Corporate View: Patrick McCartan, Caterpillar Inc.

Published: May 2024
Patrick McCartan, Vice President and Treasurer, Caterpillar Inc.

Driving a culture of continuous improvement

Patrick McCartan, Vice President and Treasurer at Caterpillar describes a leadership style based on nurturing talent and explains why innovation should never end.

Patrick McCartan

Vice President and Treasurer
Caterpillar logo

Caterpillar Inc. is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.

Caterpillar does business on every continent, principally operating through three primary segments – Construction Industries, Resource Industries and Energy & Transportation – and providing financing and related services through its Financial Products segment. Founded by Benjamin Holt and C L Best over 100 years ago, today the company is backed by a global dealer network.

Patrick McCartan, Vice President and Treasurer at Caterpillar, the construction and mining equipment manufacturer, joined the group 28 years ago, straight out of college. When executives from the company’s treasury and accounting team presented at a careers evening at Iowa State University where McCartan was in his last year studying finance, he was immediately enthralled. Joining a mid-West bank – where he’d already had an internship – was out. Replaced instead by an interview and job offer with the industrial company known for its iconic yellow bulldozers and building site machinery.

“I was pretty convinced I would go into banking, but I was blown away by the company and its leaders,” McCartan recalls in an interview with Treasury Today from the company’s Irving, Texas headquarters.

Reflecting on his career, McCartan says Caterpillar has delivered on everything those company executives promised their student audience back in the 90s. It began with what he calls a ‘foundational decade’ developing new skills spanning funding, dealer finance and risk management, moving around the company and working overseas. More recently, he’s gone on to achieve multiple career goals, including key leadership roles and driving innovation across global finance.

Mexico City

Straight out of college, McCartan was posted to Caterpillar’s Latin America Distribution Services Division as a financial rep. His job was to support the financing and liquidity needs of the company’s independent dealerships in the region so they could grow their own customer base. “Caterpillar has robust processes in place to ensure the dealerships maintain their financial strength,” he says. He adds that this early initiation into Caterpillar’s distribution services was a chance to learn more about the dealer network and its importance in the company’s strategy.

After five years in the Distribution Services Division that included a stint in Mexico City where he met his wife, he moved into corporate treasury. Working in risk management within corporate treasury, he got his first taste of FX trading and managing commodity risk, learning how to oversee large exposures across different markets, and gaining insight into the company’s risk management philosophy.

“At that time in my career, it did feel like a lot of responsibility, but Caterpillar does a very good job of giving responsibility based on experience and skills. It was my responsibility to create the strategies, but I had a leader and reviewed everything with them. It says a lot about how we develop people on the job,” he recalls in a recurring theme.

Other standout assignments back then included joining Caterpillar’s 6 Sigma programme, housed in the financial services team. It was an opportunity to learn the ins and outs of Total Quality Management (TQM) pioneered in the 1980s at Motorola and developed at other organisations including Bank of America, Honeywell International and General Electric. It was a role that McCartan admits he didn’t initially seize.

Caterpillar has robust processes in place to ensure the dealerships maintain their financial strength.

Twenty years on and now leading the integration of new systems upgrades and processes across treasury, he is grateful for that experience. He still calls on the key lessons it instilled around the importance of the correct processes and controls, and how to drive efficiency. “You never really know all that you will learn in a position,” he reflects.

After completing the 6 Sigma programme, McCartan landed in Luxembourg in another treasury role. This time his focus was intercompany funding where key learnings included getting to grips with the legal framework supporting intercompany lending processes. It wasn’t long before he was assigned his first senior leadership role as Director Corporate Funding, stationed out of Caterpillar’s corporate headquarters in the US, tasked with managing corporate funding (external and internal), cash deployment, and rating agency and bank relationships.

By now it was 2009, and McCartan stepped into his new role just as the GFC-induced global slowdown began to bite. Although Caterpillar recovered quickly, he recalls hectic months in treasury, charged with ensuring the company’s subsidiaries had access to all the funding they required. “We were the inter-company bank that handled all funding from the centre. Our role was critical for Caterpillar’s subsidiaries around the world.”

