In the “next gen” leaders of Gen Z and millennial led companies, co-CEOs are starting to emerge more frequently
Typically, in public companies a co-CEO structure is what a board does when they may not want to clarify leadership, cannot make a decision, or may want to slow CEO decision making.
There has been a long history of companies attempting a co-CEO structure and quickly abandoning the model.
In 2020 Keith Brock stepped down from his role as co-CEO at Salesforce only 18 months after taking on the role alongside Marc Benioff. Benioff has stayed on as the sole CEO.
SAP abruptly scrapped the co-CEO structure only 6 months after the appointments of Jennifer Morgan and Christian Klein with Morgan departing.
SAP had tried a co-CEO structure twice before without success.
Oracle, Citigroup, and Blackberry are other examples of companies that have experimented with the dual CEO role and eventually abandoned the model.
Charles Elson, the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware notes that “Two heads are not better than one, when you have two CEOs, there are inevitable clashes between the two. One will dominate and the other has to go. They always end up with one person being CEO.”
The median duration of co-CEO partnerships in the Fortune 1,000 is 2.1 years. Compare that with the median tenure of Fortune 500 CEOs last year: 4.9 years.
Oftentimes the decision to split the CEO role is perceived to come from trying to please multiple constituencies – whether it be after the merger of two companies or because the board is split on which candidate has the right skill set as well as the talent and energy to be the public face of the company. Sometimes the split is along an inside facing operational leader and the more externally facing leader.
This negative view of dual CEO’s is when it’s a “shotgun wedding” scenario where two people that have been inserted into a role as a “force fit” do not represent the new generation of companies that are co-founded together and there is true complementarity between the strengths of founders.
There’s a special value in a co-founder led company (vs a long-time public company). Where the two leaders who are deeply intertwined and dedicated to scaling and building the company and both have the capacity to grow, learn and forward build their skill set at an equal pace. This can be a true magic elixir.
A great example of this structure working well is at Allbirds, an eco-friendly shoe company valued at $1.7B that is run by co-CEO’s Joey Zwillinger and Tim Brown.
Zwillinger focuses on financials while Brown is zeroed in on product planning, marketing and manufacturing. Their complimentary skill sets prove that sometimes two heads are better than one.
Another example of co-CEOs working well together is at GoBrands, the born digital convenience category leader. The company was co-founded by Rafael Ilishayev and Yakir Gola when they were sophomores at Drexel University.
The fact that GoBrands co-founders were friends who came up with the concept together, ensures that there is a strong foundation and a clear division of responsibilities.
Likewise, the CEO’s of Warby Parker, the online glasses retailer, have shared the CEO role for a decade and credit their success to being in constant communication and the foundational principle that they are equals who are unconcerned with titles.
For board members who think about having “two in a box” or co-CEOs it is important to remember that trying to force a fit of two people will have a very different outcome than co-founders who start a company together, grow together and thrive together.
The “watch out” for directors is to continually mentor and forward build both CEO’s so they both continue to thrive, grow, and learn at a continuous pace so that you can avoid potentially having to select one over the other.
It’s all about transparency, mentoring, coaching and engagement. This is a key component in 2021’s modern governance philosophy where board members have to be an asset and an accelerant to the business.
Hopefully, you don’t ever need to transition the CEO due to illness, but as we saw recently with the tragic passing of Marriott CEO Arne M. Sorenson, due to pancreatic cancer, this scenario can happen, and the board should have a plan in place
When it comes to position transitions, it creates some interesting issues, which boards need actively and annually review. Some other internal questions to ask are:
- What is your succession plan in the case your CEO becomes ill/unavailable?
- Who is your next in line candidate to hand the reigns over to in a crisis?
- How strong/ready is the bench?
- Should we consider an interim scenario of 2 in a box
Marriott announced Mr. Sorenson had been diagnosed with pancreatic cancer in May 2019 and in early February 2021 it was announced that he would be stepping away from fulltime oversight of the company.
In this example of a CEO having to step away due to personal issues, it can be extremely beneficial to put in place a short term interim management structure with two acting co-CEOs who are long time members of the company and deeply understand the company and to keep the culture vibrant through a transition.
In dual founder scenarios, the co-CEO structure can be an accelerant for a company with an equal partnership of peers are really complimentary and are really a unique strength.
In a distributed virtual world it is even more incumbent that directors (particularly in high growth companies) are leaning in and helping their co-CEOs scale with the right amount of processes and infrastructure in place. It’s important to balance and keep the founder’s entrepreneurial zeal, preserving the important, special qualitative attributes of their culture.
Having a co-CEO can be a fit in unique circumstances such as co-founders but isn’t generally a success as a board mandated fit.
Boards need to think carefully before instituting a co-CEO structure and must monitor closely to see if it’s really working well and is additive. In those unique, magical circumstances where it’s cofounding a Co-Ceo who are thriving, boards can focused to support and mentor both of the co-CEO’s to help them to continue to grow at the same rate to maximize their potential and effectiveness.