On Thursday, Oracle’s Larry Ellison unexpectedly announced that he was stepping down from his CEO post and naming not one, but two CEOs to replace him. Co-president and CFOSafra Catzandco-presidentMark Hurdwill share the role of CEO.
Oracle isn’t the first major company to tap more than one CEO at the same time. Chipotle, Whole Foods, and Deutsche Bank are also run by two CEOs. Samsung even has three of them. But why?
The co-CEO system is nothing new, though it is certainly uncommon. Previous implementations suggest that having more than one chief executive can help a company accomplish more by delegating different roles to each head. But the system is certainly not for every company.
Sometimes referred to as “two-in-the-box,” the unusual structure can provide “increased scope and broader capacity,” Joseph L. Bower, a management professor at Harvard Business School, told Business Insider.
Bower, author of “The CEO Within,” thinks that co-CEOs can better lead certain companies.
“If one CEO is on a global tour of facilities, the other can deal with the government at home,” Bower offered as an example. “It also increases the range of talents in the box. A visionary can be complemented by a hands-on operator.”
At Oracle, for example, Katz will oversee manufacturing, finance, and legal decisions, while Hurd manages the sales, service, and global business units.
Some companies keep the founder in place and bring in an experienced executive to share the role. Both Chipotle and Whole Foods have kept the founder as one CEO, and both men remain the heart of their respective companies. That dynamic has shown that keeping a founder at the top as an inspirational lead and partnering them with a leader with more management experience can yield great results.
Steve Ells founded Chipotle in 1993 and served as its singular CEO until 2009, when he promoted Monty Moran to the same position from Moran’s role as president and COO. That same year, Chipotle’s annual earnings jumped 67% from 2008. Moran honed his delegation skills when he led a team of lawyers at the firm Messner Reeves, and those skills have complimented Ells’ passion for culinary creativity.
Having dual CEOs is more common in countries like Germany, said Bower, where “collective management is a tradition of sorts.” German companies Deutsche Bank and SAP both have two CEOs (though SAP co-CEO Jim Hagemann Snabe will step down to the supervisory board in May). German automaker Daimler AG only recently ended its run under co-CEOs.
Jack Zenger, CEO of the leadership research firm Zenger Folkman, agrees that the co-CEO structure could work well in some situations, such as a temporary solution after a big merger or when a CEO wants to groom their successor.
But the management structure also comes with significant downsides. Even when the two CEOs determine which duties to split, it’s only natural that “one person is going to be held primo and the other person is going to play a secondary role,” says Zenger. “To me, it seems like it raises an unnecessary set of issues that aren’t really sustainable in the long run.”
For example, having two CEOs of a small business, like online eyewear retailer Warby Parker’s Neil Blumenthal and David Gilboa, could help grow the company by splitting major responsibilities, according to Zenger. But it could also create problems with clients who may be confused about who to consult about a major decision.
And though Zenger admits that having another executive to discuss something with before approaching the board is a benefit of the system, he thinks that co-CEOs risk overly complicating things by having to report to each other constantly.
Bower also recognises that most companies that try the system will feel the strain of divided command. “It takes great discipline to consult when appropriate, be decisive when needed, and not blow up the arrangement when one’s partner has violated an aspect of the arrangement,” he said.
In 2008, for instance, media company Martha Stewart Living Omnimedia named Wenda Harris Millard and Robin Marino as dual CEOs. But the arrangement dissolved in less than a year, reportedly due to disagreements at the top.
Despite the risks, Bower thinks that the U.S. may be gradually moving toward a leadership culture more akin to Germany’s, in which co-CEOs would not be such a rarity. “[A]s we strengthen the non-executive chairman’s role, as well as the lead director, we may — in effect — be moving in that direction,” he said.
Zenger, on the other hand, believes that the history of business leadership weighs too heavily against the co-CEO structure becoming mainstream anytime soon. “After centuries of experience, it’s usually easier if there’s one person who has the ultimate say,” he said.
This is an update of an article that previously ran.
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