The changing role of the COO: are you grappling with how best to utilize the chief operating officer function? You're not alone.

AuthorMader, Steve
PositionORGANIZATIONAL LEADERSHIP

IT'S BECOME POPULAR WISDOM that chief operating officers are an endangered species in the C-suite.

To hear many business observers tell it, more and more corporations are eliminating the COO position because a variety of trends have conspired to make it unnecessary. First among these is the increased involvement, during this post-Enron era, by chief executives in operational matters. When CEOs focus their energies and attention inside the corporation, so these pundits say, there's no need for chief operating officers.

I would argue, however, that the use of chief operating officers remains a very active organizational strategy in America's corporations. And that's true across most industry lines. COOs have delivered results in a variety of economic, regulatory, and competitive business environments. Indeed, during these past three years, as the corporate world has gone through major changes produced by Sarbanes-Oxley legislation, globalization, and other major developments, COOs have continued to play a key role in many thriving companies.

What's happening in the C-Suite?

As is true of most senior executive positions, the job responsibilities and essential skill sets of chief operating officers vary widely with the specific company and have evolved in recent years. They must possess business savvy and operational management expertise, of course, but today's successful COOs also benefit from personal flexibility. After all, they must function within a corporate environment in which boards of directors, CEOs, and other top executives are often expanding their involvements and activities--a trend that is only likely to continue (see accompanying sidebar, "The CEO as Chief Execution Officer").

Meanwhile, the growing use of outsourcing, through various types of domestic and offshore relationships, has been a huge force of change, affecting COOs in all kinds of ways. At many companies today, COOs must be able to act as effective outsourcing managers, along with all the other expertise that they must bring to the table. Globalization and the expansion of outsourcing have made it increasingly valuable for COOs to possess international operational experience, especially relating to Asia.

With all these forces of change, it may be difficult for many corporations to make judgments about when--and how best--to utilize the chief operating officer function. They're not alone in grappling with these challenges. In our business we develop a firsthand understanding of the ways that the right COO can deliver value to a corporation.

As vice chairman with leadership responsibility for Christian & Timbers' board services and CEO practice, I work closely with major multinational and fast-growing corporations to resolve succession management, governance, and other essential challenges--sometimes, when it's appropriate, through the recruitment of top-quality COOs. It has afforded me the opportunity to experience how to make this role work for the company, when to do it, and who should do it.

Who's got COOs

Let's look at the current state of the COO role in Corporate America. Within the universe of the Fortune 500, nearly 175 corporations possess chief operating officers. These companies are as diverse as Whole Foods Market, Microsoft, Barnes & Noble, and Bear Stearns Cos.

Here's a significant indicator of just how actively and effectively this position is being utilized by CEOs and boards: In 137 of these Fortune 500 companies--more than three-quarters of the corporations that currently possess chief operating officers--the COO's average tenure is 1.5 years. This demonstrates that many boards have made the decision quite recently to make use of this function, and they've done it with intensity and forethought. In those cases in which management succession is an important element, it's desirable for the tenure to be relatively short.

Clearly the role is situational, and more than 60 percent of the Fortune 500 companies don't have a COO, at least for now. I'm convinced that the larger meaning of the statistical evidence is, quite simply, that there's no one-size-fits-all approach to the chief operating officer role. Let's be honest: Companies may make use of the COO function through a formal or informal organizational structure. Some companies that don't seem to have chief operating officers really do have them--they just operate as non-ordained COOs, under the guise of other titles instead. But whether that other title is president, CFO, or general manager, the function may really be that of COO and intrinsically important to the leadership strategy of the whole organization

When I'm asked about trends affecting COOs--is the position alive, dead, an artifact of old-style corporate structures, or more important to corporations than ever--my answer is this: It's all of the above. Successful organizational structures don't fall into textbook-like categories; they take advantage of key people and specific moments in time.

There will always be corporations, business models, teams of executives, and sets of strategic challenges in which the chief operating officer function makes a lot of sense. COOs can be truly vital in delivering execution through an organization. And then, for some other companies, the COO role won't make sense, at least not for now. Yet that's no guarantee it won't add value to the same corporations at some point in the future.

Why consider a COO?

For a position that is sometimes present, sometimes not, in the C-suite, COOs have a way of capturing headlines.

Recently, for example, Richard Zannino was elevated to the chief executive's post at Dow Jones & Co., the first time a non-journalist was promoted to this position in modern times. Zannino originally came to Dow Jones in 2001 as the media giant's CFO but later switched to chief operating officer, considered to be the No. 2 executive post at the company.

The board's succession committee actively debated...

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