When a company begins to scale up, it may find itself faced with problems it just doesn’t know how to solve. When this happens, it may be time to consider bringing in a Chief Operating Officer (COO). However, that may not be the right fit for every kind of company.
The goal of this article is to analyze the differences in the roles of the Fractional Chief Operating Officer vs. Chief Operating Officer. It is important to determine which one is right for each growing business.
Understanding what a Fractional Chief Operating Officer is, and the ways the role differs from a traditional Chief Operating Officer can be pivotal to setting a growing company up for long-term success.
What is a COO?
Before making any decisions, it’s important to understand the complicated role of a Chief Operating Officer. According to Accenture, the COO is “perhaps one of the least understood roles in business today.”
Yet, having a COO can be vital. Especially in times of rapid growth and transformation, when the risk for business execution is highest, a COO can make all the difference.
Keith Rabois, former COO of Square, describes the COO like a doctor in an emergency room. This means they will be the ones fixing and diagnosing problems to see if they are minor or serious. If a company faces an uncertain future, a COO could be the critical component to completely transform business operations and ensure long-term success.
When a company is ready to scale up, a COO can serve as the leader of the necessary change efforts a company needs to make. They define needed changes, lead the charge, and manage the change efforts. Perhaps most importantly, COOs celebrate each change’s success.
Often, the COO will serve as the glue holding a company together. They are a vital part of rounding out the leadership team.
What Makes for a Good COO?
Well, there are many different types of COOs. In fact, the COO position is one of the most varied positions in the world of business. It’s rare for any two COOs to come from the same background, have the same experience or operate in the same way.
Commonly, COOs should at the very least have deep knowledge of marketing, sales, and operations. It is their job to integrate all aspects of a company’s revenue cycle, ensuring that a CEO’s vision leads to actual profit.
In fact, a COO is generally regarded as the CEO’s second-in-command. They need to be able to have strategic competency. This means they can analyze and lead the implementation of necessary strategies to help businesses turn a profit.
Bringing in someone with a fresh perspective, but deep respect for the CEO’s vision is key.
Common Traits of Effective Chief Operating Officers
The Ability to Think Both Large and Small
A COO must have the ability to keep their company’s high-level strategy front and center while making detailed decisions about day-to-day operations.
A People’s Person
Someone who values and appreciates talent. At the end of the day, a COO should have the ability to recognize how to find the right people for each job.
If a COO spends their time trying to usurp the CEO, the partnership probably won’t work out. They need to be trustworthy and respectful.
Being able to study the minutia of daily-data can ensure that high-level vision translates to profitable operations.
Ultimately, the role of a Chief Operating Officer is to bring a company together. It is their job to ensure a more efficient, and therefore more effective, workflow.
On occasion, a Chief Operating Officer may even be someone with more experience than a CEO. This can be vital, as a deep understanding of business operations on all fronts is a necessity. Also, they should be someone who can think about a high-level, while still maintaining a deep focus on day-to-day operations.
What Makes a Chief Operating Officer Different from Other Roles?
The role of the Chief Operating Officer can be difficult to define. It is a role that is unique structurally, socially, strategically, and politically. It is also a role that is extraordinarily situational.
In fact, when examining COOs as a class, the Harvard Business Review found that there were almost no constants. Salespeople and marketers have been successful in the role, as have Financial and Human Resources executives.
Despite their many different ways of operating, they found that anyone from any background could succeed in the role, as long as they meet the needs of the company, and more importantly, the needs of the CEO.
The Many Types of COOs
As previously mentioned, there are many different types of COOs. It is not a one-size-fits-all type of role. Many times, the function of a COO is dependent on the specific needs of a company.
The main purpose of a Chief Operating Officer is to fill in the gaps of expertise that a CEO may be lacking. Because of this, the COO position is unique in that it is less related to the actual nature of the work, and more related to the needs of the CEO as an individual. However, in some cases, a COO’s position may be more related to the specific needs of the business itself.
The main thing that sets a Chief Operating Officer apart is the high level of trust established between them and the CEO. This should be a close working relationship, with extreme respect between both parties.
Traits that set a Chief Operating Officer Apart
A COO may be responsible for a bulk of a company’s operations, however, they usually receive little of the credit. The CEO will always have a larger spotlight.
A COO’s work is almost always done behind the scenes. Therefore, a good COO must be someone who recognizes the importance of their work without needing public attention.
