Chief operating officer facts for kids

A chief operating officer (COO) (or 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 immediately after the CEO, and reports directly to them and acts on their behalf in their absence.

A COO is usually voted in by shareholders or appointed by the board of directors.

Responsibilities and similar titles

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.

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.

Current situation

Most modern companies operate without a COO. For example, in 2007 almost 58% of Fortune 500 companies did not have a COO. In these instances the CEO either takes on more roles and responsibilities, or the roles traditionally assigned to the COO are carried out by sub C-suite executives. Although the number of COOs has been in decline for the past 10 years, there are reasons to anticipate an increased utilization of the position in the future, including:

• Companies are becoming larger and more complex, making it more difficult for one person alone to have total oversight over the whole organization.
• Companies are finding a strong relationship between firm performance and the presence of a COO.
• Companies are becoming more deliberate about CEO succession planning and will use the role to on-board and train successors.
• The increase in talent mobility means that the role will likely be used more often as a retention mechanism for key executives who are at risk of moving to a competitor.

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

COO as successor

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

Relationship with a CEO

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. Seven 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 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 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.

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 his or her own voice, independent of the CEO.