Introduction
The Chief Operating Officer (COO) is a dynamic position that reports to the Chief Executive Officer (CEO). This person is also a member of the senior management team or business administration team. The primary responsibility of the COO is to execute the company’s strategic plan by overseeing and aligning all of the business’s operations to meet the company’s goals and objectives. This executive position, if designed correctly, can be pivotal for the success of a company because they are accountable for running the business as smoothly and effectively as possible to achieve its goals.
This article will offer a definition(s) of a COO, talk about why and when a company may or may not need one, the different focuses of the COO and why it’s not a “one size fits all position”, the CEO COO relationship, and the skills that make a successful COO.
What is a Chief Operating Officer?
A Chief Operating Officer, sometimes referred to as the chief operations officer is, by design, the CEO’s right-hand person assigned to oversee the day-to-day operations of the business. This individual is dynamic because of the several positions he or she may play in the company. As a guiding explanation, this individual is a hybrid strategist and tactician who can mentally switch between thinking strategically and thinking tactically. This makes them great operators because they understand the strategic vision and understand how the business needs to operate daily to meet the vision.
As an operator or operations professional, the COO is in a great position because they have a broad, bird’s eye view of the entire operations of the business which allows them to see what areas of the business are doing well and which areas are not. Depending on the size of the organization, the COO works with other executives, department heads, or key employees to keep the company’s operations aligned with the company’s overall goals and objectives.
Why Do Many Companies Need a COO?
Many companies need a COO for several reasons. A few reasons are:
- To establish or confirm the company is running as smoothly and efficiently as possible
- To Manage the company’s resources
- To Meet regulatory and legal requirements
- To Meet financial targets
Operational Efficiency
A COO’s primary responsibility is to ensure operational efficiency. As the title alludes, the Chief Operating Officer (COO) is responsible for implementing a business operating system that aligns all departments/functions of the company with the company’s overall goals and objectives. This means that the COO creates the right team and the right systems to deliver the best quality services or products to customers, in the fastest time possible.
Managing Company Resources
Managing the company’s resources includes managing the company’s finances, employees, vendors, and assets (equipment and real estate). The COO is responsible for saving wasted time and money where possible.
Meet Regulatory and Legal Requirements
The COO is also responsible for ensuring the company meets its regulatory and legal requirements. This does not mean the COO is checking the laws and regulations, this is often completed by a compliance team or a legal team, but the COO creates checks and balances to ensure that the services and or products the company provides meet all jurisdictional laws and regulations. Not doing this could lead to fines and legal issues for the company.
Meet Financial Targets
Part of the COO’s responsibility while working with other departments, executives, or key employees is ensuring each area of the business is operating at a profit. If it’s not, then develop a plan to help that area meet its financial targets. A COO is often effective at making adjustments because the COO has a broad view of the business operating system and can implement systemic changes that yield high returns than making a local departmental or area change.
When Might a Company Need a COO?
It depends. A company may consider getting a COO when it reaches a certain size and or a level of complexity. Again, some companies have COOs as early as 10 or fewer employees if there is a complex value chain delivery process and if there is a need for a high-level executive to orchestrate the operations. Other companies may not consider a COO until it gets above 100 employees.
A COO is a senior executive who will likely be one of the highest-paid employees in the company. It is essential that the company achieves a minimum annual revenue, and can confidently pay the COO’s salary, before hiring a full-time COO. As of the first quarter of 2023, Salary.com lists the median salary for a COO at approximately $475,000.
In addition, a company may consider a COO if the CEO is unable to devote enough time and attention to managing the business operations. In this scenario, the COO could take on some of the CEO’s strategic responsibilities as well as focus on running daily operations.
Ultimately, the decision to hire a COO will depend on what’s best for the company. If the company is experiencing rapid growth or is planning to expand into new markets, a COO may be a good addition to the team to help with that. If the company is experiencing operational inefficiencies or is struggling to manage its resources effectively, a COO may also be a good addition to the team to help manage this process.
When Might a Company Not Need a COO?
Many factors come into play when considering whether a company needs a Chief Operating Officer (COO). Generally speaking, if a company has a complex organizational structure, global operations, or a large workforce, a dedicated COO may be necessary to oversee these operations.
However, smaller companies or startups with a simpler organizational structure may not require a dedicated COO. In these cases, the CEO may also oversee operations. Additionally, a thorough audit of the people and processes should be conducted before hiring a COO. Often, a company assumes it needs a COO because work is not getting done or getting done on time. However, this work may be administrative and not strategic or operational. In this scenario, hiring an experienced administrative coordinator or adding an assistant (i.e. assistant project manager), workflow consultant, or implementing new software could be the solution.