Industrial bellwether

It leads McCartan to reflect that his toughest days in treasury have always been during the inevitable business troughs that hit the cyclical sector. “I’ve got used to it, but it’s still, always, challenging,” he says. One silver lining inherent in periodically tough trading environments is that they provide rich learning opportunities.

For example, the GFC carried the seeds of a new focus on safeguarding the company’s Single A credit rating and treasury put in place enhanced processes to shore up Caterpillar’s financial strength over time with clear priorities for cash deployment.

Today, Caterpillar’s priorities include meeting targets for a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins that align with the company’s cash deployment actions. They reflect the cyclical nature of the business and allow the company to be nimble around leverage and liquidity over time. This gives the team a more flexible structure so they can react more quickly to changes in supply and demand, he says.

“You have to go through tough times to support this kind of change. The business recovered quickly after the GFC, but it exposed lots of things we needed to do better.”

Iterative reforms to liquidity, funding processes and governance, added since the GFC, meant treasury was well prepared to cope when the COVID trough hit. “We really pride ourselves on our ability to learn from different challenges we face and our ability to build skills. Although it is difficult to predict economic twists and turns, this type of robust risk management means the company is prepared for whatever comes our way,” he says.

Driving efficiency

Today, much of McCartan’s role involves integrating digital processes as Caterpillar seeks to simplify and standardise the processes in its finance function. For example, recent efforts to drive simplification and standardisation across several functional areas in treasury from front-office to back office include standing up a new (global standard) treasury tower in Bangalore.

In another project, the treasury team are developing AI forecasting abilities in-house. “For years, large, global teams have been involved in bottom-up forecasting at the company,” he explains. “We are now working with digital technology to drive more automated forecasts using AI. It’s really exciting.”

McCartan says using technology to develop forecasting tools is a disciplined process that requires experimentation and room to make mistakes; being open to change and a preparedness to accept a new way of doing things. “The first time you run new processes, you won’t get better results,” he says.

Still, he notes steady improvements in the accuracy of reporting and forecasting every quarter and says excitement levels and trust in the new technology is mounting amongst the team. “The goal is to get to the point where we can turn off the bottom-up,” he says.

One of the most thrilling aspects of introducing AI is the gradual upskilling of treasury staff, particularly around applying Microsoft 0365 technology and using multiple apps.

Treasury is streamlining processes in ways that would not have been possible even five years ago, he continues. “We realised that digitalisation is a crucial part of the global finance structure, especially analytics-based forecasts and normal continuous process improvement efforts across the team. Alongside doing their day job, people are focused on learning these new tools and we are doing a lot in house, which is really neat.”

“We have much better dashboards today and more information at our fingertips. It enables treasury to partner with the business to make strategic decisions quickly. We are also working more flexibly than before, which gives our people the ability to better manage their work/life balance,” he continues.

We are now working with digital technology to drive more automated forecasts using AI. It’s really exciting.

McCartan views the latest technological developments in Caterpillar’s treasury as part of a long trajectory of gradual digitisation. For him that began when Caterpillar implemented an inaugural TMS back in 2003. “We have continued to evolve our approach as new technologies come on the market. What I have learned is that you must constantly look for ways to improve processes and focus on creating value. You cannot be complacent.”

“Over the course of my career, I’ve seen constant evolution in the treasury department driven by advancements in technology, the expansion of available products, as well as changing regulations and accounting guidelines.”

McCartan describes a discipled and focused approach that is informed by market-leading processes and external benchmarks as well as networking and learning from treasury peers that have developed their own, best in class approaches.

Currently he’s on the lookout for insights on how digital tools can work across multiple Enterprise Resource Planning systems and how to streamline Caterpillar’s ability to make process improvements against the backdrop of a fragmented regulatory environment. “The current fragmented regulatory environment has an impact on both our business and process partners such as banks, insurance companies and asset managers,” he says.

Fittingly, McCartan concludes by circling back to the type of person he seeks to recruit amongst the current graduate cohort eager to join the company. Integrity, strategic thinking, business acumen and leadership capabilities are all essential, he lists. “The foundation of a good treasury department is having the best talent,” he says.

“It’s the Caterpillar culture and the commitment of our people that has shaped my career and will ultimately be crucial to nurturing the next generation of leaders as well. To attract the best people, the whole team needs to be involved in recruiting and onboarding; professional development, on-the-job training, and career planning.”

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