SAP's Co-CEOs: Are Two Heads Better Than One?

Nearly a year into their tenure as co-CEOs of SAP, Bill McDermott and Jim Hagemann Snabe are saying all the right things and getting good marks from industry analysts--proving that a dual-CEO model is not a recipe for disaster. But the duo still faces significant challenges.

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For most people in the United States and several million others around the globe, Sunday, Feb. 7, 2010, was a day to sit back on the couch and enjoy another Super Bowl Sunday chock full of overeating and morning-to-night football coverage.

For Bill McDermott and Jim Hagemann Snabe, two rising executives at SAP, it was a day that would change their lives forever: SAP announced on that Sunday that the pair would replace CEO Léo Apotheker as co-CEOs of the enterprise software behemoth.

Though Apotheker's ascension to the top spot was well-planned and lengthy, his tenure as CEO was tumultuous and brief. SAP was taking on water, the crew was restless, and Apotheker ultimately couldn't save the ship—or himself.

It was time for the company that claimed to offer "Innovation without Disruption" to disrupt itself.

"We knew on Saturday, Feb. 6, and by Sunday we were in execution mode," recalls McDermott, who was head of SAP sales and is well-known for his sales prowess. "There was already a lot of trust [between Jim and I] going into Feb. 7."

"Early on, it was important for us to come together on our strategy, the key priorities for the business, a management framework and leadership principles," says Snabe (via e-mail), who was promoted out of SAP's product development side.

The weekend was reminiscent of two college buddies cramming for a hastily called final exam. The end result of the duo's furious strategizing would be a house cleaning in the executive ranks, a change in tenor and energy level from its leadership, and a new mantra for the new SAP: "On premise, on demand, on device."

Does the Co-CEO Model Work?

The co-CEO announcement was greeted with a mixture of curiosity, relief (inside SAP) and skepticism. The Economist, for instance, noted in "The Trouble with Tandems":

"Joint stewardships are all too often a recipe for chaos. Rather than allowing companies to get the best from both bosses, they trigger damaging internal power struggles as each jockeys for the upper hand. Having two people in charge can also make it tougher for boards to hold either to account. At the very least, firms end up footing the bill for two chief-executive-sized pay packets."

Several follow-up articles took issue with The Economist's contentions. One, by Josh Greenbaum, an enterprise software analyst, noted that "companies like SAP are governed by a management board that tends to reward cooperative, consensus management more than most hierarchical US companies would be able to manage."

Additionally, Greenbaum wrote, SAP's German corporate structure has, in fact, had success with the co-CEO model in the past. (It was interesting, however, that neither of the new co-CEOs was German; McDermott is from the United States, and Snabe hales from Denmark.)

But the co-CEO model is not unheard of in high-tech: Since 1993, for example, Research In Motion co-CEOs Jim Balsillie and Mike Lazaridis have spilt their duties and run a highly successful company. More recently, Motorola co-CEOs Sanjay Jha and Gregory Brown have turned around the fortunes of the IT hardware and mobile phone maker.

SAP co CEO Bill McDermott Jim Hagemann Snabe

To McDermott and Snabe, the co-CEO arrangement allows the company's CEO to be in two places at once—all the time. Since McDermott is based at SAP's U.S. headquarters in Newtown Square, Pa., and Snabe is based in Copenhagen, it allows for an enviable executive flexibility. For instance, this year's SAP Sapphire show ran concurrently in Orlando and Frankfurt, and each locale had an SAP CEO presiding over the annual show.

"I never have to worry about what's being discussed [by Snabe], because the core message is based on trust," says McDermott. "Jim knows Bill, and Bill knows Jim. That's the magic of what we've brought to the equation."

Nine Months into the 'Jim and Bill Show'

While the co-CEOs certainly agree on their "On premise, on demand, on device" rhetoric, how do they both stay "on message" in a similar manner?

First, McDermott and Snabe say they place unequivocal trust in the other. "We had worked together for several years before taking on the role as co-CEOs," Snabe says, "so we had a solid foundation of trust to build from." (That has certainly come in handy as Oracle v. SAP has raged on.)

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