What is a Chief Operating Officer, and why does your business need one?
- September 21, 2022
Operations is a broad term that covers a variety of activities, depending on the business in question. It's often assumed to only relate to manufacturing businesses. However, all companies have operations, whether service-based, product-based or something else entirely.
However, there is a subtle difference between "operations" and "operating". And that's what makes the Chief Operating Officer role so unusual compared to the other C-suite roles.
Operations v Operating
The simplest way to think of operations is the process that turns inputs into outputs. For example, in a manufacturing business, the inputs are raw materials, and the outputs are finished products. Or, in an airline, the operations team will cover everything from passenger service to in-flight catering, maintenance, cleaning, and fuelling. The output being happy customers.
So a Head of Operations or Operations Director will focus solely on delivering the required outputs while managing the inputs. But, their role will be limited to the areas under their immediate control. They won't get involved with other departments like sales, marketing, finance, or HR.
However, although they will usually come from an operations background, a Chief Operating Officer will have detailed knowledge of every system in each department of a business. Crucially, they understand how all those systems interact with each other and how they relate to the strategic direction of the company.
In that respect, it's a unique role in a company as it requires a breadth and depth of knowledge that other C-suite roles don't need. For example, the Chief Finance Officer will understand the business's top-level financial strategies and how they cascade down through the finance team. But they don't need to venture outside of that specific realm. The COO will span every function.
Why does a company need a Chief Operating Officer?
Not every company needs a COO, making finding experienced personnel challenging when the time comes.
But, there are a few key reasons why businesses should consider appointing one:
1. Freeing up the CEO's time
A CEO's time is precious. They need to be focused on the big-picture items, like setting the strategy and vision for the company and building relationships with key stakeholders. That's why it can be helpful to have a COO who can take care of the detailed operations of the business. In addition, a COO can be a sounding board for the CEO, providing them with sage advice and a different perspective on various issues. As well as taking some of the day-to-day burdens away from the CEO, this also allows them to develop their long-term thinking.
2. Driving operational efficiencies
One of the primary responsibilities of a COO is to drive operational efficiencies across the whole company. This could include anything from improving processes and procedures to streamlining communication within departments. By doing this, the COO can help the company run more smoothly and make savings that can be passed on to customers or reinvested into the business.
3. Acting as a link between the executive and operational staff
A COO often acts as a buffer between the senior executive team and the operational staff. As a result, they can translate the business's strategy into tangible goals that the team on the ground can understand and work towards. This is especially important when there is a large gap in knowledge and experience between those on the executive team and those doing the day-to-day work.
4. Focusing on growth
A COO isn't just responsible for maintaining the status quo. They're also responsible for driving growth in the company. This could involve scaling the business by expanding into new markets or launching new products and services. Or it could mean finding ways to become more efficient and productive so that the company can take on more staff or increase its turnover.
5. Succession planning
The COO is usually the second in command in the company and will stand in for the CEO in their absence. The COO must be someone the CEO can trust and has a good working relationship with. If the CEO should retire, step down, or pass away, then the COO will be the one who takes over. For that reason, it's essential to have a COO as part of succession planning.
Typical skillsets of a Chief Operating Officer
Given the broad scope of the role, it's not surprising to learn that COOs need a diverse skillset. They should be able to understand and oversee every function in the business while also being strategic and long-term thinkers. In addition, they need to be excellent communicators who can build strong relationships inside and outside the company.
In addition, COOs usually have the following skills:
Process improvement, streamlining communication and ensuring that all departments work together cohesively.
A strong understanding of financial concepts to make informed decisions about the company's budget and resources.
The ability to motivate, inspire and lead a team of people towards a common goal.
Be able to develop and execute plans to help the company grow and achieve its goals.
A good understanding of marketing principles so that they can promote the company's products and services effectively.
Ability to manage staff effectively, ensuring they have the right skills and resources to do their job.
Coaching and mentoring staff, succession planning, and dealing with performance issues.
Familiarity with current trends in technology to keep the company's IT systems up to date.
Typical performance metrics of a Chief Operating Officer
The COO is typically measured on the following performance metrics:
- Operational efficiency
- Financial performance
- Customer satisfaction
- Employee satisfaction
Common challenges of being a Chief Operating Officer
The role of a COO can be challenging, and some of the most common challenges include:
1. Balancing short-term and long-term goals - Balancing the need to achieve short-term goals with the need to plan for the long-term can be challenging.
2. Dealing with conflict - There will often be conflict between departments within the company. The COO will need to be able to resolve these disputes effectively.
3. Managing change - The COO will need to manage changes in the company, such as new products, expansion into new markets, or changes in the economy.
4. Making decisions - The COO will often have to make difficult decisions that can significantly impact the company.
5. Broad skillset - The COO needs to have a wide range of skills and knowledge to effectively oversee all aspects of the business. This can be challenging to achieve.
As you can see, the role of a COO is diverse, challenging, and encompasses a huge variety of skills. As such, recruiting a COO can be tricky if your recruiter is inexperienced in this highly specialised position.
However, the benefits of employing an effective COO are huge. Not only can they improve operational efficiency and financial performance, but they can also help grow the company and improve employee satisfaction.
If you're considering recruiting a COO for your business, then make sure you partner with an experienced recruitment agency like Martin Veasey Talent Solutions to help you find the perfect candidate for the role.