The chief operating officer is one of the key members of the C-suite in many organizations. In addition to overseeing the operations of the organization, he or she may also be the second-in-command to the CEO. For a long time, this position has played a key role in running large organizations.
However, you may be surprised to learn how few companies have a COO position. According to the Harvard Business Review, only 37 percent of the largest European businesses had an active chief operating officer role in 2010. The United States isn’t far off of these numbers.
So, what is a chief operating officer? How did the position come to exist? What is changing about this role currently? And, what can we expect in the future for COOs?
What Is a Chief Operating Officer?
The primary purpose of this job is to oversee the daily operations of the company. It is a C-level position. Therefore, it typically handles a relatively high-level oversight of operations, with the specifics delegated to lower-level executives and managers.
In many cases, the COO position exists to allow the CEO to focus more on strategy and the long-term and less on the everyday management of the organization. As such, the specifics of the chief operating officer job description may vary depending on the needs and personality of the chief executive officer it is serving under.
Depending on the company, the COO may also function as a second-in-command to the CEO. While often unofficial, this relationship is why the duties of the top operations executive are so variable: his or her function is to support the CEO in running the business. This also means that the COO is frequently seen as the logical successor to the current chief executive officer.
The Origins of the COO
Although having managers dedicated to daily operations is hardly a new concept, the title of chief operating officer only arose in the second half of the 20th century. It emerged as the C-level nomenclature for corporate offices took precedence. Quickly the COO position became one of the big three C-suite jobs along with the CEO and CFO.
In many cases, the aim of the COO role was to shift some of the daily oversight responsibilities away from the CEO. However, despite quickly becoming a staple in many large corporations, the position was loosely defined from its beginning. Due to its nature as the right-hand person for the CEO, the chief operating officer was almost immediately a corporate chameleon.
For example, Richard D. Parsons held the job at Time Warner despite having no authority over the organization’s operating division. In other cases, the COO job was much more clearly operations related and the corporate president served as the second-in-command.
Trends Among Chief Operating Officers Today
EY, a research and leadership development organization, recently conducted a study of chief operating officers to learn more about their work. Notably, this included insights from COOs about what they thought of their roles and how things are changing.
About a third of COOs and half of their colleagues in the C-suite consider the position to be the toughest job in the organization. This is largely informed by the necessity for flexibility and foresight. Large organizations are growing increasingly complex and ensuring their operational success both today and in the future can be a serious challenge.
This level of challenge may see the COO filling the role of C-suite MVP. It can serve as both a reward for top team members and a way to get the most value out of talented people.
Many of the respondents to EY’s research also indicated that the job is not sufficiently strategic. Its historical role has been in executing the long-term goals of the leadership team. However, many people holding the position today think that this focus is too microscopic. Instead, they believe chief operating officers of the future will need to play a greater role in the strategy to be successful.
Undoubtedly the biggest trend of the research is that people in the top operations job feel the role is in a state of flux. New challenges and opportunities mean that it is not as defined a position as it once was. This can make being a COO stressful. However, it can also present opportunities for growth and success to ambitious executives.
A large percentage of the COOs studied by EY noted that their greatest concern is the “lack of acceptance or understanding” of their roles. They believe that a lot of people don’t understand what the operations chief is supposed to be or how best to use his or her talents. This may help explain another major trend today: the declining prevalence of chief operating officer positions.
The Decline of COO Positions
Many organizations have done away with the chief operating officer role. According to executive search firm Crist Kolder Associates, only 36 percent of Fortune 500 and S&P 500 companies had a COO in 2014, down from 48 percent in 2000.
This is likely the result of new information technologies allowing chief executive officers to oversee operations more directly. Therefore, they are able to handle the various non-C-level, operations-related executives and managers reporting to them without the need for a COO as a middle person.
It is also notable that it is growing increasingly less common for the CEO and chairperson of the board to be the same individual. This split has further increased the leadership capacity of the CEO. In turn, this minimizes the need for a C-level executive specializing in operations.
As individual executives are able to handle more responsibilities, organizations are also getting flatter. Rigid hierarchies are going out of vogue as leaders realize that a collaborative approach to running their businesses is more productive. Again, this reduces the need for the traditional hierarchy of executives.
Finally, more boards are expecting their executive searches to be both internal and external. They want to find the right person for the job rather than simply elevating an anointed successor. This trend has taken away from the function of the COO as the heir apparent to the CEO.