Different focuses of the COO Role
It’s worth noting that not all COOs focus on the same things, and that the role can vary greatly depending on the company’s needs and objectives. Several archetypes or models of the COO role have emerged over time, each with its own unique set of characteristics and responsibilities.
These archetypes can help provide a framework for better understanding the COO position and the value it can bring to a company. It is also worth noting that the COO may demonstrate a different archetype as the company grows and matures.
The Operations-Focused COO:
This type of COO usually focuses on managing the day-to-day operations of the company, managing the company’s resources effectively, meeting its financial targets, and complying with regulatory and legal requirements.
The Growth-Focused COO:
This type of COO usually focuses on driving growth and or planned rapid expansion for the company. This might include developing and implementing new business strategies, identifying new markets and opportunities for growth, and spearheading innovation and product development.
The People-Focused COO:
This type of COO usually focuses on managing and developing the company’s employees. They usually have a close working relationship with the Human Resources department and are heavily involved with developing and implementing employee training and development programs, overseeing recruiting and retention efforts, and creating a positive and productive work culture.
The Change-Focused COO:
This type of COO usually focuses on turning a failing company around and improving its overall performance and wellness. Some things this COO deals with are making major organizational changes such as restructuring departments, and teams, conducting market research, identifying new business opportunities, and working with other executives to revitalize and execute the company’s strategic plan.
The Technology-Focused COO:
This type of COO usually focuses on using technology to improve the company’s operations and performance. They could be involved by overseeing the development and implementation of new technologies, managing IT infrastructure, and aligning the company’s technology strategy with its overall business strategy.
Why the Role is not a “One Size Fits All”
The role of a Chief Operating Officer (COO) is not a “one size fits all” because it can vary greatly between companies and industries, which makes it difficult to describe definitively. The responsibilities of a COO can differ depending on the company’s size, structure, and the industry within which it operates.
Depending on the size and maturity of the organization, the COO’s responsibilities could overlap with those of other executives, such as the Chief Marketing Officer (CMO), Executive Vice President (EVP), Senior Vice President (SVP), Vice President (VP), Chief Information Officer (CIO) or Chief Financial Officer (CFO), which can make it difficult to define the role clearly. In some companies, the COO may be responsible for overseeing specific departments or functions, while in others, they may be responsible for overseeing all of the company’s operations.
One potential overlap is with the Chief Financial Officer (CFO) role. In some organizations, the Chief Operating Officer (COO) may perform financial planning and analysis, budgeting, and forecasting, which are typically done by a CFO. However, this overlap can be financially beneficial for smaller organizations that do not have a budget for a COO and a CFO.
Another area where there may overlap is the Chief Information Officer (CIO) role. As technology continues to play a larger role in business operations, the COO may lead the organization’s technology strategy and align it with the overall business goals. In this case, the COO may work closely with the IT Department to make the best technology investments for the company’s operations.
The COO may also overlap with the Chief Marketing Officer (CMO) role. In some industries where sales and marketing are closely intertwined, such as consumer goods or retail, the COO of a company may spend a lot of time involved with marketing and sales activities, such as developing marketing campaigns, managing sales teams, and tracking sales metrics.
Another reason why the role of a COO is not a “one size fits all” is that the title itself, Chief Operating Officer, is not always used. Some companies may have an executive who performs similar functions but holds a different title, such as a Chief Strategy Officer, Director of Operations, Chief Operations Officer, Chief of Staff, Business Manager, or Chief Administrative Officer.
Despite these challenges, the role of a COO is still crucial to the success of many companies because they make sure the day-to-day operations of the business are running efficiently and that the company is meeting its financial targets.
The relationship between the CEO and the COO
Chief Operating Officers have a special role in an organization and it is often defined differently than other roles. To fully grasp the value of a Chief Operating Officer for an organization, and to bring clarity to the misunderstood role of the COO, there needs to be a shift in perspective of how the role of a COO is defined.
According to an article written by Nate Bennett and Stephen A. Miles that was published by the Harvard Business Review, while other positions in an organization can be defined by the work to be done, the COO’s role is defined by the relation of the Chief Executive Officer (CEO) as an individual. A key role and often unwritten position played by the Chief Operating Officer (COO) is to be the CEO’s right-hand person, partner, the yin to the CEO’s yang, peanut butter to the CEO’s jelly, and any other colloquialism that defines a close working synergistic relationship.
From this perspective, it may be easier to understand why the role of the COO is at times elusive and why the responsibilities can range from narrow, to wide or from strategic planning and running board meetings to executing the CEO’s strategy by being an operations director who is focused on managing the daily operations. Regardless of all the jobs the COO can do, the COO is often on the team to do the things the CEO is either not good at or does not enjoy doing.