COOs must be excellent communicators. They must be able to communicate effectively with executives and the teams and departments they oversee. A large part of their role is the ability to mediate conflict and negotiate among stakeholders.
Besides, they will have to act as a spokesperson for both the staff and C-suite executives of a company. Generally, they control the flow of communication, so attentiveness to messaging and communications is vital.
Ability to Think Strategically
The COO is there to transform the CEO’s abstract vision into a profitable reality. They have to be able to achieve measurable results. Aligning company goals with day-to-day operations is pivotal. They have to be sure they can think both at a high-level and in the daily minutia of operations.
Delegating tasks is a key function of the COO role. It is imperative COOs know which tasks should go to which departments and teams. This requires a unique understanding of each departments’ skills and strengths to ensure that everyone on every team is working at their most effective level.
It is important for the COO to understand the overall vision of the company. This is because they are also in charge of ensuring every team is working toward the same goals.
It Takes All Four
A good COO will have all four of these major traits. That’s a unique ask from one single employee, but that high level of skill is what sets Chief Operating Officer apart from everyone else. COO is a demanding position that requires a highly skilled employee.
At the end of the day, the COO is there to make the CEO’s long-term vision a reality. This means that a COO must have ultimate trust in the CEO’s vision. On the other hand, the CEO must have ultimate trust in the COO’s ability to implement that vision.
What Are the Different Types of Chief Operating Officers?
As previously stated, the role of COO is a varied one. They come from many backgrounds, with all manner of unique experiences and leadership styles.
However, according to Harvard Business Review, COOs can typically be put into one of seven categories. These include:
When most people hear the term COO, this is usually what comes to mind. Executor-style COOs are focused entirely on day-to-day operations.
This leaves the CEO free to focus on the larger vision, public relations, and high-level decisions. This type of COO minimizes the CEO’s need to keep close tabs on the minute details and inner workings of the company.
The Change Agent
This type of COO is usually brought in to help a stagnant company get moving again. When growth vision stalls or market performance is weak, these COOs can come in to reinvigorate public interest in the company.
Usually, they have a unique set of skills and experiences. Sometimes, they even come from a different industry with fresh ideas to shake things up.
Sometimes, the CEO may be new to the business world. They might have become CEO thanks to a novel idea or invention, but lack the business acumen to lean on.
If the CEO is inexperienced in business, the mentor-type COO can help guide them through difficult business decisions. Usually, this type of COO is a highly seasoned professional.
The Other Half
Here, the COO and CEO complete each other. They almost function like the left and right sides of the brain.
This type of COO stays grounded and logic-oriented. This allows the CEO to think more abstractly and unpredictably. This COO will ensure their workforce receives consistent instruction, information, and communication.
The Heir Apparent
This COO is often being prepared to follow in the CEO’s footsteps. If a CEO is planning on retiring or stepping down, having their next-in-line serve as COO can be a great shadowing opportunity.
This COO is mainly there to learn the ropes of managing a company. This is a great way to streamline CEO transition.
This is when a former staff member rises to the rank of COO. Typically this happens when a team member displays a high level of value to the company.
Promoting them to COO can be a good way to keep them at the company, providing them with higher status and compensation. This will make a great employee much less likely to leave the company to chase competing offers.
This COO helps to round out a leadership team. For some CEOs, having a team can make them more efficient. This provides CEOs with the ability to bounce ideas off of another person, while also drawing useful knowledge and skills from an experienced individual.
Though the CEO will slightly outrank the COO, they are more close in standing when in this kind of relationship. Similar to The Other Half, they operate almost as one entity in terms of managing the company.
Striking the Balance
Each of these types can bring something unique to a fledgling company. Based on the needs of the CEO or the company itself, finding the right type can supplement a company’s strategy.
Additionally, these seven roles are not mutually exclusive. Though it is unlikely that one person could serve in all seven roles, it is not far-fetched to imagine a single COO wearing one or two of these different hats. However, the distinction between them makes it clear why outlining the role of COO is such a difficult task.
At the end of the day, however, the most important factor in finding a COO is for the CEO to find someone they can trust completely. They must be able to fill the role most needed by the CEO. According to Wendell Weeks, who went from COO to CEO at Corning, the CEO-COO paring needs to be a “true partnership, in every sense of the word.”
As a CEO, finding the right type of COO can turn a good business into a great one.
When Is the Right Time to Get a Chief Operating Officer?
Most companies do not start out with a Chief Operating Officer. For the early stages of business development, they aren’t really a necessity. However, as a company begins to grow, so does the need for efficient operations.
