September, 1999 - Volume 3, Number 12
Warren Bennis on Viacom, CBS, and Co-Leadership
September 7, 1999, Viacom struck the biggest media deal in history when it
announced its intention to acquire CBS for $36 billion. The new Viacom is
expected to become a $80-billion powerhouse with interests in broadcast
and cable TV, movies, radio, theme parks, Internet sites, home video,
publishing and billboards. Assuming that U.S. regulators sign off on the
merger, the pairing of the two media giants will also bring together two
powerful leaders–Viacom’s Sumner Redstone and CBS’s Mel
Karmazin–who have agreed to become the new Viacom’s CEO and president.
Will both men be able to share power in a way that works to the advantage
of the new company and its shareholders? Michael
Useem, director of Wharton’s Center
for Leadership and Change Management,
discusses the challenges posed by co-leadership with Warren
Bennis, professor of management at the
University of Southern California’s Marshall
School of Business and founding chairman
of the USC Leadership Institute. What follows is an abbreviated version of
Useem: You co-authored a book published last March titled Co-Leaders:
The Power of Great Partnerships. The announcement of the merger of CBS and
last week created another such partnership between Sumner Redstone and
Mel Karmazin. Is there a growing trend for companies to create co-leadership
at the top? If so, why is that occurring?
Bennis: This has happened during the past five years for at least
two or three major reasons. In one word, the reason is complexitywhich
has been engendered by the growing number of very, very large mergers.
Last year alone, there were $1.6 trillion worth of mergers. This year,
though we have a few more months to go, we have had almost $1.2 trillion
worth of mergers worldwide. The hugeness, complexity and globalization
that result from these combinations makes it very difficult for any one
person to have the hubris to run such organizations without sharing power
at the top. When you look at the proliferation of the C-wordthe
CEO, the COO, the CKO (chief knowledge officer), the CFO, the CLO (chief
learning officer), the CIOthose are simply examples of how top corporate
executives must share responsibilities.
As mergers force organizations and individuals whose cultures are quite
different to fuse their operationsas is the case with DaimlerChrysler,
for examplewe will see more and more examples of companies setting
up co-leadership arrangements. Peter Drucker once said that a CEO has
to understand and deal with 51 areas of work. So I dont see any
way around the notion of co-leadership. This does not necessarily mean
that there will be more co-CEOs. The situation may more closely resemble
what is going on at Ford between
William Ford and Jacques Nasser, where Nasser is the CEO and Ford is the
chairman. But we are going to see more such partnerships at the top, even
though they may not be called co-CEOs.
The case of Mel Karmazin and Sumner Redstone is interesting. From what
I have read, it seems that they are locked into an agreement in which
Redstone is the ubermensch or the CEO and chairman, while Karmazin
runs all the units and takes charge of policy, acquisitions and planning.
Clearly, this is a partnering relationship. This is true of a number of
companieswhether its Craig Barrett and Andy Grove at Intel,
Bill Gates and Steve Ballmer at Microsoft,
Charles Schwab and David Pottruck at Charles
Schwab, or Michael Armstrong and John Malone at AT&T.
These are all examples of co-leadership
Useem: What are the implications of co-leadership on who speaks
to the board of directors for management, and who speaks to big investors
for the company? Or, to put it differently, what advice would you give
money managers, stock analysts and directors who have to work with companies
that have co-leadership at the top?
Bennis: The ideal situation would be for both leaders to speak
for the company, to the board and to Wall Street. I dont think of
Wall Street as a blob; it is composed of individuals who might relate
more easily either to Redstone or to Karmazin based on past experiences.
Karmazin has been terrifically powerful in Washington. He is really a
super lobbyist. He will probably be doing more regulatory work than Sumner,
because he is so much more familiar with that territory. Redstone will
have more resonance with certain analysts, and Karmazin with others. So
I dont think that there must be just a single voice. As the cliche
goes, both must read from the same page but it need not be just one voice
that speaks for the new Viacom.
The full interview with Warren Bennis can be found at:
and information on Warren Bennis is available at http://www.marshall.usc.edu/mor/people/BennisW.html.
The New World of the Corporation
Leading up and out can be as important as leading down and around. For
managers of publicly-traded companies, the "up and out" includes
invertors, and research by Brian Bushee of the Harvard Business School
confirms the importance of responding to varying investing styles.
Bushee classified institutional shareholders according to their portfolio
turnover (frequency in trading the portfolios shares), diversification
(the number of companies in their portfolio), and momentum (acquiring
shares of companies that announced surprisingly good earnings). He then
found that institutions tended to fall into one of three combinations
of investing styles:
Transient: High portfolio turnover, high diversification, and
high momentum trading (26 percent of all institutional investors).
