CHAPTER 5
Noel Tichy: Leading a Teaching Organization
Noel Tichy is a Professor of Management & Organizations at the Ross School of Business at the University of Michigan, where he directs the Global Business Partnership. From 1985-87, he was Manager of Management Education for General Electric, where he directed its worldwide development efforts. Among the many books he has co-authored are: Judgment: How Winning Leaders Make Great Calls (2007), The Cycle of Leadership: How Great Leaders Teach Their Companies to Win (2002), The Leadership Engine: How Winning Companies Build Leaders at Every Level (1997), and Control Your Destiny or Someone Else Will: How Jack Welch is Making General Electric the World’s Most Competitive Company (1993).
Not Harvard. Not Wharton. Not London Business School, or INSEAD in Paris. Arguably, the world’s best business school is the fabled Crotonville in Ossining, NY, where General Electric (GE) has located its management-training center since 1956. Now called the John F. Welch Leadership Development Center in honor of its former CEO Jack Welch, under whose leadership it flourished, Crotonville has developed into both a talent machine producing leaders at every corporate level, and a change-driving engine.
After becoming CEO in 1981, Welch reinvented Crotonville and legend has it that he himself taught there every two weeks, missing only one session (when he had heart bypass surgery) during his 20-year tenure as CEO.
Crotonville is much more than a corporate university. It is legendary for producing CEOs for many Fortune 500 companies. Nitin Nohria, a Harvard Business School professor, was reported as saying in 2003 that “There’s reason to believe that they are a better training ground than we are.”1
Noel Tichy was instrumental in Crotonville’s development. At Jack Welch’s invitation, Tichy left the University of Michigan in 1985 to become head of GE’s management training center, and in that capacity he witnessed, participated in, and facilitated the transformation of GE as an insider. He recalls that this was the largest and best leadership laboratory in the world where, during his two-year tenure, he learned more about leadership than he had in the previous 15 years.
Returning to the University of Michigan, he started to teach what he had learned at GE, not only to MBA students and business executives, but also to the army, educational and healthcare institutions, and other not-for-profit organizations.
At a hotel in Shanghai in June 2008, after hosting a one-day leadership development session for a group of global business executives, Noel Tichy sat down with me for a vibrant one-on-one session.
Leadership is Transformational
Liu: How do you define leadership? I have read two definitions in your book. One is “leadership is the ability to see reality as it really is and to mobilize the appropriate response.” The other is “leadership is the capacity to get things done through others by changing people’s mindsets and energizing them into action.”
Tichy: I think I’ll start with the second one. The way I often teach is “leadership is accomplishing something through other people that wouldn’t have happened without you.” It does not require a formal position. It is asking: “Have I made something happen?” The true leader makes things happen through other people that wouldn’t happen without him. That is fundamental to being a leader.
To be a good leader, you have to have a teachable point of view; you have to be able to develop other leaders, and so forth.
Liu: A lot of business thinkers differentiate leadership from management. Do you do that?
Tichy: There is a short phrase: “Managers do things the right way, and leaders do the right things.” I think a good leader needs managerial skills, but having managerial skills doesn’t necessarily make a good leader. So I make that distinction. But fundamentally, I go back to “if you are a leader, you make things happen in the world that wouldn’t have happened without you.”
Liu: Don’t managers also make things happen through other people? That is what we expect managers to do well.
Tichy: James McGregor Burns, in a great book called Leadership, differentiated between transactional and transformational leadership. Transactional leadership is really management, and transformational leadership is leadership.
I did a book back in the mid-1980s that was built out of what Burns called The Transformational Leader, which was why Jack Welch hired me to run Crotonville. The book had a very simple premise at that time—I think we’ve reached that time again—that we were (and we will forever be) in need of transformational leaders. A transformational leader is someone who fundamentally transforms the organization, takes it to a different level, and it never goes back.
