On a different occasion, when Division Vice President Jim Despain was visiting the East Peoria plant, another welder showed him a striking innovation he had developed. Mr. Despain, impressed, said he wanted to show the innovation to a couple of group vice presidents the following Friday. The welder demurred. “I’m going to Cleveland Friday,” he said. “I read in a welding magazine that they’ve got something they’re trying out there and I want to go take a look at it to see if it would fit here.”
Even more impressed, Mr. Despain said he would mention to the supervisor that he appreciated the support he gave for this kind of innovation. “Oh, I haven’t told him yet,” said the welder. Here, thought Mr. Despain to himself, was a truly empowered person.
Mr. Despain’s division went from heavy losses in 1990 to significant profitability by 1995 and cut head count from 4,500 to 2,000. “We never invested a dime in more technology, never did any outsourcing,” he recalls. “We just changed the way people worked together. They were putting their own creativity into the opportunities they were provided. They forgot about themselves and started looking at the bigger picture.”
Caterpillar today looks somewhat different from when it was first reorganized, but the original principles of the reorganization are still intact: decentralization, profitability, market-based transfer prices, and accountability. There are more and different business divisions now. Some have been eliminated because they couldn’t perform (e.g., agriculture, lift trucks), and some have been split into multiple divisions (e.g., engines). But the fact that Cat has operated and thrived using essentially the same organizational model it established 15 years ago is a testament to its resilience. Cat does not reorganize every few years, as many companies do, just to “shake things up.” Such a concept would be anathema at Caterpillar.
As do all resilient companies, Cat periodically moves the goalposts to keep stretching the boundaries of what it can achieve. For example, Cat showed a profit of more than $800 million in 2001 at the bottom of the recession, and then raised the bar: The next goal was to be “attractively profitable” at the top of the business cycle, which it achieved in 2004. The next objective is to be increasingly profitable at the bottom of each successive trough.
Cat’s reorganization was deliberately designed to encourage “horizontal” thinking across silos, another trait of resilient organizations. Cat continues to build upon that horizontal emphasis when it develops its management talent, consciously moving leaders across business units, functional areas, and geographies through the course of their careers. After several years with the company, almost every manager at Cat has experience in two or three different business units. As a result, Cat has developed one of the deepest management benches in its industry. In fact, Cat’s organizational structure, with many more-or-less-complete businesses being run by essentially autonomous general managers, has “allowed us to identify people who are business leaders whom we would probably not have uncovered as quickly before,” says Glen Barton. “People have emerged from this process very capable of leading a business, and becoming a lot more than they probably could have ever realized in the old bureaucratic organization.”
Are resilient organizations problem-free? Can they be managed on autopilot? No. Resilience is not an end state. It’s a never-ending journey. But as Caterpillar’s experience (in contrast to the plight of many other motor vehicle and heavy machinery manufacturers today) shows, it is far better to navigate that journey in a craft whose parts fit together well and make up a seamless whole.
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Top 10 Traits of Resilient Organizations |
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1. They entertain the inconceivable, benchmarking themselves not against competitors, but against industries or categories that may not yet exist. 2. They build a culture of commitment and accountability, expecting and rewarding no less than the best from their people. 3. They move the goalposts, typically every three years, embarking on ambitious new objectives whether or not they feel the hot breath of competitors on their necks. 4. They show the courage of their convictions, charting a course based not on business fads or Wall Street fancy, but on their best instincts and judgment. 5. They bounce back from adversity, detecting setbacks early and mobilizing responses quickly. 6. They think horizontal, flattening their organizations, breaking down silos, transferring best practices, collaborating cross-functionally, and promoting laterally. 7. They self-correct, developing and institutionalizing internal mechanisms for correcting problems before they reach profit-warning proportions. 8. They listen to the complainers, using mechanisms and processes for surfacing and addressing dissatisfaction among customers and employees. 9. They put their motivators where their mouths are, designing financial incentives (raises, bonuses, benefits) and nonfinancial incentives (promotions, transfers, exposure) to pull in the same direction and clearly point toward what is valued. 10. They refuse to rest on their laurels, resisting or even shunning media praise and hype while pursuing tangible results. These traits are distinctive because they’re difficult to master, and resilient organizations do not necessarily pursue them directly. Rather, the traits are a natural consequence for any organization that aligns its “DNA” building blocks effectively to strategic goals. |
