Are You Tough Enough to Manage Your Committees?
Where JV committees go bad, and how JV Boards and CEOs can ensure their committees contribute productively to venture performance
First published April 2021 — Managing a joint venture can be the most exciting job you will ever have, but it is also pound-for-pound one of the toughest jobs in business. As we watch the continuing stream of new joint venture announcements — whether that be Fiat entering into a new joint venture with Foxconn for electric vehicles, or Comcast pairing up with Charter Communications and ViacomCBS to take equal ownership of industry software platform Blockgraph — it is easy to see the allure of joint ventures in the eyes of those who will be asked to run them. After all, joint ventures often involve combining technologies, capabilities, and capital in novel ways, and JVs are usually instilled with exciting growth prospects. And joint venture CEOs and management teams are afforded a level of responsibility rarely seen in leadership positions within a business unit of the same size.
But running a joint venture is difficult business – a job only for those who have the right stuff.
Indeed, many public companies have found JVs to be a useful proving ground for their own top leadership ranks. Recent chief executives of BP, Kvaerner, and LyondellBasell were all JV CEOs in the years leading up to their top appointments. Running a JV can offer persuasive evidence that an executive has what it takes to operate in a complex environment involving disparate stakeholders.
At BP, former CEO Bob Dudley fully forged his reputation between 2003 and 2008 when he was running the company’s massive Russian JV, TNK-BP – a hornets’ nest of shareholder misalignment that ultimately generated more than $40 billion in value for BP.
For every Bob Dudley, however, there is at least one spectacular flameout, and countless tours of duty cut short with disappointment. As the new JV CEO of a large, 50:50 JV told us:
“The last five CEOs were carried out on stretchers, and most were just dumped on the side of the street, left for dead or with careers that never recovered.”
The purpose of this note is to distill our experience serving hundreds of joint ventures over the last 20 years — and to offer guidance to JV CEOs and their teams on how to address the added challenges that JVs introduce.
The Added Challenge of JVs
What does it take to run a JV? First is a recognition that the job of a JV CEO and management team requires all the capabilities needed to succeed in any ordinary business, plus the skills and tools needed to meet the added demands resulting from the shared ownership structure of joint ventures. These added demands are felt most acutely in five areas: Strategy, governance, shared services and operations, organization and talent, and finance and planning (Exhibit 1). In strategy, for example, a joint venture CEO must steer the business to meet the needs of the market and the needs of multiple owners – owners that often hold differing objectives, investment and risk preferences, views on which products and markets to prioritize, and how the JV should evolve.
Continue Reading
Complete the short form below to unlock the full article, including the five areas where shared ownership raises the bar for JV leaders and how the best CEOs meet them.
Comments