All this means that maintaining a chief operating officer position is less popular among the world’s largest corporations. However, removing the position isn’t the only option. Other organizations have reimagined it to better match the needs of today. In fact, many companies that have eliminated the role may, perhaps, have been better served by a creating a new definition.
A New Chief Operating Officer for the New Business World
Over the last decade or two, the C-suite has been introduced to some new titles. For example, some companies now have chief brand officers and chief diversity officers. These new roles reflect new priorities for organizations. Branding has taken a larger stage and maintaining a diverse workforce is a requirement for many companies.
Not surprisingly, changing priorities means that the chief operating officer role of today is different from when it was first conceived. In some organizations, it has become the top leader for the employees while the CEO acts as the public face.
The COO may also help other C-level executives connect their work with the rest of the organization. For example, if a CIO is working to introduce new technologies to the company, the operations chief may help him or her better understand the needs of the team members.
Furthermore, as more businesses take a collaborative approach to their work, having someone focused on aligning team members with the strategic goals of the organization is important. So, while the need for an executive head of operations may have changed, that doesn’t mean the role is unimportant. In fact, it may be more necessary than ever to have a COO.
Roles a COO May Play Today
As the positioning of the chief operating officer changes within the leadership team, his or her key roles also change. There are many ways that a COO can continue to be helpful in the modern business world:
- Strategy Implementation: This is the role most closely related to the traditional responsibilities of the job title. The top operations executive can focus his or her efforts on making the C-suite’s strategies a reality. This may be executing the CEO’s long-term goals, working with the CFO to find well-aligned acquisitions or a host of other implementation-related jobs.
- Change Leadership: Perhaps the only constant in the business world is change. In some cases, an organization will bring on a COO to handle the leadership change of a particular strategic shift. In other cases, an organization may want someone in the role to help manage the ever-changing needs of the organization in a dynamic world.
- Experienced Mentorship: Developing leaders is essential to the success of an organization. The chief operating officer can offer his or her experience and insight to help develop younger leaders. This can be a significant job, especially if the demands on the CEO prevent him or her from filling this role.
- Partner: Sometimes chief executives simply need someone to work with them to get things done, whether that is as a sounding board, someone to serve as backup or someone to be a right-hand. This facet of the job is why the top operations executive has often been considered the second-in-command in many organizations.
Someone serving as a chief operating officer may fill some, all or none of these roles. However, they represent some of the most common applications of the position in companies today. They also demonstrate how flexible the job can be and how organizations may be able to better use their COOs in the future.
Expected Changes for Chief Operating Officers in the Future
You may wonder what to expect from chief operating officers in the future. Some suggest that we are seeing a resurgence of the use of COOs. As leadership teams begin to better understand what the position can achieve, the interest in having one as part of the C-suite increases.
According to Nate Bennett and Stephen A. Miles, writing for the Harvard Business Review: “We can easily argue that there is a growing need for the role. First, consider the widening scope of the CEO’s job. Today, we have bigger companies, with expanding global operations, aggressively pursuing acquisitions.”
They add that CEOs are expected to be the public face of the company while also interfacing with the company’s team. In other words, while the CEO may have greater leadership capacity, the expectations for the top executive have also increased, perhaps to a greater degree. So, many organizations may be able to benefit from an operations chief acting as second-in-command.
Others argue that with the always increasing rate of change in the business world, COOs are needed as an agent of change. David Spencer, writing for CIO, summed it up simply: “the modern COO connects the dots.” Organizations need to adapt to stay competitive and they need someone who can help hold things together as they change.
Exactly what will happen is impossible to say. One thing we can be certain of is that the future of the COO will not look like its past. The business world is ever-evolving and leadership teams evolve with it. So, whether there is a resurgence of chief operating officers or a continued decline, those who do hold the title will need talent and experience to be able to face the challenges of tomorrow.
Ensure Your Company’s Operations Success
Whether you have a growing company that isn’t ready for a full-time COO, want to reduce the position to part-time or just need some outside expertise, Kamyar Shah’s fractional COO service can help. As the role of the chief operating officer is constantly changing, it can be helpful to have on-demand access to insight and talent when you need it.
Get in touch today to learn how Mr. Shah can help with your operations or other executive needs. His years of experience across multiple industries afford him unique insight into how to prepare a business’ operations to meet the challenges of today and the future.