SmartAB™ Wisdom #10: Follow This Simple Recommendation & Win — It’s Easier Than You Think
In one of my recent posts: “Two Heads Are Better Than One” — I concluded the following:
· Running companies with Co-CEOs brings many benefits. It lowers the anxieties of a single CEO and allows for productive utilization of both: Experts and Generalists
· In similarity, running the BODs and Advisory Boards with Co-Chairs may help all the corporations, large and small — to enhance their ESG brand
· And especially at larger companies, such mandated changes can significantly lower the Gender and Race Gaps, and boost competencies at many levels…
And I also said that unless CEOs resemble Moses and can part water, BODs must insist that all CEOs have a competent Advisory Board in place and choose the right Co-CEO among such advisors. After all, seeing the big picture is equally important as paying attention to domain-specific details…
The pressure to be seen as a “know-it-all” oracle is severe. And the concept of a single CEO in today’s complex business environment — becomes an unrealistic and outdated model to hold on to.
I often compare the decision-making process to… negotiations. A single CEO “negotiates” with himself/herself all the time. Bringing Co-CEO onboard adds another dimension and increases the desired solution space…
There is no shortage of opinions, of course, describing the pros and the cons of using Co-CEOs. However, simple yet pragmatic guidance on how to choose the right candidate is often missing.
Below, you will find my recommendations on how to choose the Co-CEOs — without guessing, rolling the dice, or blindly accepting the recommendations of your friends, advisors, BODs, or VC partners. After all, they may not understand all your concerns and hesitations as well as you do…
Co-CEOs — The Good, The Bad, And The Plain Ugly…
Bringing Co-CEO on board is not a new concept. Many companies already tried such a management structure with various degrees of success — including:
· Netflix
· Salesforce
· Oracle
· Blackberry
· Citibank
· SAP
· Groupon,
· Deutsche Bank AG
· Chipotle Mexican Grill
· Samsung
· The Standard Bank Group, and so many more…
And although the famous proverb: “The Two Heads Are Better Than One” is cited freely and at will — let’s not forget an ancient quote attributed to Aristotle that says the same: “The Whole Is Greater Than The Sum Of Its Parts”.
Yet, as expected, there is plenty of cynicism around and one can find phrases such as: “If you have two CEOs, you have no CEOs” or: “Too many cooks spoil the broth” — being frequently cited…
So, I truly welcome the appearance of formal studies on the above. As we move from the anecdotes and opinions toward analytics and data — the writing is on the wall: Data gives us the facts; Facts give us information; Information gives us Knowledge; Knowledge turns into Wisdom, and Wisdom offers ultimate Advice leading to a better decision…
For example, in the recent HBR Review — the authors conclude: “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.
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”…
The Pros
I find the following observations made most often about the benefits of the Co-CEO structures:
· Complementary Sets Of Skills and Fewer Skill Gaps
o Combining diverse areas of expertise and knowledge
· Elevated Maturity
o By adding a “seasoned” Co-CEO to the mix
· Better Defined Responsibilities
o And effective mechanisms for resolving the differences of opinions
· Greater Mutual Respect And Trust
o Resulting in better oversight and teamwork
· Built-In Redundancy And Shock Absorption
o To reduce or mitigate the worst effects when the CEO dies, quits, or is being replaced
The Cons
Similarly, the most frequent objections center around the following:
· Inability To Make Faster Decisions
o When the speed and agility count
· Confusion In Front Of Shareholders And BODs
o Of whom to blame for failures and missed opportunities
· Limited Need Outside Of Special Situations
o Which disappears when companies complete the M&A activities or grow and no longer resemble startups
· Higher Costs
o Attributed to doubling the CEO salaries
· In-Fighting
o Especially, before completion of the M&A activities
And as reported by chiefexecutive.net, according to a survey of 111 co-CEO partnerships, what prompts establishing Co-CEO leadership structures breaks down as follows:
How To Choose The Right Co-CEO?
So, if my post convinced you to have a Co-CEO in place and you decided that it’s time to split the load at the top — what is the simplest way to find the right person? Well, it’s easier than you think.
