Clifton Wharton Case Study

Clifton Wharton Restructures TIAA-CREF

MGB 290 – Prof Bacon

Jose Abrian, Suresh Madhuvarsu, Peter Razukas, Nathaniel Roush

5/30/2012


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1. Relating the Case to Readings and Class Discussions:

Clifton Wharton transformed the TIAA-CREF from a monolithic and inflexible

organization to an organization that responds to customers and focused on results. With a wide

variety of experiences and observations gathered from University of Michigan, SUNY, Ford

Motors, and as an economist in emerging nations, Clifton was able to make long lasting

changes. Clifton Wharton showed all the four domains of the leadership strengths during his

entire 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’s

expectations. As the case suggests, “He listened, walked the halls and met with critics”. Clifton

listened to the people around him and communicated the observations to the board. Clifton

Wharton 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 campus

audiences. Finally, through his interactions and research, Wharton understood the context of

the TIAA-CREF, teachers, and colleges and how investments were made into these funds.

The leadership definition from Gardner states: “Leadership is the process of persuasion

or example by which an individual (or leadership team) induces a group to pursue objectives

held by the leader or shared by the leader and his or her followers”[2]. Clifton Wharton

persuaded the stakeholders of the organization that he was doing the right things. Wharton

presented his observations to the board of directors and later by publicly distributing the

restructuring strategy. Through careful consideration, he achieved unanimous support. This

illustrated that he was committed and confident that the strategy would succeed. Wharton

learned the context quickly and acknowledged that the revolution in financial services and

growth of mutual funds forced strategic realignment at TIAA-CREF. The case suggests that he

was 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 an

example, Wharton knew he could achieve most when dictating least. He believed that a

decision without consultation would be worse than no decision at all. Wharton knew that it is

important to have all the key actors at all levels of an organization buy into the goals and

direction. He also understood that it is a mistake to execute a plan without hearing everyone

out. The case suggests that he believed in an inclusive decision making process.


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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 a

highly motivated individual who enjoyed what he was doing. The case suggests that Wharton

was delighted to do any job well and always likes to take on new challenges. Wharton took on

challenges at the Michigan State University, SUNY and TIAA-CREF and successfully dealt with

all of them. He understood that by staying in tune with the customers, any business will be able

to make progress. Whether it was promoting the agricultural development in emerging

economies, as a president of university, or as a CEO of TIAA-CREF, Wharton worked with

various stakeholders to bring positive results. At the time of restructuring, Wharton calmed his

managers by hearing out their anxieties.

Wharton also developed several leaders underneath him with the creation of two new

revolving positions [4]. These positions provided a broadening and development experience to

the young highfliers throughout the organization. From “How Leaders Develop Leaders”

reading: “Winning companies have leaders at every level. Companies don't do things, people

do. The best way to get more leaders is to have leaders develop leaders”. Wharton also invited

staff from all levels for freewheeling discussions over lunch and printed transcripts of the

discussions in the internal newsletters. Wharton articulated the realignment strategy from the

Booz, Allen & Hamilton to create the accountability centers. He gave far greater autonomy to

these departments and each had far more bottom line responsibility. These facts suggest that

Wharton developed leaders across his organization.

Finally, from his vast experience in various industries (Agriculture, Education and

Financial) 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 the

challenges.

2. Ethical Issues:

Reviewing the case, there are three junctures that call ethics into play. The first involves

a discussion of who Wharton ultimately served as the head of TIAA-CREF. The second

discussion point outlines the ethical implications of Wharton’s strategy to insta ll himself as the

leader of the Special Trustee Joint Committee (STJC). Finally, the third decision to exclude his

predecessor while revealing the strategic changes for the company to the board offers a good

opportunity to discuss the ethics of that decision.

Was Wharton’s choice to serve the board and TIAA-CREF customers over employees

ethically sound? Wharton was brought in by the board to make changes because the board


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realized 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 methods

to accomplish this, so here he is ethically correct in abiding by their wishes. Maintaining the

status quo would certainly serve the team members of the company, but at the price of

disappointing TIAA-CREF’s customers; the lifeblood of the business. Wharton was also

ethically sound when fighting for customer choices because without customers, there would be

no fund, and in turn, no team members. Above all, customers sought flexibility. Wharton had

an ethical obligation to provide this flexibility in order to maintain the business, but we also must

consider 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 by

giving customers a choice, they are more likely to be emotional and overly aggressive which

causes them to place their future retirement dollars in peril. The TIAA-CREF consistently beat

the S&P 500; a claim the most mutual funds could not make. Wharton gave TIAA-CREF’s

customers and board what they wanted, which ultimately kept team members employed, but he

did so by allowing customers to take greater risks with their money.