Transforming an organization is a dramatic act. Through transformation you unleash fear and hope, change and resistance. I often say transformation is a three-act drama. Act I is waking the organization up to meet the change. Act II is giving a vision of where you take it. And the third act is re-architecting the organization, the human resources, and the structure to fit the vision. By the time you finish Act III, the world will have changed and you will need to start all over.
So I built the whole framework around helping people be transformational leaders. I think I’ll go back fundamentally to Burns’s saying that management is transactional. With leadership, we are talking transformational.
Leadership is Top-Down
Liu: In the preface to The Leadership Engine, you stated that “leadership was the key determinant of success, not processes, culture, techniques, or scientific management, but energized visionary leaders who could make things happen.” If people say that you might have overemphasized leadership, what is your defense?
Tichy: How could you ever overemphasize leadership? Seriously, say more about what you are getting at—I emphasize leadership at the expense of process, structure, and systems?
Liu: Henry Mintzberg once wrote an article criticizing the myth of the charismatic leader and questioning whether Lou Gerstner alone had been responsible for turning IBM around, as legend had it. He raised the question of the contribution made by other people in IBM. In his view, the turnaround could not be attributed to Gerstner alone.
Tichy: As you know from my work, I believe you have to have leaders at all levels. You have somebody at the top that is the head leader/ teacher. Everything he or she does is designed to engage thousands of people in the organization as leaders. But without a leader at the top, this won’t happen.
Mintzberg has launched a kind of anti-leadership movement in leadership. Jim Collins also has kind of an anti-leadership view. This really misses the reality. Jack Welch, for example, invested most of his time and energy in developing leaders at all levels. Crotonville was about making everyone of those kids who had just gotten off the campus, those first-time leaders, a leader. It’s having many CEOs at every single level. It’s what A. G. Lafley does at P&G.2
None of that would have happened without someone at the top. That there is someone at the top doesn’t mean that he is an autocrat. Gerstner was somebody who mobilized thousands of people.
Liu: In one interview you said “bottom-up is junk.”
Tichy: Absolutely. Never saw that happen in my life. It’s non-existent. Now the paradox is the top has to engage the bottom and then you can get bottom-up ideas. So, paradoxically, it’s top-down to get bottom-up.
The CEO as Head Teacher
Liu: I think most people will agree instinctively that leaders should be learners. You have been saying that leaders should be teachers. You’ve written several books on this subject. Tell me why.
Tichy: I often jokingly, but in a serious vein, say: Look, learning can be fun and exciting but if it does not turn into teaching and making the organization better it is not useful. The “learning organization” movement in the US held up companies like Digital Equipment as role models. Digital Equipment is dead now because the learning never translated into teaching and action in the marketplace. So learning has to further the organization’s performance. The learners must turn their learning into teaching, and that makes everybody better.
Learning is necessary but not sufficient. The teaching I am talking about is not command and control one way, but creating a virtuous teaching cycle.
Liu: People will probably agree that leaders should be teachers, or that teacher should be one of a leader’s many roles. But what you actually say is that teaching is the leader’s major role. Is that right?
Tichy: The higher the hierarchy goes, the more important it is, because if you are not doing it, you are doing the work. At General Electric, Jeff Immelt is not making jet engines or any other products, but he is really investing in the human capital side of the organization. So he is the head teacher. Every day his job is to help the organization get smarter and more aligned. And it’s not one-way teaching.
One of the many fascinating things that Jeff Immelt did was to put billions of dollars in a new R&D investment and create a “Crotonville” at the R&D center in order to get the businesses more aligned and involved in virtuous teaching cycles. All business leaders were required, four times a year, to bring the whole team up there and hang out with the scientists. That to me is an example of setting the stage for leaders to teach and creating virtuous teaching cycles all over the organization.
Leaders should also Learn
Liu: You advocate teaching organizations and people like Peter Senge advocate learning organizations.
Tichy: That’s why Digital Equipment is dead. It was one of the examples of what happens with learning organizations when they aren’t teaching organizations.
Liu: But we all know about organizational learning, and nobody uses the term “organizational teaching,” which I think is what you are supporting.
