Why your small business does (or doesn’t) need a Chief Operating Officer (COO)?

Why your small business does (or doesn’t) need a Chief Operating Officer (COO)?

Mark Hamill, Non Executive Chairman France & UK Ackermann International

Traditionally, functions like Chief Operating Officers (COOs) existed only in the realm of big corporations. Company leadership understood them to be part of a package of C-suite functions suitable primarily to Fortune 500 businesses or multinational corporations.  However, I would like to discuss how the COO role can be useful for managing growth in successful small- and medium-sized enterprises (SMEs).  The role, which is often seen as a “second-in-command” to a company CEO, oversees overall business operations and fulfilment of the corporate vision and strategy that a CEO traditionally agrees together with the company board.

For smaller businesses, creating such a role can be overwhelming provided the company is not certain what they expect from the person filling the position.  I would like to take you through a check list on why your business might wish to consider establishing a COO function and how that role can complement other managerial posts in your company.  

Check list on why your business might wish to consider establishing a COO function

 

To COO or not to COO:

The initial choice to create such a role depends greatly on where your business is in its evolution and on the growth path it has chosen.  COO roles usually supplement the activities of the CEO and, in some cases, may be referred to as a VP for Operations. Issues you might want to look at when considering establishing a COO function include the workload of the CEO (has your company grown so much that your CEO needs to do more external promotion, shareholder relations and visionary work, so you need a COO to manage the nitty gritty of day-to-day operations); the work preferences of the CEO and the need for complementary skill sets (perhaps your company director is the head of a family-run business or smaller start-up and is better suited to work on product development and defining corporate strategy); or raising the bar for professionalism in corporate management (maybe your small business is growing rapidly and considering going public, a COO role can provide greater operations discipline in the run up to an IPO or public stock listing).

Grooming existing or future executive talent: 

In some businesses, the COO may be a CEO-in-waiting or may take on the task of assisting and training executive talent for a future CEO position. The key issue here for smaller businesses is to assess how the skills and strengths of executive business leadership are evolving as the company grows. Some company founders tend to focus more naturally on external functions: they like to develop and speak of strategy, evangelize products and business initiatives or to liaise with business network partners and investors. In other cases, an entrepreneur with a successful product that develops into a fast-growing business may not prefer the spotlight, so a COO can assist the company founder in managing operations and training talent to later succeed the founder in a chief executive post. A COO with extensive, long-term skills in administration, operational controls, reporting, etc. can complement the talents of the company founder and ensure smooth business functioning and the later appointment of a new CEO.

Tackling management of larger business projects: 

There are scenarios where smaller businesses bring on COOs to help manage larger projects and initiatives that require skilled team leaders and project managers. The role of the COO in such cases is to ensure the practical aspects of realizing new programs, business R&D activities, sales initiatives or employee training and skills development programs.  Once again, in such instances, the COO function oversees realization of the company founder’s or CEO’s strategic vision.

Do any of the scenarios above sound familiar to you? If so, feel free to contact me to discuss whether setting up a COO function would make sense for your company and what the right approach to doing so would be.

 You can download the article (PDF) here