Salesforce Inc. has promoted two experienced executives to the position of co-CEO. This was taken to mean that Marc Benioff the cloud-software founder had found a successor.
Both of the chosen successors also chose to leave, and Benioff refused to give up his title, leaving him and the company in an awkward spot. It will be difficult to recruit another potential successor after the departures of Keith Block and Bret. This leaves Salesforce in a difficult position.
CRM,
in the hands of a chief executive who has seemed to focus more on his many philanthropic and other ventures in recent years but still can’t seem to fully turn over the company to new leadership.
“Marc wrestles between wanting to relinquish control of the company, and at the same time, when he sees the stock down, he starts to gravitate back in,” said Daniel Newman, founding partner and principal analyst at Futurum Research.
Salesforce released Wednesday afternoon that Taylor plans to leave at the end of the company’s fiscal year on Jan. 31, to return to his “entrepreneurial roots.” It was exactly one year to the day since Taylor was named co-CEOAfter being led to the top, you will be able to climb down. following the acquisition of his software company Quip for $582 millionStock is a deal that can be viewed as an acquisition-hire.
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Benioff’s previous co-CEO, Block, stepped down in February 2020After just 18 months, he left the position. The departures of back-to-back co-CEOs, each after spending less than two years in the position and leaving without a solid destination, does not speak well of Benioff’s management style, and Salesforce’s co-founder sounded hurt and surprised on a conference call when discussing the latest departure.
“We’re still in a little bit of shock and extremely sad and feeling a lot of loss for losing Bret,” Benioff said, when asked by an analyst about a replacement for Taylor. “And again I don’t have to tell you, he is one of the best people I’ve ever worked with in my life and also a great person. And I have to also tell you that we have a lot of fantastic people in the company.”
Benioff stated that Taylor is a skilled salesman, and that he would continue to work with Taylor until he leaves. “The deal is not over until it’s over, but we do have to tell you that he has decided to leave.”
There were likely two factors at work that fueled Taylor’s departure. One is that Salesforce’s growth is slowing — the company’s fourth-quarter revenue forecast on Wednesday missed Wall Street’s expectations by $900 million — leading to Benioff becoming more hands-on in recent months as the market turned sour.
“After this year of just continuous declines and just average looking growth — and this was a company that used to beat and raise — it definitely has not realized its potential,” Newman said, adding that he believes Benioff’s thoughts have been focused on how he needs to come back and do more to get the ship turned around.
Taylor could see the opportunity in this tech downturn. Many entrepreneurs and analysts agree that downturns can be great opportunities. Taylor has a track record of building young software companies.
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“Bret is an entrepreneurial guy,” said Jason Wong, a Gartner Group analyst. “If you are finally in the position to do it, this is actually the good moment, knowing the next 12 to 36 months will be lower valuations. It’s that opportune moment where Bret does what he does best, and Marc does what he does best, and that is grow Salesforce.”
Taylor was the co-founder of FriendFeed, a company that aggregated updates from social networks. Facebook now Meta Platforms Inc.
META,
FriendFeed was bought in 2009, two year after its founding. It was closed down in 2015. Taylor was the nonexecutive chair of Twitter for the past year. This was before the company was privatized by Tesla Inc., which was $44 billion.
TSLA,
CEO Elon Musk.
Put yourself in Taylor’s shoes for a moment: Imagine that you see the chief executive who you expect to succeed wresting back more control of the company during a trying time, and knowing that your resume could get you any number of top jobs where you would not have to share the spotlight. It’s obvious what his current path is and why he chose it.
The big question is whether Benioff will seek out another co-CEO. Benioff was brought up at Oracle Corp.
ORCL,
Larry Ellison, who has been appointed CEO but is still the chief technology officer and chairman of the company, has left. Up until the unexpected death in 2019 of Mark Hurd, Safra Catz, Hurd, were co-CEOs at Oracle for around five years. It was one of those rare occasions when co-CEOs worked. Catz now heads that position.
While Benioff has given the impression at times that he was trying to step away from some of Salesforce’s day-to-day management, Wong said he would be surprised if Benioff were to step down anytime before 2026.
“He has always talked about that $50 billion target by 2026, I assume he would be there at least until then.”
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Benioff is a well-respected leader for Salesforce. However, Wall Street still prefers to have a strong executive team around such an individual, especially since Benioff spent a lot time in Hawaii over the past years, while purchasing Time magazine, and being involved in many causes. The news stunned investors. with shares of Salesforce falling more than 6% in after-hours tradingDespite having strong numbers.
“Given that Mr. Taylor was assumed to be the ‘heir apparent’ at CRM [Salesforce], this does bring up a lot of questions in terms of the management team and frankly offsets some of the positive narrative around margins heading into CY23,” Evercore ISI analyst Kirk Materne wrote in a note Wednesday evening.
If Benioff fails woo Taylor back he should change his approach if it is to find a successor. He should announce or privately state the date that he will be retiring as chairman of Salesforce. Salesforce investors should expect Benioff to live upto it, and not just rely on him with no backup plans.
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