I recommend that as a CEO, you look at your Advisory Board and ask yourself a single question: who among my advisors I would choose to be my Co-CEO? Only a few CEOs are lucky enough to have a great co-CEO in mind, already. The ones that don’t, can choose the co-CEO from the pool of advisors they worked with for the last 3–6 months…
Chances are that after spending 6 months with your advisor solving problems and identifying opportunities — you both learned to trust each other. After all, trust can’t be promised, it must be earned. And you probably also both agreed never lie to someone who trusts you, and never trust someone who lied to you…
And ideally, your Co-CEO would also deliver both: Competence AND Integrity. Competence without Integrity makes you deal with a self-serving professional. Integrity without Competence means that you’re being served by a well-meaning but inept individual. So, you are ALWAYS looking for both…
In Conclusion
Remember my earlier quote by Aristotle: “The Whole Is Greater Than The Sum Of Its Parts”? So, in a spirit of such a quote, it would only make sense for the two Co-CEOs to identify and bring… at least 3 untapped revenue streams and profitability…
And it’s not just the Revenues. Profitability is the key word here, as revenues without profitability can be deceiving… In a long run, you can’t be just a little bit profitable the same way you can’t be just a little bit pregnant. The lack of profitability is not sustainable…
It is the 1999 dotcom crash that taught us the importance of profitability. And the VC crash of 2022 is once more — emphasizing the same. The experience of going through such VC bubbles and surviving the downturns, counts.
When VC bubbles burst, the GPs disregarding the dotcom wisdom will be unmasked as mediocre clowns of a VC circus. Simply put, when the big tide floats all the ships, it is easy to focus on the company’s revenue growth without paying too much attention to the lack of profitability.
But the high valuations of unprofitable companies won’t last long. Tracking only the revenues without the profitability — is as dangerous, as it is deceiving…
I can’t emphasize enough the importance of such an observation. And to drive my message across, I created the following hypothetical example:
· Imagine that your objective is to demonstrate 2 KPIs to investors: Revenue Growth and the growing number of New Customers
· Hence, you are raising a $100MM round to do so
· There is nothing that prevents you from paying new subscribers to your service $2 to subscribe
· In exchange, you are asking them for a $1 subscription fee
· Lo and behold, such a fake growth strategy just generated $50MM in new revenues and added 50MM new subscribers to your service. Not a bad growth figure and nothing to sneeze about the new revenues in place…
Well, I am not suggesting that many companies deceive their investors as per the above example. My objective is to alert investors to the fact that the lack of due diligence may generate false expectations — with dire consequences when the bubble bursts…
Chances are that companies with TWO Co-CEOs would never engage in such shenanigans in the first place. And yet, regretfully, I hear too many push-backs from the early-stage startups.
Essentially they say that they love the idea of having a competent Advisory Board in place — and use it to choose the much-needed Co-CEO. However, in most cases, they simply can’t afford it.
And this is EXACTLY why I designed and introduced the low-cost SmartAB™ subscription model — specifically planned to overcome such shortcomings.
And I even coined the following phrase to drive my message across: “When the going gets tough and the companies don’t know how SmartAB™ can help — is REGRETTABLE. Knowing but not utilizing good advice — is UNFORGIVABLE”…
For More Information
Please see my additional posts on Linkedin, Twitter, Medium, and CGE’s website.
AI Boogeyman
You can also find additional info in my book on amazon: “AI Boogeyman — Dispelling Fake News About Job Losses”, and on our YouTube Studio channel… Thank you.
I’m In The Business Of Joining Advisory Boards…
The current economic downturn caught many CEOs by surprise. They never experienced the dotcom bubble and could benefit from the KEEs (Knowledge, Experience, and Expertise) offered by experienced CEOs who did…
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When the going gets tough and the companies don’t know how SmartAB™ can help — is REGRETTABLE. Knowing but not utilizing good advice — is UNFORGIVABLE…
Thank you. I would love to help you and am looking forward to welcoming you as our paid subscriber… The benefits of paid subscriptions are summarized in the table below:
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Disclaimer: The opinions are my own. If you require professional gudance about taxation, accounting, or legal issues — please contact qualified lawyers and certified accountants. Thank you.
