspire others Collins lecture(2010). Collins 5-level leadership is appropriate for todays diverse business environment, organizations needs leaders all kinds of leaders having qualities from level1 to 5 in order to compete and survive in diverse environment. People working at production fllors of organizations are level 1 leaders, they are very important leaders because, organizations cans produce without such skilled people, similarly leaders having qualities of other levels have significant importance for organization, as concerned with top level leaders they are also having significance for organizations, because without such leaders no organization can exist, so level 5 leaders are also precious for organizations.

1.9.

Indirect Leadership & its impacts on performance determinants at CAT George Schaefer did outsourcing and branding, it was his indirect leadership, which resulted in cost reduction and production efficiency.

During 1984-87, innovation had been done by the CAT; they had doubled their product line from 150 to 300, introduced light weight equipment for farming e.g. tractors.

Schaefer launched plant modernization program and JIT during 1986 and completed these programs successfully by adopting new technologies and bringing innovation, during 1990s CATs plant was fully modernized and equipped with new technologies. Plant modernization caused improved productivity and efficiency, assembly process at CAT plants reduced by four fold and customers order time was reduced to 4 days from 16 days.

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Donald Fites invested in adaptation of new technologies and implemented worldwide computer network at all divisions around the world. This technological adaptation resulted in improved communication and flow of information.

1.10.

Direct Leadership at CAT & its impacts on Performance determinants

Schaefer exhibited relationship oriented behaviour and introduced employee satisfaction program (ESP) during 1986.ESP caused in an improvement in employee satisfaction and consequently, resulted in improved productivity, quality and rduction of product rejection by customers from 2.8% to 0.6%. With the introduction of ESP cost saving of $10 was achieved. Task2 2.1. Current requirements 2.1. a. Market Globalization Globalization Globalization refers to the economic, cultural, traditional communication between various countries across the world Maps of India (n.d). In this turbulence environment, due to technology, awareness, knowledge and economic factors business are no longer limited to geographical boundaries of a country or a market, now for organizations the world has become a single market, companies do not have their customers within limited access, they have customers around the world and organizations are operating worldwide with customized products, this expansion of business around the globe is called market globalization.

1. Market Globalization for CAT During 1980s CAT business was in American and European markets but with the passage of time the company had realized the importance of globalization, they expanded their business in Asian markets during 1999, like diversification, the CATs policy of globalization prevented the company in hard times. As from the case study it can be seen that market globalization had significant importance for the company in past, its still very important presently for the company, to sustain their The Comeback of Caterpillar (CAT), 1985-2001 Page 5

competitive advantage, survival and growth they must bring innovative products in accordance with demand globally. Market globalization can enable them to sustain their competitive advantages and to remain the number one in the market. Market globalization is their present as well as future need.

2.1.b. Internet for CAT These days internet has become very important source of communication, has connected the whole world and enables the organizations to do their businesses across the globe. Organizations have their branches worldwide and these are connected through internet in a single network and sharing business processes and information with each other, besides these, organizations now have knowhow of whole world market because of internet. Now instead of months, days or minutes it took only a few seconds to share information from one end of the world to other end, its only because of internet. It has enabled online banking concepts, online business concepts, now organizations are not selling their products from physical existed markets but they can also sell from internet market. CAT had realized the importance of businesses being online, they established a worldwide network (1996) and connected all branches across the globe.CAT must have to do online business i.e. they must target their customers online and sell some of their products online, its very important for the company to make their processes and communication faster so that their performance should be improved.

2.1.c. Diversity According to Ferrel & Hirt (2000), diversity is refers to the involvement of different ages, genders, races, nationalities and abilities in the organizations, according to author more and more organizations are occupying diversity of employees in order to serve their diverse customers, organizations are improving their HR policies in order to recruit diverse employees.

1.

Diversity for CAT

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CAT adopted diversity during 1987-1999, because of industry wise downfall in demand of heavy equipment products; CAT did diversification and introduced light weight equipment, power generation engines, tractors etc. Cat diversification strategy prevent the company throughout its life, but under the leadership of Glen Barton during 1999, he faced new problems e.g. CATs sales decreased by 37% but these losses have been covered by profits from their diversified engine markets. It is very important for big companies like CAT that they must have to adopt diversification, it was not only their need in past, its also their present need; they must diversify their products, markets and employee diversification. The CAT must diversify through hiring of mixture of new generation-X and Y in order to bring new synergies and talent in the organization, because they are challenge accepters, have technological knowhow and achievement oriented.

