Tim Armstrong's No-Lose Proposition as Chief of AOL

AOL’s new soon-to-be CEO Tim Armstrong will be in for quite a sea change from his previous gig at Google. The lingering question: Why would you leave Google for AOL?

It’s an interesting question raised by Sam Diaz offline. For all the talk (Techmeme) about Armstrong’s enthusiasm about a “great opportunity” AOL’s new chief is bound to have a few headaches. The biggest one: Time Warner. Will the decisions about AOL be made by the New York brass or Armstrong? How much real authority will Armstrong have?

We don’t know for sure, but if AOL’s previous leader Randy Falco was allowed to overpay for Bebo perhaps Armstrong has free reign.

However, there’s something else going on here. Armstrong has a great risk reward set-up. There’s little risk that Armstrong’s star will be tarnished and he’ll be a hero if he fixes AOL, which is still a major Web brand.

Here’s a look at Armstrong’s setup:

• Fail miserably and it’s Falco’s fault. You could even blame Jonathan Miller too. The excuse if Armstrong falls flat is this: Well, AOL was screwed up to begin with.
• Succeed and make AOL a player again and Armstrong is a Web god. Dress AOL up for a sale he’s a hero. Spin AOL off from Time Warner and you guessed it: Hero AND liberator.

You see these set-ups all the time. Carol Bartz at Yahoo has a similar set-up. If she restores Yahoo’s stature and she’s a star. If Yahoo still stumbles–it won’t in my opinion–blame Jerry Yang, Terry Semel and silly sideshows like Carl Icahn.

The risk reward management list here goes on and on. Remember Michael Capellas, former CEO of Compaq then HP exec? He took over MCI (then Worldcom) in a massive restructuring job. He had nothing to lose and came out looking like a management guru. Capellas fixed up MCI so well Verizon bought it.

Now Capellas is chief of First Data and has a bio that reads like this:

Prior to joining First Data, Capellas was a two-time, former CEO of Compaq Computer Corporation and MCI and a recognized global thought leader in the technology space. He began his career with Schlumberger Limited and went on to hold senior management positions at Schlumberger as well as Oracle Corporation and SAP Americas. He joined Compaq in 1998 as their chief information officer and was named chairman and CEO in July 1999. After the merger with HP, Capellas served as president of HP. In 2002, he accepted the challenge of leading MCI (then WorldCom) through the largest corporate reorganization in history. For three years, he served as MCI’s president and CEO and oversaw the successful rebuilding of the company. Turnaround completed, Verizon Communications ultimately acquired MCI in 2006.

That’s the bio that Armstrong is after. And he has a pretty good risk reward scenario to get it.

Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations. This post first appeared on the ZDNet blog Between the Lines.