The Truth About One-Man Corporate Rule

In a recent New York Times article [2], Randall Stross compared “one-man” decision-making at Apple to the “committee” approach used at Google. While non-judgmental, he describes different results from the two approaches. With Steve Jobs’ resignation, it will be interesting to see how that model may change.

What is the better model? As the British say, “Horses for courses.” In other words, it depends on what needs to be accomplished. Both have advantages and disadvantages.

Let’s look at two “one-man rule” companies, AIG and Citigroup, and then at IBM and Exxon, which practice inclusive management.

At AIG under Hank Greenberg, who was CEO for 35-plus years, there was only one boss. Though he hired strong executives, there were limitations on their decision making and scope of involvement. Throughout AIG’s global franchise, everyone knew what MRG (as we called him) considered success. Meet his standards, and you moved up and received the rewards that came with success. Fail to meet them, and he knew quickly — and so did the object of his attention.

Under Sandy Weill, the builder and longtime CEO at Citigroup, it was much the same. He was everywhere and knew most everything. Mr. Weill was able to build, mostly through acquisition, the great banking Citigroup brand from a medium-sized organization. He ruled with great power and brooked little interference.

IBM and Exxon take a different route. Although their CEOs are strong, competent executives, there is no cult of personality; no one man decides everything. Of course, the level of control of the CEO is nuanced as business requires. Age limits dictate how long executive officers may hold their jobs. There are executive training programs, with professionals placed in increasingly important jobs as they prove their competence. Strategies change to meet market challenges, yet the companies move in a unified and structured fashion.

Let’s first look at the advantages and downsides to one-man rule:

• Where one man is boss, decisions are made top-down and fast. Usually there is a compliant board of directors which numbers friends or colleagues of the boss. The boss has the freedom to buy and sell companies. This can be positive when opportunities require fast action before a competitor acts or the market changes.
• One-man rule is often found in startups, where the founder’s idea and his determination bring the company to a certain, even brilliant level of success. Single-minded determination has merit.
• One-man rule cuts down bureaucracy. It’s easier for a professional with a good idea to present to the boss who can act on it quickly.
• The disadvantages are seen repeatedly. Looking at past history is the not the strength that many of these leaders possess.
• One-man rulers arrogate to themselves so much power that they believe they can pass these strengths to their children. In a public company this is a bad idea. It didn’t work at Citigroup, where Mr. Weill’s desire to elevate his daughter created a rift between him and his heir apparent Jamie Dimon, resulting in Dimon’s departure and Weill’s daughter not rising at Citigroup.
• One-man rulers don’t want strong successors groomed. They view them as competitors. When pressed by their boards, they name weak successors with whom they don’t share enough power and who don’t learn the full scope of operations.
• One-man rulers stay too long. Boards are compliant. This often leads to poor results. Look at Citigroup, where Sandy Weill’s successor, a well-considered general counsel without line experience, flamed out and nearly brought the company to its knees.

How about inclusive leadership?

• At IBM and Exxon, many ideas and performance records form the basis for decisions. Ideas are sought from all professional levels and considered on their merits. People who consistently perform well are offered more responsibility. The companies actively seek strong and capable men and women to move to senior ranks.
• There is greater loyalty to the company and to each other. Teamwork is encouraged. While there is competition within the ranks, competence usually trumps everything else.
• The IBM and Exxon ethos permits potential leaders to be identified early and encourages them to take risky assignments where rewards await success.
• There are negatives. For one, decision making takes longer, as more people are consulted.
• Strategic moves are not made quickly, so market share can be lost in the short run.
  IBM and Exxon always have been more bureaucratic than AIG, where anything looking like bureaucracy was anathema.
• One-man rule gets more inappropriate the longer it exists. Thomas Watson and John D. Rockefeller started IBM and Standard Oil (now Exxon) with strict one-man rule. Look at those companies now.

OK, Mark Zuckerberg. Which route will the wildly successful Facebook take? You have choices. Take your pick.