The image of a single corporate president who is charismatic and omnipotent within his company played a leading role both in the management literature as well as the reality of the 1990s. Nevertheless, that concept of leadership is giving way to another alternative: sharing responsibilities with other management figures, such as a co-president. Peter Drucker, the management guru, said that “ninety percent of the problems that the chief executive faces are due to our belief that the boss has to be just one person.” Building on this idea, Silviya Svejenova and José Luis Álvarez, professors at the ESADE and IE (Instituto de Empresa) business schools in Spain, have co-written a book titled, Sharing Executive Power: Roles and Relationships at the Top. Their work, the result of more than five years of research, demystifies the idea that power should be exercised by one individual. The book offers other alternatives, such as arranging for two or more people to share the job that has the greatest responsibility. In an interview with Universia-Knowledge at Wharton, Álvarez explains the keys to sharing power.
Universia-Knowledge at Wharton: What is the present state of corporate power structures, and how are they evolving?
José Luis Álvarez: The reform of corporate governance is leading to a homogenization of corporate political structures. Many of these reforms originated in Anglo-American institutions. This means that, on occasion, in countries such as ours [Spain], which has a different legal framework, practices and institutions, these reforms import — or try to import — some mechanisms that do not fit our system. This has been the case with the figure of the independent vice-president (the so-called Lead Director in the United States and the United Kingdom), proposed by Manuel Conthe, president of [Spain’s] National Stock Market Commission (CNMV). That concept was ultimately diluted as a result of the reactions of some of the most important Spanish companies.
Beyond the move toward homogenization in codes based on Anglo-American models, I find four key ways political structures are evolving in companies.
In the first place, there is transparency and publicity. Corporate governance is no longer an opaque area subject to the discretion of management. Some of the key elements that must be made public include the company’s own norms and constitution; the compensation of senior executives; the most relevant accounting figures, and so forth.
Second, power has been taken away from the office of the top executive (in Spain, frequently personified by the executive president and in the U.S. by the so-called CEO) by the administrative council. Power has become more collegial, and the exercise of power is an activity that is more political and discretional. That has some advantages — such as greater control — but also some disadvantages. For example, power can be excessively diffuse in certain contingencies — for example, organizational change — when the company lacks quick and convincing processes for making decisions.
The third element is the professionalism of the board members, and the independence of those members (which vary between 30% and 50% of the total seats on the board), in order to guarantee the objectivity and fairness of their decisions.
The fourth general trend is to conceive of companies as meritocracies, in which there is no room for privileges that are based on personal taste, trust and patronage, especially when a company is managing other people’s money.
Obviously, these trends are taking place first in companies that are publicly traded on the stock market in the United States and in Europe. But this is already spreading to private and family-owned companies that are not publicly traded. It is also arriving in Latin America, where there are relevant special characteristics.
UKnowledge at Wharton: What are the problems of having a single, solitary top executive?
J.J.A.: The main problems are those derived from the ‘solitude at the top.’ They involve several ingredients.
In the first place, being the only boss is always an irritant if there is one top executive and the company does not have a hierarchical leadership (although shareholders are managers more than they are bosses) to which it can refer things.
You are also more alone because whenever the top boss flaunts his or her power, subordinates begin to modulate their messages. They communicate only those messages that do not threaten or endanger their image, salaries or careers.
Finally, there is an objective problem: The job of the top leader is very complex — namely, attending simultaneously to innovation and to control, change and stability, both within the company and with external stakeholders, over both the short and the long term. No matter how brilliant a single person may be, one single person cannot do a satisfactory job of balancing so many types of conflicting demands.
UKnowledge at Wharton: There are cases of companies that have structures involving shared power. In what sectors and under what conditions have these structures been applied with the most success?
J.J.A.: Sharing power is more common than one might consider. There are many examples of companies where two executives jointly manage the company, and they are in a variety of sectors. That includes such companies as Google; Guess, the popular brand of clothing; Research-in-Motion (RIM), the company that launched Blackberry; IMAX, the company that makes spectacular films; and Fortis, which provides integrated financial services. In Spain, for several years, Banco Popular was managed by the two Valls brothers, Luis and Javier. Other companies that have functioned for a period of time — or are continuing to function — with a structure of shared power include Sapient, the rapidly growing consulting firm that focuses on innovation. In addition, there are co-CEOs in the investment banking sector. For decades, Winthrop H. Smith and Charles E. Merrill jointly managed Merrill Lynch. For three decades, Goldman Sachs has not only had co-chief executives, but also co-directors of departments on various organizational levels. And not long ago, that company named co-presidents and co-chief operating officers.
