Two CEOs: Better than One or Double Trouble?

Ann All

In my household, neither my husband nor I like to make big decisions, so we spend an inordinate amount of time talking things over. And at least it keeps us from blaming each other for poor decisions. But I suspect few chief executives are as wishy-washy as we are, and a lack of accountability isn't exactly a good thing in a corporate environment. Which is why some folks question the decision to appoint co-CEOs to lead a company.

 

When SAP CEO Leo Apotheker decided to resign from the company last month after the board decided not to renew his contract, SAP appointed Bill McDermott, the head of sales, and Jim Hagemann Snabe, its head of product development, as co-CEOs. SAP is no stranger to the dual leadership model, as I wrote last February in a story about co-CEOs. SAP's co-CEOs over the years have included Dietmar Hopp, Hasso Plattner, Henning Kagermann and Apotheker. In an interview with ZDNet's Dennis Howlett, Doug Merritt, a member of SAP's executive council, positioned the company's "collegiate style of leadership" as a strength.

 

Struggling MySpace also appointed co-CEOs when CEO Owen Van Natta abruptly left the company, just 10 months after he was hired to revitalize the social networking site. Both leadership changes are mentioned in an article in The Economist that takes a mostly dim view of co-CEOs.

 

The article runs down some of the common reasons for appointing co-CEOs:

  • To smooth transition after a merger by giving executives from both companies a key role at the table.
  • To help companies retain talented folks who might resign if they didn't get the top job.
  • To smooth relations between relatives in family-owned businesses.

 

It also mentions some of the knocks against the co-CEO model:

  • Two words: power struggles.
  • Tough for boards to hold a single person accountable for business decisions.
  • Paying two CEO salaries instead of one.

 

The article also notes that research published last year in the Journal of Business Studies found that share prices of 44 firms that appointed co-CEOs between 1993 and 2005 performed no better than those of similar companies with a single leader.

 

Co-CEOs appear to be more common in the technology industry, perhaps because many founders remain directly involved with day-to-day business or perhaps because there is a generally a clear split between technologically minded product managers and finance or marketing types. I found both to be true at several startups I featured in my story on co-CEOs.

 

At Houston-based of NutshellMail, provider of a free service that manages users' e-mail and social-networking accounts through any existing e-mail account, David Lyman, who earned a degree in computer and telecommunications engineering and who worked as an IT consultant for Accenture, handles project management and all technical issues and relationships. Co-CEO Mark Schmulen, who studied international relations and economics at the University of Pennsylvania and was an investment banking analyst for JP Morgan Chase, focuses on finance, investor relations, marketing, customer support and business development. Diverse skill sets are a must in co-CEOs, Schmulen told me:

Having two of the same types of people as leaders doesn't really buy you anything.The only reason to do that is because you don't have enough hours in day, and to help with that you can just hire managers.

The co-CEO model works best if the chiefs are friends, Schmulen said:

Although we rarely have conflict, when we do, we are both quick to forgive and move on. This is why a strong personal relationship is so important. As best friends, we have a long history of resolving problems, moving on, and not taking things too personally. At the end of the day, we both understand that we have the same interest at heart.

Other advice offered by Schmulen and my other story sources:

  • Spend some time going over organizational structure. Sit down and define your organizational processes and determine who has responsibility for each process.
  • Share the organizational breakdown with staff so they won't be tempted to try to play co-CEOs against each other.
  • Recognize when you are over-discussing issues and taking too long to make decisions.
  • Bring in outside advisers if and when you reach impasses when trying to make joint decisions.

 

The Economist suggests shared leadership benefits from having a power broker behind the scenes. Hasso Plattner, one of SAP's founders and head of its supervisory board, plays that role. At Indian services company Wipro, Chairman Azim Premji exerts considerable influence although co-CEOs Girish Paranjpe and Suresh Vaswani run the company.



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