(FORTUNE Magazine) – SAY FAREWELL to the classic postwar American manager, that model of rational decision-making who coolly piloted us through the prosperity of the Fifties and the go-go of the Sixties, only to begin stubbing his toe in the Seventies. Vanguard corporations are deciding that this generally amiable character -- he did get a bit autocratic at times -- isn't up to the challenges of today. No, what's required now, the emerging wisdom indicates, are not mere managers, but leaders, people like Lee Iacocca of Chrysler, Jack Welch of General Electric, and John Reed of Citicorp. The new paragon is an executive who can envision a future for his organization and inspire colleagues to join him in building that future. Perhaps the most notable departure from managerial practice: The leader does not fear change, but instead embraces it and creates it. He knows that his most important job is probably to transform the way his company does business. Corporate America has always maintained at least a nodding interest in the subject of leadership, but recently the exigencies of global competition, . deregulation, and accelerating technological change have whipped that interest into an anxious search for new answers to old questions: Can leadership be taught? How do you spot potential leaders? And what, precisely, sets leaders apart from everyday managers? In response, a torrent of books bearing names like The Leadership Factor and The Leadership Challenge is pouring out of the nation's business schools. This fall Russell Palmer, dean of the Wharton School, will personally conduct its first course on leadership, a subject that some faculty colleagues keep insisting is unteachable. The Center for Creative Leadership, a nonprofit educational and research institute in Greensboro, North Carolina, reports that in the past five years, the number of its students, mostly sent by corporations, has tripled. At some of the smartest U.S. companies, interest in developing better leaders has begun to go well beyond the academic. In pursuit of that goal, sober senior executives are doing things that, judged according to the old norms, might seem downright peculiar. Apple Computer brass, for example, recently went off to a resort to spend a week in deep introspection, to learn ''inner tennis'' (it teaches you to keep your eye on the ball and use your instincts), and to walk the length of balance beams suspended high in the air. The top people from General Foods' U.S. grocery business and its Entenmann's baked-goods division have gone down to the water to try to make rafts out of 50-gallon drums, two-by-fours, and rope. In some companies executives are even submitting to so-called upward evaluations by their subordinates, who are asked to rate the performance of their chiefs. All this may sound heretical, or simply nonsensical. But busy, skeptical executives who have been through these activities have come away convinced they are better leaders for it. MUCH OF the current thinking on leadership had its beginnings in a famous 1977 Harvard Business Review article titled ''Managers and Leaders: Are They Different?'' Yes, they are, concluded the author, Abraham Zaleznik, a Harvard Business School professor who subsequently became that institution's first occupant of the Konosuke Matsushita chair in leadership. Managers do the same things over and over again, Zaleznik argued, but it takes a leader to innovate. While a good leader needs to be a manager too, a manager is not necessarily a leader. From the ensuing scholarly debate, informed by the rough-and-tumble that ! increasingly has buffeted U.S. companies, there has emerged approximate consensus on the kind of leader that business needs today. Noel Tichy of the University of Michigan and Mary Anne Devanna of Columbia University point to the new ideal in the title of their 1986 book, The Transformational Leader. The new corporate chief must be able to change things, to work a substantive difference in an organization, in contrast to the merely ''transactional'' manager still running most companies -- transactional because he keeps on cutting the same kinds of deals with employees, customers, and society at large. Corporations normally do not take kindly to transformational leaders. ''The natural state of an organization is conservative, to maintain the status quo,'' says Walter Ulmer Jr., president of the Center for Creative Leadership. Which is why, of course, a leader is exactly what's required when only radical change will preserve the organization in the face of new realities. Ram Charan, a consultant to the likes of General Electric and Du Pont, who travels so much advising chief executives that he doesn't bother to have an apartment anywhere, stresses this quality in leaders of ''divine discontent with the status quo.'' A leader also must have a vision of what the organization can and should become. Often even harder to find, he must have the ability to rally others around that vision. This typically requires a different set of people skills than those that American managers brought back with them from World War II. Tyranny won't work anymore because business has become too complicated for one person to control single-handed. Indeed, one of the functions of an effective executive is to develop leadership deep down in the company. The leader need not be charismatic. What may work best is a willingness to listen and learn bordering on self-effacement. The new-style leader knows that if he wants to get the most from his followers, he must be openly sensitive to their concerns, give them responsibility, and win their trust. He does this in part by making clear that he has certain values. Warren Bennis, a professor at the University of Southern California and author of the book Leaders, thinks leadership in the U.S. ''is now seriously questioned because of some extraordinary ethical lapses in government, business, and even religion.'' The questioning extends from Wall Street to the White House and will figure in the next presidential election. Without better leaders, says Bennis, America will become a ''mega-banana