Executive Outlook: Chief Operating Officer (COO)
Filter tag: Change Management and Executive Outplacement, Culture & Organisational Effectiveness, Leadership Capability
The C-suite has always faced the challenge of having to simultaneously run tomorrow’s race while also competing in today’s marathon, but that challenge has become even more difficult in recent years. Ongoing uncertainty and disruption has called for bolder, more assertive, and purposeful transformational leadership guided by well-executed strategy.
As part of our ongoing Executive Transition research, we have found that organisations are appointing a Chief Operating Officer to drive growth, boost organisational resilience, and generate value. As of 2022, 40% of leading companies had this role as part of their leadership team. The remit of this position has never been easy to nail down, and the role of the COO can be the most variable of the C-suite. As the world of work has evolved, so has the expectations of those in these positions to become catalysts for business impact.
While their title implies a strong foundation in operations, areas such as supply chain and customer satisfaction are equally of importance as the role of the modern and future COO will require much more diverse and well-rounded enterprise capabilities. Often considered to be the right hand of the CEO, the COO must pair their strategic and day-to-day operational capabilities with high-level relationship management, customer and stakeholder engagement. Rather than being a specialist in a specific capability, success in the role requires the executive to instead become a specialist of the business itself to become a driver and facilitator of its growth.
Here are some of the top skills required to be successful in the role for the foreseeable future, challenges faced, and factors to keep in mind if a COO role is your objective when undergoing an executive transition.
When working with our Executive Outplacement clients, we often encourage them to use LinkedIn to benchmark themselves against other candidates and to get a feel for the marketplace. A LinkedIn search for profiles in the UK with a current title of “Chief Operating Officer” yields approximately 15,000 results. While there is not much data available on the demographics of these executives, data from the US can help to paint the picture. In the US, COOs are predominantly male (76.6%) with an average age of 51 years old. The majority (89%) of these COOs are older than 40 years old, while the further 11% are between 30 and 40 years old. The COO role is found in businesses of all sizes, with most COOs representing mid-sized organisations with 50-500 employees (43%) or large organisations with more than 10,000 employees (21%).
As for tenure, the data shows that approximately one third (33%) of COOs will hold the role for just 1-2 years. 18% will have a tenure of 3-4 years, and a further 18% will have the title for 5-7 years. It is not entirely uncommon to hold the role for longer stretches of time, as 11% of COOs have a tenure of 11+ years.
According to Glassdoor, the average UK base pay for a Chief Operating Officer is approximately £111,000 per year. However, pay scales for the role range from £59,000 and £211,000. The average additional cash compensation for COOs in the UK is £40,000. Of course, the financial reward for the role will vary by region, industry, and size of the business. Those currently in the role might find that moving company is their best option for increasing their earning potential.
Top COO Skills
The role of the Chief Operating Officer has become increasingly important in recent years, but rarely do these positions have a clear job description. Because their remit is so varied, a COO’s skillset is arguably the most versatile of anyone else the C-suite apart from the Chief Executive. Some of the most valuable characteristics of successful COOs include:
- Broad enterprise capabilities: Unlike the CFO, CTO, or CMO who represent specific functions and must be experts in their respective areas, the COO needs to be a generalist. While many will rise to this role from a more specialised background in finance or supply chain, a COO’s day-to-day means that they need to have an understanding of all areas of the business. An organisation is the sum of its parts, and it falls on the COO to ensure all those parts are moving seamlessly together to reach targets and deliver on strategic objectives. The COO needs to have enough understanding of how those different parts function to spot inefficiencies and remedy them. Having to oversee the organisation’s complexity provides a broad viewpoint and deep enterprise insight that can be beneficial for success as a COO, and especially beneficial to those ascending to CEO later. The most effective COOs are those with strong, well-rounded strategic, CX, operational, people, and commercial capabilities rather than narrower expertise in one or two of these areas.
