Thoughts on the Co-CEO

I’m involved with a couple of companies in which two founders use a “co-CEO” title. This has forced me to do some thinking about whether or not this is inherently bad.

One of these companies has been working with my friend and an experienced CEO who is named Tom. Tom challenged this company with two statements, which I’ll paraphrase below.

1. “In all my interactions with your company, you (founder #1) are clearly behaving as the CEO, and you (founder #2) are clearly behaving as the CTO. Why do you resist it?”
2. “I challenge you to think of a single company with ten million dollars in sales that has two co-CEOs.”

Let’s start with the first challenge. In this particular case, Tom was dead right. One of the founders clearly behaves like the CEO. He thrives on the business issues and defers to his co-founder on the technical issues. He is the voice of the company and is perceived by the world as “in charge”, even though he works hard to present an outward image that his partner is his equal. The other founder clearly takes the lead on technology and product related issues. The other company that I’m involved with that has co-CEOs is not such a clear cut case – they’re both leading equally and neither is the CTO.

I actually don’t think that the problem is that there are two CEOs. In my opinion, this is often just a symptom of a deeper and much more important problem.

While I’m doubtful that there are any really good reasons to have co-CEOs, I’m positive that there are some bad reasons. One bad reason is the desire to make equal founders feel equally important. If the founders are not dysfunctional (in both of these cases, they’re not) then they should be able to easily work as equals and assume different outward facing titles.

In my first company, the three founders each took on the title “Partner” for the first year or so. We did this mostly to express our loyalty to each other, and to avoid the whole issue of titles. We quickly realized that David Brown was obviously best at dealing with contracts, negotiations, partnerships, and the like. Most importantly, he was naturally perceived by others as the person in charge mostly based on his personality, attitude, and assertiveness. The other two founders (Bob and I) decided not to worry about this and took on titles which matched our strengths – “VP of Business Development” and “VP of Research and Development” respectively, while David Brown became “President.” The key for us was that from the moment we made this decision about our outward facing titles and the perception we wanted to foster outside the company, nothing between us changed. We were still partners and we still discussed the smallest details of strategy, the business, or the product together. But from that day forward, we agreed that David Brown was primarily responsible for business issues, that I was primarily responsible for technology and product issues, and the Bob was primarily responsible for selling the product. As the years passed, this turned from a nearly meaningless discussion about “titles” into a functional necessity. We trusted each other to bring the big issues to each other. But most importantly, we trusted each other to start not to bring the little issues to each other, and to simply act within our areas of responsibility.

Another bad reason to use the co-CEO title is conflict avoidance. Inexperienced founders may think it’s “no big deal” and may use the co-CEO title as a way of avoiding the discussion altogether. This is clearly bad on a variety of levels.

The obvious downside of having co-CEOs is that it sends a signal to your customers, employees, and partners that there is no clear chain of command, especially in a small company. Much like children play mom against dad, you open yourself up to being played by people inside and outside of your company. If mom says no, try dad.

What’s worse, if you don’t decide who is ultimately responsible for the direction of the company it could cause a rift.

Finally, I think that having co-CEOs in an early stage company sends a signal that there may be internal struggle in general. Perception is reality, even when it’s not.

Some of the major mistakes that the co-CEOs from the movie identified from their experience were:

  • Not delegating responsibilities
  • Not creating sustainable organizational structures
  • Unclear communications channels between groups

Note that I’m not saying that just because there is smoke there is fire. The mere presence of co-CEOs doesn’t mean there is dysfunction. In fact, there are good answers to Tom’s second challenge. But in small early stage companies, it’s quite likely that the founders have some form of internal power struggle, a conflict avoidance problem, or have not accepted a clear chain of command and/or division of responsibilities. Any of those can lead to very real trouble if they become systemic; if not now, then as the company grows.

I was once in a meeting with a small company that refused to use any titles whosoever. It was pretty easy to tell who was in charge. The CEO is probably the one who talks first, most often, and is rarely challenged by the other people in the room. She’s the one that everyone is comfortable with and is respected enough to be the voice of the company. If you’re a co-CEO who’s not leading the business conversations, it should be telling you something.

If you have a deep trust and mutual respect with your co-founders, then it logically follows that titles shouldn’t matter to you at all. So the trick is simply to be honest with yourself, and to define and agree upon general areas of responsibility while maintaining mutual trust and respect. If you can’t do this, then give up now on being partners.

Once you’ve done that, then you pick titles that accurately reflect areas of responsibility. Most successful early stage companies that I know have two or three founders using titles such as CEO, CTO, and VP of Sales/BizDev. I think there’s a reason for this. Clear signals, clear division of responsibility, and clear trust.

What do you think? How do you perceive companies with two CEOs?

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