"If I were secretary of state, I would use legislation to compel all schools to join clusters, organised either by local authorities or by these new regional commissioners," he said. "You say to the outstanding heads, `You're going to get more money for doing this, you'll be judged exceptional by Ofsted, so you must make sure that all schools in your cluster are working effectively.'
"I wouldn't wait for it to happen by osmosis, I would actually force schools to join clusters."
The change would allow Ofsted to inspect the performance of federations, rather than grading individual schools, he said - a major shake-up of the way the watchdog operates.
Sir Michael revealed the plans ahead of a meeting with education secretary Nicky Morgan, in which he is expected to press for extra money to pay for the "exceptional headteacher" proposal.
"If we're going to do anything about the long tail of underachievement, we have to crack this problem," Sir Michael said. "We're not going to rise up the Pisa [Programme for International Student Assessment] tables until this issue is sorted out. I'll be talking to the secretary of state about financially incentivising it.
"We'll say you are an absolutely exceptional headteacher, running an exceptional school, supporting some of the toughest schools in the country to turn them around, and hopefully the secretary of state will say, `That's a great idea, here's some money to do it.' "
Ofsted has come under sustained attack over the past year from politicians, policymakers and teachers over the quality of its inspections. While robustly defending the inspectorate as a whole, Sir Michael (pictured, right) has made key concessions to his critics, including announcing that individual lesson observations will be scrapped.
He has also vowed to press on with reforms to the way that "good" and "outstanding" schools are inspected and to end the "cliff edge" inspections of the past.
"There's no point in sending teams of inspectors to inspect when we have all the data and information on those schools," he said. "We will go into good schools more regularly and have a dialogue with the heads and the teachers, but we'll have masses of data, which will tell us about progress and outcomes and performance-related pay.
"Where we see a steep decline, where things are really unravelling, then we'll call for a full section 5 inspection. But if the head is aware there's a problem, has a plan to sort it out, then it won't go into `requires improvement'. There will be a lot less boom-and-bust, cliff-edge inspection."
Sir Michael, former headteacher of Mossbourne Community Academy in East London, also commented on the "Trojan Horse" allegations in Birmingham. He labelled Birmingham City Council "a disgrace" for not listening to headteachers' complaints earlier, since subsequent inquiries have found evidence of pupils being exposed to extremist views.
Clusters of schools would improve oversight, which should be a "burning issue" for the education secretary, Sir Michael said, and the plans would make it more difficult for similar situations to arise in future.
"I went up to Birmingham to speak to teachers, and their confidence was shattered because their work had been undermined," he said. "They had been bullied, intimidated and forced out in accord with how the governors felt the school should be run along Muslim lines."
Sir Michael's proposals received a guarded welcome from headteachers' leaders, who supported plans for more clusters but raised concerns about bringing in new laws and cautioned against yet another Ofsted category for school leaders.
Russell Hobby, general secretary of the NAHT headteachers' union, said the "exceptional" grade would lead to school leaders being judged, rather than schools.
"I am not sure that ever-accelerating categories of greatness is really what the education system needs," Mr Hobby said. "I don't think you need to pay heads to turn around failing schools. The best incentive would be knowing Ofsted was not going to turn up for the next two years."
`Headteachers aren't in the job for the money'
Tony Draper, headteacher of Water Hall Primary School in Milton Keynes, responds to the cluster proposals. The school and his leadership are rated outstanding by Ofsted
Some schools will find it very difficult to work together, as their whole outlook might come from opposite ends of the spectrum. You have to have a shared vision and values and that may not be possible with the schools in your local area. It might, however, be possible to have a relationship with schools in other parts of the country.
I would be more than happy to work with other schools, but I wouldn't claim to be an outstanding headteacher. I tell my team all the time that having such great people around me makes me look good.
A good school is about having those people around you to work with. And that is the issue that arises with going into a struggling school: are the people willing to embrace the support you are there to offer?
You can't just go in and say "do this and do that" - you have to immerse yourself in the school and with the people. It's about building relationships, and that will be very difficult if you are only in the school for limited periods.
Of course, money will incentivise some people, but not all headteachers and certainly not me. What incentivises me is seeing people engaged; it's about the community and making sure the pupils get the best education possible. Generally, headteachers are not in the job for the financial aspect of it.