The Leadership Moment: Clifton Watford

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There is no doubt that Clifton Watford is extraordinary leadership. His leadership period was filled with pioneering moments, challenging restructuring decisions, heavy decisions, and yet remarkable success. He pioneered the great transformation of Teachers Insurance and Annuities Association- College Retirement Fund (TIAA-CREF) from an institution that was riddled with inefficiencies and outdated practices into a company that was a customer-focused and competitive (Useem, 1998, 156). The company needed major restructuring as it had been deemed outdated and unfair by both customers and critics alike. The company had very poor customer relations due to its monopolistic position. Additionally, even though it had top-notch fund managers and its industry performance was regularly higher than the industry average, customer satisfaction was low due to its inflexibility (Useem, 1998, 159).

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Its inflexibility lay in the crucial area of customer choice and product variety. In the area of customer choice, the firm did not allow movement from its fixed income wing, the TIAA to its stock-based side, the CREF. One could move their investment from the CREF fund to the TIAA, but even this could only happen at the end of the month only (Useem, 1998, 157). In short, the customer had very little control over how he or she wanted their retirement fund managed. In matters concerning its product variety, the Teacher was a slow responder. It took it more than thirty years to start its stock options fund, CREF (Useem, 1998, 157). Also, in the face of growing opposition that offered a variety of investment options such as having portfolios specialized in emerging markets of social stocks, the giant did not respond (Useem, 1998, 159). However, if you think that the disgruntled customer could transfer their portfolio to a competitor’s firm, you are mistaken. The institution did not permit transfers of portfolios from their account to any other firm (Useem, 1998, 157). This had terrible implications on the choice options available for the customers. It may also have led to inefficiencies due to the monopoly position held.

The organization also suffered from an acute lack of creativity due to the bureaucratic and traditional impedances inherent within its system. Wharton noted that when he inquired from his management why they chose a particular line of action they mostly replied that it’s because that’s the way the organization worked (Useem, 1998, 171). This reply summarizes the kind of system in operation that was in use: a static system focused more on fulfilling organizational tradition rather than creatively responding to customer and market pressures.

The staff was also not properly motivated and treated. They worked in a poor physical environment, put up with outdated equipment, and had poor management strategies to handle them (Useem, 1998, 162). It is no wonder the turn-over rate for lower-level employees was shockingly high at almost 25% per annum (Useem, 1998, 162).

Wharton was faced with the challenge of providing effective leadership. The first thing that he did when he joined the institution was to listen. He “believed settling for a plan before hearing everyone out was a mistake” (Useem, 1998, 170). He needed to listen to everyone, from the customers, employees to critics. He then established a committee to look into proposed solutions and start taking action immediately. The proposed solutions were made public to everyone foes and friends alike. This proved to be a controversial yet necessary move. Additionally, he made the management convene regularly to draw up strategies and exchange ideas (Useem, 1998, 164). Also, he realigned the business divisions strategically to become more customer-sensitive. The restructure came with greater autonomy but also greater responsibility in terms of profit and cost targets (Useem, 1998, 165).

In matters relating to staff, he changed the remuneration system. The new system, as Useem (1998) notes “focused on the customer and rewarded results” (p. 165). A portion of one’s salary now depended on customer-based evaluation pointers. The new system came with new evaluation strategies on all levels: one would be evaluated by superiors, subordinates and fellow ranked employees (Useem, 1998, 166).

The new impetus achieved allowed the company to start focusing on the customer’s needs. New products were created and flexibility increased. Funds transferred to TIAA were credited at once (Useem, 1998, 167). A department to deal with creating new products came to be. Additionally, the company started to release quarterly reports and give on-campus advice to concerned parties (Useem, 1998, 167).

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Perhaps the most surprising move was his move to disband the monopoly that was Teachers. He initiated the move to allow the competition to take over the accounts of those willing to do so (Useem, 1998, 167). He lost millions of dollars worth of business but gained much more later on. This brave and strategically puzzling move paid much more later on.

