When two heads might just be better than one
Investors are wary, boards rarely go for it, but Deutsche Bank has hired joint CEOs. Nick Clark discovers why it may not be such a crazy idea
Two heads are better than one, the old adage goes. German financial powerhouse Deutsche Bank will hope that holds true after announcing the appointment of co-chief executives. This sort of dual management structure has led to disaster for firms in the past, but there just might be method in Deutsche's madness.
There are few examples of joint chief executives at major global companies, and even fewer who have made it successful. Sean O'Hare, partner at PricewaterhouseCoopers, said: "It is not something I have come across a lot but having two chief executives with complementary skills can be positive for a company. It is understandable. The scale and the complexity of the job has increased."
What's the thinking at Deutsche? It has moved to replace chief executive Joseph Ackermann with two existing board members: investment banking head Anshu Jain, and Juergen Fitschen, the head of the German business.
Christopher Wheeler, analyst at Mediobanca Securities, said as a rule he found companies with two chief executives "unattractive" but not only is this move a political one, to keep a senior German speaker in the top job to soothe domestic tensions, it is one that gives Mr Jain, the non-native, time to win the "hearts and minds of the whole bank".
Mr O'Hare said that with the joint chief executive role, "the ideal is that one will be departing after three or four years, with a natural transition towards a single chief executive".
It was all smiles from the new bosses this week. Yet precedent in the aggressive world of banking, is not on their side, as one expert pointed out.
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A consultant said: "The crucial factor is to make sure there is clarity both internally and externally over who has primary responsibility for which areas and issues, how they divide things up, what the decision-making processes are".
On Wall Street, Jon Corzine, co-chief executive of Goldman Sachs alongside Hank Paulson, was forced out in January 1999. A year later Citigroup's John Reed lost a similar power struggle. He had shared duties with Sandy Weill after the pair completed the merger of Citicorp and Travelers. The board was ultimately forced to choose between them and went with Mr Weill.
The strategy, and failure, is not limited to the US. A partnership between John Mack and Oswald Grübel at Credit Suiss fell apart in 2004. One corporate governance expert said: "Equal roles can lead to tension if they have dramatically differing views on strategy."
Yet not all joint chief roles collapse after a few years. The most high-profile current partnership is at smartphone group Research in Motion (RIM), which makes BlackBerrys. The company has enjoyed startling growth under the stewardship of joint chairmen and chief executives Jim Balsillie - in charge of the marketing aspect - and Mike Lazaridis, the brains behind the technology. Mr O'Hare said: "That is the other way for a partnership to work, if the two executives play to two different sets of skills."
However, 2011 has proved tough for RIM. Products have been delayed, the share price has dropped 60% and it has twice warned on profits. The spotlight fell on the management with shareholders calling for the chairman and chief executive roles to be split up. Others have questioned why the firm needs two chief executives.
Mr Balsillie and Mr Lazaridis agreed to a review of the structure that will report in January. But they defended their dual role. As "partners in the business for almost 20 years" they had built a company with a turnover of $20bn a year. What is the logic of blaming the co-heads structure for the failure now, but not crediting it for the success before?
It is not the only electronics company to appoint dual heads. In 2008, Motorola appointed Greg Brown and Sanjay Jha. And SAP is feeling the benefits of two heads. The world's largest enterprise software group is run by Bill McDermott and Jim Hagemann Snabe. The pair, appointed in February last year, also have very different strengths, with one focusing on investors and marketing, the other on technology and operations.
In the UK, splitting the chief executive role is rare. Yet earlier this month, Richard Branson's Virgin Group re-shuffled its management. Stephen Murphy, chief executive since 2004, is set to stand aside in favour of co-chiefs.
Ultimately, whether it is co-chief executives or a cadre of top managers, major corporations need a collegiate atmosphere to function.
Odd couples who break even
Deutsche Bank: Anshu Jain & Jürgen Fitschen
Deutsche believes that it takes two to replace Josef Ackermann after a decade in charge of the bank.
Indian-born Anshu Jain, who is a UK citizen, has grown a powerful investment banking franchise, which generates 75% of the company's profits.
He is expected to take control of the operational side of the bank, while his counterpart, Jürgen Fitschen, the head of the German operation, will most likely oversee issues in the company's home market.
Mr Jain, a keen cricket fan, is in the process of learning German to help pave the way for him to eventually take over the role in full.
SAP: Bill McDermott & Jim Hagemann Snabe
The co-chief executives of German software giant SAP were brought in to pick up the pieces in the wake of Leo Apotheker's departure last year and turn it into a "happy company".
Almost 18 months on and Jim Hagemann Snabe and Bill McDermott have stabilised the group and they back their differences as a crucial part of their success.
Mr McDermott, a charismatic sports-mad American, deals with customers and knows his home market well. Mr Snabe, from Denmark, looks after product development and knows the intimate workings of the company.
RIM: Mike Lazaridis & Jim Balsillie
Turkish-born Mike Lazaridis was the brains behind the technology that powered Research in Motion, while his co-chief executive Jim Balsillie helped it sell.
Mr Lazaridis, who moved to Canada when he was five, won a prize for reading every science book in his local library and went to study electrical engineering at the University of Waterloo.
Mr Balsillie, a keen sportsman, studied in Toronto before earning an MBA from Harvard Business School.
The partnership was forged in 1992 and has grown a $20bn-a-year business, although it faces challenges in 2011.