Caterpillar Constructs a Leadership Pipeline

For more than a century, Caterpillar Inc. has been an integral part of major construction and earth-moving projects around the world. The company's signature yellow equipment is ubiquitous -- it's found on highways and byways, on construction sites and in mines, and in virtually every country and on every continent. Indeed, more than half of this Fortune 100 giant's sales have been to customers from outside the United States.

But now, Caterpillar is undertaking a major new construction project: building an even better organization -- one that excels at finding and developing its next generation of global leaders. And the company, using proven leadership assessment tools, has already unearthed top talent.

Rapid expansion

Throughout the 20^th century, Caterpillar's innovations fueled the company's growth. From track-type tractors to the world's largest off-highway truck, Caterpillar has been a pioneer in the technologies that make progress possible. Most recently, the company successfully launched breakthrough ACERT™ clean diesel-engine technology, which reduces emissions at the point of combustion without sacrificing reliability, durability, or fuel economy.

As Caterpillar has grown and diversified, the company has increasingly focused its attention not just on innovations, but also on finding and developing superior leaders. This has been imperative, given the sheer volume of leadership talent required to run an ever-expanding global enterprise.

In fact, as early as 1996, senior managers had already begun reevaluating how they selected and prepared potential leaders. The company invited Donald O. Clifton, Ph.D., of The Gallup Organization to its headquarters in Peoria, Illinois, to meet with the company's executive team. Dr. Clifton was a pioneer in the field of selecting employees for their talents (defined as their naturally recurring patterns of thoughts, feelings, and behaviors that can be productively applied). His model for employee selection was rooted in studying the best performers in each role, discovering the specific talents they possess, and developing an interview that identifies people who have talents similar to those of the best in the role.

Soon after the initial meeting with Dr. Clifton, Caterpillar and Gallup started developing a talent-based selection system. Caterpillar determined that fresh leadership -- with talents that would fit their leadership roles and Caterpillar's culture -- should come from within the company's ranks, from colleges and universities around the world, and from successful leaders in other organizations.

Gallup's task was to build a leadership assessment tool that would become integral to Caterpillar's hiring process. Caterpillar's management recommended one process for use company-wide. This was a shift from what had been a more informal process, in which each area of the company developed its own procedure. For more than a year, Gallup worked with Caterpillar's business units to determine what specific leadership talents would work best across the organization, ultimately narrowing Caterpillar's selection tools to just three.

Caterpillar also launched the Manufacturing Professionals Development Program (MPDP), designed to select talented individuals from outside the organization. These new hires would rotate through three different assignments within Caterpillar: process engineering, purchasing or logistics, and front-line supervision. The purpose of the rotation was to give each individual a good foundation upon which to build his or her career at Caterpillar.

Such an intensive, streamlined program successfully met Caterpillar's accelerated succession timetable; the company was determined to fill its potential management roles in a timely manner.

Measurable results

Today, Caterpillar continues to use assessment tools designed and built by Gallup to select front-line supervisors, middle managers, and senior executives. But initially, the company's leadership felt anxious about relying on such tools. Some executives were skeptical, wondering how a one-hour or 90-minute phone interview could reveal whether or not someone would be a good leader.

The results, though, put the doubts to rest: All MPDP participants who were selected using one of the three main instruments have demonstrated potential for success in their roles, according to Caterpillar's own performance standards.

The success of the three main instruments is crucial for Caterpillar, and measurably so. Finding the right matches for MPDP results in properly allocated resources, greater skills match, and enhanced job satisfaction. And increasing the number of MPDP participants who go on to fulfill the leadership role to 100% would save the company close to $1 million a year, according to Caterpillar.

Studying strengths next

For Caterpillar, as for many companies, great products and outstanding manufacturing, distribution, and marketing processes aren't enough. The company's people are also a key to its future success, as it has discovered in its development of leaders and managers. Now, in an effort to build a better and more engaged workforce, Caterpillar has begun to study the strengths of its employees to help them find the roles that enable them to best apply their talents.

Caterpillar knows that its innovations will always come from one source: its people.