THE PAST YEAR was different in more ways than one. While we would normally host ~15 joint venture CEOs in Washington, D.C. to network and discuss top-of-mind issues with peers, in 2020 we gathered virtually for our 11th annual session, with 40 JV CEOs joining from around the world. These CEOs represented companies across industries, including 13 healthcare JVs, 9 natural resources JVs, 4 manufacturing JVs, and 3 financial services JVs. Their joint ventures offer health insurance, provide lab testing, transport oil, produce energy, manufacture heavy machinery, sell HVAC equipment, clear credit card transactions, and stream popular foreign television shows to American viewers. It was a diverse group, united in dealing with the normal challenges involved in running a joint venture – that is, a business owned by multiple owners who do not always agree – as well as a pandemic that showed no signs of abating.
The purpose of this memo is to share lessons that the group took away from two JV CEOs on different ends of their tenure. Brian O’Dwyer described what it was like to move up from within the JV to take the CEO job at Q2 Solutions, a JV between IQVIA and Quest Diagnostics. David Dexter, 21 years in role at Sonora Quest Laboratories (SQL), a JV between Banner Health and Quest Diagnostics, shared how he works with his team and his Board of Directors to push SQL’s innovation activities forward in a way that supports both owners.
LEADERSHIP TRANSITIONS IN JVs:
Brian O’Dwyer, Q2 Solutions
The average term of a JV CEO is 3 years, about half that of a public company CEO. That might lead one to believe that JV Boards are twice as good at succession planning and execution as public company Boards, but in our experience, that is not the case. In fact, because 50% of JVs use a “Fixed Reserved” JV management model, where one owner has perpetual rights to nominate specific management positions (Exhibit 1), many JV Boards do not feel as much responsibility for succession planning – and leave it to the owner with nomination rights to handle. But what if the best successor candidate is not in the owner with nomination rights? Is the Board flexible enough to adapt? In Q2 Solutions’ case, it was.
Launched in 2015, Q2 Solutions is a 60:40 joint venture of IQVIA (formerly QuintilesIMS) and Quest Diagnostics, combining global clinical trials laboratory services capabilities to help customers develop drugs faster and more efficiently. Brian O’Dwyer is now CEO of Q2 Solutions, and when promoted he brought more than 20 years of experience in the healthcare and laboratory industry related to the establishment, management, integration, and restructuring of both business and commercial operations. However, there were two structural factors, in addition to his professional background, that set him up for success in his CEO role: 1) moving up from within the JV organization, and 2) building working relationships with his predecessor and the leadership team as peers for two years.
Brian’s predecessor was seconded to Q2 Solutions after 19 years in several senior clinical and commercial leadership roles with IQVIA. As the JV’s first CEO, he had to quickly form a management team that was roughly equally split between IQVIA and Quest secondees. It didn’t take long for the team to realize that the parent companies have different ways of working, so an initial focus was the integration of cultures.
By late 2016, when Brian joined as VP and GM Americas Region, Q2 Solutions was less rigid in its application of the “Fixed Reserved” management model, and the company was beginning to form its own culture. The Board gave the management team leeway to fill key positions with the people best able to meet the needs of the business, regardless of whether they moved up from within the JV, came from one of the shareholder companies, or were hired from outside.
Brian’s two years in the VP / GM role, for example, helped him to understand the JV’s operational and cultural nuances, and begin to evaluate how much independence from the owners was best. While Brian’s predecessor invested in building capabilities that would increase Q2 Solutions’ independence, Brian shifted focus once he became CEO. His view is that there is more value created for the JV – and less friction while achieving it – by operating more like a division of the majority owner, while continuing to embrace the minority shareholder. His focus is on contemporaneous sharing of strategically important information, and seeking to ensure maximum value is created for all parties.
Additionally, Brian says that his experience within the JV before becoming its CEO has “given me the opportunity to understand the organization and the team dynamics in a way that enabled me to relate to them and to bring them on the journey with me”. His time as a leadership team member allowed Brian...