We focus on factors that have fundamentally changed demands on COOs: global recession, the evolving paradigm surrounding governance, threats to operations from natural disasters and terrorism, and the rise of big data. Each requires COOs to develop new competencies, to think about risk, and to become increasingly agile as a leader.
Over the last ten years, leadership teams have found themselves facing many unusual and some unprecedented challenges. These challenges are, because of their nature and because of the way organisations were exposed, particularly influential in reshaping the work of the COO. In this article, we focus on four major factors that have fundamentally changed demands on the COO: the global recession, the evolving paradigm surrounding governance, the threats to operations posed by natural disasters and terrorism, and the rise of big data. Each factor is significant, undeniable, and unavoidable for companies, regardless of geography, industry, or market position. And more importantly, each factor requires COOs to develop and demonstrate new competencies, to think differently about risk, and to become increasingly quick and agile in order to satisfy the needs of the position’s many stakeholders and to effectively lead.
The Global Recession
The decade-long global recession has been the most pressing issue facing business leaders. Because globalisation has increased interdependencies among economies, it was difficult to understand the steps any government should take to turn things around. In the early 2000s, companies invested in countries like Brazil, Russia, India, and China because they presented seemingly attractive opportunities for operations, as emerging markets for products and services. By the middle of the decade, these investments became subject to second-guessing. The nature of the global recession made forecasting the return on overseas investments even more complex than it previously had been.
Though surviving the recession by finding ways to lower costs was the COO’s primary concern over this period, right alongside was the challenge of understanding what the “new normal” might be for their company and its industry – and what that new normal might require from its chief operating executive. Cost cutting could not rule the day forever; at some point energy would need to be refocused on finding growth. Understanding evolving economic conditions and their consequences for business strategy, determining where opportunities might exist, and organising to pursue them are just a few examples of issues that have required resetting during this evolution of what normal now means. Restarting or reinvigorating innovation agendas required considerable effort because the behaviour these agendas require is so markedly different from those required of during a period of heavy and sustained cost cutting. The decade has been volatile. Volatility is vexing for leaders, and over the past decade, it has become the new norm. In all, the recession forced COOs to truly become global citizens in order to properly understand ways to first manage costs and then exploit opportunities for growth. This requires COOs to become much more externally focused than they ever have before.
A noticeable trend over the past ten years has been a more public interest in corporate governance. Investors have been rightly concerned about leadership teams’ ability to deftly manage its company through recession. Where possible, activist investors have sought to increase control over the company through the acquisition of board seats. Where that was not possible, public forums have been used to raise questions about the suitability of the leadership team and to thereby influence its decisions.
As a result of this pressure, boards have stepped up their game. Board chairs have become much more involved in the companies they oversee. Now in the United States, as has been the practice in Europe, the chair position is more and more frequently separated from the CEO position. Board chair is not an honorific position; someone with deep understanding of the company and its industry now fills the role. An independent chair means CEOs are freed of duties and can use the newly found time to get “closer” to the company operations. Two trends are a natural result of this “found time” on the CEO’s calendar. First, CEOs are reporting a broader span of control; they sense enough bandwidth to take on more direct reports. Second, during this same ten-year period, we have noted a slow but persistent decline in the number of large companies with a COO. For a more internally focused CEO, a COO may appear to be redundant. It is possible that changes in the ways chairs and CEOs are enacting their jobs have the net result of creating role overlap between the CEO and COO. When this is suspected, the first question to ask is if that overlap creates value or confusion for the company. Some companies have decided that the COO role is not necessary when the CEO has a more internal focus.
Though there are reasons to be encouraged by a renewed engagement of the CEO, the decision to operate without a COO brings with it some unintended and potentially risky consequences. Chief among these risks is the ability of a company to ensure leadership continuity. This is because the COO role has been so effectively used to groom successors – you needn’t look further than Tim Cook at Apple. For years, Jobs deliberately developed Cook to take over, giving him increasingly greater responsibility, engagement with the Apple Board, and exposure to the public. Compare the intentionality of that transition to the situation that recently was revealed at DuPont after CEO Ellen Kullman was forced to resign. Though she had been in the role for many years and had ample opportunity to deploy a role like COO in order to develop a successor, no such person was in place. Instead, the board had to select an interim CEO from among its board members. This situation is precisely what Fortune Magazine called it – “a succession disaster”. So while the decision to separate the Chair and CEO roles has many advantages, it is clear that the downstream consequences as they pertain to succession may not have been sufficiently thought through.
About the Authors
Nate Bennett is Professor in the J. Mack Robinson College of Business at Georgia State University. Over the years, he has won numerous awards for his teaching. He has over 20 years of experience in the development and delivery of leadership development programs for executives with major corporations. He is co-author (with Stephen Miles) of two Stanford University Press books, Riding Shotgun: The Role of the COO and Your Career Game: How Game Theory Can Help You Achieve Your Professional Goals.
Stephen A. Miles is Founder and CEO of The Miles Group. He has over 20 years of experience developing talent strategies for organisations, teams,
and individuals – focussing on high-performance, world-class leadership through CEO succession, board optimisation, team effectiveness, executive assessment and coaching services.