A chief operating officer (COO), also called chief operations officer, is an executive in charge of the daily operations of an organization (i.e. personnel, resources, and logistics). COOs are usually second-in-command to the chief executive officer (CEO), and report directly to them, acting on their behalf in their absence.
In some situations the position may be appointed by the board of directors, for example where a COO is appointed as the CEO's successor.
Responsibilities and relationships Roles and functions The role of the COO differs from industry to industry and from organization to organization. Some organizations function without a COO. Others may have two COOs, each assigned to oversee several business lines or divisions, such as Lehman Brothers from 2002 to 2004 when Bradley Jack and Joseph M. Gregory were the co-COOs. A COO could also be brought in from other organizations as a "fixer", such as Daniel J. O'Neill who in 1999 joined Molson in that capacity.
In the manufacturing sector, the primary role of the COO is routinely one of operations management, meaning that the COO is responsible for the development, design, operation, and improvement of the systems that create and deliver the firm's products. The COO is responsible for ensuring that business operations are efficient and effective and that the proper management of resources, distribution of goods and services to customers and analysis of queue systems is conducted.
Despite the functional diversity associated with the role of COO, there are some common functions the COOs usually perform: At the direction of the CEO and board of directors, marshalling limited resources to the most productive uses with the aim of creating maximum value for the company's stakeholders Developing and cascading the organization's strategy/mission statement to the lower-ranking staff, and implementing appropriate rewards/recognition and coaching or corrective practices to align personnel with company goals Planning by prioritizing customer, employee, and organizational requirements Maintaining and monitoring staffing, levels, knowledge-skills-attributes (KSA), expectations and motivation to fulfill organizational requirements Driving performance measures for the operation (including a consideration of efficiency versus effectiveness), often in the form of dashboards convenient for review of high-level key indicators
Relationship with CEO Unlike other C-suite positions, which tend to be defined according to commonly designated responsibilities across most companies, a COO's job tends to be defined in relation to the specific CEO with whom they work, given the close working relationship of these two individuals.
The selection of a COO is similar in many ways to the selection of a vice president or chief of staff of the United States: power and responsibility structures vary in government and private regimes depending on the style and needs of the president or CEO. Thus, the COO role meets individual expectations and changes as leadership teams adjust.
The COO position is common in firms that are operationally intensive, such as airline and automotive industries.
Because the COO is often responsible for serving as an information conduit to the CEO, it is essential that the relationship between COO and CEO be a positive one. Trust is the most important ingredient necessary for a CEO-COO relationship to thrive. The CEO must have full confidence that the COO is not making direct passes for their job, can get the work done, and shares their vision (rather than using their trusted spot and access to information to undermine the CEO's strategy or implement his/her own vision). When a relationship built upon trust is created between the CEO and COO, firm performance is improved and shareholder results are strengthened. Some strategies that are key to building trust in the CEO-COO relationship include:
Communication—The CEO has to be comfortable sharing information with the COO and regularly communicating the strategy and any changes to it. Similarly, the COO has to be comfortable regularly providing status updates to the CEO. When communication breaks down, mistrust or misunderstanding is likely to mess things up. Clear decision rights—The COO role appears to work the best when the roles and responsibilities of the COO have been clearly delineated ahead of time and the COO is allowed to make the final decision within a pre-agreed-upon scope. Lock on the backdoor—The CEO must not undermine the COO's credibility by continually reversing decisions. When employees learn that they can get a different answer by going directly to the CEO as opposed to the COO, the COO role quickly becomes impotent. Sharing the spotlight—In effective CEO-COO relationships, both parties are comfortable with how much "credit" they receive for their work internally, externally, from the board of directors, and from each other. Fit between CEO and COO—The two individuals must respect each other and effectively partner together. This is not a partnership that can be forced. Fit Between the COO and the position—The selected COO must have the right credentials to carry out the purpose for which the COO role was created (which can include everything from operations expertise to change expertise to having a complementary skill set to the CEO). Transparency of succession expectations and timeline—Both parties must understand whether the COO desires the CEO job, whether the COO is in consideration for the top job, and what the timing might be for such a transition.
Successor to CEO Routinely in large organizations the COO will be the heir apparent to the CEO. Individuals may have worked their way (internally) up the company ladder before being named COO, or may have been recruited from an outside company. Either way, the position is used as a training and testing ground for the next CEO.
