Sometimes the Economist gets is right, sometimes it gets it wrong. Last week one of the last of the authoritative business magazines put its foot in its mouth with a lightweight and poorly considered column about the value of co-CEOs, with a specific reference to SAP’s recent appointment of Bill McDermott and Jim Hagemann Snabe to replace departed CEO Leo Apotheker. Where to start with this rare example of a major journalistic miss?
Let’s start with some fact-checking. The column refers to research from “last year” in a journal cited as the Journal of Business Studies that claims that there is no particular upside to a co-CEO structure in terms of return on equity. Unless my search engine fails me (and Google Scholar was the engine I used), there is no journal that goes by this name. What does exist is the Journal of International Business Studies, which has no such article in its archives from 2009, and the International Journal of Business Studies, which hasn’t published an issue is three years. There is also something called the Journal of Business Studies published out of Ryukoku University in Japan, but I’m pretty sure that’s not what the author meant in his citation, considering the bulk of its publishing seems to be in Japanese.
Strike one: unverifiable data from an unfindable publication.
The column goes on to cite Oracle as an example of a company that has thrived with a single CEO structure, with Larry Ellison as the “boss” in charge. The columnist misses the fact that Oracle may have a single CEO, but it has two co-presidents, in the person of Charles Phillips and Safra Catz, both of whom bring to Oracle an extraordinary bench strength that has made the company’s M&A strategy a genuinely impressive success. Okay, so their titles are president, not CEO, but, in terms of their day-to-day roles in the company, Phillips and Catz are much more co-CEO’s, and Larry much more the chairman, than their titles would indicate.
Strike two: misapplied example that actually disproves the writer’s point.
And then there’s the cultural issue of German corporate structure, particularly SAP’s, and its ability to leverage a co-CEO function better than a US or UK company would. Companies like SAP are governed by a management board which tends to reward cooperative, consensus management more than most hierarchical US companies would be able to manage. With management-by-consensus as the backdrop, the fact that SAP has had considerable success with the co-CEO model in the past augurs well for its ability to leverage this model in the future.
Strike three: lack of historical and cultural context fails to elucidate mitigating factors in SAP’s favor.
There’s more to be disappointed in regarding this column, such as the fact that SAP is now much more structurally similar to Oracle than the column would imply. The role of supervisory board chairman Hasso Plattner has never been stronger since the recent management changes, and his working relationship with Snabe and McDermott will more resemble that of the Oracle triumvirate than otherwise. But by now I think my point is proven.
Except for this last point: The author’s claim that tandem bikes are hard to ride shows as much knowledge about bicycling as it does about co-CEOs. Tandems use less energy while leveraging the power of two riders propelling a single frame, they have less wind resistance than two bikes, and they provide an easier means for communication and decision-making between the riders. Sure they take getting used to, just as riding two bicycles in close formation takes getting used to.
Just as reading a poorly written and poorly researched column in the Economist takes getting used to.