Wharton walked an ethical tightrope is his strategy to build momentum and enact

change within the TIAA-CREF. To accomplish this task, he formed the Special Trustee Joint

Committee (STJC) in order to review and prioritize the tasks that needed to be done to bring

TIAA-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 the

name of the mandate for change, Wharton took the controversial position of not only making

himself the chairman of the committee, but also choosing who would be on the committee and

setting the timetable for the strategic reassessment recommendation to the board. The case

glosses over this power play, but it should be brought up because of the ethics involved. The

committee was made up of very few people from within the company which could have been

perceived as alienating TIAA-CREF’s employees. Wharton was certainly aware of the potential

for this committee to seem as if it operated in a clandestine fashion because he made it a point

to 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 causing

Wharton to disband the SJTC. Had Wharton not treaded lightly on the ethical issues

surrounding the forming of and communication from the SJTC, perhaps many more years of the

status quo would have passed, disappointing customers and not serving the desires of the

board.


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Once Wharton and the SJTC gathered the necessary data and recommendations for the

fundamental strategic changes that needed to be made at TIAA-CREF, Wharton made a

questionable 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 allowed

his predecessor to save face, but didn’t Wharton have an ethical obligation to include his

predecessor in the actual board meeting? Playing the devil’s advocate, this could be

considered 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 the

organization better than anyone else would not be allowed to speak. The case says that

Wharton filled in his predecessor completely on the details after the meeting, but we have no

way 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 his

predecessor from the board meeting, this opens up too many opportunities to interpret this

action as unethical.

History has judged Wharton’s time at TIAA-CREF as successful mostly due to the fact

that 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 of

the outcome. The decisions that Wharton made regarding how data was gathered and shared

internally as well as with the board were the correct decisions when we consider that he served

the board and TIAA-CREF’s customers, but not necessarily ethically sound when all of the

players 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 bureaucracy

and complacency can be major impediments which heavily dampen a leader’s ability to quickly

and efficiently implement change. This was exactly the type of environment that Wharton

encountered at TIAA-CREF, and thus, a carefully crafted approach was required to counteract

it. A leader needs to have an ability to recognize the presence of these roadblocks and sculpt

his/her strategy accordingly in response.

Wharton utilized changes to the compensation system as a method for achieving the

customer service and performance improvements he sought. It is important for leaders to

understand that employees will generally do exactly what they are incentivized to do by their

pay structure. If the reward system is not designed to guide employees towards a desired

outcome, it will most likely not be achieved. Before Wharton’s changes, TIAA-CREF employees


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had no reason to provide top notch customer service, so they didn’t. When driving the direction

of the group, leaders need to carefully consider the reward infrastructure that is in place and

how that can be modified to reach the end goals.

The notion of transparency and involvement of the greater group also reveal themselves

heavily in this case. Wharton was clearly not a dictator and instead chose to bring many people

around him into the leadership process. He convened regular meeting with executive, senior,

and middle managers to collectively address problems and develop strategy. He further utilized

these groups as conduits to the larger employee base. With this approach, the entire company

could feel that they had a part in the direction of the changes. Wharton also chose a

controversial path when he decided to publicly distribute his strategic plan for TIAA-CREF and

gather feedback. He saw value in the input received from the general public as well. The key

takeaway is that leaders can benefit from involving all those affected by directional change in

the leadership process as it is taking form.

Taking the notion of transparency one step further, Wharton had been known to obtain

buy-in from key partners early in the transformational process. This tactic was heavily exhibited

in his approach to reorganizing the SUNY system. He chose to engage key legislators early and

in more personal meetings so that when the final proposals were presented, his supporters

were already in order. This type of early engagement and pre-planning can be a key to the

success 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 62

Clifton Wharton Case Study

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