George Schaefer introduced cost-cutting measures and employee involvement programs, outsourced machines, parts, and components, and began modernizing Caterpillar's plants. Donald Fites diversified the company's product line and reorganized the company structurally. He also completed Caterpillar's modernization program, revitalized its dealership network, and altered the company's approach to labor relations.
Traditionally, the management of Caterpillar was founded on a firm, hierarchical organization dominated by the executive office. Former CEO's set the vision and strategy for Caterpillar and typically went unchallenged. In addition, Caterpillar adamantly believed in the "promote from within" policy. This created an environment of educated and devoted employees; however, it also created an environment lacking diversity, creativity, and imagination.
For six and a half years (1992-1998), labor relation issues were a problem for Caterpillar's Peoria plant. During this time, the company experienced two nationwide strikes. An agreement was finally reached in 1998.
Schafer wanted to change Caterpillar's management foundation. He stated that "we need movers, shakers, decision makers.above all; we need leaders who set high standards for themselves and their people."(Hamel) Schafer appointed unlikely candidates to top posts to help turn Caterpillar into a lively and flexible organization. Employees were empowered and decision making moved down the chain of command. Schafer also realized the importance of building close relationships with those on the front line and that a happy employee was the cornerstone of Caterpillar's success. .
Schaefer continued the cost cutting measures his predecessor implemented as well as, focusing on new ideas to bring Caterpillar out of its downward spiral. Schaefer focused on Caterpillar's core businesses, introduced new product lines, and launched a new manufacturing strategy.