Chosing this picture of Robert Duvall and Al Pacino kind of strikes me as the typical CEO COO image. Duvalls character in the Godfather Tom Hagen is the familys consigliere. In the mafia these men are advisors and men who get the backroom work done. They make sure that orders are followed through and ehem….executed. In business, COO’s are a lot like Tom Hagen. They are important parts of a company structure, overseeing certain projects while the head of the family/ CEO tends to the bigger picture matters.
So in companies, what do these people do? Why do startups need them? Do they need them?
The role of operations is a strange one. Strange in the sense that depending on the company, the role can vary quite a lot. EY released a bulky and comprehensive report on the role of COOs around the world which takes a snapshot of the role across different companies of different sizes and industries. The EY report is probably the single most defining document I could find on the subject of operations roles. Report is here
According to Harvard Business Review, there’s are only ever 7 different types of COO. Have a look at the HBR article to go into each one. But from the table below, the prevailing commonalities are in being supportive, one half of a partnership and goal.
- The Executor
- The Change agent
- Other half
- MVP- Most valuable player.
I think if you have to ask yourself as a company founder “Do I need a COO” and you aren’t sure, then the answer is no. Definitely not. There is a great Forbes article on the topic of ‘The myth of the startup COO‘ penned by Brad Svrluga which speaks nothing but truth for companies less than 15 people. But by the time you actually do need a COO, you are run ragged as a CEO, project manager, book keeper etc. You simply can not keep up and the cracks are starting to show. The developer team is getting frustrated by the lack of communication, lack of direction. The board of directors are getting frustrated by lack of visibility on project completion. The HR manager needs more time with the CEO to finalise for the new growth positions. As a leader are constantly fighting fires and never getting to build, sell, create and nurture.
So what does the COO do that the CEO doesn’t do? The easiest description is a COO faces inward, the CEO faces outward and inward. While the COO looks over the flock and tends to the well being and smooth running of the company internally, the CEO is the outward looking, public, customer, regulator and investor facing, steering where the flock grazes. Sort of like a coach versus a manager of a football team. Enough of the analogies, let’s get to the facts.
I have worked a few roles in my life inside of tech teams and startup teams. Designer, to sales guy, CEO, product lead, Head of production, investor and pure play operations. In the size of companies I was part of and building, I found that I was the ops guy through and through and to a certain extent, every division has a reliance on operations. It is true that small startups don’t need Ops guys, they need multi talented people that can do several things and do them efficiently. Generating bottom line impact work. Swiss arm knifes not wrist watches. The below ops items are based on my experiences in building startups and creating culture; but more importantly, maintaining culture.
The main reason small companies do not need ops guys is because the startups or small firms have a DIY culture most of the time for all the COO tasks. They are not large enough to need one or spend on this role. What are these tasks I hear you ask? Here is a short list of tasks a startup CEO has to take care of in no particular order. Deep breath…..
- Articulate vision for your product or service and start shouting about the idea.
- Develop and demo product
- Incorporate the company- in most cases required pre investment but often seen not to happen until investment or promising revenues show.
- Founders don’t do this until investment lands or they have to register IP or trademarks.
- Setup tax compliance.
- Supervise/ project manage product development team, designer and developer.
- Create and iterate investor pitch deck
- Create and iterate sales pitch deck
- Find customers
- Sell to customers
- Figure out why customers are not buying
- Figure out why customers are buying
- Secure relevant analytics that investors will be happy about.
- Develop the business model and business plan.
- Source investors
- Meet all said investors
- Manage investors or potential investors relationships
- Manage sales relationships
- Focus on product market fit
- Product customer support
- What platform are we going to build product on, will we stick with it? Is it stable?
- What software management tools will we use in-house.
- Are we relevant in the market place?
- Create the investment term sheet
- Figure out your equity structure with your founder partner ie. 50/50 down the middle?
- Stay fit and healthy personally
- Maintain good mental health
- Maintain relationships outside of work.
Then thrown in the other elements like dealing with a sick family member or bereavement. Dealing with ill personal health or all the other things life can throw at you.
