A look at Caterpillar’s company strategy, values, and priorities leads one to surmise their performance measures. The machinery industrialist states it focuses specifically on value creation (Caterpillar’s strategy, n.d.). Therefore, some of its performance indicators are revenue growth, earnings-per-share, and operating profit. Caterpillar identifies services and offerings as elements of its organizational structure that give the entity a competitive advantage (Caterpillar’s strategy, n.d.). It proves that these metrics can verify its strategic effectiveness. Caterpillar also prioritizes sales, technology, and employees; based on that, their other performance measures include product quality, inventory turnover, reported incidents, and employee retention rate. The manufacturer declares some of their competencies and organizational advantages to be safety and quality, which proves that the indicators mentioned are used to verify strategic effectiveness.
Structurally, Caterpillar is divided into 22 divisions, categorized by the industrial segments in which these operate. There are Construction Industries, Resource Industries, Energy & Transportation, Financial Products and Services, and Distribution & Digital (Caterpillar org chart & company profile, 2023). Organizational high-ranking leaders and managers are divided into three large groups, which consist of a CEO and officers responsible for industries and departments or sub-divisions (Governance, n.d.). There are also five committees whose functions are to assist, recommend, and approve the Board of Directors.
Despite being an industry veteran of machine manufacturing, Caterpillar’s organizational structure is relatively innovative, significantly contributing to its competitive advantage. It can be safely said that the entity is a holacracy. One can see that there are independent yet equal and self-organizing teams (Caterpillar org chart & company profile, 2023). Moreover, the organizational hierarchy is relatively flat as there are only three executive levels CEO, Chief Officers, and Senior Vice Presidents. Power and authority are inevitably distributed in such a model among specifically aimed employees’ teams and their managers in a way that allows them to govern themselves freely.
Being a leading performer is demanding, especially in domestic and global contexts. It requires managers to study relevant internal and external factors constantly and understand these well. According to Sherman (2019), internal environments include personnel, organizational culture, and various resources, while external ones include the economy, political climate, and stakeholders such as suppliers and customers. The former needs to be understood by Caterpillar’s management to determine where the entity excels or what it lacks. They should explore the latter to be aware of new business regulations, competitor actions, and economic fluctuations that will inevitably affect the company.
Caterpillar is among the largest American machinery manufacturers domestically and worldwide, with a wealth of resources, a well-developed supply chain, and a solid competitive edge. The company responds to external influences and internal changes using its unique Operating & Execution Model (Caterpillar’s strategy, n.d.). When a problem occurs, they locate it by evaluating which organizational segments are generating and consuming value and then developing appropriate improvement or fixing strategies (Caterpillar’s strategy, n.d.). This conceptual model allows the company’s leaders and managers to productively and efficiently reallocate organizational resources, direct efforts, identify opportunities for further growth, and find sources of crises.
Today, Caterpillar is truly an organization with exemplary structure and operations. However, some improvements can still be recommended. For example, they should implement AI in performance analysis, planning, and business decision-making. According to DeKeyrel (2021), it is already helping many companies better respond to the unexpected. Caterpillar can also develop greener customer and supplier policies to motivate their suppliers and clients to be more environmentally friendly. For example, prioritizing the most environmentally friendly raw materials and practices at all production levels can simplify decision-making and improve overall performance.
References
Caterpillar org chart & company profile. (2023). Databahn. Web.
Caterpillar’s strategy. (n.d.). Caterpillar. Web.
DeKeyrel, K. (2021). How to create more sustainable operations – one asset at a time. IBM. Web.
Governance. (n.d.). Caterpillar. Web.
Sherman, F. (2019). What are internal & external environmental factors that affect business? Chron. Web.