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Clifton WhartonRestructures TIAA-CREF                     MGB 290 – Prof Bacon   Jose Abrian, Suresh Madhuvarsu, Peter Raz...
Clifton Wharton Restructures TIAA-CREF1. Relating the Case to Readings and Class Discussions:       Clifton Wharton transf...
Clifton Wharton Restructures TIAA-CREF       Wharton also showed self-regulation in dealing with tough situations. For exa...
Clifton Wharton Restructures TIAA-CREFrealized that the financial world outside of TIAA-CREF was positioning itself to thr...
Clifton Wharton Restructures TIAA-CREF       Once Wharton and the SJTC gathered the necessary data and recommendations for...
Clifton Wharton Restructures TIAA-CREFhad no reason to provide top notch customer service, so they didn’t. When driving th...
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Clifton Wharton Case Study


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Clifton Wharton restructured the TIAA-CREF from a monolithic and inflexible organization to a more customer service focused organization. This summary is done in UC Davis by our team during our MBA time.

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Clifton Wharton Case Study

  1. 1. Clifton WhartonRestructures TIAA-CREF MGB 290 – Prof Bacon Jose Abrian, Suresh Madhuvarsu, Peter Razukas, Nathaniel Roush 5/30/2012
  2. 2. Clifton Wharton Restructures TIAA-CREF1. Relating the Case to Readings and Class Discussions: Clifton Wharton transformed the TIAA-CREF from a monolithic and inflexibleorganization to an organization that responds to customers and focused on results. With a widevariety of experiences and observations gathered from University of Michigan, SUNY, FordMotors, and as an economist in emerging nations, Clifton was able to make long lastingchanges. Clifton Wharton showed all the four domains of the leadership strengths during hisentire tenure at the TIAA-CREF[1]. Right from the time of taking the responsibility as the CEO,Clifton took full responsibility of the execution by focusing on how to restore the customer’sexpectations. As the case suggests, “He listened, walked the halls and met with critics”. Cliftonlistened to the people around him and communicated the observations to the board. CliftonWharton believed that as a CEO he would make a difference only if he would walk the talk.Wharton took every opportunity to speak before the college associations and campusaudiences. Finally, through his interactions and research, Wharton understood the context ofthe TIAA-CREF, teachers, and colleges and how investments were made into these funds. The leadership definition from Gardner states: “Leadership is the process of persuasionor example by which an individual (or leadership team) induces a group to pursue objectivesheld by the leader or shared by the leader and his or her followers”[2]. Clifton Whartonpersuaded the stakeholders of the organization that he was doing the right things. Whartonpresented his observations to the board of directors and later by publicly distributing therestructuring strategy. Through careful consideration, he achieved unanimous support. Thisillustrated that he was committed and confident that the strategy would succeed. Whartonlearned the context quickly and acknowledged that the revolution in financial services andgrowth of mutual funds forced strategic realignment at TIAA-CREF. The case suggests that hewas able to persuade the Michigan State University faculty that he was doing the right things.This, at a later time, became the turning point for Wharton’s career. On several occasions, Wharton exhibited several aspects of the Emotional Intelligence[3]. Wharton was very much aware of his strengths and weaknesses in various situations. As anexample, Wharton knew he could achieve most when dictating least. He believed that adecision without consultation would be worse than no decision at all. Wharton knew that it isimportant to have all the key actors at all levels of an organization buy into the goals anddirection. He also understood that it is a mistake to execute a plan without hearing everyoneout. The case suggests that he believed in an inclusive decision making process.MGB 290 Page 2