republic.'' In a corporate context, the leader's values must include a concern for employees, for customers, and for the quality of the product his company makes. They also include a healthy dose of down-home ethics: an unfailing demand for honesty and an insistence that everyone in the company get a fair shake. Harvard's Zaleznik argues that people's innate desire to fit into a hierarchy collapses when the led see ''a new breed of leaders so narcissistic that it has no interest in the many, when the middle sees the top selling out for stock options.'' Robert Neuschel, who three years ago started the first leadership course at Northwestern University's business school, sees it as a failure of leadership that the smartest B-school grads go off to Wall Street to get rich quick and corporate executives squeeze labor and cut costs while fitting themselves out with golden parachutes. ''It makes me sick,'' he says, warning darkly of the risk of an antibusiness backlash and increased government interference. THE CONSENSUS starts to break down on the question of whether you can train someone to be a leader and the best ways of doing so. Warren Bennis believes you can do a lot to teach executives to be more imaginative, to communicate better, and to be more self-aware. Beyond that, he avers, instilling leadership gets tougher. ''Can you teach judgment, taste, wit?'' he asks. ''I'm not sure. You can't teach curiosity, energy, and resonance'' -- the ability to set something sympathetic vibrating in the people around you. The University of Michigan's Tichy says, ''Everyone can improve, but not everyone can become world class.'' He estimates that 80% of a leader's growth comes from his job experience, but that the remaining 20% can be shaped by training and study. If 80% does occur on the job, what can a company do to make sure its up-and- comers get the right kind of job experience? The secret may be plenty of freedom and responsibility early in an executive's career. The experts hold up Johnson & Johnson as a corporation that breeds leaders by giving them command early. The largest U.S. pharmaceutical company, J&J is broken up into 165 units worldwide, some with only a few dozen employees, some with as many as 5,000, but each with considerable autonomy. The unit presidents in the U.S. and some abroad have full responsibility for their units' research and development, manufacturing, marketing, and sales. Headquarters in New Brunswick, New Jersey, sets corporate policy on financial and administrative matters, but otherwise the unit presidents, many in their late 30s and early 40s, are on their own. Says Irwin Holzman, vice president for organization planning and development: ''We believe in keeping the units small and recruiting the best people we can find, giving them as much responsibility as early as we can, moving them up rapidly, and keeping track of them.'' What J&J watches for is a high energy level, flexibility, judgment, maturity, and most of all, success at selling. ''We give them fertile soil, good air, and lots of water,'' says Holzman, ''and watch them grow.'' Carl Spalding was 38 when Johnson & Johnson sent him to South Africa as managing director of its consumer products company there. Not only did he have to run the business, but he also had to hire, train, and promote black employees, even build housing for them, sometimes in conflict with apartheid laws. Spalding says his three years' experience in South Africa was ''a very, very beneficial experience.'' And a leaderly lesson in how to work change: Now 42 and back in the U.S., he has been picked to head a new unit, J&J Dental Care, which merges the company's consumer and professional dental-products businesses into one. Job rotation by itself does not round out a leader, observes Michael Lombardo at the Center for Creative Leadership. The hundreds of executives at major corporations surveyed by the center reported that they learned much more about leadership from particularly tough and hectic assignments such as start- ups or turnarounds than by moving from routine job to routine job. The executives also said they learned from failures and disasters, from mentors, and from those prestigious advanced programs at business schools. But the value of these courses was more in the implicit recognition of great things to come than in the specific skills taught there. Anointed as leaders, graduates began to act the part. To have any effect, the push to instill leadership must come from above. General Foods Chairman Philip Smith, 53, says that as his career progressed, he saw ''rather dramatic changes in the performance of divisions when the only thing that had changed in the division was the leader.'' He became convinced that developing and selecting leaders was ''the foundation for all growth at General Foods.'' In the 1970s GF had become overcentralized, Smith says; its executives spent too much time analyzing and too little time acting, and the company lost touch with its customers. When the board made Smith president in 1981, four years before Philip Morris acquired GF, the directors were well aware they were picking a man who wanted to change the company. Today General Foods puts as much effort into leadership development as any corporation. To bring out leadership qualities latent in his top management, Smith started a program for the 400 highest-ranking executives, sending them off in groups of 15 to 18 for three days at corporate retreats such as Arden House, in the hills near the Hudson River north of New York. Smith always attends these meetings to discuss his ideas about leadership and to expound his vision of General Foods as ''the world's premier food and beverage company.'' Executives spend a day with counselors going through questionnaires that had been filled out anonymously by ten people they work with, including subordinates. The higher the executive, the more revealing the answers tend to be. Smith himself submitted to an assessment by his staff and was surprised to find they considered him unreceptive to new ideas and intimidatingly blunt in his reactions; he thought he