It was the end of 1999, and John Thornton, co-president and chief operating officer of Goldman, Sachs & Co. (GS ), had some bad news for his top execs. "We're not as good as we need to be," he recalls telling the group of 500 managing directors. The results of their annual peer reviews had revealed some glaring deficiencies in leadership strength and "people development." Not a good thing, he knew, considering that Goldman's worldwide head count would more than double from its 1996 levels in a year through acquisitions and new hires, to nearly 23,000--and strong leaders would be essential to integrate them all.
Goldman had already begun planning a leadership-training operation dubbed Pine Street--named for the original location of the company. But for help refining the concept, Thornton and his fellow execs turned to a pro--Steven Kerr, 60, chief learning officer for General Electric Co. (GE ) and head of GE's fabled Crotonville, one of the most widely admired corporate-learning organizations. The brainchild of ex-chairman and CEO John F. Welch, the center stresses his notion of a "boundaryless" corporation that shares information and ideas freely and clearly communicates a corporate philosophy from the top down.
Last April, after Welch announced his retirement, Kerr felt he could move on and joined Goldman full time. A former B-school professor at the University of Michigan and elsewhere, Kerr says he'll develop the Goldman training program along Crotonville lines. "The executives have to get clear on the guiding principles of Goldman," he says. "Once that happens, I'll shake them up with outsiders' views." But he has warned his new bosses not to expect a cookie-cutter version of GE's corporate school--he's not even sure "what 20% of Crotonville" will work. "The longest program at Goldman is two days," says Kerr, vs. three weeks at GE.
Goldman's high-profile hire is in keeping with the growing trend in the corporate world to beef up internal leadership education and training. Of course, companies are the biggest consumers of executive education provided by colleges, universities, and private-sector institutes. But many companies--fully 31% of respondents to BusinessWeek's executive education survey--reported running an in-house corporate university. "It's more difficult with business schools to ensure that you have a cultural fit with the organization," says Shari Ballard, vice-president of human resource operations at Best Buy Co. in Eden Prairie, Minn.
That sentiment worries B-schools, which draw an estimated $800 million from their executive programs. As companies seek out key professors, consultants, and inspirational gurus, B-schools stand to lose revenues and clout. To be sure, the bulk of the business still goes to B-schools. And the schools often take a small cut of professors' speaking and teaching fees, which range from $10,000 to $150,000 per session, according to Leigh Bureau, a speakers' agency. Meanwhile, some B-schools have started to dole out extra payments to entice faculty to teach in custom exec ed programs the schools run.
Aside from doing his own cherry-picking of favorite profs, such as Michigan's David D. Ulrich, who teaches organizational behavior, Kerr is tapping key Goldman execs, including Chairman and CEO Henry M. Paulson Jr., to lead some sessions. Classwork includes case studies and discussions that deal with actual situations at Goldman--complete with the names and business predicaments of current employees.
While it's tempting for companies to sideline training during a downturn, Kerr says that's a bad idea. In the works: a program for up-and-coming managers and a Pine Street facility in Jersey City by 2003. Goldman is located just blocks from the ruins of the World Trade Center, and the significance of the September 11 tragedy for business leaders isn't lost on Kerr: "You want leaders to be adaptive," he says. "You're going to be surprised by the future. That's a fact." Just what Jack Welch might say.
By Mica Schneider in New York