Goldman Sachs Leadership - Praised for Complementary Nature

In the article, THE LEADERSHIP TEAM. By: Miles, Stephen A., Watkins, Michael D., Harvard Business Review, 00178012, Apr2007, Vol. 85, Issue 4, authors argue that top leadership has to complement each other. They give four ways in which persons complement mutually.

They quoted Goldman Sach's practice of co-leaders in their article.

A Commitment to Complementarity at Gldman Sachs

The benefits and challenges of running an organization with leaders who play complementary roles can be seen at Goldman Sachs, where for decades many parts of the business – and sometimes the firm itself – have been headed by teams of two co-leaders.

The practice emerged almost by chance. In 1976, when the senior managing director died, the firm decided to fill his position with two partners and members of the management committee, John Weinberg and John Whitehead, who had worked closely together for years. "As friends, they were able to collaborate in a noncompetitive way," recalls Jonathan Cohen, a Goldman Sachs advisory director who started at the firm in 1969. "It was natural for them to come together." Weinberg and Whitehead ran the firm for eight years, and a precedent was set.

Over time, the notion of co-leadership became ingrained in the firm's culture. Although no formal policy mandates that certain businesses be run by more than one person, when a position opens, Cohen says, "you look over the best people for the job, and often there are two with complementary strengths." The practice has extended to the top. Before leaving to become U.S. treasury secretary in July 2006, chief executive officer Henry Paulson, Jr., worked in a close complementary fashion with then president and chief operating officer Lloyd Blankfein, who is now CEO. Earlier, Paulson headed a three-person team comprising himself and co-presidents and COOs John Thornton and John Thain.

The benefits of such arrangements are several. Co-leadership can act as a restraint on the naturally strong egos found at a top-tier investment bank. It can help assimilate senior hires into the organization's culture by pairing the newcomers with veterans of the firm. It also allows the leadership to be in two or more places at once – something that proved beneficial after the attacks of September 11. At the time of the attacks, Kerr says, Paulson and Thornton were out of the country, but Thain was in New York and could thus oversee efforts to restore order at the firm.

Perhaps the greatest benefit of co-leadership is diversity of thought and talent. Decisions, while they might take slightly longer to reach, often are better because two different minds have been at work on them. Co-leaders can play to their individual strengths. When Paulson and Blankfein worked together, Paulson, who had spent his career building client relationships, was Mr. Outside; Blankfein, who had a background in the technical intricacies of financial instruments, was Mr. Inside. Faced with the succession challenge that is often embedded in such a complementary relationship, Blankfein has had to work to raise his public profile and increase his involvement with clients since becoming CEO.

Weinberg and Whitehead set ground rules for the successful relationship early on, including an agreement that if one person felt very strongly about something, they both would head in that direction.

Such semiformal agreements continue to this day.