Tech Beat: New co-CEO structure presents challenges and opportunity as data center operator Online Tech continues expansion
Courtesy Online Tech
The move comes despite the fact that even companies that eschew traditional hierarchy tend to have a single CEO responsible for making final decisions and acting as the face of the company.
“Conventional wisdom says not to do this,” new co-CEO Mike Klein said. “But that’s who we are. We fly in the face of conventional wisdom.”The transition to co-CEOs comes at a time of transition for the company and is a bold move that does not have much precedent in the business community.
“There isn’t really much systematic research on this topic,” University of Michigan professor Jim Westphal said.
“ You’d be hard pressed to find a situation where a co-CEO arrangement was praised as being really key to the success of a company. It usually falls into the ‘necessary evil’ category.”
Before being made CEO, Klein was chief operating officer and president of the company. He said his responsibilities will not change along with his title.
“It’s more having two faces to the company that can go out and represent us in front of customers and everyone else,” he said.
“Since I invested in the company five years ago, [CEO] Yan [Ness] and I have really worked as partners and from a day-to-day operations prospective not much is going to change. It’s more a recognition of how well our partnership has worked up to this point.”
Ness, who will be co-CEO with Klein, said that he wouldn’t necessarily recommend the co-CEO track to other companies, but that given the right partnership it made sense to have a partnership at the top.
“I believe the whole ‘pack mentality’ is very common in corporate America, where you have to have one guy out front who’s the face of everything,” he said.
“I get that because it’s easy, simple, and clear to see what’s gong on. However, if you can pull it off I think a partnership mentality is more powerful.”
Westphal, who studies strategic management and organizational theory at the Ross School of Business said each partnership is different, but there are certain characteristics that can help determine the future success of the endeavor.
“If you have two managers who haven’t worked together previously, have different professional backgrounds, are not personal friends, and don’t have an understanding of what their roles will be going in you’re probably going to have major problems,” he said.
“Even in better case scenarios these typically do not last very long.”
For Klein and Ness, those concerns are outweighed by the knowledge that they do not fit that profile. The two have worked closely together for the past five years and say that while they have vigorous debates, there’s a deep respect for the others’ opinion.
The two also see major potential benefits in having significant decisions made by a team rather than just one person.
“Other CEO’s will understand when I say this, it’s a really lonely position,” Ness said.
“ You’re always looking for someone trusted other than your wife to talk to and say ‘what do you think about this ’ Just knowing I can go in there and lay an idea on the table and I’ll get the unfettered truth from Mike [Klein] and knowing he can do the same with me is a relief. I know my competitor CEOs can’t do that. They’re struggling and losing sleep over decisions that I don’t have to.”
The move to co-CEOs comes as Online Tech plans to expand their management team from a core group of five to about 10 over the next near. The company grew from 23 to 40 people in 2012 and plans to add another 17 people in the coming year.
“Those additions will come at all levels of the company, from sales and IT support to management positions,” Klein said. "We're especially looking for people with either IT sales, client services, or extensive software development experience."
Expansion will also begin into new markets as the company begins to move on its plan to add four new data centers across the Midwest to its three existing ones in Michigan. Online Tech received a $20 million investment from Missouri-based News-Press & Gazette in September to make the expansion possible.
“If we were going to just stay the same size, something like this [moving to co-CEOs] wouldn’t be necessary,” Ness said.
“But we want our ‘return on luck’ that we work so well together. When you find something great you should use it. Pack mentality may not be a bad way to organize, but we don’t think it’s the best.”