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American Association for Physician Leadership
American Association for Physician Leadership

Is It Time to Consider Co-CEOs?

by Marc A. Feigen | Michael Jenkins | Anton Warendh

August 15, 2022


Summary:

“Two heads are better than one.” It’s a familiar expression—and one that businesses might want to heed. The authors’ study of 87 companies led by co-CEOs showed that those firms tended to generate better returns than did peer companies with a sole CEO.



For a long time the prevailing wisdom has been that companies need to be led by a single strong leader. Over the years some companies have put co-CEOs in charge, but not often. Of the 2,200 companies that were listed in the S&P 1200 and the Russell 1000 from 1996 to 2020, fewer than 100 were led by co–chief executives. Moreover, during that period, especially in times of stress, some of those jointly led companies performed notably poorly—among them Chipotle Mexican Grill, the software company SAP, and the mobile phone pioneer Research In Motion (which became BlackBerry in 2013).

Many observers don’t find this surprising. Installing two decision-makers at the top, the theory goes, almost invariably leads to trouble, in the form of conflicts, confusion, inconsistency, irresolution, and delays. Marvin Bower, who built McKinsey, famously warned Goldman Sachs not to have co-CEOs. “Power sharing,” he said, “never works.”

Except that it often does.

We recently took a careful look at the performance of 87 public companies whose leaders were identified as co-CEOs. We found that those firms tended to produce more value for shareholders than their peers did. While co-CEOs were in charge, they generated an average annual shareholder return of 9.5%—significantly better than the average of 6.9% for each company’s relevant index. This impressive result didn’t hinge on a few highfliers: Nearly 60% of the companies led by co-CEOs outperformed. And co-CEO tenure was not short-lived but more or less the same as sole-CEO tenure—about five years, on average.

We’re not suggesting that all organizations should rush to adopt a co-CEO arrangement. With so little public company data available to us (under 100 companies in 25 years is not a lot), we have to use caution. For firms in stable industries facing only moderate disruption, having a single CEO may still be the better option. But today the job of running a company has become so complex and multifaceted, and the scope of responsibilities so great, that the co-CEO model deserves a fresh and close look. This is particularly true for companies shifting decisively toward agile-based management and for those embarking on technology-based transformations. “I love the model,” says Jeff Horing, a managing director at the private-equity firm Insight Partners, who oversees a portfolio of more than 350 technology companies.

Under the right circumstances, it’s remarkable how much co-CEOs can do. They can bring deep and diverse competencies, backgrounds, and perspectives to the job. They can be in two places at once—literally. They can form a left-brain/right-brain partnership. One CEO can focus on technology-driven transformation while the other attends to more-traditional aspects of the business, such as marketing, finance, and operations. One can lean inside, the other outside. Together they can master the increasingly complex corporate functions that CEOs today are expected to manage, including investor relations, HR, and regulatory compliance. If one half of the duo leaves, the other can ensure a stable transition. And co-CEOs double a company’s opportunity to diversify the C-suite.

Significantly, two chief executives can also keep each other grounded. In the words of Chip Kaye, for 17 years a co-CEO of the private equity firm Warburg Pincus (and now its sole CEO), the power-sharing arrangement helps leaders “keep their egos in check.”

So what are the right conditions for an effective partnership?

To answer that question, we studied everything we could about how co-CEO leadership has—or hasn’t—worked at 10 companies that have tried the model in recent decades: Chipotle, Goldman Sachs, the Harris Poll, Jefferies Financial Group, the computing technology company Oracle, the investment management company PIMCO, Research In Motion/BlackBerry, SAP, Unilever, and Warburg Pincus. Our work has led us to conclude that nine conditions can enable successful co-CEOs.

Note that not all the organizations we studied in depth have actually given their top leaders the title of “co-CEO.” Indeed, in the business world at large, the co-CEO relationship is far more common than the title—many companies are effectively run by co-CEOs, even if they’re not called that. For example, Jefferies Financial Group has been jointly led for 20 years by a president and a CEO. “Although we have separate titles,” says Brian Friedman, the president, “we work together seamlessly as equal partners.”

Here are the key factors for success:

1. Willing Participants

This sounds self-evident but is vitally important: Co-CEOs need to be seriously committed to the idea of a partnership. According to Eric Schwartz, who was a co-CEO twice at Goldman Sachs (first for its Global Equities Division and later for its Investment Management Division), “the only way co-CEOs works is if both parties say, ‘This is OK. I’m going to have more time, more diversity of opinion. I’m going to be willing to compromise and communicate more because I see the benefits of having two heads.’”

The model fails when, as Insight Partners’ Horing puts it, “one wants to run the whole thing.” That was the case at the Carlyle Group, a global private-equity fund. There former co-CEO Kewsong Lee outlasted his counterpart, Glenn Youngkin. “They were very different personalities,” one former Carlyle executive recently told the Financial Times. “It was like mixing oil and water.”

2. Complementary Skill Sets

When boards today think about CEO succession, they often face a confounding choice between two talented leaders who have very different areas of expertise—both of which are necessary at the top. As one head of HR told us, speaking about two candidates for the CEO job at a Fortune 100 company, “I wish I could merge them.”

