The Co-CEO Model: Risk or Reward? – CEOworld Magazine

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Success is getting tougher in a competitive and uncertain world: Today’s business environment is a cocktail of competition and uncertainty. High performance is hard to come by, as indicated by a Forbes study of 400 top global executives, with 90% saying they don’t believe the current environment is business-friendly. With increasing complexity, disruption and change, has the role of CEO become too big for one person? The founder and namesake of David Martin & Company believes that many decision-makers in this role “almost never work.” Still, there are many cases where co-CEOs may be more viable than conventional wisdom suggests.

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Enter the Co-CEO Model, a New Approach to Leadership

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A co-CEO model is an advanced approach to leadership where the decisions and responsibilities of a chief executive are shared between two counterparties. Only eight companies in the Fortune 500 operate with this model. According to Harvard Business Review, sharing responsibilities based on functional or technical expertise can be valuable in industries or in specific situations where a company may experience rapid growth, change and disruption, or high volumes of transactional activity. Additionally, Chief Executives magazine claims that co-CEO models often arise in companies with multiple founders who maintain a close working and often personal relationship.

In a turbulent world full of pressure, the potential value is

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Due to the ever-increasing demands and pressures of CEOs, this shared leadership can allow co-executives to serve their company more efficiently and effectively. An HBR study conducted with 87 public companies shows that organizations led by a co-CEO performed better, with an average annual shareholder return of 9.5%, compared to companies with a sole CEO, which generated an average of 6.9%. Adopting this model can be valuable not only to the company as a whole, but to the leaders themselves. Benefits include:

Better Mental Health: According to an article in Fortune, having someone who understands the struggles of the role well can relieve the daily stress and pressure of a CEO. Sharing the workload with an equal peer, who has access to the same information and holds equal rights, can improve a CEO’s work-life balance. Take advantage of individual strengths and play of ability: Co-CEOs from different backgrounds can take advantage of each other’s strengths while dividing up tasks and responsibilities. Control can be divided either functionally to allow for more practical management or a strategic focus so that a leader can lead innovation. At the same time, the other runs the day-to-day operations. Better Decision Making: When each co-CEO has total ownership of specific business areas, the expertise they can develop can accelerate the decision-making process. An article in WorkLife claims that checks and balances reduce the risk of poor decisions, and that two leaders improve innovation because they can push for new ideas to cover all bases. Building a Collaborative Culture: Shared leadership crafted at the top of the organization establishes a strong foundation for collaboration among employees, as they feel encouraged to share responsibilities and work with each other. Seeing how effective it can be at the leadership level. Better Succession Planning: According to Financial Review, the model can make succession planning easier by the company’s success as a co-CEO. The successor may be better equipped to manage the organization by seeking advice from the current CEO and placing him in a position to make quick executive decisions.

Co-CEO’s Case Study Provides Valuable Lessons Learned

Theoretically, the co-CEO model provides several benefits for the organization. However, the real test of a model’s viability is whether it can stand up to individual personality and external factors once it comes into play. SAP hired Model as co-CEO with Bill McDermott and Jim Snabe in 2010; It was brought back again in 2019 with Christian Klein and Jennifer Morgan. Both the systems were successful in implementation. However, the company decided to return to the single-CEO model in 2020 due to the COVID-19 pandemic. “More than ever, the current environment requires companies to take swift, resolute action, backed by a clear leadership structure,” the organization said in an article in the Wall Street Journal.

Another interesting case is luggage and travel accessory retailer Away. The founding CEO, Steph Corey, planned to step back into the role of executive chairman and bring in Stuart Hasseldon as the new CEO. However, Corey changed his mind and remained with Haselden as co-CEO. This arrangement did not inspire confidence, as the model did not arise from a foundation of cooperation and mutual buying and selling. Co-CEO should be the plan and not the result.

The model has been used temporarily for a specific strategic purpose, as seen with WeWork, who under co-founder Adam Newman appointed a co-CEO to oversee the stabilization period after a rocky period. . Research in Motion (RIM), now BlackBerry, employed the co-CEO model for 20 years. Two leaders, Jim Balsillie and Mike Lazaridis, led the company during the most successful period in its history. While they failed to predict the turnaround in the smartphone market, which cost the company dearly, the co-CEO model can hardly be blamed, as many other companies with a sole CEO have made the same mistake.

Based on these examples, the co-CEO model may be a valid option for some companies, environments, and circumstances.

Success is all about setting up the proper infrastructure from the very beginning

While for many organizations, the value added by a co-CEO may far outweigh the losses or perceived risks, it does not guarantee that the model will be successful. A co-CEO’s ability to succeed goes beyond business situations and even the candidates themselves. The proper infrastructure to support success includes:

Alignment of Company’s Mission, Vision and Values ​​- Having a Co-CEO with shared core values ​​and vision for the company’s future is the first factor the company must correct. Without this alignment, leaders are likely to struggle over the “right” vision and direction of the company, which dramatically reduces decision effectiveness and leads to a vague strategy and lack of focus that may pervade the organization. Is. Complimentary Skills and Personality – One of the most attractive benefits of the co-CEO model for organizations is the ability to extend the term of leadership and “divide and conquer” at the CEO level. To do this successfully, the co-CEO must have diverse and complementary skills, experience, and personality. As the overlap for these characteristics increases, the risk of conflict also increases. Clear Roles, Responsibilities and Powers – Clear spans of control, responsibility and accountability are critical to ensuring a productive co-CEO dynamic. Deliberate separation by task helps to ensure that authority and responsibility are clear throughout the organization and minimizes conflict arising from overlapping focus. Each CEO can play to their strengths, which can lead to better results for the business. Established Conflict Resolution Framework – With two leaders comes inevitable conflict, and the key is to keep it constructive. One possibility is that an outside board member or a strong chairman provides and assists in the resolution, similar to how SAP managed its model. Otherwise, establishing a formal and mutually agreed process document for resolving leader impasse ensures that decision efficiency and effectiveness can be maintained. Have an exit plan – It is wise to set up a formal succession plan early for the co-CEO to ensure that the arrangement can be dissolved with the least negative impact on the organization and its employees. Know yourself and check your ego at the door – self-awareness and the desire to set aside personal feelings and egos can be self-evident. Still, it’s vital to a successful co-CEO dynamic. Both leaders should be aware of counter-productive behaviors and prioritize the needs of the company over personal conflicts. Foundations of Trust — “After all, it’s about trust — a successful team is rooted in that. The best partnerships of any kind are built on respect and a desire for flexibility,” says Lauren Gores, co-CEO of Summer Friday The co-CEO should be transparent about the issues, challenges and perspectives. Trust should be established to make decisions that align with the goals of the company. that we know well, so we don’t waste time going back and forth. We just make decisions and move on.” Inward and outgoing communication – Right-sharing leaders must be willing to engage in collaborative behavior and communicate openly, honestly and respectfully. Equally important is employees and To establish a clear message to the public, present a united front and maintain decision clarity.

The right model for any organization ultimately depends on the situation

In some situations, industries, and organizations, the co-CEO model can have far more benefits than drawbacks. If your industry is particularly susceptible to change, is fast-paced and growth-focused or requires more substantial technical knowledge at the top leadership level, a co-CEO model presents several advantages. After all, just having a CEO doesn’t guarantee success for a company, and the business challenges we face today require more creative solutions to secure a company’s success.

Co-authored by Lance Mortlock (EY Canada Managing Partner, Energy and author of Disaster Proof) and Karun Gautam (EY Canada, Senior Manager, Energy).
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