Salesforce better get used to Marc Benioff at the helm because he keeps chasing his handpicked successors

Salesforce Inc. has twice promoted an experienced executive to co-CEO, both times taken as a sign that the cloud software pioneer has found a possible successor to co-founder Marc Benioff at the helm.

But both chosen successors also chose to leave as Benioff refused to hand over his title, leaving himself and the company in dire straits. Recruiting another potential successor will be difficult after seeing respected executives Keith Block and Brett Taylor walk out the door, leaving Salesforce’s way
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in the hands of a CEO who seems to have focused more on his many philanthropic and other endeavors in recent years, but has yet to fully transition the company to new management.

“Mark is struggling between wanting to give up control of the company and at the same time when he sees the stock going down, he starts to gravitate back,” said Daniel Newman, founding partner and principal analyst at Futurum Research.

Salesforce disclosed this on Wednesday afternoon Taylor plans to leave at the end of the company’s fiscal year on Jan. 31, to return to his “entrepreneurial roots”. It had been exactly one year since then Taylor was named co-CEOafter being directed to the top after acquiring his software company Quip for $582 million in stock, a transaction treated as a hire purchase.

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Benioff’s previous co-CEO, Block, retired in February 2020, after only 18 months in the position. The departure of co-CEOs who each spent less than two years in the position and left without a solid destination doesn’t speak well for Benioff’s management style, and the Salesforce co-founder sounded hurt and surprised on a conference call when discussing the last departure.

“We’re still in a little bit of shock and we’re extremely sad and we feel a great loss to lose Brett,” Benioff said when asked by an analyst about Taylor’s replacement. “And again, I don’t have to tell you, he’s one of the best people I’ve ever worked with in my life, and a great guy too. And I must also tell you that we have a lot of fantastic people in the company.”

Benioff added that he’s a good salesman and that he’ll continue to work with Taylor until he’s out the door. “It’s not a deal ’til it’s done, but we have to tell you that he’s decided to leave.”

Two factors were likely at work that led to Taylor’s departure. One is that Salesforce’s growth has been slowing — the company’s fourth-quarter revenue forecast on Wednesday beat Wall Street expectations by $900 million — which has led Benioff to become increasingly active in recent months as the market has soured.

“After this year of continuous declines and just average-looking growth — and this was a company that used to beat and raise — it definitely hasn’t lived up to its potential,” Newman said, adding that he believes Benioff’s thoughts were focused on how he must come back and do more to turn the ship around.

Taylor can also see an opportunity in the current tech downturn. Many analysts and entrepreneurs have noted that downturns represent great opportunities for those who can take advantage of them, and Taylor has a proven track record of growing young software companies.

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“Brett is an entrepreneurial guy,” said Jason Wong, an analyst with the Gartner Group. “If you’re finally able to do it, it’s actually a good time, knowing that the next 12 to 36 months are going to be lower grades.” This is that perfect moment where Brett is doing what he does best and Mark is doing what he does best, which is growing Salesforce.”

Before Quip, Taylor co-founded a company called FriendFeed, which aggregated social media updates. Facebook, now Meta Platforms Inc.
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bought FriendFeed in 2009, two years after it was founded. It was shut down in 2015. Last year, Taylor also recently served as Twitter’s non-executive chairman before going private in its $44 billion acquisition by Tesla Inc.
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CEO Elon Musk.

Put yourself in Taylor’s shoes for a moment: Imagine seeing the CEO you expect to succeed take back more control of the company in a difficult period, and knowing that your resume can land you countless top positions where you you shouldn’t share the limelight. His current path and the reasons for it seem obvious.

The big question is whether Benioff will look for another co-CEO. Benioff was raised at Oracle Corp.
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where Larry Ellison stepped down as CEO but still runs the company in a de facto manner as Chief Technology Officer and Chairman. Until Mark Hurd’s unexpected death in 2019, Safra Katz and Hurd were co-CEOs of Oracle for about five years, one of the rare times that co-CEOs seem to work, and now Katz runs the position alone.

While Benioff has sometimes given the impression that he is trying to step back from some of the day-to-day running of Salesforce, Wong said he would be surprised if Benioff stepped down before 2026.

“He’s always talked about that $50 billion target by 2026, I guess he’ll be there at least until then.”

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Benioff is a proven leader for Salesforce, but Wall Street still likes to see a strong executive team around such a leader, especially one who has spent a lot of time in Hawaii in recent years while buying Time magazine and has been active in many pet causes. Investors were clearly surprised by the news, with Salesforce shares down more than 6% in after-hours trading despite mostly strong numbers.

“Given that Mr Taylor was seen as the ‘heir apparent’ at CRM [Salesforce]it does raise a lot of questions regarding the management team and frankly offset some of the positive narrative around margins heading into CY23,” Evercore ISI analyst Kirk Mattern wrote in a note on Wednesday evening.

If Benioff can’t woo Taylor back, he needs to change his approach if he hopes to find another potential successor who really sticks around. He needs to either publicly or privately name a date when he will transition to chairman of the company and stick to it no matter what happens, or Salesforce investors should just plan to trust Benioff with no backup plan.

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