How Do You Know When It’s Time to Hire a COO?
COO is one of those roles that’s hard to nail down because it can mean different things to different people and serve different purposes in different companies. But, while the specific responsibilities held by a COO may vary from company to company, the role itself is almost always one that makes a big difference—good or bad—as a company grows.
The potential impact that a COO role will have on the organization makes it imperative that you take the time to define the role clearly upfront. It’s critical. Only when you are able to demystify the nature of the position will you have the information you need to hire the right person, set clear expectations and create the positive business outcomes you’re hoping for.
Raising the stakes even more is the fact that the decision about whether to hire a COO and what kind of role they will fulfill usually needs to be made at a critical point in a company’s growth. The successful CEO eventually realizes that their time is their greatest business resource. This epiphany usually hits as things are really starting to heat up. The CEO is feeling strapped for time, maybe a little overwhelmed by an avalanche of growing responsibilities and worried that they aren’t spending their time effectively, and can no longer cover as much ground as they once had.
This is when the CEO starts asking serious questions about how they spend their time, and—more to the point—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 are the person best suited to certain tasks. They also become more discerning about which roles and responsibilities they want to hold onto, and which they would rather delegate.
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 your organization. To make smart choices, you need to understand the COO role in general and why it may or may not be an appropriate addition to your team.
The COO: Who They Are and What They Do
The first half of the COO equation is how you will define the scope of the COO role. The definition of “COO” can vary wildly depending on the company and the situation, so it’s smart to give this some serious thought before you start considering candidates.
This kind of COO is primarily someone who 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, offsites and the related agendas and follow-up items.
If you go this route, you need to bear in mind that this version of the COO requires less experience and seniority than the other two types. 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 will frustrate the functional leads and be suboptimal as this type of COO is not skilled to operate at that level.
The more appropriate scenario, if you want this kind of COO, is to have them supporting 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.
Then there is the COO who is really in a go-to-market role, but with the COO title. This individual has responsibility not only for internal operations, but also—at a high level—for customer-facing strategies and tactics. This is the version of the COO role that steps in to truly take a wide range of things off the CEO’s plate.
This is the right choice for the CEO of a product-led company who feels really comfortable with the product and engineering side of things, but is out of their depth on operational and marketing stuff. This solution is also the best fit 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 will just need a good director of lead gen who can work with the COO.
Now that we have nailed the scope of the COO role we want, its time to tackle the talent profile. The people who step into the COO role usually fit one of three molds:
This is the person who is, obviously, really good with numbers. They’ve probably taken one or more companies to $25 million, or maybe $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 are the kind of person you look for when you need someone who will be really strong on putting in solid financial processes, while also being capable of picking up some ancillary functions.
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.
Finally, there is the person who has had a great run as a CEO, and now wants to try something different. These people have made their money, but they miss being involved. They are 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 versus Functional Leads Question
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 are beginning to see material growth, I prefer to 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.
In either case, you need to fully understand your organization’s true needs. Remember that, depending on which type of COO role 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 in the hierarchy by the COO. You can mitigate some of this risk with the profile of COO you hire, for example, the past 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, it’s also important to have a long-term vision for the COO. For your sake as well as the COO’s, you need to be really 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 company grow. Or, maybe it’s your intention to groom the COO as a successor to your current CEO. There are many possibilities, you just want to be clear about 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).
This process gives us a great springboard for uncovering the kinds of challenges they are most likely to face. These might include geographic footprint challenges or how to build the right hiring machine, or—as we’ve talked about here—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.
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. Success always requires a strong team. The days of the lone genius are over. Building out the right kind of team the right way creates a great market advantage that’s worth the effort.