- Adaptability: Due to having to wear many different hats on any given day, adaptability is critical for success in this role. Because the modern COO role comes with so many different mandates and responsibilities, it is rarely defined. This lack of a structured remit requires those in these positions to encourage their teams to pivot quickly and often, and encouraging the right culture and effective operations to do so is a crucial attribute. If this capability is not inherent, this would be an ideal area of focus for personal development. COOs need to keep their finger on the pulse of the business, their industry, and the marketplace at large. While it won’t be possible to predict every bump in the road, becoming more adaptable will help COOs become better at anticipating changes as they crop up.
- Execution and Delivery: Because so much of the organisation’s strategic mandate flows through the COO, it is crucial for these executives to be inclined towards action. Being able to identify organisational inefficiencies, develop strategies to remedy them, and enacting those plans with desirable outcomes is the true measure of success in this role. Are you able to see the business from multiple stakeholder views, and do what needs to be done to innovate and create improvements? Do you have what it takes to both create the vision and lead others to bring it to fruition?
- Relationship Management: A COO’s ability to deliver goes a long way for instilling trust and credibility among stakeholder audiences, which is a critical task for any executive in this role to accomplish. Among the C-suite, the COO’s visibility in the organisation is one of the highest. With their hands in so many different areas of the business, COOs are constantly having to navigate different audiences and perspectives. The COO needs to juggle their relationships with the rest of the C-Suite and Board, other senior-level leadership, staff further down in the business, customers, investors, and suppliers. Each of these audiences will have different needs, priorities, and insights. Therefore, having a high emotional quotient makes it much easier to forge and maintain strong support among all the groups you vacillate between on a regular basis. Being willing to listen to these differing perspectives will help you inform your own strategy, and your abilities as a communicator will be crucial for expressing your plans and objectives to your various audiences and getting them on board.
Top Market Challenges Impacting COOs
The skills above will be critically important as COOs attempt to navigate the challenges of the current business landscape. Some of the top factors that these executives should be aware of are:
- Short-term Firefighting: When was the last time your organisation could rely on a five- or ten-year strategic plan? Surely it has been a while. In recent years, COOs and the rest of the C-suite have been faced with having to deliver on strategic objectives while battling near constant interruptions. The unexpected pandemic and its resulting aftershock of difficulties added more challenges to the C-suite’s already full plate, so understandably, dedicating energy to putting out urgent fires has taken the focus away from longer term planning or adhering to big picture goals. The COO role is highly strategic in nature, and executives in this position need to keep one foot in the present and the other stepping forward towards the future. Getting wrapped up in delivering impact in the short-term creates the risk of this becoming a cycle. While this might be good for in the moment agility, the business’s future competitive edge is at stake.
- People and Resources: It is no secret that this is a tough time for the jobs market and for the global economy. These challenges have trickled into many businesses, leading to tough staffing decisions, cutbacks, organisational restructuring, and reprioritisation. Even those businesses who are looking to grow are facing hardships with attracting and retaining talent with the right skills and capabilities. Lack of people and fiscal resources presents major operational difficulties that many COOs will be tasked with finding solutions to. For the foreseeable future, COOs should anticipate being tasked with having to do more with less and be very strategic about their resource allocation.
- ESG and CSR: But internal resources are not the only resources COOs and their stakeholder audiences are worried about. Sustainability has become a major area of focus for both businesses and their customers, with many organisations introducing carbon reduction initiatives and committing to net zero targets. Therefore, incorporating ESG into company strategy has become an essential expectation for the COO and the rest of the C-suite. However, it is not enough to simply set targets. The organisation needs to be able to ‘walk the talk.’ The business’s efforts must be perceived as genuine and be supported by real action. It will fall on the COO to help determine what targets are most achievable for the business, and to help generate the necessary internal support.
- Digital Transformation and Cyber Threats: The current wave of digital transformation presents an opportunity for businesses to become more agile, efficient, and competitive through the adoption of advanced technologies. But with increased reliance on technology comes increased cybersecurity risks, which of course threatens a business’s operations. COOs are having to keep these threats in mind as they help shape the organisation’s digital transformation plans and wider strategy.