Dedicated: Low portfolio turnover, low diversification, no momentum
trading (4 percent).
Quasi-indexer: Low portfolio turnover, high diversification, reverse
Examining a broad cross-sections of U.S. companies between 1983 and 1994,
Bushee finds that:
- Companies that improve their disclosure quality increase holdings
by transient investors.
- Firms that attract more transient investors by improving their disclosure
subsequently experience greater volatility in their stock prices, reflecting
the more aggressive trading by short-term holders.
- When a firms investor base is dominated by transient investors,
it tends to reduce it R&D spending in response to an earnings decline,
while firms with dedicated and quasi-indexer investors do not.
Short-term investors evidently foster short-term managers, and their
impact may intensify in the future as companies move toward greater transparency
and shareholders move toward more day-trading. To avoid sub-optimal decisions
on long-term decisions such as research and development, company managers
may therefore want to devise methods for (1) attracting more dedicated
and quasi-indexer investors, and (2) ensuring that strategic decisions
are not constrained by transient investors.
Source: Brian Bushee, "A Taxonomy of Institution Investors:
How Investor Behavior Matters," IRQ: Investor Relations Quarterly,
Vol. 2, No. 4, 1999, pp. 13-18; "The Influence of Institutional Investors
on Myopic R&D Investment Behavior," Accounting Review,
Vo. 73, No. 3, July, 1998, pp. 305-333. Information on Brian Bushee can
be found at http://www.people.hbs.edu/bbushee/bio.html.
Leading without Authority
As organizations decentralize responsibility, accelerate outsourcing,
and emphasize teamwork, managers find themselves increasingly accountable
for results from people over which they no longer hold authority. In Getting
It Done: How to Lead when Youre Not in Charge, Roger
Fisher (author of Getting to Yes) and Alan Sharp present a handbook
for leading horizontally when there is no vertical clout.
In the flattened workplace world, if you instruct somebody to take action,
they may hear it as an accusation of past failure, assignment of lesser
work, or assertion of higher stature. In any case, they may not appreciate
the actions purpose aside from the order to do it. But how can you
lead them if you cant tell them?
With anecdote and argument, Fisher and Sharp focus our attention on five
steps for more effective lateral leadership, for overcoming the everyday
frustrations of working with others when there is no boss:
- Clarify precisely what you want to achieve with others: a compelling
vision and measurable milestones along the way help.
- Corral the thinking of everybody, rely on the insistence of no one:
organizing systematic ways to reach good decisions is key.
- Convert collective insights into collective action: get going even
without conclusive analysis.
- Energize all in their own way to get the job done: everyone needs
an engaging way to serve the enterprise.
- Help each to do it better next time: learning from doing is superb
Source: Roger Fisher and Alan Sharp, Getting It Done: How to
Lead When Youre Not in Charge (New York: HarperBusiness,
LEADERSHIP DEVELOPMENT PROGRAM: Leading Fast May 18, 2000
"Leading Fast: Developing Leaders for Fast-Moving Organization"
is the focus of Whartons fourth annual Leadership Conference scheduled
for May 18, 2000 at the Four Seasons Hotel in Philadelphia. Confirmed
Noel Tichy, author of The Leadership Engine: Howe Winning Companies
Build Leaders at Every Level (1997), and co-author of Every Growth
Business Is A Growth Business: How Your Company Can Prosper Year After
Ram Charan, co-author of Every Growth Business Is A Growth Business
and co-author of "Why CEOs Fail," Fortune Magazine, June 21,
and Human Resources in an Era of Restructuring
Wharton Executive Education is presenting a three-day open enrollment
program in the "Leadership and Strategic Use of Human Resources for Surviving
in an Era of Restructuring and Downsizing Learning from the U.S.,
the Advanced Nation of Restructuring." Offered in collaboration with the
International Centre for the Study of East Asian Development (ICSEAD),
the program is scheduled for January 20-22, 2000, in Kitakuyshu, Japan.
Wharton and ICSEAD offered their three-day program in 1999 on "Creation
of Corporate Value" and in 1998 on "Corporate Strategy and Management
in an Era of Globalization" that drew managers primarily from Japan but
also from Korea and Taiwan. Information on the 1999 program is available
from Executive Education's representative in Japan, Yumi Wakayama at email@example.com.
always matters, but in this more complex and fast-paced system, management
and leadership matter just a little bit more. When I look at a country
or company today I am asking, can the boss do information arbitrage, can
he or she be constantly synthesizing six different dimensions at once
Because if you dont see the world, and you cant see the interactions
that are shaping the world, you surely cannot strategize about the world."
Source: Thomas L. Friedman, The Lexus and the Olive Tree
(New York: Farrar, Straus, Giroux, 1999). Information on the author and
book is available at http://www.lexusandtheolivetree.com/