Everything above is what you do as a small startup beating the ground raising investment and building a new product. This sized company is about 4 to 20 people. Really at this early stage its a Founder position rather than a swinging CEO we might think of. But as a company grows from 20 to say 40, it needs to free up the founders and heads to work on larger tasks and projects. Vision and culture, two DNA elements of a companies success, need to be maintained through growth.
Below is a list of some of the items a larger company CEO has to worry about, except some or most are now taken care of by a COO.
- Maintain good legal and accounting. Ensure end of year finance accounts are kept in order by auditor or accountant or book keeper.
- Maintain the business plan and model is followed.
- Are you on budget? Over or below?
- TAX compliance even though you have accountants.
- Figure out your equity structure- tiered, all common, preference levels, claw backs, performance penalties for you and your employees
- What is the employee share pool?
- Are the performance cliffs and clawbacks?
- Reporting user numbers weekly, monthly sessions time, sales, viewers, conversation rates etc
- Have to justify stats reports if they show in the negative or unexpected curve
- Insure 100% productivity of all employees. Got to be killing it!
- HR policy
- Regulatory policy
- Head up new hires, write job specifications
- Interview new hire candidates
- Manage team throughput. Are projects getting completed? If not, why not?
- What is the company structure? Flat? Vertical?
- What is the project management method Agile? Waterfall?
- Make sure customer support is on point more than ever.
- Company insurance.
- Employers insurance
- Product insurance
- Maintain good relationship with all staff and new hires.
- Maintain good team structure and project process to completion
- Maintain Investor relationships
- Board structure and meetings.
- Is marketing working?
- Maintain company culture despite growth demands. Culture = success.
- Maintain investment pipeline and relationships.
- Learn to be incredible at optimising meetings and conversations with investors and customers. You literally don’t have time to languish in the conjecture of meetings with no agenda because you are so busy.
- Maintain product and company vision and constantly articulate this to investors and customers in person, online, on social, on phone calls in me stings and in your sleep.
So in the latter picture, where the company has larger concerns we are looking at a company of about 20 to 50 people. More people, more revenues, bigger concerns. You now exist as a company that is no longer a football team or family, it is a small growing army. In this growth stage it is hyper important that you do one thing.
Do not forget about why it worked so well and what got you to this growth point.
I have read numerous articles, listened to too many anecdotes from business colleagues of different sized businesses. It is common to hear how the magic at the start that secured hyper growth and success was suddenly lost when the team scaled in size. We can look at fab.coms failure as a point in case. They failed seemingly by moving into the european market too early after also deciding to start holding sales inventory rather than drop shipping. Full story here which is an interesting read. This CEO memo that was sent to every employee wide as fab.com neared the mouth of the abyss.
From the outsider position it seems that there is one commonality at play. Separation. In a last ditch attempt to save the company, Fab.com desperately switched back to their original business model. So when we look at how to keep the focus on what a company does well and to keep doing that, it seems only natural and fitting that there is an entire job dedicated to this. Enter the role of a Chief Operations Officer
Looking at the laundry list above of task items (and this is just the broad strokes) we see that a CEO needs some back up, some help to make sure things run to plan. The division of tasks is never a simple cutting up of the list. The relationship is delicate with the CEO in that, if a company has never had a COO, the introduction of one into a working group can be a big change. Direct reports to the CEO may now find that they need to interface with the COO before going to the CEO, Perhaps they don’t need to bring it to the CEO at all. People may find they are asked to report hours or have much greater input than they did before. Structure and form can be graceful or stifling.
There is a segregation of sorts that might need to occur between teams in the company to satisfy productivity. A sort of deconstruction before new interrelationship constructs emerge for the better. It is hard to put more shape on it given there is no specific company we are talking about. All that can be know is that time needs to be invested to get to know a company before large growth is tackled and change is brought about. In my humbled experience in building teams and completing projects, it can not be ignored that failure to plan is planing for failure.
So if you are a 15 man startup or even a 10 body team of rockstars, its not your time yet. Keep it DIY, run agile methodology, create those user stories, track those bugs and get that paperwork done. You don’t have just one or two things to do and you are over the mountain top, you have it all to do. Cause thats startup.
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