was just being forthright. He has since tried to become a more sympathetic listener. Joan Kofodimos, a behavioral scientist at the Center for Creative Leadership, notes that most top executives have no idea of the impact they have on others. ERVIN SHAMES, 47, head of General Foods' U.S. grocery business, the company's most profitable, went beyond Smith's initiatives to a degree that made him wonder at times, ''What have I done?'' Last fall he started putting his top 15 people through a program that began with watching scenes from Shakespeare's Henry IV, Part I, and O'Neill's Long Day's Journey Into Night performed by a theater company from Pace University. The executives then made up and put on skits suggested by the plays but specifically related to General Foods. The purpose, says Shames, was not only to dig ideas about leadership out of the plays, but also to demonstrate the importance of drama and metaphor in getting a message across. Says Shames: ''Memos just don't move the heart and the soul.'' To drive home the point, when Shames's staff came to him with written proposals for improving the way General Foods develops new products, he asked them instead to write a play. The group came back with a better memo. He explained he really wasn't kidding about the play. What his people then invented has become known as ''the boat experience.'' It involves building a raft out of 50-gallon drums, two-by-fours, and rope, and paddling it across a lake to capture flags symbolic of new products. Each team of managers put through the experience has to build the raft in two ways. First, in the traditional General Foods style, the team is given vague goals followed up with nit-picking supervision. Halfway through the construction, for example, directions would come down from top management insisting that plans had to be changed to make sure there were life jackets for everyone. Then each team would go through the exercise again, following the new approach outlined in the memo: Precise goals laid out at the beginning and after that no meddling from above. When the rafts built by the first system turned turtle while those built under the second system consistently captured the flags, executives got the point about how to develop new products. Retreats and so-called off-site exercises aren't worth much unless people can see changes back in the office as well. Smith is trying to bring these about too. The average tenure for a plant or division chief used to be a ''ridiculous'' two years, he says, far too little time to make a mark or learn much. He wants to raise the average to five years, and so far has achieved what he describes as a ''moderate success'' in lifting the average to three years. Has Smith's drive for leadership had any effect on General Foods' performance? He thinks so, but says that the payoff has taken longer than he expected. GF managers are more willing to take risks, he believes, and less tolerant of restrictions from above. He points to ventures into new product lines, such as gourmet foods sold by direct mail, and into new technologies, such as those for prepared desserts and for juices that don't require refrigeration. And General Foods has improved to the point where its profit and unit-sales growth will at least match the industry averages this year. To speed the improvement, though, Smith recently announced big cuts in the headquarters staff of 2,000 as well as plans to turn GF's three product sectors into separate operating companies. A strong theme of many corporate leadership programs is to encourage the participants to understand themselves, even if this requires putting them through some seemingly unbusinesslike situations. Says Apple Computer's Stefan Winsnes, 45, a solid Swede who was head of human resources for Europe when he took the company's special leadership training in California last fall: ''Objectively the program looks absolutely ridiculous.'' Winsnes spent five days climbing trees, hitting tennis balls, and talking frankly about himself, others, and the company. He found it ''a very special experience,'' full of metaphors that applied to his work at Apple. For instance, Winsnes says, when people walk across a beam 25 feet above the ground (with a safety line attached) the apprehension that showed on their faces at the beginning and the triumph at the end -- all of it captured on videotape for replay later in the day -- brought out the feelings they all have when they undertake a new project and when they complete it. And the encouragement and cheers of the other executives showed how much strong support can mean in the office, even for the most senior people. At sessions of ''inner tennis,'' led by Tim Gallwey, the inventor of this instinctive approach to the game, Winsnes saw that if the beginner concentrates on hitting the ball without worrying about style, strokes, and footwork, he can be hitting respectable shots within a few minutes. The lesson for the office: If you worry about process too much, you lose sight of what you are trying to do. Winsnes, who now runs Apple University, says the course has created a special bond among the 200 senior executives at Apple who have attended. WHO ARE THE LEADERS in corporate America today? Consultants and academics would probably choose GE's Jack Welch as the best example of the new kind of top executive U.S. business needs. When the board picked Welch out of a field of six candidates for CEO in 1981, there was an appreciable risk that his abrasiveness would bring him down. Instead he seems to have revitalized GE, cutting out more than 100,000 jobs, getting rid of low-growth businesses, and moving into more promising fields with such acquisitions as RCA Corp. and Kidder Peabody. Noel Tichy, on leave from his academic job to head GE's leadership training efforts, calls Welch an intuitive revolutionary who encourages radicals and holds to the principle of ''If it ain't broke, fix it.'' That's why Welch leans hard on divisions that are doing well, such as RCA and aerospace, to keep improving. Unlike most CEOs, Tichy observes, Welch loves change. Welch wanted GE's Management