Many companies wait until it’s too late to hire a COO. Sometimes this is because of budgetary restraints or the idea that COO is an unnecessary position. It’s important to have an understanding of where a company is at and where it’s going to understand their need for a COO.
Basically, a company should begin thinking about bringing on a COO right before things go bad. If a CEO realized their company is beginning to scale up, odds are they’ll soon be overwhelmed by the workload. Hence, the use of a COO will be necessary.
Another reason to bring in a Chief Operating Officer is if there is a specific business need or area of expertise the CEO lacks. COOs can be pivotal in filling in those necessary gaps, which in turn will ensure long-term success.
Signs a Business May Need a Chief Operating Officer Very Soon
CEO Stretched Too Thin
A CEO is spending too much time working in the business instead of on the business. They do not have the capacity to shift their focus to long-term goals and vision.
Many in the company, but especially the CEO, are feeling overwhelmed. There is a daily struggle to ensure appropriate operational efficiency.
Time to Scale Up
A business is maintaining a steady profit. There is a specific need to begin scaling up. Without the ability to scale up, the company’s growth will stagnate and stall.
A company needs a stronger leadership team. Without it, everything may begin to unravel.
Questions a CEO Should Ask
There are important questions you should ask to determine if it’s time for a COO.
- What is your company’s current bandwidth? How much revenue can you currently generate?
- Will you be able to successfully reach your yearly revenue goal?
- What is your maximum capacity limit for operations? When will you reach this capacity?
- How much capital do you have available? How much capital will it take to reach your revenue goal? When will you need a capital infusion?
- Are your prices set correctly? Or, are you undervaluing your product or service?
- How many more sales are necessary to reach your yearly revenue goal?
- Are your current marketing efforts supporting your sales team in reaching that revenue goal? Do these efforts generate enough leads?
If a CEO can confidently answer these questions, a Chief Operating Officer may not be necessary. However, if they struggle to come up with the right answers, or see far enough ahead into the future, it’s probably time to start looking for a COO.
What if I Can’t Yet Hire a Full-Time Chief Operating Officer?
Many growing businesses may find it difficult to bring on a full-time executive. The costs can be astronomical, and they might not even know what exactly they want or need from the position.
For these companies, it might be counter-intuitive to bring in a full-time COO right off the bat. There are many things that go into bringing on a new executive, such as building a new executive office, creating a unique hiring process, and putting together an expensive perks and benefits package. Doing all of this could put a company even farther into the red, which isn’t great when trying to scale up.
Luckily, there is another option. If a fledgling business is not yet ready to bring on a COO, a Fractional Chief Operating Officer may be the answer. Fractional COOs can ensure more effective business operations for a growing business, while still maintaining budget-appropriate costs.
What Is a Fractional COO?
Simply put, a Fractional Chief Operating Officer is a highly-experienced consultant who operates as a part-time COO. This allows a business to retain the insight of a COO without having to bear the full-time costs.
This is perfect for small businesses and start-ups who need the support of an operations expert, but cannot yet afford a full-time executive. The main purpose of a Fractional COO is to provide leadership support and cost flexibility for those up-and-coming businesses trying to scale up in a competitive market.
Hiring a Fractional COO can mean the difference between successful business scaling and harmful stagnation for any company on the upswing.
What Exactly Does a Fractional COO do?
Often times, Fractional COOs may be more useful to a small business than a full-time executive. They provide businesses with the flexibility they need while remaining laser-focused on the company’s needs.
To begin, a Fractional COO will get to know a company’s business model. Once they’re well versed in that, they will begin to work within that framework to bring a business the leadership and accountability in any area of the CEO’s choice.
A CEO may use a Fractional COO to:
- Head up senior operations in areas the CEO isn’t able to
- Analyze business data, including KPIs, analytics, etc, and produce detailed business reports
- Provide unbiased and insightful strategic input in areas where the CEO’s expertise may be lacking
- Oversee staffing procedures, including interviews, recruitment events, and outlining necessary hiring requirements for each position
- Delegate tasks to the appropriate teams or team members
- Lead sales and marketing departments while offering key innovations
- Innovate better ways to produce products or services, including more efficient technology
- Strategize the company’s business growth goals by using more detailed or innovative success metrics
- Serve as second-in-command or interim CEO when necessary
Often times, a Fractional COO is brought into a company to completely overhaul operations. By introducing new strategies and processes, Fractional COOs can be the key component in bringing businesses to the next level. This creates a smooth scaling-up process.