  3. 3. Clifton Wharton Restructures TIAA-CREF Wharton also showed self-regulation in dealing with tough situations. For example,Wharton was very attentive even when Caspa Harris Jr. was very blunt. Wharton was also ahighly motivated individual who enjoyed what he was doing. The case suggests that Whartonwas delighted to do any job well and always likes to take on new challenges. Wharton took onchallenges at the Michigan State University, SUNY and TIAA-CREF and successfully dealt withall of them. He understood that by staying in tune with the customers, any business will be ableto make progress. Whether it was promoting the agricultural development in emergingeconomies, as a president of university, or as a CEO of TIAA-CREF, Wharton worked withvarious stakeholders to bring positive results. At the time of restructuring, Wharton calmed hismanagers by hearing out their anxieties. Wharton also developed several leaders underneath him with the creation of two newrevolving positions [4]. These positions provided a broadening and development experience tothe young highfliers throughout the organization. From “How Leaders Develop Leaders”reading: “Winning companies have leaders at every level. Companies dont do things, peopledo. The best way to get more leaders is to have leaders develop leaders”. Wharton also invitedstaff from all levels for freewheeling discussions over lunch and printed transcripts of thediscussions in the internal newsletters. Wharton articulated the realignment strategy from theBooz, Allen & Hamilton to create the accountability centers. He gave far greater autonomy tothese departments and each had far more bottom line responsibility. These facts suggest thatWharton developed leaders across his organization. Finally, from his vast experience in various industries (Agriculture, Education andFinancial) and roles (Economist, President and CEO), Wharton exhibited adaptive leadership[5]. Based on the context, he learned the key issues and understood how to adapt to solve thechallenges.2. Ethical Issues: Reviewing the case, there are three junctures that call ethics into play. The first involvesa discussion of who Wharton ultimately served as the head of TIAA-CREF. The seconddiscussion point outlines the ethical implications of Wharton’s strategy to install himself as theleader of the Special Trustee Joint Committee (STJC). Finally, the third decision to exclude hispredecessor while revealing the strategic changes for the company to the board offers a goodopportunity to discuss the ethics of that decision. Was Wharton’s choice to serve the board and TIAA-CREF customers over employeesethically sound? Wharton was brought in by the board to make changes because the boardMGB 290 Page 3
  4. 4. Clifton Wharton Restructures TIAA-CREFrealized that the financial world outside of TIAA-CREF was positioning itself to threaten TIAA-CREF’s monopoly. Wharton needed to comply with the board’s objectives and devise methodsto accomplish this, so here he is ethically correct in abiding by their wishes. Maintaining thestatus quo would certainly serve the team members of the company, but at the price ofdisappointing TIAA-CREF’s customers; the lifeblood of the business. Wharton was alsoethically sound when fighting for customer choices because without customers, there would beno fund, and in turn, no team members. Above all, customers sought flexibility. Wharton hadan ethical obligation to provide this flexibility in order to maintain the business, but we also mustconsider Wharton’s obligation to these same customers to protect their future retirement dollars.History has shown, on average, individuals are very poor judges of the financial markets and bygiving customers a choice, they are more likely to be emotional and overly aggressive whichcauses them to place their future retirement dollars in peril. The TIAA-CREF consistently beatthe S&P 500; a claim the most mutual funds could not make. Wharton gave TIAA-CREF’scustomers and board what they wanted, which ultimately kept team members employed, but hedid so by allowing customers to take greater risks with their money. Wharton walked an ethical tightrope is his strategy to build momentum and enactchange within the TIAA-CREF. To accomplish this task, he formed the Special Trustee JointCommittee (STJC) in order to review and prioritize the tasks that needed to be done to bringTIAA-CREF into the next phase of growth and fight against potential competitors. On one hand,he could always stand by what the board wanted: change. The board needed a strong,authoritarian figure who could navigate the complex waters of a vast organization and in thename of the mandate for change, Wharton took the controversial position of not only makinghimself the chairman of the committee, but also choosing who would be on the committee andsetting the timetable for the strategic reassessment recommendation to the board. The caseglosses over this power play, but it should be brought up because of the ethics involved. Thecommittee was made up of very few people from within the company which could have beenperceived as alienating TIAA-CREF’s employees. Wharton was certainly aware of the potentialfor this committee to seem as if it operated in a clandestine fashion because he made it a pointto share transcripts of all matters pertaining to the committee meetings. Had he not done this,perhaps fears within the company would have grown, breeding mistrust, and ultimately causingWharton to disband the SJTC. Had Wharton not treaded lightly on the ethical issuessurrounding the forming of and communication from the SJTC, perhaps many more years of thestatus quo would have passed, disappointing customers and not serving the desires of theboard.MGB 290 Page 4
