Thursday, July 03, 2008
The power of two
Wipro sides with Peter Drucker to appoint joint CEOs.
Are two heads better than one when it comes to succession? Much depends on which school of thought you subscribe to. The great Napoleon Bonaparte's leadership maxim was: "Better one mediocre general than two brilliant ones". On the other hand, the late Peter Drucker wrote in The Practice of Management, "…90 per cent of the trouble we have with the chief executive's job is rooted in our superstition of the one-man chief."
Wipro chairman Azim Premji recently toed the Drucker line of thought when he appointed Suresh Vaswani and Girish Paranjpe as joint chief executive officers of Wipro Technologies, the company's global information technology arm.
Both Paranjpe and Vaswani have been inducted into the Wipro board along with chief financial officer Suresh Senapathy. Premji also announced the appointment of Sudip Banerjee, currently president of the enterprise business solutions, as director on the advisory board of PremjiInvest, the private equity outfit that channels Premji's non-Wipro investments.
The flurry of changes comes after the lull of three years that followed the exit of vice-chairman Vivek Paul in 2005. "We are transitioning our leadership by adding a pair of joint CEOs, who together give twice the leverage to seize opportunities in the IT, research and development and BPO services sectors. Today, the opportunities are endless and this structure provides us with ‘the power of two'. It gives us dramatically greater breadth and depth to leverage all opportunities. This is not 1+1; it is the power of 2," reasons Premji.
Working as one
The two — Vaswani and Paranjpe — are responsible for jointly shaping the strategy, branding initiatives, people motivation and the bottom line. Both heads will roll if anything goes wrong. Wipro Technologies follows the matrix structure with a straight-line (primary) and a dotted-line (secondary) reporting to the joint CEOs.
For instance, all heads of geographies will now report to the global head of sales and operations who, in turn, will report straight-line to Vaswani and dotted-line to Paranjpe. The finance, human resources and recruitment functions will report to the joint CEOs and into their respective corporation functional leaders: Suresh Senapaty and Pratik Kumar, who is corporate vice-president, HR.
Says Kumar: "We did not go through the grand debate of one CEO versus two. We, however, did believe that leadership was to come from within." The structure, he notes, is a reflection of the strategy and choice of leadership. Vaswani and Paranjpe have worked with each other for over 15 years and are said to have complementary styles.
"It's not enough to do the same thing. We were looking at consolidation in the ranks to introduce cohesiveness and we had to address the changing nature of client relationships. There was indeed a compelling reason to transform and grow," says Paranjpe.
Wipro Technologies has consolidated its 1,500-odd technology and business consultants across domains and verticals under a single head. Consulting accounts for 4 per cent of Wipro's revenue. The consulting practice will directly report to Paranjpe.
Wipro also took a long look at its existing verticals and re-classified the business units (BUs) based on broader industry classifications that allow logical leverage and provide each unit with the benefits of scale and scope to grow rapidly.
It reorganised product engineering services (PES) as a service line to realise its true potential and also address the embedded, real-time very-large-scale integration. The new structure also caters more effectively to the system software needs of BUs like manufacturing, healthcare, energy, utilities, retail, transport, services, communication technology, media and technology.
Moreover, while Wipro Technologies was primarily focusing on the telecom sector, it will now cater to all verticals and leverage its research and development capabilities across all segments.
It poses a challenge
Companies with co-CEOs are rare. To begin with, a company ends up paying twice the salary for the same job, so it does tend to bump up compensation costs. Besides, will a co-CEO structure work, or will it inevitably disrupt corporate balance and fuel dissent at the top as well as down the line?
There are some success stories. Jim Balsillie, the co-CEO of Research In Motion (RIM), which makes Blackberry phones, is responsible for driving corporate strategy, business development, marketing, sales, and finance.
Mike Lazaridis, who founded the company while studying at the University of Waterloo, is the company's president and co-CEO, responsible for product strategy, research and development, product development, and manufacturing.
SAP AG named Leo Apotheker as the co-CEO alongside Henning Kagermann. Apotheker was earlier SAP's deputy CEO when Kagermann was the CEO. At Google, co-founders Sergey Brin and Larry Page, and CEO Eric Schmidt declared in filings to the Securities & Exchange Commission that they ran the company as a triumvirate. Almost 10 per cent of family businesses in the world are said to have co-CEOs.
However, power sharing is not easy. The biggest stumbling block in the path of a two-CEO structure is the possible lack of trust. It is a very delicate arrangement; you cannot establish rules and guidelines to make it work. A cursory look at the history of companies too does not support ‘The power of two', as joint CEOs are sometimes referred to.
There are several high-profile cases globally where the joint CEOs experiment has failed. John Reed and Sandy Weill fell out after the historic merger to create Citigroup and the former left the corporate world for a while, only to rejoin as the interim CEO of the New York Stock Exchange. Consumer goods giant Unilever had experimented with two co-chairmen.
Sapient flirted with the model, but slowing growth and issues between co-founders Jerry Greenberg and Stuart Moore saw the latter depart.
In mergers, the talk of dividing the role so that the new entity can benefit from the capabilities of two experienced leaders is seen as a flimsy veil for the real goal — pushing a deal through. Many a time, it is impossible to effect a merger unless egos are satisfied.
However, given the increasing complexity of the world, companies may have to align with Drucker, as Wipro has, so that accountability and responsibilities at the top of the organisation are shared.