One of the many balances of the CEO role is the balance between internal and external. In other words, the CEO must weigh time spent on internal operations with time spent on external environments and stakeholders.
While both sides are clearly important, I’ll always put my money on the company that has mastered the internal, operational side of the equation. Time cover stories and strategic partnerships are great, but not if there’s waste, chaos, and infighting back at headquarters.
Some CEOs, recognizing the need for better operational capacity inside the company (and perhaps wanting to free themselves up for big-picture, externally focused work) enlist the help of a chief operating officer, a second-in-command to take over day-to-day operations.
But finding a good COO is easier said than done. Accenture has called it “one of the least understood roles in business today,” and there’s no stable set of qualifications to look for. A COO can be anything from a trusted CEO mentor to a startup cofounder who needed a prestigious title. Nate Bennett and Stephen Miles have identified no fewer than seven COO types, each with distinct roles and objectives, ranging from “the executor” to “the heir apparent.”
4 Signs You Need Operational Support
Even so, in a time of skyrocketing organizational complexity and terrible rates of execution, the idea of an executive dedicated to operations seems to make sense. What are some signs you might need operational support as a CEO?
- Strong strategic orientation. You’ve self-diagnosed or received feedback that you are a leader with more comfort handling longer-term, strategic problems than the details of day-to-day execution.
- Unpredictability. You frequently experience last-minute surprises from within your own company (e.g., missed sales targets, behind-schedule releases).
- Siloed functional areas. Your direct reports compete for attention and resources, and departments operate as silos.
- Inefficiency. Your organization features confusing, redundant process and unclear decision rights.
All of these are the domain of a good COO, who—however else you define the role—should drive consistent execution, coordinate functional areas, and reduce waste.
Thinking Twice: The Pitfalls of CEO-COO Partnerships
If you suspect it’s time to seek out operational support, I would still caution you to think twice before putting up the job ad for a COO. Why?
First, as mentioned above, there’s no stable set of qualities that make a “good” COO. That means the executive search can be long and involve much self-reflection.
Second, the cost of making a poor COO selection is very high. The CEO and COO share a close bond very near the seat of power, so the repercussions of a bad fit are significant. As Ram Charan and Geoffrey Colvin write in their well-known Fortune article, “Why CEOs Fail”:
These partnerships [between CEO and COO] depend on a rare chemistry that's hard to predict, and the stakes are high. If it doesn't work, the resulting trouble is worse than most. Compounding it, the CEO must then fire the COO fast, which is often a problem.
Finally, the data conflicts on whether partnering with a COO drives firm performance. One study of 153 firms, published in Strategic Management Journal in 2009, found a correlation between the presence of a COO and return on assets and market-to-book ration. But a contradictory ten-year study of 400 companies—published in the same journal—found that companies with a COO on board had underperformed compared to industry peers.
Considering a Virtual COO
Maybe hiring a COO is the right move for you, and maybe it isn’t. Many CEOs find themselves in this predicament: they know they aren’t achieving operational excellence within the company yet are wary of taking a big step and hiring a second-in-command.
Though I’ve never had a COO in my own career as CEO, I have always been interested in the management of business operations. That led me to create the system that would evolve into Khorus, a platform that helps CEOs manage strategic goals and gather practical insight into their organization. Since I founded Khorus and began working with our customer CEOs, I’ve come to think of the software as a virtual COO, filling many of the functions a good COO would: breaking down broad strategic objectives into concrete goals, helping to define key metrics for various functional areas, ensuring horizontal coordination, and—most importantly—bringing timely operational information to the CEO that helps him or her make effective decisions.
Obviously, software isn’t going to fill other common COO roles, like mentoring or taking over for the CEO. But especially when paired with a consultant who understands the methodology behind the software, Khorus can amplify your operational capabilities. Plus, it offers some key improvements over a flesh-and-blood COO:
- It’s a lot cheaper.
- You’re not going to get into a power struggle with it.
- It’s not going to clash with your leadership style
- It’s not going to add a management layer between you and your executive team.
Even though Khorus delivers an out-of-the-box solution for operational excellence, the idea behind it is broader than one solution or one company. I believe that going forward, platforms like Khorus will become a default part of the CEO’s toolbox.
As business speeds up and digital transformation continues, it just makes good sense for CEOs to adopt their own systems for keeping the operational side of the business healthy. Every other functional leader has their own dedicated software—Salesforce.com and sales leaders being the prime example.
Yet the CEO, especially the CEO without a top-tier COO, has been left to fend for himself in making sure the entire organization delivers results. That’s the gap we at Khorus are filling.
If you would like a closer look at how Khorus supports operational excellence, please schedule a quick demo. We'll learn about your business and see how we can help.