The new Citigroup, formed by the merger of Citicorp and Travelers Group, will join a rare breed of company - those with two chiefs.
In unveiling their $70 billion combination in April, Citicorp's John S. Reed and Travelers' Sanford I. Weill said they would share the top job. That announcement has added fire to the debate on whether any company can be effectively led by two strong-willed and high-profile chief executives.
Analysts and consultants said it was likely the Citigroup deal would not have gotten done without such a power-sharing arrangement. Some industry observers also believe, however, that Mr. Reed and Mr. Weill could create a new management paradigm if their co-CEO model proves successful.
"They are setting a new precedent," said Janet Spencer, a consultant at Delta Consulting Group in New York. "I think to run an organization, particularly one the size of Citigroup, one person can't do it alone."
But, Ms. Spencer said, "co-CEO is something else entirely."
Companies have normally adopted a management model that places one person, the chief executive, in charge of external relations and broad strategic decision-making, and another leader, the chief operating officer, in charge of internal issues and day-to-day oversight. Comanagement roles have been reserved for executives lower down on the business line, and those scenarios usually devolve into a "run for the roses" for the top corporate office, consultants said.
Recent megamergers like Citicorp-Travelers and Daimler Benz-Chrysler, however, are creating companies so diverse and geographically challenging that co-CEOs might be needed to keep a reign on operations, consultants theorized.
The old corporate model could be adapted successfully for dual CEOs at such gargantuan organizations, providing the two leaders can agree on a common vision for the company and on how to split the role to eliminate tension, consultants said.
"There is no reason why you couldn't construct that model," said Peter Davis, a management consultant at Booz-Allen Hamilton & Co. in New York.
Comanagement can work when the two leaders have complementary skills, Mr. Davis said. "You would need to figure out how to avoid redundancies in responsibilities and you would need to divide and conquer them."
Indeed, several professional partnerships have thrived under a co-CEO model, Mr. Davis and other consultants said. For example, Goldman Sachs & Co., the New York investment bank, has had two such arrangements over the last decade.
But other experts said comanagement could foster serious operational risks if the role-sharing is not clearly defined and agreed upon at the outset.
"It's like having two spouses," said Charles Wendel, a consultant at Financial Institutions Consulting in New York. "One reason why co-CEOs are as rare as they are is the battle over internal fiefdoms."
Corporate America's track record is mixed. Time Warner Inc. had a brief experiment with co-chiefs in the early 1990s that has been regarded widely as a failure. On the other hand, ABC/Capital Cities, Inc., has had a successful run with dual managers.
The model has not been used in other conglomerates, however. For example, General Electric Co., General Motors Corp., and Exxon Co.-three widely diversified U.S. companies-are run by a single chief executive. That fact has been used to support the case against the new model.
"It sets up the company for an unstable equilibrium," said Mark Sirorer, a professor at New York University's Stern School of Management, whose recent book described such arrangements as a "synergy trap."
"The evidence is not very good that it works."
But some companies appear willing to take a chance that two leaders will help boost financial performance and keep a tighter grip on operations.
In February, Sybase Inc. named co-chief executives in what was seen as a bid to boost sagging performance. Mitchell Kertzman, who had held the title alone, now shares the top spot at the Emeryville, Calif., database software developer with John Chen, its former president and chief operating officer.
The same week it made the announcement, Sybase said it would lay off 10% of its work force and take a $70 million first-quarter charge. The co- leaders said the new management structure reflected the relationship they had developed over the years.
Last year, Ralston Purina Co. in St. Louis named co-chief executive officers-W. Patrick McGinnis, head of the company's pet food division, and J. Patrick Mulcahy, head of is Eveready Battery unit- to replace the outgoing William P. Stiritz.
Analysts predicted that the move was the precursor to a spinoff of Ralston's battery unit.
And in an arrangement many consultants noted as typical of family- controlled companies, Nordstrom's Inc., the Seattle-based retailer, has six members of the same family acting as president, each with responsibility over one aspect of the company business.
Proponents of the concept said it works when each chief executive focuses on a specific field of knowledge and can entrust the other to run a different group of businesses.
Citigroup, for one, would combine one of the nation's largest insurance, brokerage, and investment banking firms with one of the biggest U.S.-based banks, with operations sprawled across 50 foreign countries. Mr. Weill, with his years of experience leading a diverse financial enterprise, would compliment Mr. Reed's decades of hands-on expertise in traditional retail and commercial banking.
Complementary expertise can help a company make operational changes quickly and more successfully, consultants said.
A successful co-CEO model would also depend on shared values, Mr. Davis said. "You need to have one strategic vision for the company."
Still, many observers remained skeptical about whether the new model would work in all situations. Shareholders and corporate boards are becoming increasingly influential in the strategic direction of companies, consultants said. comanagement can create confusion.
"Just to run an organization, you need some kind of single-point accountability," Ms. Spencer explained.
And then there are public relations challenges. "What if one CEO is speaking in public about the strategic issues facing the company and that person says something the other co-CEO doesn't agree with?" Mr. Sirorer said.
"I want to know who is running the board meeting and who is running the annual meeting," he said. "If you need two people to run a sprawling operation, then why not just keep the companies separate?"
