India Knowledge@Wharton | Are two CEOs better than one?

India Knowledge@Wharton | Are two CEOs better than one?
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First Published: Mon, Jul 07 2008. 12 14 AM IST

Illustration: Malay Karmakar/Mint.
Illustration: Malay Karmakar/Mint.
Updated: Mon, Jul 07 2008. 12 14 AM IST
In mid-April, Wipro Ltd chairman Azim Premji announced that the firm had appointed not one but two CEOs—Girish Paranjpe and Suresh Vaswani—to replace former CEO Vivek Paul, who left in 2005.
Executives from the company’s various verticals and horizontals were expected to function as CEOs following Paul’s departure, but that situation “pushed too much of the operating load on me, and was getting counterproductive”, says Premji.
But can such a two-headed leadership structure work? Premji is confident that it will. “We believe that two people who have worked together for more than 10 years, and been in the company for more than 15 years, would be able to work very well as a team. (Given) the fact that 75% of our revenues come from global markets, (and) the fact that we are growing at 30% a year in a service, highly people-intensive industry, we figured that a two-man team would be stronger than one man at the top,” he explains.
“The business environment in India gives an impetus to this model of collegial and collective leadership,” says Ravi Aron, senior fellow at Wharton’s Mack Center for Technology Innovation.
Illustration: Malay Karmakar/Mint.
While companies that are anchored in India have access to premiums such as highly skilled labour and attractive wage levels, they also face uncertainties in the business environment with respect to infrastructure, power availability, urban transportation and stability in policy regimes. “Even countries in eastern Europe…can more or less take for granted the availability of urban amenities, power and transportation,” Aron adds.
Companies such as Wipro need two CEOs because of the complexity of doing business in India, Aron says. “On the one hand, you have to manage offshore client relationships and business development by staying really closely tuned to what is happening in international markets. On the other, you have to be embedded in India to manage the country-specific challenges,” he says. “Sometimes, these two faces of complexity are quite divorced from each other; they are different sets of challenges. It may be difficult for the same CEO to handle both ends.”
Wharton management professor Peter Cappelli sounds a cautionary note, pointing out that he hasn’t seen the twin-CEO model work effectively in Western corporations.
“Generally, in the world of governance, this is a situation to avoid,” he says. “My guess is that what ultimately happens is the co-CEOs confront the possibility of a stalemate, but there is also the possibility of them continuing to disagree, and so they may end up negotiating settlements all the time. In principle, that is not bad if they actually have the interpersonal skills to negotiate conflicts as opposed to just stalemates.”
Cappelli points out that in companies that have twin CEOs, the board of directors could help resolve disputes. The real problem, though, comes up while trying to make decisions that reinforce the company’s culture or which make for a consistent strategy.
Cappelli warns that if the two individuals differ about business direction, “you could end up with practices that don’t represent either vision because the parties are negotiating compromises along the way”. That, he says, “is arguably the worst of all possible worlds”.
Bridging the global digital divide
On 20 May, the US-based non-profit One Laptop per Child (OLPC) programme unveiled the second version of its XO laptop, which is designed to bring affordable, modern technology to children in developing countries.
Meanwhile, Intel Corp. has announced its next-generation Classmate PC, which targets the same market, and Microsoft Corp. has been tweaking its Windows XP operating system for these educational devices, which also run on the open source Linux operating system.
While the focus on developing countries is promising, some question whether these efforts will be effective.
Wharton business and public policy professor Gerald Faulhaber, for example, questions whether these companies are pushing the right devices into emerging markets, arguing that a PC-based device is simply the wrong choice. Africa, for example, doesn’t have the infrastructure to connect laptops to the Internet; and where Internet access is available, service may be poor at best.
“In India, China and Africa, the issue is that the PC is not the relevant technology. The relevant technology is wireless technology—cellphones. Cellular technology is far more ubiquitous than broadband or PC penetration. We are not going to see PCs there for a long time,” Faulhaber says.
Cost is another key issue. Even if OLPC’s laptop achieves its $100 (around Rs4,280 now) price target, the devices still may not be cheap enough because the per capita income lags in emerging markets.
N-Computing, a for-profit company that connects PCs to centralized networks in emerging markets, doesn’t try to give one device per student, but creates labs where PCs are available. Chief marketing officer Raj Shah notes that the actual cost of the device is just a small proportion of the total expenditure for laptops in the emerging market; the costs for Internet access, support and maintenance of these laptops easily eclipse the initial purchase price.
“One student and one PC is a good goal to go after, but the US doesn’t even have that,” explains Shah. “Laptops are much more expensive to maintain. They get stolen. They get crushed. And they need infrastructure… How will they connect?”
Others note that there is little research linking laptops in the classroom to educational advancement. But, according to Wharton legal studies professor, Andrea Matwyshyn, waiting for definitive proof wouldn’t make sense. “These initiatives...could open another world to students in the developing world. The goal is to build marketable skills and open doors to technology skills. These kids have a completely different life. Food and other donations are important, but it is not a zero-sum game.”
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First Published: Mon, Jul 07 2008. 12 14 AM IST
More Topics: CEOs | Wipro | Azim Premji | Business | Office |