Dual CEO Structure – A Review in Technology Industry- Focus on Wipro

Dual CEO Structure has always been perceived to be a weak structure. Many firms have adopted this with mixed results. Empirical research points out the fact that firms with Single CEO Structure have generated more ROI compared to dual CEO structure firms. Despite this well known fact why do the boards and management adopt the co-CEO model? Situations like the M&A where the acquired or merger company CEO has to be included in the management for various reasons, sudden CEO exit to avoid further exits from the company boards try to give two people the opportunity to lead jointly and in times of crisis large organizations with massive geographical presence also adopt dual CEO model. Historically Dual CEO Model has been a success for technology companies like Research in Motion which adopted this model since 1993 and Motorola adopted it in August 2009, and SAP adopted in February 2010. Wipro adopted this model in April 2008 and moved away from this model in January 2011.

Research in Motion is one company that has grown tremendously under the joint leadership of Jim Balsillie and Mike Lazardis since 1993 and it is still doing well despite facing some heat from Apple in the recent years. Mike Lazardis strengths lie in the engineering and product development side and he recruited Jim Balsillie to look after the corporate finance and business development part of the business. There was clear understanding about their strengths and each focused on their part which helped the tremendous growth of the company.

SAP is another that used the Co-CEO structure many times in its existence. SAP had Dietmer Hopp, Henning Kagermann and Hasso Plattner in 1998, Leo Apotheker and Kagermann in 2008. Henning Kagermann was sole CEO from 2003 till 2008. Leo Apotheker became sole CEO in May 2009 till Febrauary 2010 and Bill McDermott and Jim Hagemann Snabe were again appointed joint CEOs. SAP has been very successful with its joint CEO structure as the company has done well during the joint CEOs tenures. The success can be attributed to SAP German Corporate Structure that reward consensus management and management boards also play a crucial role in controlling the CEOs and their performance. But we have to see how the two new non German CEOs perform together and deliver.

Motorola was a different case. The company adopted this model in 2008 as the company was planning to spin off the wireless handset division into a separate entity. Motorola lost $4.3 billion from 2007 to 2009. Sanjay Jha was set to become the CEO of the separated unit. Greg Brown will take over rest of the businesses. At last in January 2011 the company’s assets have been divided between two separate and independent companies to create Motorola Solutions and Motorola Mobility. Motorola Solutions will be led by its President and CEO, Greg Brown, while Motorola Mobility will be headed up by its CEO and Chairman, Sanjay Jha. The joint CEO model ended for Motorola as planned earlier in 2008 in 2011.

Wipro Chairman Azim Premji announced a dual CEO management structure in April, 2008. Girish Paranjpe and Suresh Vaswani were appointed as joint CEOs. Premji announced this as the best way forward to leverage the depth of leadership and tide over the recession due to financial crisis. But in January 2011 Wipro dismantled the dual management structure and appointed a single CEO T K Kurien. Wipro's performance over the last four to five quarters prompted rejig at the top. One of the comments made by Premji was “It will be foolish to ignore the financial services, healthcare and energy (and utility) business”. This speaks a lot about how dual structure didn’t work as vertical break up show that Financial services, communication, media, telecom and technology were Girish responsibility where as Vaswani was also responsible for healthcare, energy, utilities, manufacturing, retail, BPO, Enterprise applications etc. so both missed out on those verticals financial services, healthcare and utilities that drove revenues at the rival firms TCS and Cognizant technology.

Cognizant is very close to Wipro and is expected to displace Wipro as India’s number three IT services company. The gap reduced significantly in terms of quarterly revenue and Analysts feel that Cognizant will surpass Wipro in coming quarters. Another reason was Wipro failed to adopt aggressive approach during the downturn and company was looking to survive by looking internally in terms of freezing nrw hiring and also attrition that led to shortage of resources. Rishad Premji son of the founder who is actively involved in the business is also expected to take over as future CEO and the new CEO will lead him to the future succession. Both Wipro CEOs have lost the sight of market evolving post recession and let the competitors overtake.

Dual CEO Structure is best suited at an entrepreneurial level, where a team of people are working together. But it is difficult to work when a company is in a stable to growth stage and it can only be considered as stop gap arrangement. It also involves a lengthy decision-making process with contradictory viewpoints as two people often work in different ways. Wipro case highlights that both CEOs missed opportunities in critical verticals where competitors are doing exceptionally well and also failed to evolve the best strategy during downturn and allowed the competitors to come near. Both the CEOs also failed to adopt new Client engagement approach and sales and marketing teams failed to acquire new clients. We have to see how this shakeup will work for Wipro and how it regains its number three position if at all it loses it to Cognizant.

Discussion points:

1.      When should Dual CEO Structure be adopted and for how long?

2.      How to make it work? How to overcome the coordination related issues?

3.      How to tackle the delay in decision making process?

4.      How should employees be involved in dual CEO structure?