Doing More with More: Shared Leadership Models in Joint Ventures

   

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GettyImages-57436286_resized.jpgOVER THE last 30 years, my partners and I have talked to more than a thousand JV CEOs around the world, many of them as clients. And while these JV CEOs hold wildly different levels of delegated authority and varied job titles (e.g., CEO, Managing Director, President, General Manager), the vast majority are vested with singular accountability for running the business or asset. But a subset of JV CEO positions are structured with shared accountability.

While this may seem like a formula for calamity, shared leadership models can be quite effective in certain joint venture contexts. Such structures come in more forms – and indeed, offer broader applicability and are far more likely to work in joint ventures – than joint leadership models in public companies. Boiled down, there are six archetypical shared leadership models in JVs: Executive Chair-CEO, Co-CEOs, Office of the CEO, Rotating CEOs, Dual Hatted CEOs, and the Managing Board with Shareholder Representatives.


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The model with the broadest appeal – and the most under-utilized – is the Executive Chair (Exhibit 1). Here, the Chair works closely with the JV CEO, is typically 30-50% dedicated, and is infused with direct leadership responsibilities. Those responsibilities often relate to long-term strategy, government or external affairs, and/or governance and shareholder management. Having an Executive Chair can be extremely useful to JVs with intense governance and shareholder management demands by delivering a needed boost of support to CEOs struggling to manage and align the shareholders without undermining the CEO’s needed focus on building the business and running the company. SWIFT, a global consortium of several thousand banks and other financial institutions that manages a critical financial services industry infrastructure for secure transmission of financial transactions, has had an executive chair. So too for Merial, an animal health consolidation JV initially founded when Merck and Rhône-Poulenc consolidated their animal health businesses into a 50:50 JV.


Exhibit 1: Alternative Structure: Executive Chair

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The Dual-Hatted CEO is a construct where the CEO holds two titles – one as JV CEO and one as a business or functional leader inside a shareholder (Exhibit 2). Typically, the position within the shareholder entails a leadership role in a business or function with a close operating relationship to the JV – thereby providing the JV CEO with formal status and standing within, as well as increased visibility into, that shareholder. Done well, this provides the JV CEO with an ability to directly shape, influence, or coordinate plans and activities within the shareholder and thus help propel the JV’s success.

Consider a three-partner mobile payments joint venture. Late last year, the JV moved to a dual-hatted CEO model, believing that a closer day-to-day working relationship with – and within – its largest partner would further accelerate the business, and drive acceptance of the joint venture’s products by that company's product, marketing, sales organizations. The CEO of the JV, who is a secondee from that partner, now has a senior role within the parent company's product organization, in addition to retaining his role leading the joint venture.

Exhibit 2: Alternative Structure: The Dual-Hatted CEO

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A different model – the Managing Board with Shareholder Representatives – is a variant of the Continental European two-tiered board structure. A European 50:50 chemical refining JV has operated under this structure since its founding a dozen years ago. The JV has two boards: A Supervisory Board which collectively oversees the business, and a Managing Board which collectively runs the business. The Managing Board includes the JV CEO and the three other most senior members of management. In an interesting JV application, there is an agreement that each shareholder has two “representatives” on the Managing Board. JV management is independent and its core function is to operate the business. But by having shareholder “representatives” on the Managing Board, it creates increased connectivty with and access to the shareholders who are vital to the company’s success. The representative” designation confers status on these executives within the corresponding shareholder company – and thus allows them to participate in internal conversations to understand that shareholder’s interests, positions, and resources that might aid the venture.

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Shared leadership is not for everyone – and not for all (or most) joint ventures. But, in certain situations and with the right people, it can be a powerful antidote to some of the classic problems of running a business with two or more shareholders. Is it time to put the ‘joint’ back into joint venture? 

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