Are two heads better than one?

What do Oracle, Google, Netflix and Spotify have in common? All four companies have co-CEOs.  

This is something new in the techno-sphere that for the longest time elevated and venerated the founder/CEO as superstar. The venture world spoke religiously of betting on the founder, the visionary, the Moses who would lead the team to its rightful destiny. There might be technical co-founders, but there could never be co-CEOs.  

Now, all of a sudden there is an upstart theory that is beginning to support the theory that two heads are better than one, unless one is a Muppet two-headed monster from “Sesame Street.”

The reason is that it is becoming nearly impossible to find all the technical, cognitive, operational, managerial, finance, leadership and deal skills in one person.  

Shared leadership does not always work, and Michael Watkins, professor at IMD Business school, has written about the pros and cons of this arrangement.  His primary theme is that “the answer lies in attitudes and execution, not the concept.”

Co-leadership addresses the core issue by creating a deliberate division of skill sets. If it works well, then the two leaders are “leveraging their individual expertise in complementary domains,” Watkins writes.

Watkins relies on strong data from his research: “A study of 87 public companies led by co-CEOs between 1996 and 2020 found that they generated average annual shareholder returns of 9.5%, better than the 6.9% average for each firm’s relevant index.”  

Watkins cites three common characteristics necessary for a successful relationship. He discusses Intel’s “two-in-a-box” model that paired technical leaders with commercial ones. They married engineering excellence with sales and marketing.

Goldman Sachs had two CEOs in the 2000s. Gary Cohn and Lloyd Blankfein acted as “integrated thinking partners,” challenging assumptions and stress testing ideas before they were disseminated to the rank and file.

This sounds great. Maybe. Watkins then points out patterns of failure. Top of the list is “decision ambiguity.” The corollary to this problem is favorable forum shopping. In other words, if Mom says no, you go to Dad for a better interpretation of why the window and the baseball were actually not on a collision course but rather were more affected by the rotation of the Earth.  

In our little AI company, my co-founder is the more charming, and also frankly a pushover. His idea of a negotiation is, “he asked for $200 so I said yes.”   

Another risk is “competing power centers,” Watkins writes. Political science and military tactics suggest that a single central source of influence and authority is fundamental for achieving stability or control. For further amplification on that principle, please refer to the current administration.

Watkins does offer a few principles for success to the co-CEO model starting with a leadership charter. Define the roles, write it down. Divide responsibilities by expertise, not convenience.  

“Establish a unified external interface.” Mom and Dad stand united, at least until little Bobby goes to bed. He encourages regular private meetings. No public disagreements in front of the children.

The elephant in the room, however, is “design clear conflict resolution mechanisms,” Watkins writes. Tie does not favor the runner in corporate decisions making.

Use the board of directors to assure alignment, not as umpires calling balls and strikes. Co-leadership can offer a sustainable competitive advantage if it is deliberate in its design and implementation. (“Physician, heal thyself,” Luke, 4:23.)

And so, voila, I have put my ego in a closet and have created co-CEOs in our little AI company. One of the co-founders is clearly the technical visionary and leader, not to mention that he has been thinking and working in artificial intelligence for 12 years. So, giving him the clear authority in the area where he is an expert was obvious. 

I would not normally make a public announcement like this, but I offer it because knowing when to step down, step aside or step alongside is one of the major blind spots for founders in startups.

Those three letters, power and authority. The lure of it being “your baby” is strong. Resist it. Play the long game and think clearly about the trajectory of the company.

Finally, remember that being a CEO is not a sinecure. You can be fired, and on that subject, I know whereof I speak.

Rule No. 803: “You just keep thinking, Butch; that’s what you’re good at.” —The Sundance Kid

Senturia is a serial entrepreneur who invests in startups. Please email ideas to neil@askturing.ai