The task of leading restructuring was daunting and overwhelming. However, this is not how Wharton viewed the challenge. The prospects of the challenge were appealing to him and he was ready to take on the task (Useem, 1998, 154). This is the first asset of a leader: to relish the challenge. Lussier and Achua (2009) call this trait dominance. They go on to state that an individual can only be effective as a leader if he or she wants to lead. If they do not want to, it will play into their performance as soon as the pressure kicks in (p. 37-38). Therefore, the leader must first be able to muster the courage from within to approach a task before he or she can attempt it. Failure to do so will result in buckling under pressure. Indeed, the pressure Wharton joined was immense. Not only was he faced with the challenge of restructuring, but he was also attempting to do the incredible with very little experience in this field. Yes, he had restructured other large organizations but he had not run financial or insurance firms (Useem, 1998, 154). The restructuring also brought about tensions within the employee ranks while in the background the expected change would have been nerve-wracking. This pressure would have caused him to crumble had he not wanted the challenge in the first place. However, the fact that he relished the challenge made him enjoy the experience instead (Useem, 1998, 173).

The fact that he wanted to delve into the challenge points to another inherent leadership issue: self-confidence. Self-confidence allows an individual to move beyond their His belief in himself allowed him to be able to garner the courage needed for the task (Useem, 1998, 169). His past experiences also had a large part to play in the way he effectively handled himself. Self-confidence allows one to He had effectively restructured other major systems in the past and thus developed more confidence in his abilities (Useem, 1998, 169).

“Leadership is a matter of how to be, not who to do it” is Hesselbein’s (3, 2002) definition of leadership. In other words, it is the character of the person that is the most important part of his or her leadership.

The first characteristic required of a leader is confidence. Confidence gives one the ability to face the task ahead and not quite in the face of challenge. Confidence develops through a process of overcoming one challenge after another (Useem, 1998, 169). If one has the confidence to approach a bigger task honed by the experience of the previous task, then indeed this process is developmental. The experiences and lessons that are learned in one experience help form the basis of the judgment of the next leadership challenge (Useem, 1998, 169). This seems to suggest that the more leadership experiences one has the better quality of a leader one becomes. This is why self-confidence is honed by experience: past experiences help you know what the probable outcomes of a decision are going to be.

However, the question of whether a correct judgment is a matter of experience or whether one has an inherent tendency to make intelligent decisions is also worth looking into. Does a leader make good choices based on experience alone or does it come packaged with his personality? This question sounds remarkably akin to the argument as to whether leaders are made or they simply are born. The truth is that a little of both is required. Studies indicate that leaders, in general, have higher IQs than on average (Lussier and Achua, 2009, 39). However, the learning process experienced during previous leadership experiences helps one to build on this intelligence to enable even better decision-making in the future.

Wharton provides a compelling case for this premise. His strategies and tactics for dealing with managerial problems are beyond a doubt filled with instances of wisdom and flashes of deep thought. The intelligence needed to achieve such tasks seems both gifted and gained. One can argue that he was gifted as if you trace through his educational experience, you will find that he was not just an average student. He attended Harvard and even became the first African American announcer for the campus radio (Useem, 1998, 174). Additionally, as a trained economist, he published widely in agricultural development even writing texts that are in use as classroom material (Useem, 1998, 168; 176). However, the experience also served him well. Useem (2009)records that his strategy to first listen to all stakeholders before making a move was something he did from the beginning (p. 163; 170). His establishment of a commission to look into the woes of Teachers was also a move played from “his years as a university administrator and those of the corporate executives on whose boards he had long served” (Useem, 163)

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The other leadership issue highlighted from this text is how a leader motivates his subordinates. Daft (2007) defines leadership as “an influence relationship among leaders and followers who intend real changes and outcomes that reflect their shared purposes” (p. 4). There is no question that Wharton did achieve this influence and move the employees to the intended result. How did Wharton take a dysfunctional system and make the employee’s attitude change far enough to become focused on the things that matter?

The first thing is to see Wharton doing as a leader is recognizing the employees, of all levels, importance to the organization. He listened to them, showing them that he values their input and advice. By meeting employees of all levels at both formal meetings and fairly informal lunches, he established a rapport with them that allowed his influence to be felt at all levels. Leadership is done with rather than to people therefore discussion and interaction rather than decrees and laws are the best ways to lead (Daft, 2007, 5). By coming down to their level, Wharton ensured that he led the pack from within rather than direct and issue commands from above. He interacted with them at the level where their conversation was casual but still official. A true leader passes his vision boldly but not forcefully (Daft, 2007, 4). Studies show that an employee that has been positively impacted by management or the work environment gives better results and is known to be more creative, more alert and generally think faster (Staw, Satton and Pelled, 1994, 54). We can therefore conclude that the creativity that was experienced in the company may have been partly as a result of the positive emotion felt from the leader, Wharton.

