“I quickly discovered that as much as I wanted to be a CEO, I was an operations guy,” confided an acquaintance who is a chief operating officer (COO) at a midsize west coast electronics company.
This admission is understandable. Many people who aspire to climb to the top of corporate management quickly discover what organizational consultants have known for years: more often than not, the roles of chief executive officer (CEO) and COO are mutually exclusive.
The CEO is responsible for laying out company strategy, including bringing on new acquisitions and lines of business. In some cases, the CEO makes decisions about exiting businesses. The CEO can also be called upon to be the corporate salesperson — traveling to client sites when large deals are at stake so these deals can be sealed.
The COO has a firm grasp of how the business operates, how various business functions interact with each other, and what is needed to tune up the company to get the best performance and the highest quality products. This person often exhibits great attention to detail, and the best COOs can sense when a particular area of the business is struggling without having to be told about it.
It’s not surprising that many CEOs dislike COO duties, which they find to be too task oriented and mundane. COOs recognize that they are good at dissecting the organization and tuning it up for optimal performance.
There are examples of corporations that have deliberately hired COO types as their CEOs; these have been during times when the business was operationally deficient and someone with the know-how had to set things right. In the longer term, however, many corporations end up moving out officers who are too operationally oriented when they discover that these individuals can’t make the transition to strategy setting and public relations.
And yet, executive search and leadership firms, including Heidrick & Struggles, say that for those companies developing their own future CEOs from the ranks, over 50% of new CEOs step into the position from a COO role. They also have a strong background in finance.
“The prevalence of CEOs with a strong financial background points to the fact that large companies prefer CEOs who can create value for the company and who understand the company’s financial drivers,” said Heidrick & Struggles’ Jeffrey S. Sanders, vice chairman and managing partner of the North American CEO practice. “Typically, companies are looking for CEOs who can develop a strategy and understand the financial ramifications of business decisions….A foundation in finance is an important building block for a career. However, only about five percent of these CEOs were promoted directly from the role of CFO — more than half were appointed from the role of COO or President.”
Executive leadership and search firm Russell Reynolds Associates points out that CEOs must be “Strategic yet tactical, tough yet emotionally sensitive, and decisive yet inclusive.” Naturally, this includes operations knowledge and training.
However, great CEOs also make smart strategic decisions, and keep their fingers on the pulse of the people who work for and with them. To do this, they must avoid getting buried in the minutiae of operations.
This is why companies take the time to groom future CEOs in operational roles, but then expect these individuals to take that knowledge with them as they transition into roles that can go well beyond the physical boundaries of the company. In the course of this, many individuals who are being considered for CEO roles discover that operations is their true passion, and they opt to become great COOs. Others move into the CEO position, but recognize the need for a great COO who can exceed anything they could ever hope to do in an operational position.
The key for companies and rising executives is to understand just where their skills and passions lie and how they can best contribute, because great companies have leaders who excel strategically and operationally.