Co-CEOs can be a solution to this frequent quandary. At the Harris Poll, for example, John Gerzema and Will Johnson report that by sharing the top role, they can “divide and conquer.” Johnson leads HR and the business units, while Gerzema is responsible for new business, client service, and innovation. Each plays to his strengths. At Warburg Pincus—which was run jointly for two decades by Lionel Pincus and John Vogelstein—Pincus raised the funds and Vogelstein invested them. The more distinct the skills of each co-CEO, the better: When their skills overlap, conflict becomes more likely.

3. Clear Responsibilities and Decision Rights

It’s also important to create separate areas of control, responsibility, and decision-making. “The key to success,” says Bill Janeway, a former vice chairman of Warburg Pincus, is “complementary domains of recognized competence.” That philosophy has guided Manny Roman, PIMCO’s CEO, in his partnership with Dan Ivascyn, the company’s chief investment officer, who is in every sense but title a co-CEO. Today Roman oversees marketing, sales, and operations while Ivascyn leads investing. Neither treads on the other’s turf. A co-CEO at another firm described his working relationship this way: “Most of the time we know what’s mine and what’s his. When we don’t, we get together and say, ‘You take this,’ or ‘I’ll take it,’ or we both take it and resolve it together.”

4. Mechanisms for Conflict Resolution

When they disagree, most co-CEOs simply shut the door and hash things out. “Even if we were at loggerheads,” Schwartz recalls of his time at Goldman Sachs, “we still communicated openly. We would sit down and talk about it, try to agree, and if we just couldn’t get there, we enjoyed enough mutual respect to simply let the person who felt more strongly win the debate.” Other co-CEOs have used board members or outside facilitators to surface conflict and work through it. At Oracle and SAP the co-CEO model was supported by a strong executive chairman who could settle disagreements and provide focus. To function, co-CEOs must agree up front on an approach to conflict resolution.

5. An Appearance of Unity

Even when co-CEOs have a difference of opinion, they need to speak to their employees with a common voice, because disagreement among coequals can lead to confusion and indecision throughout the organization. “People are insightful,” PIMCO’s Ivascyn told us. “It doesn’t take much to question authority.” If co-CEOs disagree in front of the team, it’s important that they return later with a solution. When Research In Motion was under extreme stress and its co-CEOs could not agree on what direction to take, the company foundered (although it rebounded after changing its leadership, its strategy, and its name). At Jefferies the top team reports to both leaders, who make decisions together. “Speaking to one of us,” Friedman says, “is considered speaking to both of us.”

6. Fully Shared Accountability

Both co-CEOs must be accountable for overall performance. Both should sign the quarterly financial statement, and they should be compensated equally. At one company we studied, the co-CEOs insisted that they be paid the same—“to the penny,” as one of them told us.

7. Board Support

Co-CEOs need ongoing, nonintrusive backing from the board. The independent directors should have an individual annual check-in with each chief executive to make sure there are no boiling-over points, but the board shouldn’t meddle. It’s human nature for a director to want to take one co-CEO or the other aside and quietly ask, “How is it going?” But that can lead to division. In addition, boards should avoid becoming a court of appeals that one co-CEO or the other turns to whenever a conflict arises. Disagreements should be brought to the board only if the two CEOs do so together.

8. Shared Values

Co-CEOs fail when they have different values. To succeed, they need a relationship based on honesty, respect, trust, and compromise.

9. An Exit Strategy

The co-CEO model can be hard to unwind, so developing a clear approach for changing course is vital. At Warburg Pincus, splitting the CEO role worked for years, but when the time came to shift back to a single chief executive, the firm didn’t have a good playbook. One option to consider is making it officially possible for any co-CEO to say, “No more” and then leave on good terms, in accordance with a previously agreed-upon plan.

Some companies have found it effective to toggle back and forth between the two models. Workday, for example, had co-CEOs from 2009 to 2014, then shifted to a sole chief executive, and in 2020 announced that a duo would again share the reins.

. . .

Many people are leery of co-CEO arrangements because of a few disaster stories. But the occasional misfire does not mean that the leadership model itself is flawed. After all, having a single CEO is no guarantee of success either.

Given the pace of change and disruption we’re likely to experience in the years ahead, we can expect more and more companies to try installing co-CEOs—and we hope the guidance we have provided here will help them succeed. Agile organizations are particularly good at managing ambiguity and blurred boundaries, so they may find that the co-CEO model is especially easy for them to implement and sustain. The approach will never be for everybody, but if your company is moving away from command-and-control leadership, as more and more organizations are, putting two leaders at the top may make a lot of sense. The idea is hardly new: Co-consuls ruled ancient Rome for nearly 500 years. And some businesspeople have long understood the merits of sharing power. As John Whitehead wrote of running Goldman Sachs with John Weinberg back in the 1970s and 1980s, “Two heads were better than one.”

Copyright 2022 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.


Marc A. Feigen

Marc A. Feigen is the founder of Feigen Advisors LLC, a firm serving CEOs of leading global enterprises.


Michael Jenkins

Michael Jenkins is a partner at Kearney, a global management-consulting firm, where he
leads the strategy and transformation practices in the Americas.


Anton Warendh

Anton Warendh is the director of client service and operations at Feigen Advisors LLC, a firm serving CEOs of leading global enterprises.

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