Given these challenges, current and aspiring Chief Operating Officers should focus their attention on these key areas:
- Supporting the CEO: We have spoken at length about the difficulties and pressures facing CEOs, and oftentimes, COOs are appointed to help support or drive CEO performance. This may take one of two forms. The first option is for the COO to take on a complimentary role to the CEO, possessing opposing traits and characteristics that offer different perspectives, insights, and ways of working that lead to better outcomes. Alternatively, they may take on a partner role and be viewed as another version of the CEO, lending support to their ideas and sharing in their vision. Regardless of which form is taken, it is an unspoken understanding that the COO is there to drive performance at the top. This may involve challenging the CEO to think differently or taking on some of the burden to alleviate their pressures. The relationship between these two senior roles is one of the most crucial in the business and has the potential to make or break the organisation’s effectiveness.
Others will enter the COO role as the heir apparent to the CEO, appointed with the expectation and understanding that they will one day be at the helm. Historically, the COO role was the primary steppingstone to the top job, with 76% of new CEOs in the early 2000s having started as a COO. Today, COO is still the most common starting point for CEOs but to a lesser extent, with nearly 27% of CEOs in Fortune 500 and S&P 500 companies promoted from the COO role in 2021. Comparatively, only 8% of CEO promotions in 2022 were from the CFO position. It would be naïve to enter the COO position without potential succession in mind, and therefore executives in these roles or aspiring to them should make the most of the time they spend in this position. Learn all you can about the business and its people. Increase your visibility and support so that when the time comes for you to ascend to the CEO spot, you can dedicate less time to generating buy-in and building your credibility. Of course, you need to ensure you are not so wrapped up in your next role that you neglect your responsibilities as COO. The COOs who tend to overperform in the Chief Executive role later are those who draw on the experience and knowledge they gained through shaping and delivering operational excellence.
- Strengthening Strategic Relationships: However, it is not just their relationship with the CEO that Chief Operating Officers need to be mindful and protective of. As mentioned, COOs operate throughout the business and therefore must navigate a wide range of internal and external audiences. The COO needs to be able to cooperate with the rest of the C-suite and the Board, work effectively with senior leadership, instil confidence in investors, generate buy-in from the rest of the organisation’s staff, and demonstrate value to customers and partners. One of the most important strategic relationships the COO is tasked with nurturing, however, is that with the organisation’s suppliers. The past few years have been incredibly disruptive at the operations and supply chain level, and new and reliable suppliers can be hard to come by. In PwC’s latest COO Pulse Survey, 57% of responding COOs reported building closer relationships with suppliers is very important to transforming their business operations. As a result, executives at this level need to be thinking more strategically about how their relationships can be leveraged to improve stability, increase quality, and optimise pricing. Fostering fruitful partnerships will be critical, but today’s COO’s need to be willing and able to cut ties as needed to better serve the business. An ability to effectively judge your relationships will serve you well in the role.
- Strategic Workforce Management: Of course, the Chief Operating Officer’s strategic vision is null without the right people in place to enact it. Hiring has been a challenge for businesses across industries since the onset of the pandemic, but COO’s personnel interests are less about getting bodies through the door and more about getting the right talent in the right positions. Having highly skilled talent can make the business leaner without sacrificing on efficiency. The right talent is worth more than having a broad workforce that does not necessarily deliver at the desired level. As businesses restructure and rethink their personnel priorities, COOs should champion quality over quantity to make the most of the organisation’s resources.
- Doubling Down on Digital: Investing in new technology will help with this as well. Artificial Intelligence (AI) has been a major area of interest for COOs in recent years due to the productivity benefits it can produce without increasing workloads. Automation is nearly always a wise investment from an operations standpoint by helping to streamline, predict, and execute. After much resistance, businesses and their C-suites have begun embracing new technologies rapidly. COOs have no choice but to get on board with digital transformation and champion it in their strategy. Coming to grips with this technology makes it possible to plan for it more effectively. Current and aspiring COOs should dedicate the time to researching macro trends and sharpening their own digital capabilities to deliver long term value.
If you are a current Chief Operating Officer looking for your next executive role, or an executive looking to transition into a COO role, we can help. The Rialto Consultancy offers a range of career strategy services including Executive Outplacement, Executive Career Coaching, and Personal Branding. Get in touch with our team to discuss your options to make a game changing transformational career move.