Tichy: Right, I spend my life actually doing it. At Royal Dutch Shell there are 70,000 people right now getting taught by their leaders; at Ford 40,000 people; at ATMI, this small hi-tech organization, and at Hewlett-Packard . . . but 90 percent of companies around the world don’t do it.
Liu: But you are adding a learning component to your teaching organization idea. In The Cycle of Leadership, you said that in The Leadership Engine you had missed something; that is, that teachers should also learn.
Tichy: Exactly. As I wrote in The Cycle of Leadership, Eckhard Pfeiffer at Compaq was a one-way teacher. He was a brilliant man who did not seem to understand that he would have been smarter and his people smarter if he had been more open to learning. The people in his organization would have bought in more and aligned around executing his strategy. So you can be an autocratic teacher and ultimately fail because in today’s world you need to be learning from people down in the organization.
Liu: So actually to me it is like both a teaching and learning organization, right?
Tichy: I would put it this way: A learning organization is the foundation to becoming a teaching organization. You have continuous learning, and then I want you to have the responsibility to teach it to others and begin the virtuous teaching cycle. So you get smarter. It kind of feeds on itself.
Storytelling in Leadership
Liu: You are one of the first people who drew my attention to the role of storytelling in leadership.
Tichy: That was from Howard Gardner.
Liu: I love the idea of the three types of leadership stories. That is very helpful and useful. But when I read your book, I have the impression that you define a story in a very broad sense. To me, some of them are not stories. They are just some adjectives or metaphors.
Tichy: That would not be my definition. Stories are narratives. Howard Gardner once said there are multiple stories. There is the “Who am I?” story. If you look at people like Gandhi, there is a kind of narrative of their lives. There is the “Who we are” story, which is a story about how we are connected and part of something. And then there is the “Where we are going” story, like “We are going to cross the river” or “We are going to climb the mountain.”
How do you give your team a sense of identity? Obviously you have to tell a story about the future. I think A. G. Lafley at P&G is developing a very complex movie of the future or writing a novel of the future of P&G in his mind. He can visualize where P&G will be two years from now. He can play that movie in his mind.
I think that’s good leadership. That’s how I think stories play a key role. It’s based on that story line for the future that you make judgments. Then you can decide which people should be on this team or not because this is where the movie is going. The strategy decisions—Should we make this acquisition or not? Should we move into these markets or not?—are based on where we are, how we are moving forward. The story line also prepares me when there’s a crisis. Is what I’m doing with this crisis consistent with where we are headed?
Liu: What are the major components of a story?
Tichy: The story line for the organization is the case for change, where we are going, and how we are going to get there. To me those are the three building blocks. If I’m going to mobilize GE, I will say: “Hey, the stock price is down, the world is upset with it. We have to change. Here’s where we are going. Here’s a picture of what we are going to look like: hi-tech; new technologies; globalization . . . Here are the steps we are going to take: we are going to grow in China this way, we are going to grow in India that way.” That’s what I think Jeff Immelt is doing.
Liu: What’s the difference between a story and an analysis here?
Tichy: The difference is that the story is painting a picture, a script, showing what the play looks like, who the actors are, and what the unfolding themes are, not just a PowerPoint presentation. It’s painting a picture.
Jack Welch, the Leader of His Time
Liu: Jack Welch is sort of controversial. There was a cover story in Fortune3 which says “Sorry Jack, your rules are out of fashion” or something like that. And you said that Jack Welch and Alfred Sloan will be the two most remembered and respected business leaders in the twenty-first century.
Tichy: The Fortune article was ridiculous. If you look at the so-called new leadership in the article, it’s basically Welch leadership. They made up what we call a “straw man” view of Welch. It threw him in with the old command-and-control leadership, which he never was.
Welch started “workout” projects. Welch was engaging thousands of people at all levels in thousands of plants. He was teaching at Crotonville and involving people all the time. That article was a joke.
Liu: What do Jack Welch and Alfred Sloan have in common?