What’s more, structures of shared power occur very frequently in family-owned companies and in small and midsize companies in general, as well as in new business ventures. About 15% of all family companies have a structure of shared power, according to various conservative statistical estimates.
To sum up, all structures have advantages and disadvantages, depending on specific contingencies. Sharing power can work out well, despite the requirements that I noted earlier, if several people (such as several brothers) are the key shareholders or have created the company (such as two or three entrepreneurs), and they all have a joint claim to exercising power. However, above all, the natural environment for pluralized political structures is companies that are very complex, heterogeneous and differentiated. (For example, a bank that has a back office that is quite different from the front office, or a company that must combine innovation and creativity with control.)
UKnowledge at Wharton: When two people run the company, how should they work together and establish a working relationship?
J.J.A.: When two people jointly occupy the post of executive president — chief executive and general manager — they have to take great care in defining their realms of activity, both those that they do jointly and do separately. They must also establish relationships based on open communication and trust. In the course of studying many company case histories, my co-author and I have identified several basic rules for making shared mandates effective. Those rules are:
1. Carefully select the components of the tandem. It is important that the duo not only be complementary when it comes to the professional tasks they perform, but also, ideally, complementary in their emotional history. When it comes to job tasks, it is very valuable for colleagues to have resumes, competencies and contacts that are quite different from each other. However, when it comes to the emotional realm, it is important that their styles are not dissonant. In addition, the two partners must both have the same passion for success and for the future of the company.
2. Know the partner. If two executives are going to share their post in a sustainable way, they must have a close knowledge of each other from the outset. However, they must also continuously improve their understanding of each other and the way they handle their tasks and their emotions.
3. Plan for joint tasks. The partners need to decide which activities they must undertake separately, and which activities must be undertaken jointly. There has to be transparency regarding how the pair will undertake their tasks, so that various internal and external groups in the company have clear expectations and understand how to do their jobs. Generally speaking, when it comes to activities in which one of the members of the duo is better than the other — or has special familiarity — they must be decided by that partner. Meetings, production reviews and evaluations of business units or especially important negotiations normally require that both partners work together.
4. Speak with a single voice. The duo must communicate in a consistent way, both to external and internal stakeholders. Each executive must be able to speak for the duo, and both must be interchangeable when it comes to communication.
5. Resolve disagreements in private: To avoid confusion among subordinates, it is essential for the two top people to resolve their differences in private. The willingness and skills to resolve differences in a discreet and efficient way are critical for the sustainability of the tandem.
6. Share responsibility: When power is shared, the two partners must be jointly responsible for their behavior.
UKnowledge at Wharton: Is it feasible to establish broader groups of top leadership, such as three-person teams?
J.J.A.: Three-person teams are feasible, although they are more difficult to sustain than duos, which are usually stronger. The challenge of having three top leaders is the following: When a two-person team breaks apart, the cause is often quite visible, and people can see who was responsible. Moreover, nobody wants to be perceived as the cause of the rupture, since it is in the interest of both partners to try to make the partnership work. However, when you have three people, it is harder to know who is responsible for what.
Some two-person teams break apart, and it is sometimes a very emotional process. However, it is not about politics. To have a political problem, you need a minimum of three people: With three people, you can have alliances, political strategies, maneuvering, backstabbing, and so forth. That’s why three-person teams are more fragile.
Nevertheless, three-person teams can work out, when there are powerful reasons for staying together, such as personal affection among brothers (although not always the case), and within family-owned enterprises. For example, Loews was managed for a time by three brothers. Multi-person teams can also work out when the people who created the company share a lot of mutual trust, such as the three creators of DreamWorks – [Steven] Spielberg, [David] Geffen and [Jeffrey] Katzenberg. Nevertheless, tensions will appear once the company is strengthened and has grown. Companies that are more stable can also be managed by triumvirates (even if the power sharing between the three partners is unequal). Such was the case at La Caixa, the [Spanish] financial institution that was run for a long period of time by [José] Vilarasau (the strongest of its three leaders), and his two partners [Antonio] Brufau and [Isidro] Fainé (at the base of the leadership triangle).
