How Do You Know When It’s Time to Hire a COO?
March 30, 2021
In the early days of a startup, it’s pretty typical for the CEO to have their hands in everything: marketing, IT, hiring, sales, development, design, ping-pong tournament planning—you name it.
Whether you prefer to use a wearing-many-hats analogy or a juggling analogy here is up to you, but we all know that after a while some of those hats start to get kind of ratty, and not in a cool vintage way. Or you wind up catching the wrong end of a chainsaw.
Point is, successful CEOs eventually realize time is their greatest business resource. This epiphany usually hits as things are really starting to heat up. They’re feeling strapped for time, overwhelmed by an avalanche of growing responsibilities, and they’ve realized they can no longer cover as much ground as they did before.
This is when the CEO starts asking questions about where their time is best spent. In addition to figuring out how they can contribute the most value to the company, they also start thinking more critically about whether they’re best suited for certain tasks. They also become more discerning about which roles and responsibilities they want to hold onto, and which they would rather delegate.
“Successful CEOs eventually realize time is their greatest business resource.”
Those are some pretty heavy questions, and they typically indicate that it’s time to make some changes in how leadership responsibilities are divvied up across the organization—and if that means bringing in a Chief Operating Officer (COO).
To make smart choices, CEOs must understand the COO role and why it may or may not be an appropriate addition to the team.
The role of the COO
The first half of the COO equation: How will you define the scope of the role? The definition of COO can vary wildly depending on the company and the situation, so give this some serious thought before you start considering candidates. Here’s an overview of the most common types of COOs:
Chief-of-staff COO
This is primarily someone the CEO can lean on to handle special projects, prep board materials, and manage the overall operating rhythm. Typical responsibilities include tracking, facilitating, removing friction, and speeding up decision-making. They are instrumental in managing leadership meetings, off-sites, and the related agendas and follow-up items.
If you go this route, bear in mind that this version of the COO requires less experience and seniority than the two types below. Because of this, it’s important to avoid creating a situation in which high-level functional leads are (or feel like they are) reporting to this kind of COO. This can happen if the COO becomes a proxy for the CEO or a gatekeeper, and it’ll frustrate the functional leads and be suboptimal. This type of COO won’t have the skills to operate at that level.
The more appropriate scenario: Have this person support both the CEO and functional leads.
Support functions COO
This is probably the most common definition of the COO: someone who owns all the business support functions, including finance, HR, maybe some IT, and possibly some kind of legal role as well. This person ensures that the infrastructure for scale is being built to sustain the growth ahead in an efficient and effective way. This allows the CEO to focus on product and go-to-market without missing a beat.
Everything-but-product COO
And then there’s the type of COO who’s really in a go-to-market role, but with the COO title. This individual is not only responsible for internal operations, but also—at a high level—for customer-facing strategies and tactics. If you need someone to take a ton off the plate of the CEO, this is it.
This is also the right choice for the CEO of a product-led company that feels comfortable with the product and engineering side of things, but is out of their depth on operational and marketing stuff. This solution is also ideal when the company is growing, but maybe not growing fast enough to justify the hiring of multiple top-tier functional leads who can build out all the different areas of the company.
In this case, the everything-but-product COO can take on the task of working with more junior functional leads to achieve a comparable result. For example, you won’t need to hire a CMO—you’ll just need a good director of lead gen who can work with the COO.
Once you’ve nailed down the right type of COO for your startup, the next step is tackling the talent profile. The people who step into the COO role usually fit one of three molds:
1. CFO background
This person is really good with numbers. They’ve probably taken one or more companies to $25 million or $50 million in revenue. And they’ve usually had their hands in all different functional areas of the business. They tend to be fairly seasoned and they’re the kind of person you look for when you need someone who will be strong with putting in solid financial processes, while also being capable of picking up some ancillary functions.
2. Career COO
The career COO takes on a jack-of-all-trades role at a series of early-stage companies. When assessing this type of candidate, you want to look at how successful they have been at past gigs, and also whether they leaned more strongly toward any one focus area. It’s also a good idea to take note of the kinds of CEOs they worked with. Since the COO—especially for a career COO—is a right-hand kind of role, working style compatibility is critically important.
3. Ex-CEO
This type had a great run as a CEO and now wants to try something different. They’ve made their money, but they miss being involved. They’re looking for opportunities to coach an individual or a team from the inside. This isn’t an ego trip. They aren’t looking to get back in the CEO chair, they just want to share their knowledge in a way that positively impacts the business.
The COO vs. functional leads
The relationship between the COO and your functional leads brings up an important and often overlooked question: Is the CEO’s lack of time truly an indication that it’s time to bring on a COO, or is the issue that other leaders in the organization aren’t strong enough (or don’t have the right skills) to take on some of the work that the CEO needs to offload?
This is an important distinction, and how you answer it plays a major role in your decisions about whether to hire a COO and how to define that role.
Once you move past the market fit stage and you’re beginning to see material growth, hire functional leaders who have the expertise and depth of experience to build out their respective disciplines. If you’re able to take this approach, your preferred COO type might be—as noted above—the chief-of-staff COO.
But sometimes there are financial or other constraints that make hiring that many high-level people impossible. In that case, the higher-level COO who can manage some junior functional leaders makes the most sense.
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In either case, know your organization’s true needs. Remember that, depending on which type of COO you choose, bringing this person into the mix will affect which kinds of functional leads will want to join your team. The highest-caliber functional leads will want to work directly for the CEO, not get bumped a level down. You can mitigate some of this risk with the profile of COO you hire. For example, the ex-CEO type will help here. Your choices will have ripple effects across your organization, so take the time to really think it through.
In addition to defining the COO role and considering the different types of people who can fill it, set a long-term vision for the COO. For your sake as well as the COO’s, be clear about the purpose of the job and where it’s going.
For instance, is the plan to have the COO build out all the requisite functions and basically work themselves out of a job? That’s one way to go.
Alternatively, you might plan to keep the COO structure beyond that stage and evolve the COO role as the different functions and the company grow.
Or maybe it’s your intention to groom the COO to eventually become CEO.
There are lots of possibilities, so know which path you’re following.
Big questions, big rewards
Helping CEOs think all the way through these kinds of choices is what I do. When I start working with the CEO of a pre-IPO company, I begin with a three-year exercise that guides them to think through their next phase of growth—including trying to quantify that growth by revenue, number of customers, number of people, etc. It then takes the planning a level deeper by having them break their projected number of people down by function for each of the following three years (the current one, plus the two following).
“The days of the lone genius are over—success requires a strong team.”
This process gives us a great springboard for uncovering the kinds of challenges they’re most likely to face. These might include geographic footprint challenges or learning how to build the right hiring machine, or how to successfully manage executive hiring. The questions raised by this process help us discover critical insights and open up important conversations that help shape the future of the company.
Related read: So You Made a Terrible Hiring Decision. Here’s How to Fix It.
Which executives you need on your team, in what order, and at which stage of growth—these are all key decisions for a growing company. Scoping out the roles accurately and then finding the right people to step into those roles is a huge part of being able to harness anticipated growth. I personally take on this work because it’s exciting and rewarding to help companies at this tipping point make decisions that put them squarely on the path to success.
The days of the lone genius are over—success requires a strong team. And building out the right kind of team the right way creates a great market advantage that’s worth the effort.
Editor’s note: This was originally published in August 2019 and updated in March 2021.