Twitter took a gamble on Jack Dorsey's return. Has it paid off? A look at how Dorsey has handled being a CEO twice over.
Jack Dorsey received a lot of publicity when he returned as permanent CEO of Twitter, the company he helped found in 2006.
A lot of that focused on the fact that he would continue as CEO of Square, the payments startup Dorsey founded in 2009 after departing Twitter a year earlier.
When Dorsey was forced out of Twitter in 2008, co-founder Evan Williams allegedly told him, “You can be a dressmaker or the CEO of Twitter. You can’t be both.” in reference to the fashion design classes Dorsey had been leaving the office early to attend.
So why is it now possible for Dorsey to be CEO of both Twitter and Square?
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A Man With Two Asses?
Dorsey certainly isn’t the first person to simultaneously run two major companies. Another who has taken on the challenge is Elon Musk (CEO of Tesla Motors and SpaceX). His advice to Dorsey? Don’t.
“If you’re the CEO of a company, you have to work your bloody ass off. If you’re the CEO of two companies, you have to work two bloody asses off and you don’t have two asses,” said Musk, eloquently expressing the difficulty involved. He has also stated that he will eventually take a step back from the day-to-day running of Tesla.
Steve Jobs also spent time as a dual CEO, running Pixar and Apple simultaneously for years, a period he called, “The worst time in [his] life.”
A Lack of Focus?
Dorsey has attracted criticism for his decision to run Twitter and Square simultaneously, especially at such a critical time for both companies (Square was headed for IPO and Twitter’s stock was underperforming). Many people question how effective a CEO can be without a total focus on the company they are running.
Marissa Mayer, CEO of Yahoo!, has been the target of similar criticism for just sitting on the board of other companies, and being CEO is, of course, an even greater responsibility. Critics worried that Mayer’s board seats at Wal-Mart and Jawbone could be a distraction during a time when its core business is floundering.
So it was inevitable that Dorsey, taking on a much weightier set of responsibilities, would come under fire in the same way. It isn’t just outside commentators, though. These concerns were also raised in Square’s own IPO filing, where Dorsey’s two jobs were listed as a risk factor.
The document clearly and concisely defined the problem: "Jack Dorsey, our co-founder, President, and Chief Executive Officer, also serves as Chief Executive Officer of Twitter. This may at times adversely affect his ability to devote time, attention, and effort to Square."
Despite these criticisms, Twitter co-founder Evan Williams (yes, the guy who made the dressmaker comment) claimed to be glad that Dorsey was returning as CEO, saying, “I’m confident this is exactly what Twitter needs at this time. I can’t wait to see what happens now.”
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A Day in the Life of Dorsey
So, how has Dorsey managed his workload since then? He certainly gets an A for effort, often putting in 18-hour work days. That still might not be enough, though, as Twitter’s chairman found it so difficult to meet with Dorsey that he ended up driving his car in order to do so.
Other current and former Twitter employees have noted his habit of abruptly cutting off meetings when they reach their scheduled end, saying, “I’ve got to go.”
Dorsey maintains a rigid schedule. He spends his mornings at Twitter and afternoons at Square, aided by the fact that they are only one block apart. He also devotes different days to different aspects of the businesses.
Eric Flamholtz, a UCLA management professor, said, “A classic CEO should have his hands in everything: financials, operations, personnel. But if you’re splitting your time between the two companies, it becomes much more about who the people are around you.” This is something Dorsey seems to have taken on board, working with eight direct reports at Twitter and 10 at Square.
He has also been seeking mentorship from Disney Chief Executive Robert Iger (Alongside his dual CEO-ship, Dorsey is also on Disney’s board). Iger himself has confidence in Dorsey’s ability to manage his roles, saying that, in order to to run two companies at once, “You need a few things and Jack has them. You need the ability to focus and prioritize and compartmentalize…and you need great people under you.”
What Have We Seen From Dorsey?
Only a week after becoming Twitter’s permanent CEO, Dorsey fired 8 percent of Twitter’s employees. Although the layoffs cost Twitter millions in severance costs and restructuring expenses, they led to improved earnings predictions and boosted the company’s stock by 3.7 percent.
Since then, things haven’t between quite so rosy. Square’s IPO was lackluster, debuting at $9 a share (much lower than the expected $11 to $13 dollar range). Although the prices did rise, they remained below the price paid by private investors in 2014. To put that in context, a $12 share price values Square at $3.9 billion but the 2014 funding was raised based on a $6 billion valuation.
Twitter continued to struggle with user growth. The biggest shift since Dorsey took over was the news that Twitter could be dropping its famous 140-character limit, arguably its defining feature. This is still only a possibility, albeit one that Dorsey has publicly discussed.
It also changed its star-shaped "favorites" to heart-shaped "likes", perhaps trading on users familiarity with the term from other social networks (ahem, Facebook). Neither of these measures has managed to do anything about stagnant user growth on the platform.
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In January, a number of execs left the company. While the departing execs and Dorsey all said the right things, some sources claimed that they were pushed out. Whatever the truth of it, the news had a clear impact on Twitter stock. The company’s value dropped by more than $500 million in less than 24 hours.
Overall, Twitter’s value has dropped by more than $4 billion during the early part of 2016, clearly showing that not only has Dorsey not produced the turnaround Twitter hoped for but that Wall Street has no expectations of that changing. One analyst even called Twitter “total junk.”
Declining value at both Twitter and Square also affected Dorsey personally. His own net worth dropped below $1 billion as a result. It is also worth noting that neither company has made it to profitability and are still trading at or below their IPO price.
"The biggest single problem that shareholders have with Dorsey is that he is not able to devote his full time to Twitter and the share price slide suggests he should spend his full time with Twitter," said Wedbush Securities Inc. analyst Michael Pachter. The same can be said of Square.
Twitter took a risk in naming Dorsey as CEO despite his commitments at Square, and so far has yet to see that gamble pay off. With no signs that the downward trend will be halted, Dorsey’s task is only getting more difficult.