Different Types of Fractional COOs
A Part-Time or Temporary Contractor
This type of Fractional COO will be with your company for a set amount of time, serving until a company no longer has a need for them, or is ready to hire a full-time COO.
On a Project-Based Level
These Fractional COOs may assist a company with one or more projects. Then, when those projects are over, so is their involvement with the company. This type is useful if there is a very specific business need.
An Advisor Without Team Involvement
This type is often brought in to assist the CEO. They serve as a consultant to the CEO, providing advice without necessarily taking over any operations.
Choosing the right type of Fractional COO is entirely dependent on a company’s immediate needs, as well as any budgetary constraints. But, one of the key benefits of hiring a Fractional COO is the flexibility to choose what is actually needed.
What Are the Benefits of Hiring a Fractional COO?
The most obvious benefit is the cost. Hiring a Fractional Chief Operating Officer allows a company to customize the level of involvement the Fractional COO has with a business. Therefore, this allows a company to customize the necessary compensation package for the Fractional COO based on the company’s budget.
In addition, a Fractional COO is oftentimes more laser-focused on a specific area. This means when a company has a very specific need, a Fractional COO could provide the necessary expertise to fill in any gaps. For example, if a company struggles with innovating in the realm of marketing, they can bring in a Fractional COO who specializes in marketing processes.
Fractional COOs can also supplement the current CEO’s knowledge. They may be able to pick up in areas where a CEO’s genius might be lacking. So, while a CEO might be more attuned to focusing on high-level vision, a Fractional COO can come in to clean up day-to-day operations.
Another use of a Fractional COO in a growing company is to help build or advance talent and teams. They can help oversee the hiring process and ensure a business is recruiting the right people for the job. With their guidance, a company can build teams that help them reach new levels of dominance in their sector.
Fractional Chief Operating Officer vs. Chief Operating Officer: Which is Right for My Company?
Fractional COOs and traditional COOs can have many similarities. But, for some businesses, one may be better than the other based on their specific needs and areas of interest. Here are some specific benefits of hiring a fractional chief operating officer vs. chief operating officer.
Fractional COOs usually work remotely. Even when they do not, they usually do not require a separate executive office, whereas a full-time COO would.
Easy on HR
There is no elaborate hiring process when selecting a Fractional COO. Usually, Fractional COOs are already experienced leaders who have worked at an executive level. Often, they will come with proven track records for success.
A traditional COO might require a completely unique hiring process, which could put a strain on an already small Human Resources department.
You do not have to provide a Fractional COO with extensive benefits, bonuses, or perks, as they are hired as contractors. This could save your business thousands.
Hiring a Fractional COO lets you “test run” the COO position. This can help your business decide what you actually want and need from a Chief Operating Officer, without any major commitment.
Easier to Let Go
It is much easier to let a Fractional COO go if things don’t work out. Releasing a full-time COO from a contract might be much more difficult. They can often get tied up in legal stipulations and expensive payout packages that complicate matters.
Since fractional COOs are contractors, letting them go is usually a relatively easy process.
Rounding Out Teams
Fractional COOs are there to help you build. This means, they can find the right talent for you, and in some cases, even help you find their full-time replacement.
Fractional COOs usually have years of proven results. This could mean bringing on someone with much more experience than someone new to the Chief Operating Officer position.
Perhaps most importantly, Fractional COOs are flexible. For a growing business, this means they can roll with the often unpredictable punches that come with scaling up a business. Fractional COOs can usually work as much or as little as you need, or as your budget allows.
All of this being said, there are some cases in which hiring a full-time Chief Operating Officer might be the better option. For larger businesses, or those growing at a truly exponential rate, hiring a COO could see greater stability in the long-run. It could also help build a stronger long-term relationship between COO and CEO.
However, for most small to mid-level businesses or start-ups, the Fractional COO might be the best choice. Fractional COOs can help mitigate costs. At the same time, they can help a company to build both day-to-day and more long-term business operations strategies.
In addition, businesses with very specific operations needs or questions would also likely benefit more from the help of a Fractional Chief Operating Officer. Fractional COOs are more likely to come in with specific experience in one area. This can be especially helpful to businesses that need laser-focus in, particularly weak spots.
Common Mistakes in Hiring COOs
Once you’ve decided whether a Fractional COO or COO is right for you, it’s important to make sure you find the right person for the job. When doing so, it’s also important that you stay away from these common mistakes when hiring COOs.
