Microsoft’s chief operating officer used to run a chain of retail warehouses for Walmart. His counterpart at Samsung Electronics is the chairman’s son (and heir apparent). General Electric does not have a COO, and never has. Apple’s became chief executive (and has not seen fit to appoint a replacement). Alcatel-Lucent has just adopted the role; the BBC is abolishing it.
What are COOs and what do they do? They can be the ringmasters of a company’s day-to-day operations – Manchester United’s Michael Bolingbroke actually joined the football club from Canadian circus group Cirque du Soleil – or they can be mere beneficiaries of title inflation. They have neither the job-specific qualifications of a chief financial officer nor the power of a chief executive, but while their numbers are dwindling at US companies, they seem to be proliferating elsewhere.
“There are as many definitions of the title as there are COOs in the role,” says Sarah Galloway of Russell Reynolds, the executive search company. Before starting a search for a new COO, “you have to be very careful to see what the [hiring] organisation understands by the role”.
The shifting role of COO reflects the reality of running modern companies. Johan Aurik, just elected as next global managing partner of AT Kearney, the management consultancy, has seen an increase in the importance of COOs, “because companies are becoming more global and global operations are extraordinarily and increasingly complex”.
There are four main reasons why a company might appoint one:
■To secure succession. Chief executives can grant more powers to a rising star, without handing over the senior executive job straight away.
For the same reason, COOs can be prey to poachers. In the US, they come and go more frequently than chief executives or chief financial officers. Tom Kolder of Crist Kolder, a US search firm that tracks executive roles at the biggest US companies, says they are “a fertile hunting ground” for boards seeking chief executive replacements.
■To provide structure. As companies increase in size or take on new responsibilities, they may choose to introduce a hands-on senior executive.
Vineet Nayar, chief executive of HCL Technologies, the Indian IT services company, travels the globe urging companies to “invert the pyramid” of traditional corporate structure and turn themselves into self-governing units. Yet he recently appointed Anant Gupta as COO with a mandate to look at how to “industrialise” the company’s processes as it grows. “It was time to put a method into the madness, to consolidate as a $5bn company and set the table stakes [to become] a $10bn company,” Mr Nayar says.
Similarly, Mark Zuckerberg, now 28, bolstered his role as the creative force behind Facebook by appointing 43-year-old Sheryl Sandberg from Google to be the social network group’s COO in 2008. He said she brought “relevant experience and a track record of scaling business operations”.
■To liberate the chief executive to concentrate on other priorities. Harish Manwani, who holds the role at Unilever, says his job is to make sure the multinational consumer goods company can “deliver in-year performance”, while chief executive Paul Polman sets the strategic agenda. Mr Manwani chairs a monthly operational meeting with heads of Unilever’s biggest geographical markets. Mr Polman chairs the leadership executive, made up of function and category heads, and the COO, which meets face to face roughly once a quarter.
■To tackle a looming operational challenge. Earlier this month, Alcatel-Lucent – the Paris-based telecoms company with an ambitious turnround plan – gave Paul Tufano, its chief financial officer, the additional role of COO. He takes on the typical COO duties of running the supply chain and procurement functions, as well as three business units, which analysts interpreted as an attempt to add weight to Alcatel’s cost-cutting programme.
Smaller companies may occasionally find a COO useful, too. The co-founders of BSO Network Solutions, a French telecoms company, who are in their late 20s, appointed Gilles Fabre as COO in April. Like Mr Zuckerberg, they wanted someone with in-depth industry knowledge to complement their entrepreneurial flair. “I’m 52, so I have 30 years of experience and they have 30 years of life,” he says.
But COO is also a fragile role, as easily scrapped as created. George Entwistle, new director-general of the BBC, has decided to fold the operations unit of the broadcaster into the finance department. The decision put Caroline Thomson, a rival for the director-general role, out of a job.
Alcatel and the BBC’s decisions illustrate another trend: companies increasingly choose chief financial officers for their operational experience or to hand them operating responsibility on top of their financial role. As a result, in the US, according to Crist Kolder’s figures, the proportion of big companies with a COO has fallen to 35 per cent from 47 per cent in 2000.
Mr Fabre detects, however, an increase in the number of non-US companies appointing standalone COOs even though, he says, the role is less well understood outside the US. His own title does not translate into a distinct office in his native language, for instance: in French, he is the directeur général délégué, which can also mean group managing director.
The potential for confusion underlines the importance, for both employer and employee, of defining precisely the division of roles between chief executive and COO. One of the few elements common to most COOs is that they report directly to the boss. But a principal reason why chief executives decide to do away with the role is that they perceive it as an unnecessary extra filter between them and front-line staff.
The COO and chief executive do not have to be in constant face-to-face contact, however; Unilever’s Mr Manwani is based in Singapore, while Mr Polman is in London, and the leadership executive communicates weekly, online and by telephone.
Ideally, Mr Fabre says, the CEO and COO should be “two brains working in the same direction”, but they should not duplicate roles. Poor definition of these roles can lead to confusion or – given the number of COOs who aspire to the top job – suspicion. Walter Isaacson, Steve Jobs’s biographer, wrote that Apple’s former COO Tim Cook mastered the art of “implementing Jobs’s intuition, which he accomplished with a quiet diligence”. That diligence made him the obvious choice to succeed Jobs, who died last year. But the unanswerable question is what would have happened to Mr Cook had Mr Jobs survived.
Headhunters advise ambitious COOs not to get marooned in the role – and not to accumulate too many COO jobs on their curriculum. As Ms Galloway says, the role can have a “bridesmaid” quality: “If you’re a serial COO, people will start to wonder what’s wrong with you.”