Over the weekend we learned that SAP is making more changes at the top - with Hagemann-Snabe giving up the co-CEO role in May 2014 and likely moving to the supervisory board then. With that the other Dane is leaving the SAP executive board - but not so much in Wiking raid retreat speed as Lars Dalgaard did.
The official story line
SAP played this that Hagemann-Snabe always said he would be available only for a limited time for the co-CEO role - and that he notified Plattner of his request to move out of the role by 2014. This triggers a supervisory board meeting and with that a public notice under German public company regulations. And SAP deserves kudos for actively addressing this change in a press and analyst call - even though Plattner did not have all the answers we are sure he would have liked to have in place today.
Plattner countered Hagemann-Snabe's resignation by suggesting to make him a member of the supervisory board - subject to shareholder approval (which of course isn't an issue with the three SAP founders Hopp, Plattner and Tschira owning way over the 25% needed to establish a member to the supervisory board). Hagemann-Snabe and McDermott will operate the business as usual for the next 10 months to come - that is sharing the CEO role and Hagemann-Snabe looking after the vertical aspects of the SAP software portfolio.
Behind the scenes
The reader needs to keep in mind that German supervisory boards are staffed half by shareholders, half by employee representatives. With Plattner having to go back to the supervisory board with Hagemann-Snabe's notice, this knowledge was also in the heads of the employee representatives. And while there is no reason to doubt their professionalism in regards of the confidentiality of a personnel change - the safe choice is to pro-actively communicate the change to the public - and with that to the employees. And as mentioned before the stock markets.
Did Hagemann-Snabe surprise Plattner?
We know how fond the SAP founders are of the co-CEO model. It balances things out, gives more bandwidth etc. So if Plattner knew for sure that Hagemann-Snabe would be leaving - why not have the next junior partner for McDermott groomed and ready to go in time? Well, Plattner answered this literally with saying I could not find another Jim. Which lead to some good questions from the press in regards of the viability of the unusual co-CEO model. You need to have the right talent to operate in such a leadership model.
As an alternate view I would not be surprised that McDermott wanted to be the sole CEO of SAP at some point, and Hagemann-Snabe knew that and took himself out of contention with saying he wants to fill the role only for a limited time. To give some more credibility to this, the respected German daily F.A.Z. unearthed that in an interview with German management magazin Capital McDermott once answered to the question of being a co-Ceo with is this a the joke?
Why not co-CEO with Sikka?
That is one of the questions in the room - but what has not happened, can still happen. And Sikka's position just got stronger with the last re-organization - as he is since then completely in charge of all product development activities. It's now time for him and his team to deliver and they have their hands pretty full. Maybe with Hagemann-Snabe's move to the board in May 2014 Sikka will become co-CEO - but that would not have been true to the statement today, starting McDermott being the sole CEO. So the message for Sikka has probably been to deliver the products that the company needs to grow in all product areas - and good things will follow for him once proven.
The German Angle
Despite all the international operations and success of SAP - a large part of its employee base and much of its DNA is still German. For instance at the shareholder meeting in June Plattner reassured the audience that the official company language ("Amtssprache") is and remains German. Bill McDermott's remarks had to be translated from English to German. 13 of SAP's 16 supervisory board members are German. The necessity for this press conference came from German public company regulations to relay supervisory board decisions with no delay. SAP's German labor council leader was quick at hand at stating that Germany as location had been weakened and that there is no more representation of Germany and Europe at the CEO levels. Fears got even more fuelled by SAP moving its communication department from Walldorf to Palo Alto recently.
So Bill McDermott has his work cut out not only in Germany but all over Europe, where Hagemann-Snabe handled almost all customer interactions. How these first meetings will go will be a key indicator for McDermott's success in his CEO tenure. It speaks for him offering to learn German and potentially even moving or spending substantial time in Walldorf or Europe. Nothing would win the hearts and minds of the German employee base more than these symbolic actions. But McDermott will be well advised to find some Walldorf based executives to be a sounding board for him - and Mucic, Leukert and Goerke come to mind.
