Is It Time for a New Leadership Model in Cannabis?
2024 may be go down as the year of cannabis CEO turnover.
I don’t automatically blame the exited leaders. In cannabis, management turnover is a multifactorial issue.
Of course, individual performance plays a role and CEOs must be held accountable for results.
But are CEOs metaphorically set up to fail i.e. is the job too big and challenging for one person?
To successfully run a medium-to-large MSO in today’s environment, a CEO needs to be a:
- Motivating leader and manager with an entrepreneurial mindset
- Expert in operations & compliance
- Fundraiser, extraordinaire
- Active lobbyist etc, etc
…under very difficult financial and market constraints, while competing against a large illicit market that doesn’t play by your rules.
This challenge is a function of task difficulty (e.g., it’s really hard to raise money today) and role depth & breadth (e.g., you are spread thin on critical issues).
I know many cannabis CEOs in the US and Canada. Few would say they are happy, self-actualizing and not under siege. This unhappiness impacts their performance and will trickle down to subordinates and the culture.
Anyone who writes this problem off as sour grapes or says it’s just as tough in other sectors has never led a cannabis firm or understood that many large businesses in mature industries can generally run themselves.
One solution might be to split the CEO duties into 2 roles i.e. have co-CEOs. One would concentrate on internal priorities while the other would focus on external activities.
Co-CEO arrangements are not as odd as you think. In 2024, 8 of the Fortune 500 have co-CEOs. Over the 1996-2000 period, 87 of the 2,200 S&P and Russell companies featured 2 chiefs.
This structure offers unique benefits. It enables more strategic focus, better matches the ‘right person to the right task,’ and frees up time for management & coaching. Having co-CEOs also increases talent depth and delivers a ready-made succession plan (a big gap at many cannabis firms).
To be sure, the idea gets mixed reviews. It is not easy to pull off in the real world. There inevitably will be differing styles, diffused accountability, and ego collisions. Politicking could increase as subordinates look to play off the CEOs against each other. I also won’t minimize the challenge of finding and keeping 2 good leaders; securing one is tough enough.
But the research is promising. A Harvard Business Review study of co-CEO models found that the avg. annual shareholder return was 9.5%, significantly better than the avg. of 6.9%. Approximately 60% of co-CEO led companies outperformed the average.
Circling back, the cannabis industry is unique and that puts big maybe unfair demands on its leaders. It might be time we help them out with a creative management models.
Let’s talk. I help companies improve their decision-making abilities & structures.
#leadership #MSOS #management #LPs #organizationalstructure #CEOs