2.1.d. Mergers and acquisition for CAT In order to cover up its losses and prevents the company from downfall, CATs leaders have done mergers and acquisition in past, in 1996 Donald Fites purchased MaK(engine company) and British Perkins (1998) engine manufacturers. Mergers and acquisition played very important role in the success of CAT in past. Under the leadership of Glen Barton, company had faced significant losses, so to be the number one and for sustainability it is very important for CAT to expand its business by mergers and acquisitions. 2.2. Future requirements 2.2. a. Psychological contracts Psychological contracts are like relationship between employee and employer, these are perceptions, beliefs of employees for the employer, employees took organizational responsibilities informally Wikipedia (2010). Psychological Contracts at CAT For CAT, psychological contracts are one on the most important future as well as present need; management must promote psychological contracts in order to prevent strikes and employees dissatisfaction, the company had faced lots of problems during 1981-83 only due The Comeback of Caterpillar (CAT), 1985-2001 Page 7

to employees dissatisfaction. Top management at CAT had not recognized the importance of psychological contracts this leads to long strikes by the employees and resulted heavy losses. Promotion of psychological contracts at CAT will result to employee satisfaction, belongingness for the organization, loyalty, retention and productivity. Psychological contracts at CAT might leads to free flow of communication at all level of organizations and an open friendly culture. 2.2. b. Scenario planning According to RDI (2007), managers make judgments about future possibilities and develop plan for those in order to overcome uncertainties and risks. 1. Scenario Planning at CAT In case of CAT, it can be seen that the company have done scenario planning to some extent but they have not done it properly and with concentration, e.g. rise in dollar values causes losses at CAT, to cope against such situation e.g. financial marker risks, natural disasters etc in future the company must have to develop proper scenario planning. Scenario planning will help the CAT to minimize their future potential risks and enable them to maximize the possibilities of success. 2.2. c. Shared Organizational Learning According to Collins lecture (2010), learning organizations are those, promotes and support learning throughout at all levels of organization. 1. Shared organization learning at CAT CAT should promote learning throughout the organization is such a way that their culture become adaptive to learning, learning culture will help the CAT to sustain competitiveness and growth in the futures dynamic and complex environment and people at shared learning culture of CAT should be adaptive to change quickly and effectively.

2.2. d. Virtual Organizations According to Collins Lecture (2010) virtual organizations are organisation distributed geographically and whose work is coordinated through electronic communication, virtual organizations have shared vision and goals and combine their competencies. The Comeback of Caterpillar (CAT), 1985-2001 Page 8

1. CAT as Virtual Organization In this fast moving world where technologies are changing in minutes instead of months or years it has become very important for the businesses to operate in a unique way, through virtual connection organization can operate differently, its very crucial for the success of CAT that they must also be virtually operated in future, presence everywhere through wired network is a plus point for CAT in this way they can provide immediate services to their customers, for their light weight equipments they can take online orders and can do online selling it should enhances the customer satisfaction on the other hand it should be cost effective for CAT.

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Task3 3.1. Development of Leadership at CAT For the development of leadership within CAT, first we should plan how will develop. After planning next we practically do the actions then evaluation of its effectiveness Mullins (2010). In order to develop the leadership program at CAT, first the organization should plan who will be developed and how one should be developed. The organization should develop from its own staff member i.e. managers and they should recruit some new and fresh talent in order to compete, survive and adopt new technologies. 3.1. a. Recruitment & Selection of new staff for leadership development 1. Recruitment: Recruitment refers to job announcement/advertising, attracting, and screening of candidates FlippoE (1984). According to tutor2u (n.d), there are different methods of recruitment these can be internal recruitment, external recruitment, jobcentres, job advertisement etc. Internal recruitment have its advantages and limitations for organization e.g. internal recruitment is cheaper and easy because the staff is already experienced. But one drawback of internal recruitment is it limits the new ideas and talent within the organization. While external recruitment is costly but it brings new ideas within the organization. Organization can recruit through jobcentres, its also cost effective way of recruitment because job centres are paid by the government and they are providing services to both employer and jobless people. It also saves organizations time.