The Pros and Cons of Co-CEOs
The continuous mutual complimenting of McDermott and Hagemann-Snabe has been seen for many years now. And there are advantages in the different backgrounds and styles of two professionals - as you always get a multi-dimensional perspective and feedback on things. When this is not desired - it requires intense coordination and choreography - and that takes time. This is the time that McDermott will save now and will hopefully use wisely. Freeing up 2-3 hours of a CEO's time per week can make a huge impact on a company's success. The question now is, who will play the role of McDermott's sounding board. In the short run Hagemann-Snabe is of course around - but there will have to be a partner or partners for that. With Plattner preferring the technical topics and playing the role of instigator and mentor with Sikka - he is not the natural counterpart for McDermott. Oswald does not speak much English. Brandt is retiring. So it will be interesting to see who will fill that role. Working closely on future earnings calls with Mucic, he should be the forerunner for this role.
What's next?
SAP is a complex organization so in the past most promotions came from within. Bill McDermott himself was the highest hire SAP made in the last decade - that did not join through an acquisition. And the tenure of the acquired CEOs - John Schwarz and John Chen has not been long enough to be of a lasting impact.
We will see if McDermott will promote further on the internal promotion path - or hire from the outside. The organic path would be to make Rob Enslin an executive board member running sales and market operations. Then there is the retirement of Werner Brandt - and as we learnt in typical Plattner style side remark - that Luca Mucic will be his successor.
That one resolved - there is the question what to do with veteran Gert Oswald - on the executive board since 1996 (!), continuously expanding his area of responsibility. But he is 60 - so we will see if his contract will be extended - or not.
What will go a long way would be for the board or McDermott to promote or bring in a board member from Asia or Latin America. These are growth markets for SAP and they look for representation at the top - which is missing so far.
And maybe these promotions will be to the global management body, the body under the executive management board. Right now Ensslin is the longest tenured non executive board member, Calderoni and Leukert were just added in the last re-org, and Mucic was added quietly. With Poonen leaving, I would expect CMO Becher getting a seat in the global management board, marketing is too important and Plattner agrees with that - for not having it presented in one of the two management boards.
Advice for partners
Not too much changes, unless you were a product partner that relied on Hagemann-Snabe for the success of the partnership. In that case find some visibility with McDermott, Sikka or Plattner immediately. Everything else at board level is transitioning, so the same advice is valid for partners going through Brandt and Oswald.
Advice for customers
Dennis Howlett makes the case clear why customers need to take notice and genuinely care for executive level changes here.
We don't think too much will change - unless your executive board sponsor is one of the current co-CEOs. McDermott will have to reduce his exposure here, and Hagemann-Snabe will have to hand it over. Less customers will be directly served by a CEO - but that may be too their advantage - as they may get sponsorship closer to where it matters, in the product development organization. We recommend to actively start moving your executive sponsorship to where your critical automation areas are - if it's with technology go with Sikka and / or directs, if it's with the Business Suite Leukert is your man and if it's vertical automation then ... wait for the dust to settle a little.
MyPOV
SAP already streamlined the organization with moving all development responsibility to Sikka in the last reorganization back on May 24th (my take here). It now has simplified and accelerated the decision processes on the CEO level with putting the reins in McDermott's hands exclusively, we expext this transition to happen faster in day to day operations than the formalities.
Everyone knowing and having experienced McDermott knows that customer relations are in very good hands. SAP's challenges are however on the technical side - and that's where McDermott will need to have a firm, steady and foremost credible hand. McDermott will have to earn his respect on the key technical development side, with European and Asian clients and win the German employee base over.
In short he has to turn into a global CEO that can project his charisma and communication skills beyond English speaking audiences and cultures. From all I know McDermott can make that transition - if will be for the better of SAP. We wish him das Glueck des Tuechtigen. (translated freely - the luck will come to the hard working).
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Find key articles and tweets in my Storify collection here.
My predictions on future (organic) executive level nominations are here.