Tichy: They both, in their time, set the stage for what was taught in business schools. Alfred Sloan really was the quintessential manager who created the multi-divisional organization and practiced, in a positive sense, creative scientific management.
All changes have been like a pendulum. Every solution at some point has embodied the next problem. General Motors ultimately became a model for bureaucracy. And that’s what Welch inherited at GE too.
Welch really unleashed the human element in the organization, did the best job he could to get rid of bureaucracy, though never totally. He unleashed leadership at all levels in the organization. I think Sloan was a man of his time, and Welch was a man of his time.
I think Jeff Immelt will come up with his answer for the twenty-first century. I don’t think he has it yet.
Why Leaders Fail
Liu: You mentioned and praised many business leaders in your book. I have doubts about some of them, like Dick Brown, the former CEO of EDS, who got fired, and also Bob Nardelli, who got fired at Home Depot too. What do you think of those people?
Tichy: I know both of them very well. Dick is a really good guy. He is not a great manager. He doesn’t always pay attention to the details.
Liu: He is a great leader but not a great manager?
Tichy: Well, I think to be a great leader you also have to be a good manager. He had certain elements of leadership. But he didn’t have the building blocks. So things were out of control.
Nardelli is a little different. Nardelli is a very tough manager, like Welch was. But Welch also had the ability to build people up. Nardelli just uses a hammer. He got away with that at GE, because the organization was strong enough to take some pretty strong leaders and be resilient at the same time. As CEO at Home Depot, he was transforming it and driving very hard. I think he lost touch with the people side of the organization. We saw what happened.
Liu: Jack Welch wrote in his autobiography that when he told the two unsuccessful CEO candidates, one got very mad. I guess that was Nardelli.
Tichy: That was Nardelli. I know all these guys really well. Jim McNerney said, “Well, I would’ve loved to get it. But life goes on. I get a lot of opportunities.” I saw Nardelli three years later and he was still asking “Why not me? Why not me?”
Liu: Another person I have doubts about is Larry Bossidy. He co-authored a book, Execution, with Ram Charan, which sold very well in China. He was CEO at Honeywell but, after he retired, Honeywell did not do well and he had to go back. That is not evidence of a great leader to me. What’s your comment?
Tichy: I know Larry very well. I think Larry did a number of things. In Allied Signal, he did turn the company around. He ended up merging it with Honeywell, which didn’t have a leadership pipeline that was deep enough. Could he have done a better job developing leaders? Maybe. But he was only there for 10 years, and building a leadership pipeline really needs years and years. By the way, Larry came back in and his solution was to bring in David Cote, a former GE leader, from outside and he has done very well.
Larry did not produce CEO candidates for his job. Is he someone who develops leadership? Yes. Did he put a lot of leadership programs together at Allied Signal and Honeywell? Yes. Why didn’t he ultimately have the candidate inside the organization? I’m not sure. Maybe he never had enough time. Or he made some mistakes. The reality is, David Cote was brought in from outside.
Building a Leadership Pipeline
Liu: You are saying 10 years is not enough to build the leadership pipeline.
Tichy: When I work with an organization on the leadership pipeline, I’m talking about a people from 22-year-old off-campus hires to the next CEO: the phases you go through from individual contributor to first-time leader, to functional leader, to head of a function, to head of a business.
Liu: That’s more like 20 years, then.
Tichy: Yes.
Liu: That’s bad news for Chinese companies. Everything in China is going so fast, and they just earn money so easily in many cases. So they don’t invest in developing leaders. But now even if they are facing a difficult time, they are dumbstruck by the idea that they have to develop leaders for 20 years to get the results they want.
Tichy: I’ll give you one example that’s even more interesting. We are working with an organization in Dubai. They have to go from having thousands of employees to 120,000 employees in the next three years. They have decided to build the leadership pipeline without outside hires, which is even more challenging than in China.
There’s no easy answer except that the senior leadership has got to put in more time and energy. Whether it is fast enough or not, you have to start.
Liu: And you are saying that the CEO should be the head teacher.
Tichy: Absolutely. If not, it’s not going to happen.
