Case Study: Two Firms that Took the Co-CEO Plunge
Sourced by: PSMJ
In 2022, the Harvard Business Review analyzed the performance of 87 public companies whose leaders were identified as co-CEOs. “We found that those firms tended to produce more value for shareholders than their peers did,” HBR wrote. “While co-CEOs were in charge, they generated an average annual shareholder return of 9.5%— significantly better than the average of 6.9% for each company’s relevant index. This impressive result didn’t hinge on a few highfliers: Nearly 60% of the companies led by co-CEOs outperformed. And co-CEO tenure was not short-lived, but more or less the same as sole-CEO tenure—about five years, on average.”
The publication noted that its findings contradict the longstanding view that a single, strong leader is the best approach for running a successful company.
This revelation is no surprise to two PSMJPRO member companies that use the co-CEO model – engineering and construction services firm Evergreen Engineering, Inc. and architecture, planning & design firm Hendy.
“Since taking over as Co-CEO’s we have grown our staff, had better retention, expanded our management group and added scanning capabilities to our services,” says Danielle Daniels, co-CEO of Evergreen Engineering with Justin Price.
Despite being vastly different in many areas, these two firms arrived at a co-CEO arrangement in a similar way. In both cases, the decision to break from the solo-leader tradition was borne of strategic creativity and the fortunate circumstance of having a pair of successors-in-waiting who possess complementary skill sets.
COMPLEMENTARY EXPERIENCE
Susan Dwyer and Carolina Weidler have been co-CEOs at Hendy, a Southern California interior architecture and design firm, since early 2023, succeeding founder Heidi Hendy. The 40-person firm also transitioned to an Employee Stock Ownership Plan at roughly the same time.
The pair benefited from a two-year trial run of sorts as Heidi Hendy gradually transferred greater amounts of responsibility to each, while shifting toward her new role as board chair. “We’ve witnessed the power of their co- CEO compatibility these past two years as they expertly led Hendy through the pandemic,” Hendy said in announcing the move.
Dwyer recalls, “Heidi asked us if it was something we’d be interested in doing, and I really liked the idea of doing this together. Then I did some research and I saw that the co-CEO structure is statistically more successful, and that piqued my interest as well.”
There are a lot of similarities in the co- CEO roles at Evergreen and Hendy, but one of the most notable is the way that the partners complement each other’s strengths and skills.
At Hendy, while both lead in their specific practice areas, Dwyer handles finance and human resources, while Weidler’s LEAN Six Sigma background lends itself more to marketing and operations. “When we divided up the responsibilities, and agreed who would be champion of which area, we decided that if we can’t agree on an issue, then whoever is responsible for that area would have the final say. Fortunately, I don’t think we’ve ever come close to not agreeing.”
At Evergreen, Daniels focuses on internal matters, while Price’s purview is outside the firm’s walls. “Justin oversees project management, project coordination and development, client relations, marketing and selling, industry association participation and expanding the business. I handle financial, human resources, information technologies, insurance, contracts, benefits and company activities,” says Daniel.
Both partners review important legal documents and can pick up the slack if the other is not available. Dwyer and Weidler also say that they have a general understanding of the other’s responsibilities and can step in when circumstances require it.
KEYS TO CO-CEO SUCCESS
What other practices and characteristics are important in making the co-CEO model click?
Present a United Front.
A cardinal sin for co-CEOs is to take disagreements outside of the partnership. “I believe we have always presented a united front,” says Daniels. “We collaborate first, so when we respond to our team, Justin and I are in alignment. We don’t try or want to undermine each other, and I think our staff knows that the response they get from us is always going to be with the success of our staff, our business and each other in mind.”
Weidler says, “This is not mom and dad, yes and no. We always speak as one; we’re always aligned. People can come to either one of us and they’re going to get generally the same answer.”
Communicate Clearly, Honestly & Frequently.
Price says that one of the biggest challenges of the co-CEO structure is having enough time to strategize regularly. Daniels agrees. “[The biggest challenge is] making sure there is time to check in with each other on the bigger-picture items, or making the effort to communicate when things are going on behind the scenes so that the other is looped in,” she says.
“Susan and I communicate daily,” says Weidler. “We’re very strategic about how we talk and how often we talk. You have to understand that communication is key. Sometimes, if we’re not in the office together, or we’re running around doing a million things, we still make a point to call each other to catch up. ‘Here’s what happened today.’ That’s the only way it works.”