  5. 5. Clifton Wharton Restructures TIAA-CREF Once Wharton and the SJTC gathered the necessary data and recommendations for thefundamental strategic changes that needed to be made at TIAA-CREF, Wharton made aquestionable ethical decision to exclude his predecessor (then a current member of the board)from the board meeting. It is easy to say that this was a graceful and tactful move that allowedhis predecessor to save face, but didn’t Wharton have an ethical obligation to include hispredecessor in the actual board meeting? Playing the devil’s advocate, this could beconsidered unethical in that it allowed Wharton to silence perhaps the largest critic of the plan.Without his predecessor there, the opportunity for the person who perhaps knew theorganization better than anyone else would not be allowed to speak. The case says thatWharton filled in his predecessor completely on the details after the meeting, but we have noway of proving this. Wharton could have easily told his predecessor about the strategic plan,but left off a few key details by phrasing parts of the plan differently. By excluding hispredecessor from the board meeting, this opens up too many opportunities to interpret thisaction as unethical. History has judged Wharton’s time at TIAA-CREF as successful mostly due to the factthat when given the choice to leave the TIAA-CREF, the vast majority of customers stayed.However, as we analyze this case from an ethical standpoint, we need to take the focus off ofthe outcome. The decisions that Wharton made regarding how data was gathered and sharedinternally as well as with the board were the correct decisions when we consider that he servedthe board and TIAA-CREF’s customers, but not necessarily ethically sound when all of theplayers are considered.3. Leadership Lessons, ‘Big Ideas’, and Key Take-aways: One of the primary lessons that can be taken away from the case is that bureaucracyand complacency can be major impediments which heavily dampen a leader’s ability to quicklyand efficiently implement change. This was exactly the type of environment that Whartonencountered at TIAA-CREF, and thus, a carefully crafted approach was required to counteractit. A leader needs to have an ability to recognize the presence of these roadblocks and sculpthis/her strategy accordingly in response. Wharton utilized changes to the compensation system as a method for achieving thecustomer service and performance improvements he sought. It is important for leaders tounderstand that employees will generally do exactly what they are incentivized to do by theirpay structure. If the reward system is not designed to guide employees towards a desiredoutcome, it will most likely not be achieved. Before Wharton’s changes, TIAA-CREF employeesMGB 290 Page 5
  6. 6. Clifton Wharton Restructures TIAA-CREFhad no reason to provide top notch customer service, so they didn’t. When driving the directionof the group, leaders need to carefully consider the reward infrastructure that is in place andhow that can be modified to reach the end goals. The notion of transparency and involvement of the greater group also reveal themselvesheavily in this case. Wharton was clearly not a dictator and instead chose to bring many peoplearound him into the leadership process. He convened regular meeting with executive, senior,and middle managers to collectively address problems and develop strategy. He further utilizedthese groups as conduits to the larger employee base. With this approach, the entire companycould feel that they had a part in the direction of the changes. Wharton also chose acontroversial path when he decided to publicly distribute his strategic plan for TIAA-CREF andgather feedback. He saw value in the input received from the general public as well. The keytakeaway is that leaders can benefit from involving all those affected by directional change inthe leadership process as it is taking form. Taking the notion of transparency one step further, Wharton had been known to obtainbuy-in from key partners early in the transformational process. This tactic was heavily exhibitedin his approach to reorganizing the SUNY system. He chose to engage key legislators early andin more personal meetings so that when the final proposals were presented, his supporterswere already in order. This type of early engagement and pre-planning can be a key to thesuccess of a leader as he/she is molding strategy and seeking a path to implementation.References :[1] Tom Rath & Barry Conchie : Strengths based Leadership - page 24[2] John N W. Gardner : On Leadership - page 1[3] What Makes a Leader : On Leadership : page 3[4] How Leaders Develop Leaders : page 5[5] The work of Leadership : On Leadership : Page 62MGB 290 Page 6