Liu: What happens if the CEO is not good at teaching? He may have developed some teachable viewpoints, but lacks the necessary delivery techniques.
Tichy: For leaders who sincerely want to develop themselves in teaching people, we can give them the techniques. Are they going to be world-class teachers? No, they don’t need to be. Will they have different personality styles? Yes, of course.
Learning from Welch
Liu: A couple of years ago, I wrote an essay called “What to Learn from Welch.” It said that CEOs in China were learning wrong things from Jack Welch—learning to be No. 1 or No. 2, or to fire the bottom 10 percent, or Six Sigma. However, the first thing you should learn is to develop teachers in your organization. You had first-hand experience of how Jack Welch led GE and concluded that he was a world-class teacher. Could you share more?
Tichy: He absolutely understood from day one that the organization would succeed to the extent that it had leaders and was committed to developing as many leaders as possible. I think we are all products of our background. Welch grew up as a working-class kid. As he grew up, he was always putting a team together. He was captain of the hockey team in high school. His view of the world was that you win by building a team.
The GE he took over was a huge bureaucracy. The paradoxical part was that while he was downsizing, he was also investing and developing leaders in the future. For example, when I was running Crotonville, we were building a US$45 million residence facility there. While we were doing that, we were laying people off. People would ask: How can you justify that? And Welch’s answer was: “That’s about tomorrow. That’s about leaders we have in the twenty-first century. We are doing what we have to do to keep our business vital today. We are also going to invest in the future.” That was vintage Welch. He was putting huge investments in Crotonville in the development of people even though he had to do some tough stuff. It turns out he was right.
Liu: You said during the two years you were in charge of Crotonville, he showed up and taught every other week. That’s very impressive.
Tichy: The only guy that did better was Roger Enrico at Pepsi, who put in more days and actually ran programs for longer periods. I joked with Welch and sent him a Fortune article about what Enrico had done and said to him, “You think you are a player, well, the real Olympic player is Roger.” What Welch did was that he shared the article around at GE and said, “You are right. We’ve got to do more teaching.”
Liu: Was Welch a natural teacher or did he just get better over time?
Tichy: I think both. When I was there, I don’t think he was anywhere as good as he ended up in the year 2000. He had led the plastics business, which was 5,000 or 6,000 people—a small business. It wasn’t 400,000 people, which was what it was when he started as CEO at GE in 1981. Back in the plastics days, he had invested a lot in developing and coaching people. What he had to learn was how to do it on a huge scale. You have to rely on other leaders. You can’t do it all yourself. I think he learnt that over time. Plus in the 1980s, he had to do some tough things: downsizing, divesting, and so on. That’s the learning journey he took.
Liu: Looking back at those leaders you have worked with or had the chance to observe closely, would you still say Jack Welch is the greatest?
Tichy: Absolutely. There are some other very good ones: Jorma Ollila at Nokia, Roger Enrico at Pepsi, David Novak at Yum! Brands, McNerney at Boeing, and Mark Hurd at HP. But it’s like going back to Alfred Sloan. At the time, he set the standard. Welch clearly set the standard in his time. He probably was managing one of the most complex companies in the world. So he has been impacting so many different industries. He has been producing more leaders as well, even though they don’t all succeed, like Nardelli. There must be 25 or 30 ex-GE people running big companies. Nobody has that record. It happened because Welch focused on leadership.
Liu: And that might be an argument for companies that don’t develop leaders. They can steal from GE or Pepsi.
Tichy: I think Welch’s answer would be this: “The pyramid shapes this way. So I train as many athletes as I can, but I can only send three to the Olympics. That doesn’t mean I stop the pipeline. If I want to win the Olympics I have to keep getting more and better, even if some of them are going to some other places.”
Endnotes
1 “Survey: Coming and Going,” The Economist, October 25, 2003.
2 As we saw earlier, Lafley remained as CEO at P&G until June 2009.
3 Betsy Morris, “The New Rules,” Fortune, July 24, 2006.
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