Development Institute, situated on a lovely ! campus overlooking the Hudson River at Crotonville, New York, to revamp its curriculum for the 5,000 GE managers who pass through the school every year. Under Tichy and his predecessor, James Baughman, a former Harvard professor who now directs management development at GE, the emphasis of the school has shifted from teaching managerial skills like financial analysis to implanting ideas about risk-taking, leadership, and values. Instead of just listening to lectures, executives come to spend a week in earnest discussions among themselves and with top corporate chiefs, including Welch, who visits the school every three or four weeks. They debate and discuss the big challenges that face the company, such as the shift away from a manufacturing economy and the difficulty of motivating today's new, better-educated workers. Leadership is most in demand where competition or deregulation have hit hardest, notably in the auto and financial services businesses. In the auto industry, Lee Iacocca obviously stands out as a heroic leader who saved Chrysler with salesmanship, enthusiasm, and nerve. But as Harvard Professor John P. Kotter points out in his new book, The Leadership Factor, there is considerably more to Iacocca than flamboyance. He knows the auto business profoundly well and from that knowledge conceived a clear vision of where Chrysler should go and how it could get there. He knew what products would work, and he knew whom to hire. He built a new team of executives at the top and began recruiting talent for entry-level managerial jobs at first-rate universities rather than picking up local boys cheap, as the company used to. Iacocca created a whole network of people he needed to make Chrysler succeed and then ''worked relentlessly to keep key people in that network motivated,'' Kotter argues. It was not just Iacocca's good luck that Congress approved the loan guarantees that saved Chrysler's neck -- it was his hard work and persuasiveness that got the votes. For a dramatic demonstration of the importance of leadership, compare Iacocca's Chrysler with General Motors. Ross Perot, since he served unhappily for a while on GM's board, may have had that company in mind when he said recently, ''Lack of leadership is the biggest problem we have in making this country competitive.'' GM puts a major effort into developing executives. The executive committee spends two days a year examining the careers and prospects of the promising managers in the company. The most senior people at GM go off $ on retreats to talk about leadership. But GM's efforts have not worked. Perhaps because GM didn't get hurt as much by foreign competition as Ford and Chrysler, it didn't have the same motivation to change. Perhaps because GM did so well for decades on the decentralized but rigidly controlled management organization basically established by Alfred Sloan in the early 1920s, change comes harder. ''GM still worships at the totem of Sloan,'' says Harvard's Zaleznik. ''You have to burn your totems. It's not disrespectful.'' The problem may be compounded by the fact that for three decades all but one of the company's chairmen have been financial types rather than auto- manufacturing men. The incumbent, Roger Smith, has made the right gestures. He accomplished the first major reorganization of GM since Sloan. But Smith, another finance man, has failed to create a vision that would grab people at the company. He has failed to bring home the necessity of change to GM's entrenched thousands of bureaucrats, failed to impart either a sense of the threat at hand or the new possibilities that await the industry. GM is still lacking the intangibles of leadership. In banking and finance, Citicorp's John Reed made his mark by one courageous act: taking a big loss on Third World loans by setting up a $3-billion reserve and thereby implicitly acknowledging that these loans probably aren't going to be repaid. Note the willingness, even eagerness, to break with the past, even if it meant a potentially wounding break with those who had led the organization before. Reed's decision could be taken as a repudiation of his predecessor, Walter Wriston, who had led the bank into taking big risks overseas. ELSEWHERE in financial services, despite the changes wrought by deregulation, leaders seem few. Says Windle Priem, a managing director of Korn/Ferry International, the executive search firm: ''There are very, very few change agents to choose from.'' When he gets a major search assignment in banking, he says, ''I'm always looking at the same handful of people.'' One of the change agents he has placed in the past: Frank Cahouet, who helped diversify Security Pacific Corp., then turned around Crocker National Corp., and, after a spell at the Federal National Mortgage Association, was recruited in June to rescue the failing Mellon Bank Corp. Most companies still haven't got the message that new times may just require a new type of individual in the corner office. Gerard Roche, chairman of Heidrick & Struggles, another headhunting firm, says that most of his clients are not interested in visionaries when they ask him to find a new chief executive. ''They want tough-minded, battle-scarred veterans of competitive wars,'' says Roche. Fine, perhaps, for the short term. Maybe such veterans can stanch the bleeding or prevent a takeover. But are they likely to nurture the seeds of growth, the sources of competitive strength for the next war, and the war after that? It's difficult enough for even the most effective leader to keep the spirit of renewal alive. Says Phil Smith of General Foods: ''There are periods of ferment when things change, and then fairly stable periods like the 1960s, when change must be ratified and implemented. Large organizations can't tolerate constant turmoil.'' Or can they? Walter Ulmer, president of the Center for Creative Leadership, raises a tantalizing possibility: ''There's no evidence you can keep an organization creative, although I think it is possible with a lot of energy and time.'' And, he might add, with the right leader.