leadership styles with dynamic environment of world class business

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 followers to

Subject to change solution take function

decision within limits

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

The Comeback of Caterpillar (CAT), 1985-2001

1.1.a George Schaefer Leadership Style

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 organization’s 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.

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 1980’s 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 Collin’s 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 company’s 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. Barton’s strategic skills and conceptual skills helped him in implementation of

new strategies.

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 Collin’s lecture(2010).

Collins 5-level leadership is appropriate for today’s 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

can’s 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 1990’s CAT’s 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.

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 1980’s 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 CAT’s 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, it’s still very important presently for the company, to sustain their

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,

it’s 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

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. CAT’s 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, it’s 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, CAT’s 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

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 future’s 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.

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.


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.


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.


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.


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: MGraw-

Hill.

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].

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http://en.wikipedia.org/wiki/Psychological_contract

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leadership styles with dynamic environment of world class business

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