A 2003 Crist Associates study revealed that only 17% of companies that promote a COO to a CEO replace the COO within the next year.
An Accenture study found that approximately one in nine COOs moved into the CEO's shoes within a year of their departure and that half of COOs see themselves as the "heir apparent." COOs transitioning into the CEO role often face similar challenges including: Not being automatically granted the luxury of a diagnostic period. Given that they know the company, COOs turned CEOs are often expected to hit the ground running when in actuality they too need to enter diagnostic mode to fully understand their new role and to see the company from a new perspective. Finding time to manage a new key stakeholder: The board. Many COOs turned CEOs are often surprised how time-intensive managing the board of directors can be and must learn to incorporate this important responsibility into an already packed schedule. Being in the spotlight. COOs are used to having the luxury of working "behind the scenes." As CEO, many are surprised to find they have become a "public" figure both inside and outside the organization and must learn how to manage this additional obligation. Recalibrating their image. Often COOs struggle not with the strategy portion of the job itself, but overcoming the perception of other stakeholders that they are an "execution" executive versus a "strategy" executive. As a result, nearly 50% of the S&P 500 companies have opted to appoint a Chief Strategy Officer (CSO) to be a "mini CEO" and as peer to the COO.
According to researchers Miles and Bennett, just knowing these common pitfalls can help a COO "heir" better prepare for the transition, thereby avoiding them in totality or ensuring that at least they do not evolve into full derailers once they are in the CEO seat.
Relationship with board of directors In addition to having a strong and trusting relationship with the CEO, the COO should also have an effective relationship with the board. A good relationship between COO and the board allows the board to better understand and independently judge a potential successor. A strong relationship between the board and the COO also offers the board an additional expert opinion on the health of the company, and status of key initiatives. It benefits the CEO to allow such a relationship to form because it reflects confidence and fosters transparency. It also reinforces that the CEO is capable of developing talent, and helps the CEO to retain the COO by further empowering the individual. A strong relationship benefits the COOs in that they are able to expand their experience as well as their professional network. Additionally, if they are looking to be the next CEO, it allows them to develop credibility with the board. Researchers advise the COO to go beyond simply presenting at board meetings, to ensure they are developing strong one-on-one relationships with each board director. Researchers also urge the COO to develop their own voice, independent of the CEO.
Relationship with president In a similar vein to the COO, the title of corporate president as a separate position (as opposed to being combined with a "C-suite" designation, such as "president and CEO" or "president and COO") is also loosely defined. The president is usually the legally recognized highest rank of corporate officer, ranking above the various vice presidents (including senior vice president and executive vice president), but on its own generally considered subordinate, in practice, to the CEO.
Lloyd E. Reuss was president of General Motors from 1990 to 1992, as the right-hand man of chairman and CEO Robert C. Stempel. Stempel insisted on naming Reuss as company president in charge of North American operations, the board reluctantly agreed but showed their displeasure by not giving Reuss the title of COO.
Richard D. Parsons was number two in the company hierarchy during his tenure as president of Time Warner from 1995 to 2001, but he had no authority over the operating divisions, and instead took on assignments at the behest of chairman and CEO Gerald Levin.
Michael Capellas was appointed president of Hewlett-Packard in order to ease its acquisition and integration of Compaq, where Capellas was previously chairman and CEO. Capellas ended up serving just six months as HP president before departing. His former role of president was not filled as the executives who reported to him then reported directly to the CEO.
In 2007, the investment banking firms of Bear Stearns and Morgan Stanley each had two presidents (Warren Spector and Alan Schwartz at Bear, Robert Scully and Zoe Cruz at Morgan) reporting to one CEO (who was also chairman of the board); each president was essentially a co-COO (despite the lack of title) overseeing half of the firm's business divisions. Schwartz became sole president of Bear after Spector was ousted, and several months later assumed the position of CEO as well when James Cayne was forced to resign (Cayne remained chairman).
Tom Anselmi of Maple Leaf Sports & Entertainment was chief operating officer from 2004 until September 6, 2013. Between the departure of Richard Peddie and the hiring of Tim Leiweke for the posts of president and CEO, Anselmi added the title of president from September 4, 2012, to June 30, 2013, however he remained COO and did not receive the title of CEO.