When two heads are better than one. How to make having Co-CEOs a feature and not a bug.
Motley Co-CEOs Ilana Lever and Cecily Motley.
When starting a business with your cofounders, it can be instinctive to agree to share everything equally. We have previously discussed why splitting equity down the middle is not necessarily a good idea. The preference for equality can also lead you to declare yourselves Co-CEOs. Whether this is right for the business is rarely questioned. It is easier to assume that as founders, you have joint responsibility and power within the company. Therefore, you must all be CEOs. By choosing a CEO, founders mistakenly believe they have to make one founder more important than the others. Fear of unleashing ego and emotions is why startups often defer and end up with Co-CEOs when there may be a better way.
Co-CEOs are not a new thing and not just for startups. In recent years giants such as Oracle, Salesforce, WeWork, and Netflix have operated with joint CEOs. For these huge corporations, the usual reasons are 1) Succession planning; either when bedding in a new CEO alongside a more established leader or when more than one candidate is deemed worthy of the role. Or 2) When the job is to be too big for just one person.
For startups, it's not the same. Sure, there is lots to do; however, you do not have to deal with legacy issues or an uncertain board of directors. The most common challenge is that many startups do not see the value of having a single CEO. It is often not until a business is ready for funding that the question of a CEO even comes up. For many investors, the traditional wisdom is that there should always be just one captain of the ship. This view is not just historical dogma; even the most modern incubators such as Techstars strongly advise against having joint CEOs.
So what to do?
The first thing to understand is what the function of the founder CEO is. For most mature businesses, the CEO is where the buck stops. They set the strategy, have the final word on the big calls and are the organisation's leader. In a startup, the role of CEO is much more functional. Rather than making all the calls, their responsibilities are more about dealing with investors, leading fundraising and talking to the press. The most significant distinction is that they are the founder that thrives on the business challenges more than the technical, product or marketing decisions. If you think about it like this, it may be easier to assign the CEO title. Remember, the CEO is not the most important person in every business area, but they are for investors and communicating the vision of the business.
The other thing to stop and ask is, do all founders want to be CEO? In our Rightfounder test, we ask this question and what we usually see is 1) that either one (or more) individuals strongly want to be CEO while others in the team have little interest or 2) all founders want to be CEO. In the first instance, it usually is straightforward to decide who should be CEO. It's where more than one person has a strong desire to be the business lead, more work is needed, and you may end up with a structure incorporating Co-CEOs. Where nobody wants to be CEO (this happens more often than you would think), we advise the businesses to consider a more commercially minded cofounder to join the team.
Whether you have a joint or single CEO structure, the most important thing you need to do is agree on the individual roles and responsibilities.
As above, the CEO is often the commercial business lead; however, in your startup, Sales, Finance, Marketing, Product Development, Operations, People, and Technical roles are also all critical. Assign responsibilities for each area of your business and decide who has the final say in decision making in each domain.
It is also crucial to determine how you will handle disagreements on strategy and tactics. You must have a process to resolve conflicts. Be aware that assertiveness can override agreeableness, so find a way to remove emotion when deciding who is right. It would be best if you also were willing to trust and empower founders to make the calls in their specialist areas.
Lastly, if you feel that having a single CEO is not in keeping with your founding team's skills, ambitions, and values, make having a Co-CEO a strength, not a weakness. Build a structure where you can make better decisions as a team while still moving your business forward quickly. Know this is not easy to do, but it can be worth the effort.
Whatever the size of your business, Co-CEOs can work; however, be sure there is a good reason for having this arrangement. Everyone being equal is not the correct answer. It has to be due to the mix of the skills, personality and motivations of the founding team. Whatever your structure, and regardless of who calls themselves a CEO, you need agreement on roles and responsibilities. Everybody must know what is expected, both of themselves and each other.
Co-CEOs in the wild
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Since their inception three years ago, the two founders, Cecily Motley and Ilana Lever have operated as joint CEOs. I met with Ilana to ask how that arrangement serves them best.
"Firstly, we are lucky to have each other. Aside from our complementary skills and personalities, the highs and lows are too intense to do this independently.
We have been Co-CEOs since we founded Motley just over three years ago. While it is not for everyone, we see it purely in the framework of what the CEO actually does. For us, in this configuration, we bring all the different elements of a great CEO to the table. I am an ex-management consultant, so I am trained in strategy and am a commercial thinker. Cecily is a real visionary. We bring a balance to the commercial and artistic motivations for the business. Having those two voices at the table is a powerful thing. If one of us had more authority, this balance would break down.
It's hard to say whether it's right for other businesses, but it's right for us. The key to making sure it works is to have a rigorous process to follow to make decisions. We are lucky that we nearly always agree on the ultimate priorities for the business and share very similar values. Where we have strategic differences, we generally compromise. What compromise means for us is that we try out the two different approaches on a small scale and use that test to prove which is the right choice. We also have a strong network to mediate or help us decide on the best solution. Our success in managing our business and our relationship is all down to this systematic approach.
We know a lot of happy founders and a lot of unhappy ones. What I think sets the happy ones apart from the unhappy ones is that they have clearly defined roles and have systems for conflict resolution. I believe this to be true whether they have single or joint-CEOs.
The only downside to our structure is that sometimes it can take a little longer to make a decision. We recognise that but believe the benefit of being able to make better decisions means it's worth it. Again, we use our processes and systems and outside advice to speed things up whenever we can.
We understand that Co-CEOs are not for everyone. We had an early-stage investor who offered us a term sheet on the proviso that we nominated someone to be the sole CEO. We decided to pass. It was not practical. We realised there was no good way to do it because we make our CEO decisions together. If we made a change, it would have been inauthentic as we would just be doing it to please them. We also realised that if this issue was important, there would undoubtedly be others, and they would not give us the freedom to run our business as we thought best. We now have investors who have never even brought the topic up. Their focus is purely on our performance.
Whenever challenged on how we manage the business, Cecily and I respond simply that it works, so why would we change. Like everything else we do, if we find it is no longer serving us, we will change it. As the business grows and the shape of the company changes, we will look at it again, but for now, it works great."