The COO’s position depends on the CEO’s talents and abilities because he or she often fills a skills gap. The COO brings to the organization what the CEO doesn’t or isn’t good at.
What makes Successful COOs
Given that the COO’s roles and responsibilities are contingent on the type of organization, the organization’s stage in its growth, and the relationship between the COO and CEO, it is challenging to pinpoint what makes the most successful COOs or to compare and contrast one COO from another. However, there are some core leadership skills and personal character traits that aspiring COOs may want to embody to be considered for the role.
Leadership skills
Aspiring Chief Operating Officers should have good communication skills, good business acumen, strategic thinking skills, and decision-making skills, be adaptable, and have above-average emotional intelligence.
Communication Skills:
Effective communication is one of the most important leadership skills. COOs who can communicate clearly and effectively can inspire and motivate their teams and build trust with their colleagues, business partners, and employees.
Business Acumen
COOs must have great business acumen also known as the ability to understand and make effective decisions based on the financial and operational aspects of a business. This encompasses some of the other core skills as it involves having a deep understanding of the organization’s goals, operations, industry, and competitors to think strategically and make wise decisions.
Strategic thinking:
COOs must be able to think strategically and develop a plan that aligns with the CEO’s vision and the organization’s goals. They must be able to identify opportunities, anticipate challenges, and at times develop contingency plans to help achieve the organization’s goals and objectives.
Decision-making:
Decision-Making skills are important and core leadership skills because COOs need to be able to make difficult decisions that impact the success of the organization. Strong COOs can gather and analyze information, evaluate alternatives, and make informed decisions that align with the organization’s goals.
Adaptability:
Adaptability is on the list because, in today’s rapidly changing business environment, COOs must be able to adapt to new situations and respond to unexpected challenges. COOs who are flexible and adaptable can navigate change quicker, and guide their teams through uncertain times.
Emotional intelligence:
Emotional intelligence is the ability to understand and manage one’s own emotions and the emotions of others. COOs who possess above-average emotional intelligence are better able to connect with their teams, build relationships, and resolve conflicts.
Character Traits
Some of the core character traits that a great COO should embody are some of the character traits that are expected of close personal friends and life partners. All things taken into consideration, the CEO and COO will be business partners and thus it is understandable for there to be a preference to be in partnership with someone loyal, honest, supportive, empathetic, respectful, and trustworthy.
Loyalty:
A great COO is loyal and committed to the business and the business relationships. Excluding illegal activities, unethical conduct, or the development of an unsafe work environment, the COO will stick around through the wins and losses.
Honesty:
A great COO should be honest and truthful, even if it’s difficult. The COO is expected to speak their mind or have his or her own voice while providing constructive feedback, but to do so in a manner that is respectful and supportive of whomever they are speaking with.
Supportive:
A great COO is going to be involved in some level of team building and capacity building. The COO will need to be supportive and encouraging, and be willing to celebrate and promote the successes and accomplishments of others while offering help when needed.
Empathy:
A great COO is empathetic and understanding. They can put themselves in others’ shoes and offer guidance and support during challenging times. This isn’t a suggestion to be the office counselor or similar, however, the skill to identify with others goes a long way when nurturing organizational working relationships.
Respectful:
A great COO is respectful and considerate of everyone’s opinion and perspective. They listen attentively and communicate with kindness and understanding.
Trustworthy:
A great COO is trustworthy and keeps confidential information confidential! Understandably, Non-Disclosure Agreements (NDAs) will be signed, however, productivity and collaboration are enhanced when working with someone who is inherently trustworthy.
Conclusion
The role of the Chief Operating Officer (COO), whether titled COO or “person who oversees operational functions” is critical to the success of many companies. It is important to note that the role of the COO can vary depending on the company and industry. In some companies, the COO may be responsible for overseeing specific departments or functions, while in others, the COO may be responsible for overseeing all of the company’s operations.
A company typically considers s a COO when it reaches a certain size or level of complexity. However, the decision to hire a COO should be based on the company’s needs and objectives, and also the company’s revenue and budget for the COO’s salary. A COO can have different focuses and approaches from operations, growth, people, change, and technology, and there isn’t one universal definition for the COO.
It is important to remember that to fully grasp the criticality of the COO, the role should also be defined by the relationship with the CEO, as an individual. The COO is a partner to the CEO and is usually on the team because he or she is good at the things the CEO is not good at, or necessarily enjoys doing.
The COO is a partner to the CEO and also part of the top management team. This role is not a size fits all and defining success in this role is not always easy. However, aspiring COOs should work to embody core leadership skills and core personal character traits that will positively contribute to the success of the organization.