In this episode of Operationally Speaking, Sergiu Simmel of Get Business Momentum interviews our CEO, Adam Kaplan on the topic of the relationship between the CEO and the COO.
Listen to the episode here:
In this episode, Adam discusses the following:
Understanding the CEO
There are different types of CEOs. Most are baby boomers. Most will have to sell their business in the next 10, at most 20, years.
While in business, CEOs who spend a significant amount (25%+) of time in rather than on their business experience ‘pain.’ This pain is extremely avoidable. Typically, most CEOs that spend this amount of time in, rather than on the business do not have a second-in-command or a strong enough right-hand in their business.
In a recent article, we describe the three common types of CEOs. Each CEO will run his or her business differently. He or she will also need a complementary COO to do so.
The CEO we see most often is the sales oriented one. This CEO needs a COO who is different, typically process oriented. Additionally, this individual is more likely to have some sort of a financial background but is not necessarily a previous CFO. This COO will help guide the CEO on which opportunities to pursue.
What is the boomer business selling tsunami?
It is a little bit of hyperbole -- we don’t yet know if it will be a tsunami or tidal wave. What we do know is that people over 65 are staying in the workforce longer than at any time in the last 50 years and at double the rate of 30 years ago.
This includes the staggering 12 million or so baby boomer business owners.
What we have found is that this is a generation that is not good at delegating. Also, a majority of them (perhaps up to ¾) don’t have succession plans in place for their business. Without a succession plan or willing successor, they will have to either sell or close their businesses
A better strategy is to have a non-family member ready, willing and able to run the business as it exists, and perhaps even improve it. This is why it is so important that founders and business owners have a Chief Operations Officer in place, primed, and ready to take over as CEO upon the current business owners departure.
What are some other areas that CEOs struggle with in their business?
Consistent Financial Performance
Many people talk about “rollercoaster revenues”. This is certainly a big part of it for non-recurring revenue based businesses. Yet revenues are only half of the income statement. Too many organizations lack spending rigor. And the buck often stops with the CEO.
Getting into the details to understand an organization's performance is something that COOs do very well, and CEOs tend to stay away from. CEOs should consider hiring someone that is smarter than them and get out of their way when it comes to these matters.
Work/ Life Balance
CEOs rarely achieve an optimal work/ life balance when they are spending so much time in the business. Additionally, when a CEO is the only individual overseeing both key leadership roles they are heavily sought after. Without a direct report to deflect to, everyone wants to involve the CEO – from customers, vendors, to employees. CEOs are always ‘on,’ and without a right-hand, their family life takes a toll.
Poor work/ life balance is an area that CEOs struggle with. Traditionally used for line employees, however, it should be considered more widely throughout the organization. Work/ life balance should be just as important to entry-level employees, as it is to top executives, such as CEOs.
CEOs have a unique ability to set the vision for their company. With this vision comes a lot of ideas that need to be seen through completion. Most CEOs do not have the desire to create the vision AND put the plan into action, as planning and holding people accountable is not their strong suit. A strong COO will create action plans for the vision and hold the team accountable to that plan.
When a staff member appears to be the wrong individual for the role, CEOs often turn a blind eye to the issue. In order to move a business forward, it is crucial that the right people are in the right seats. A COO will have their eyes on the talent at all times, assessing what is being done well, and what could be done better. COOs are used to having tough conversations with employees and understand that these conversations will only help the organization in the long run.
When do you suggest a CEO consider hiring a COO?
There is never really a bad time, once the business has sufficient complexity to keep the COO busy. That complexity is typically more driven by the market the company is in, rather than the size of the business.
For example, a 20-person SAAS CRM company fighting for market share has more complexity than a 200-person printing services company fighting to retain customers in a dying industry.
Another example - let’s say the CEO sees an opportunity to get into a new market. Yet she has no experience in that market. That would be a good indicator to hire a COO who knows and has gotten results, in that market.
Also, in highly regulated industries like Cannabis and Financial Services more operational experience is required.
Thoughts on promoting from within the organization for the COO role
Promoting the right person from within is almost always the best option. That person knows the CEO, the culture, the core values, etc.
However, even if the candidate is capable of elevating into the COO duties themselves, the relationship with the CEO will need to change with it. Both the CEO and new COO would need to adjust to that change. If either can’t, then the relationship won’t work.
Understanding the counterbalance of the Chief Operations Officer and the CEO
We highlight as counterbalance with the CEO as one of the top 5 traits to seek in a COO. In the EOS world, people refer to this counterbalance as the Ying and the Yang. Fundamentally, what this is about is that we are all different. Oftentimes, COO's are described as ‘world-class followers.’ There is some truth to the notion that the COO is a follower - and 100% ok with that.
There are some COOs who want to become a CEO one day, and others that do not. Both types are fine. What’s important is that in a small/ medium company, a COO must be comfortable following the vision laid out by the CEO. If not, (s)he needs to look for opportunities elsewhere.
Additionally, the COO should be comfortable to privately challenge the CEO’s thinking, but the two need to be solidly in step when communicating with stakeholders.”
Listen to the full interview here.