Check Your Ego.
Co-CEOs can only work if both participants recognize that it’s not just about them. “When we were making the decision, it wasn’t about ego and just wanting to be the president of the company,” says Daniels. “We were looking at what would set Evergreen up for the best success, and we realized that our skills and experience complemented each other’s and brought a level of balance and perspective we didn’t previously have.”
Hendy’s Dwyer says, “We don’t speak over each other. We don’t have to have the last say. It’s not about who’s the loudest voice. We read each other’s emotional cues, we recognize each other’s strengths and differences, and it’s all seamless.”
Respect & Trust Each Other.
“If you’re considering this, you have to make sure that you like, respect and value the other person,” says Weidler. “If you really enjoy working with your partner, it becomes a collaborative endeavor. You’re not trying to one-up the other. You have to respect, but also be open with each other. If she calls me out, I don’t get defensive; I consider it a gift. We’re very open. We’re both in this journey together, and we’re doing it together fully.”
Prepare Early.
Dwyer and Weidler worked together for eight years and spent two years transitioning into the role. Evergreen’s Daniels and Price agree that getting an early start is important. “Begin developing and training your leadership team early,” says Price. “It’s critical to play to your strengths and then help with explaining business situations to your counterpart on the financial impact, whether its project- or client-related, or overall-business-related.”
ADVANTAGES OF CO-CEOS
The two sets of firm leaders are in the relatively early stages of the co-CEO model, but they see no shortage of benefits. Here are a few, in addition to those already identified.
Freedom to Do Technical Work.
“Heidi always felt that she let too much of the design side go while she was trying to create a business,” says Dwyer. Adds Weidler, “Most clients want us involved. We didn’t go to school to look at spreadsheets all day. So now that we’re up and running as co-CEOs, we still have our hands in projects. We stay in touch with clients. We can delegate as we go forward with any project, but we’re still active in the design community and not just the faces of the business.”
Ability to Focus on Strengths.
In addition to keeping a hand in the technical side, the two-pronged leadership approach allows each co- CEO to bring their greatest value to
the firm. “We realized that two heads are better than one,” says Price. “We both had aspirations to be the next president, but we found that we both brought strengths that the other didn’t have.”
Fresh Strategic Direction.
“We recognize that each generation does things differently and our predecessor was very supportive of allowing his management team to feel empowered,” says Daniels. But, she adds, there was room to update the firm’s culture and approach to doing business.
“One of the things Justin and I noticed since coming into the position is that we’re future- and employee-oriented. With that ‘two-heads’ concept, we [reviewed and developed] an approach that covered both business and employee needs. We looked at the longevity and big picture together, as well as our employee retention. Within 30 days of taking over as co-CEOs, we overhauled our bill-out rates, and implemented an all-staff wage increase due to the significant jump we saw with inflation and to bump us into a reasonably competitive pay range for our industry. We also completely revamped our PTO and holiday policies and then really dove into culture surveys for our employees to get their feedback on where we could make improvements.”
Increased Access to Leadership for Staff.
With co-CEOs, employees have the luxury of twice the number of leaders to consult with critical issues. “That’s another value add for staff,” says Hendy’s Dwyer. “They get two people with two different leadership styles. We’re very different in some ways, but we’re also very much alike. People can come to either of us with questions, which helps to create a very rich environment for growth. We also both sit out on the floor with everyone else, not locked away in an office. And because there’s two of us, there is twice as likely to be a CEO around to talk with.”
Shared Weight.
One of the biggest complaints of CEOs is that they sometimes feel they have no one available who understands or relates to the specific challenges of the role. As Shakespeare said, “Heavy lies the head that wears the crown.” But having a co-CEO can alleviate this stress. “Having someone to share the weight of decision-making…allows us to focus on one business aspect versus being spread too thin,” says Daniels.
Head Start on the Next Ownership Transition.
Having two leaders in place can ease the next ownership transition. “Let’s say one of us wants to retire,” says Dwyer. “The idea of finding a successor is much easier. Maybe one of us wants to continue leading alone. Or we could continue to look for another co-CEO.” Co-CEOs aren’t for every firm; but the four co-CEOs say they wouldn’t have it any other way. “The ‘co-ing’ is getting better,” says Price. “Every day we’re learning how to support one another more. The trust in our business relationship gets better and stronger.” Dwyer says, “We have no regrets. If a company is thinking about co-CEOs, and the situation is right, I’d advise them to do it.”