1. External Recruitment at CAT CAT should recruit and select new staff from externally e.g. universities, by advertising in news paper and through recruitment agencies and then go through a detail selection process and will select new staff. Recruitment and selection of new staff will help CAT to add new talent in the organization and it should enhance the future prospects for CAT.

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2. Selection for leadership development from within CAT CAT should select managers from within the organization and develop them as leaders, the managers should be selected on the basis of past and present performance, qualification, experience and potential they have got to become a leader. After selection from outside and inside the CAT should do actual development of the staff, different methods could be used, but according to my recommendation the organization should select the following: 3.1. b. Mentoring According to Robbins (2001), mentoring is like a relationship between a senior and his/her subordinate and helping him/her in the development. CAT should provide mentors for the staff, so that they should guide them in their career and leadership development. Mentees will help develop and polish their personal skills and self confidence. Staff mentoring , not only develop leadership skills but also promotes the friendly and open environment within organization 3.1. c. Training courses CAT must have to arrange different trainings and trainings on up to date technologies, business process, tools and techniques, this will keep their staff in line with market needs and upcoming technologies. 3.1. d. Own universities These days most organizations have their own universities and development centres for educating and training of their staff, its very effective and efficient way of development. CAT will establish their own developing centres e.g. universities for educating and developing their staff for their different divisions in the world. Where the staff should learn practical work as well as theoretical background for developing their skills. After providing all these trainings at CAT, the trained staff should be evaluated in order to determine whether the development have met the desired standards or not and how effectively they have got leadership skills and what should be further needed for their developments.

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3.1. e. Empowerment According to Mullins L (2010) People respond in best ways when they have greater responsibilities. Empowerment is a good way for staff development, by empowering staff they feel sense of belongingness for organization and motivation for hard work and these leads to increase in productivity.

1. Empowerment at CAT After appropriate development of leadership skills within employees at CAT, the organization should empower them in order to determine their performance. CAT had empowered their staff in past by dividing organization into seventeen divisions and the result was increased productivity. 3.1.f. Investor in People CAT should do investor in people in order to develop leadership e.g. through trainings, financial and non financial rewards, empowering. Investors in people will result employee satisfaction and leadership skills will be best. CAT can invest in people for long term benefits and leadership in the market. They must have to provide some reward to their employees for motivation and productivity. 3.2. Critical Evaluation Development of leadership and introduction of new trainings, empowerment, recruitment and selection and development of own universities should be costly for CAT e.g. external recruitment cost, training costs, cost for establishing universities etc, but all these costs are for short term because if we consider the benefits of all these on long term and compare with cost then cost is very tiny in comparison with benefits and profitability, CAT should sustain leadership position in the market with having skilled and well developed human resources, they could enjoy employee loyalty and retention and the ultimate result should be improved quality products, high sales and profitability. All in all the leadership development is very good for CAT for their future prospects.

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Bibliography Collin, B.(2010).Diploma in management studies. Lecture delivered for module Managing Leadership in Organizations on April 2010-july 2010 at Birmingham International College Ferrel, O., and Hirt, G. (2000) Business A Changing World. 3rded Newyork: MGraw-Hill. Lancaster, G.Massingham, L.(1999) Essentials of Marketing. 3rded Berkshire Uk: MGrawHill. Mullins, L (2010). MANAGEMENT & ORGANISATIONAL BEHAVIOUR. 9th ed uk: Pearson Education. Robbins, S.(2001) Organizational Behaviour. 9thed New Jersey: Prentice Hall. Tutor2u(n.d).Recruitment Methods[online] availbe fromhttp://tutor2u.net/business/gcse/people_recruitment_methods.htmaccessed on[20.07.10]

Maps of India (n.d) Globalization of markets [online] available from <http://business.mapsofindia.com/globalization/market.html> accessed on [13.07.10]. Wikipedia (2010) Psychological contracts [online] available from<http://en.wikipedia.org/wiki/Psychological_contract>accessed on [20.07.10]

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