Seeking out a Director or Vice President of Operations
Sometimes, companies will hire below a C-suite executive level in order to cut costs.
These people are then expected to operate at the level of an executive but without the benefits or necessary experience. Because of this, they often fall short of what is actually needed by the business.
Lowballing the Chief Operating Officer’s salary
Again, this is done to cut costs.
Here, we once again have a business that is forced to hire someone at a Director or Vice President level. People without the necessary experience typically cannot function at the executive level.
Not Distinguishing the COO Hiring Process
Occasionally, companies treat the hiring process for Chief Operating Officer as if it were any other position.
COOs have very unique, highly specialized functions. This requires specialized hiring processes and unique labor structures. Without that, the COO is often doomed to fail.
Why do companies make these mistakes in the first place?
Well, there is usually one of two reasons:
- They cannot afford the talent they actually need
- They don’t understand the inherent differences of the Chief Operating Officer position vs. the other positions in the company
COO can be a complicated position. A fledgling company or new CEO may not have an understanding of how to make the role most effective.
This Is where a Fractional COO comes in
Before making these common hiring mistakes, a company might consider hiring a Fractional COO to see what they actually need from the position. This can also ease the financial burden of hiring an executive until the company is actually able to scale up in terms of profit.
Even so, there are still some important considerations to make when choosing any COO, Fractional, or otherwise.
The most important thing when choosing a Fractional COO or full-time COO is finding someone the CEO can really trust. The CEO and COO should have a natural rapport and the potential to develop a good relationship.
There Must be Trust
Remember, the CEO and COO will be working very closely together toward a common goal. It is important any potential COO understands what a company wants and needs at the current phase of its development.
This also means that any Fractional COO or COO that is hired should trust that the CEO has the best vision for their company. They must respect the work that has already been put in to get the business to its current level. However, they should also challenge the CEO to expand their thinking.
When bringing on a COO or Fractional COO, the company should be prepared for some major changes. While the COO can and should work within the established business model framework, it is also their job to do a complete operations overhaul.
If the CEO or the rest of the company is not prepared to trust the COO to make the right changes, the partnership will not be successful. In addition, the CEO must trust that the COO only wants what’s best for the company.
Give and Take
According to Harvard Business Review, there are several things a CEO must be prepared to give their COO upon hiring. These include:
Those vying for the COO position typically understand that it is their job to embrace the CEO’s strategy and vision. However, they can only achieve this if the CEO is clear in their communication. CEOs must be direct and unafraid of being honest with their COOs.
Clear Decision Rights
It is vital for both the CEO and COO to define which responsibilities will fall to which role. Setting explicit and reasonable lines of demarcation between the CEO and COO can help smooth out the relationship.
Though the lines may sometimes get blurry, and overlap is often required, setting clear lines at the start of the professional relationship can help the COO to feel more valued in their role. Often, these decision-making lines are drawn based on the particular competencies of each party.
A Lock on the Back Door
When a COO is brought into a company, a new layer of management is added. Executives who were previously able to address the CEO directly must now flow through the intermediary of the COO.
It is the CEO’s job to ensure that line of delegation is followed. This ensures the lines of responsibility are respected. When the lines of responsibility are respected, the CEO and COO are able to build a more trusting relationship.
A Shared Spotlight
Many COOs understand that the CEO will be largely in the spotlight. They typically come into the position knowing that it is their job to make the CEO more successful.
However, a CEO should be deliberate in ensuring the COO is given credit where it is due. They should communicate with the company and the public the importance of their COO. This creates a more trusting relationship, as everyone likes to be appreciated.
Building a Strong Relationship
If the CEO is prepared to make these changes for their COO, they can often build a more trusting, and therefore more successful, relationship. In any case, it is imperative the CEO find the right person whom they can really trust. Only by finding the right person, will they achieve any success in adding the COO role.
Whether they are Fractional or full-time, a COO can be the necessary ingredient for large-scale and long-term business success. They can keep any business from growing stagnant, so it is important to find one that is trusted and respected, both by the CEO and the industry at large.
Having the Right COO by Your Side Could Make All the Difference
It’s is imperative a company chooses the right COO, and the right type of COO, to oversee their business operations. Without total trust and effective communication, the growth of a business may stall entirely.
Deciding between Fractional Chief Operating Officer vs. Chief Operating Officer, and then choosing the right person for the job, might be a difficult and complicated process. However, understanding and undergoing this process could help your business reach new heights of success.