Two Can Play That Game
5 May 2011 Enrico Preziosi
Most companies have one chief executive officer who guides strategy and leads the management team. But this is by no means the only model for success. Jim Banks speaks to Enrico Preziosi, chairman of Italian toy company Giochi Preziosi, to find out how the firm's unusual management structure - which includes two CEOs - has helped it to expand worldwide.
Every company will face different challenges to its plans for growth, and will formulate with a different business model to overcome them.Sometimes those differences will be in the detail, but on other occasions they will significantly vary between competitors. Most companies will have a single CEO to take the helm and steer them towards their strategic goals.
Yet even this seemingly obvious choice is not necessarily an automatic one. It certainly wasn't for Giochi Preziosi, a leading name in the international toy market - the company's unusual management structure includes two CEOs.
At Giochi Preziosi, Dario Bertè heads up marketing and sales, while Oddone Maria Pozzi oversees the company's financial and administrative activities. Although they are tasked with controlling very different parts of the business, Bertè and Pozzi have equal standing within the company and equal input in the decision-making process. Both work closely with Enrico Preziosi, chairman and founder of the company, to blend entrepreneurial vision, marketing drive and financial accountability - three important, but sometimes contradictory elements of the business.
"The reason we have this structure is that I believe there is no person in the world who could handle the finance, marketing and retail functions together," says Preziosi. "Here, we have people that are focused on single activities and have wider experience in their individual markets, rather than having just one person who tries to do everything.
"This structure is more efficient and we can employ specific skills for each role. Our corporate strategy is to double our revenues in the next three or four years, so it is mandatory that we have more people sharing responsibility for running the group."
Based in Italy, Giochi Preziosi was established in 1978 as a toy wholesaler. The company soon began to enter into sole rights agreements with international toy manufacturers, and then progressed to producing its own toys for national and international markets. Steady growth through acquisitions has allowed it to become Italy's leading toymaker, and the fifth largest toymaker in the world.
The company is constantly looking to diversify into new sectors and markets, and still pursues a strong policy of growth and internationalisation. Already well established in Asia and Europe, Giochi Preziosi is continuing to expand in key markets, including Russia and Brazil, and is trying to increase its presence in the US. Sharing the responsibilities of the CEO role is a major boon in these efforts.
"In mergers and acquisitions, for example, it is easier to get an opportunity in a market if different people have different skills," the chairman says. "We are trying to grow in Europe, Russia and Brazil, but it would be impossible to have one person covering all those markets. Our set-up means that we are more flexible and better able to capture the opportunities that arise."
Communication: the key to effective decision-making
One question that stems from Giochi Preziosi's unusual structure is how the decision-making process is run; after all, there are three voices vying to be heard at the highest level of the company, where the key decisions are made. The finance and marketing functions may have very different views and, because they have an equal say in the running of the company, there is potential for gridlock unless both sides clearly agree on how to move forward. In Giochi Preziosi's case, however, the structure seems to work well, as is evidenced by the company's sustained pattern of growth.
"Decision-making is easier in a company that has a committee that includes the chairman and the CEOs," Preziosi says. "It provides an opportunity for us to define all decisions together; there is a lot of information sharing between us. Also, the management structure is clearly defined, so people know who takes the final decision on how to run the business. As chairman, I am involved in strategy, but not day-to-day operations. However, I am always informed about the decisions the CEOs make, as is my duty and my right. I understand that different models are hard to explain, but our way of organising our senior management team is the reason for our success across the world."
In 30 years, the company has grown from nothing to a business with a turnover exceeding €1bn, which it aims to increase to over €2bn in the next four years. Preziosi attributes this to the management structure that allows him the time - as both the chairman and the entrepreneur behind the business - to deal with the bigger picture and guide the company towards its long-term goals; however, the success of this structure is entirely dependent on how well the CEOs communicate, even though they speak different business languages.
"The CEOs are not separated," says Preziosi. "Although they oversee different areas, they work on the same floor and talk to each other every day.
"Sales and marketing is very different to finance and administration. One is the engine of the company, the other that takes care of the numbers. But our two CEOs understand each other and they know they are involved in defining the company's results. They have equal standing in the company, which is not always easy, but they are like brothers."
Even in such a close relationship, there are inevitably occasions when marketing and finance disagree on the best way to grow the company; for example, finance will sometimes want to keep a tight rein on spending at a time when marketing wants to invest heavily. Nevertheless, the CEOs eventually agree on any decision that is made, partly because they understand that they share the same goals - improving the numbers and fuelling growth.
This ability to come to an agreement is, in part, due to the fact that each CEO is aware of the activities of the other. Bertè understands something of how the finance department looks at the company's performance and Pozzi has some knowledge about marketing. They each realise how the other parts of the business take a different view on their priorities. The fact that they are in constant communication has nurtured that understanding, as well as an acceptance that they are working towards a common goal from different perspectives.
Building a platform for growth
Giochi Preziosi's ongoing expansion plans will put the theory behind its innovative management structure to the test. The company is in discussion with a distributor in Russia about opening up that market, and similar talks are underway with a distributor in Brazil. At the same time, the company is hoping to expand its presence in Europe with a range of new products and would like to build on its foothold in the US market.
"In the US, we have a tiny presence," says Preziosi. "We have just one customer so far, Toys 'R' Us. Nonetheless, one of our dolls - Cicciobello - is having huge success in that market, so we are looking to improve our presence there.
"We are always looking for acquisitions, so our growth target of over €2bn is achievable within a few years. It might seem ambitious, but for us it is normal. In 2010, we bought a large stake in a chain of shops in France. We also have new offices in Brazil and Russia, which will be very important for our future growth."
So far, having two CEOs with different approaches to the business has been a source of inspiration and inventiveness for Giochi Preziosi. Crucially, the chairman is closely involved in formulating strategy, which means that the company is headed up by a triumvirate that is capable of making decisions that reflect the needs of the whole business, not just the finance or marketing functions. As long as the two CEOs are able to communicate in a business language that each can understand, then the company can have the best of both worlds.