The 3 Hats Every COO Needs to Wear
How to decide whether a chief operating officer is needed at your company, and what qualities to look for when hiring one.
At the executive level in a company, the chief operating officer is probably the least understood and least defined role. Others, such as CMO, CFO and CTO, have clear functions — with numerous publications, playbooks and courses devoted to them and detailing how they can succeed. There is also a much clearer career path for these positions: If you want to be a CMO, you work in marketing, and if you want to be a CFO have probably had training in finance, worked in investing or accounting and/or started moving up the ladder in the finance department.
The COO role, by contrast, is complex to define and differs quite a bit from company to company. According to a 2006 Harvard Business Review article, there are seven types of COOs, along with common permutations, making a potential set of prototypes a double-digit number. Despite such inconsistency in terms of what the role actually entails, this position has proven to be a must in a number of companies. Good examples include Mark Zuckerberg’s right-hand woman, Sheryl Sandberg, and Tim Cook, the former COO and current CEO of Apple.
So, what does this key position actually entail? Through my own practical business experience and substantial external research, I’ve defined the three hats a COO needs to wear, regardless of the company and how the role has been otherwise defined.
1. Resource allocator
Thanks to my prior career in investing, I’ve found it useful to look at a business as a portfolio of bets. Every company has its own strategy and a finite number of resources: people, money and the attention of the management. Everything it does is essentially a bet of some portion of these resources, with a distinct risk/reward profile and timeline of expected outcome. (For example, a mature product that’s already performing well has far fewer risks, but also a potentially smaller upside.)
The job of a COO is to strive for the best asset allocation among these “bets” to ensure that the company executes its strategy and vision — to dynamically maintain an appropriate portfolio of growth vs. optimization bets and a healthy proportion of idealism and pragmatism, depending on the company’s stage and goals.
This approach to resource allocation should be data-driven and pragmatic, similar to the approach of an investor. Like an investor, the COO usually acts as a person who evaluates ideas, not the one who brings them to the table. Considering the deep 360-degree context knowledge of an organization a COO has and (ideally) the absence of a bias towards projects, they can be a good judge of what should be upscaled or downscaled in terms of resource allocation.
2. Architect of alignment (not process)
In the classic 20th-century understanding, the COO is the person responsible for processes in the day-to-day operations of a business. A word that makes me think of bureaucracy, “processes” can carry a negative connotation; in the current reality, especially in dynamic tech companies, these can decrease the speed of the company and quickly demotivate employees. The work of a 21st-century COO, then, is to guard the simplicity, speed, transparent context sharing and mobility of an organization against a natural tendency to bureaucratize.
And simplicity, speed and mobility are great, of course, but along with size grows the complexity of an organization, as well as the processes essential to keeping everything together. Many companies, however, have proven that alignment is a great alternative to processes. People who are closest to the problems are most likely to find the best solutions to them — but these people also need to be aligned with the company’s goals. As the most “mobile” C-suite professional, the COO ensures that employees are provided with clear goals and alignment and are empowered by a flexible organizational structure in order to quickly tackle problems. This superiority of people over processes, detailed in Gary Hamel’s book Humanocracy: Creating Organizations as Amazing as the People Inside Them, provides strong results for companies and makes an employees’ jobs more meaningful to them.
3. SWAT group leader
A COO’s C-level position and horizontal (i.e. non-function-specific) view of the company provides great insight into its issues and opportunities. Given this unique setup, the right person should be able to identify, kick-start and push the most value-creating projects to the finish line.
Almost always, an organization will have challenges that are too big to chew, or lack the appropriate leadership to get results, so level of involvement in these key projects can vary. Unlocking value with selective involvement while maintaining a strategic focus requires a COO to be a generalist with a can-do attitude, strong problem-solving skills, a structured approach to work and the ability to mobilize problem-solving resources.
Not every company needs a COO, but I believe it’s important for founders and managers to understand the value they can bring to the table — one more vital tool for strengthening a business.
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