However, motivation is not merely limited to appealing to the better part of human reason. The use of other motivational methods such as setting targets and remuneration based on performance are also useful. Wharton used both appeal and remuneration tactics (Useem, 1998, 165). This is true leadership: the use of all the tools at your ability to influence the course of action.

We cannot fully appreciate the depth of leadership shown by Wharton without considering his background. Wharton came from an African-American background. His father had already sown in him the seed of pioneering through example. He was the first black American to become a professional diplomat. Wharton himself went on to achieve firsts of his own. Though he was not the first black to head a major education institution (Black Issues in Higher Education, 1998), he was the first to run a Fortune 500 company. At a time when the racial discussion was much more heated than today, Wharton established a very important rule. He stated that he did not want to be seen as a black appointee, but rather as a human being chosen because of his qualifications. In an interview with Black Issues in Higher Education (1998), he stated that though he felt racism even at his senior levels of management, he never concentrated on it as a major issue. He concentration was set on the “significant” issues rather than playing the racial card. Additionally, he stated that even when issues of race place a handicap on him, he still competes to win irrespective of the odds brought about by color. This statement points to the principle that runs true leaders, that who you are inside is the most important part of your leadership toolkit (Hesselbein, 3). A true leader does not count on his background but rather on his skill set to take him through. Useem (1998) notes that the skills that are possessed by individuals are not subject to one’s race or gender but rather to an individual’s practice and execution of them. Therefore, we must look beyond our backgrounds, race and genders; we should not use these as excuses not to lead and achieve. His “levelling the field policy” extended into the office place. He showed that minorities can excel by appointing more women and other minority members to leadership positions based on merit (Black Issues in Higher Education). The results were astounding. His leadership moment teaches us that it is truly what is in the inside that matters.

So, did Wharton get the right combination of leadership tools? The results speak for themselves. With an increase in asset base from $55 billion to $114 billion and an increase in customer base from 890,000 to 1.5 million, success is undeniable (Useem, 1998, 176). The improved services led to an increased customer loyalty. The staff also gained a fresh impetus and creativity was cultivated into the system. Indeed, his efforts resulted in resounding success.

However, if I was asked, some of his moves seem kind of inefficient in the long-run. He allowed the monopoly power to be over-run. In my opinion, this might cost the firm in the future as it may cost them a sizeable amount of business if a small bad business decision is made that is capitalized on by the competition. Additionally, a compensation system based on performance of the firm is a risky assessment tool in a bad business cycle. For example, if a large percentage of the salary depend on investment returns or business growth during a period where the economy is depressed, then the salary system becomes unfair.

The Clifton Wharton story is one inspiring ordeal. My biggest lesson is to believe in myself, no matter the challenge. He was faced with a failing organization in an unfamiliar industry and still took the challenge successfully. This level of self confidence is something I would love to possess. If I see the challenge is overwhelming, then I back off. Though this may be viewed as caution, truthfully, it is more out of fear than wisdom.

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I also need to learn how to slowly apply strategy without rushing to embrace a challenge. Wharton started by first sitting down to listen and formulate strategy. After strategising, he made sure that the application was quickly started. I have always thought rushing into a challenge is a sign of courage and quick thinking. However, this has resulted in a lot of regret and failure. I need to approach tasks generally more systematically and strategically.

Questions

  1. What is the importance of involving employees of all levels in discussing the future of a company? To what extent did Wharton involve them? What could he have done to involve them more in this regard?
  2. Wharton exposed his strategy to the competition by publicizing their strategy document. Where should we draw the line as to what constitutes reasonable exposure and what should be our company’s private strategy?
  3. The restructuring of the fund was an immense accomplishment. How did Wharton achieve this? How much did he motivate the employees to achieve this? What would you have done differently were you in his position?

References

Daft, R. (2007). The Leadership Experience. Cengage Learning.

Hesselbein, F. (2002). Hesselbein on Leadership. John Wiley and Sons.

Lussier, R., & Achua, C. (2009). Leadership: Theory, Application, & Skill Development (4th ed.). Cengage Learning.

Staw, B., Sutton, R., & Pelled, L. (1994). Employee Positive Emotion and Favorable Outcomes at the Workplace. Organization Science, 5(1), 55-71.

Useem, M. (1998). The Leadership Moment. Three Rivers Press.

Wharton, C. (n.d.). Reflections of a trailblazer – African American Clifton R. Wharton, Jr., former president of Michigan State University – Cover Story – Interview. Web.

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