Why A COO Is The Third Leg Of The Stability Stool
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Most companies have a senior executive or senior manager — the titles can vary, depending on a range of variables such as company size, number of employees, locations, the industry or industries the company operates in, whether it’s public, private, e.g.
One company’s chairman & CEO is another’s owner/principal, general manager, president; some companies combine executive oversight functions, such as president & chief operating officer, reporting in to a CEO, a chairman, e.g.
There are many organizations out there in the executive staffing space — and most of the roles being filled are interim CFO’s, controllers, VP’s of accounting and finance, and, largely because when most companies begin to struggle, it usually points back to poor or nonexistent controls or KPI’s, or the tendency of accounting and finance people to focus on writing stories about what happened, in the form of earnings reports, income statements, MD&A’s, annual reports, 10Q’s/10K’s or even just a monthly report.
Very seldom do companies invest in interim- or project-based operations leadership, and that’s a shame, because they would benefit from the investment.
Expecting a company to run properly with a two legged stool — say, a CEO and a CFO, is like expecting to balance on a chair or stool with two legs. There needs to be a third leg to balance the weight, and to stabilize what it is bearing or carrying.
Let’s face it, there are myriad titular monikers beginning with “C” and ending in “O” — CMO’s, CSO’s, CRO’s, CHRO’s, e.g.
For most manufacturing and service businesses of decent size, scale, scope and complexity and critical mass, it is critical to have direct, daily oversight of the operations functions: how stuff gets made, how materials come in, how production is done, how service is delivered. Sure, it’s possible in a smaller company for the CEO, GM, president, whatever he or she is called — to manage and absorb those responsibilities, but many companies need a chief operating officer long before they think they do, or realize that there are many operational issues falling through the cracks.
As a rule, when the company classifies labor costs — such as direct or indirect labor — involved in producing products or providing service to the customers of the enterprise, those are generally people in the operations function.
A properly aligned and zeroed-in operations culture defines success via a mix of KPI’s — key performance indicators, and if those indicators are not measurable, quantifiable, scoreable — then they are not KPI’s.
And, if there is not a “third person” view of production and service operations — the third person is the COO — then who will make things? Who will serve customers? Who will direct (and directly manage) the direct and indirect people who provide these functions?
Weak operations causes other problems — lackluster compliance, regulatory oversight, a poor safety culture, high turnover, high absenteeism, spikes in unnecessary risks, insurance claims, workforce morale issues, quality problems, unhappy customers — the list goes on and on.
And, if, in particular, it’s an industry that is hyper focused on quality and defect rates — a culture of Six Sigma, LEAN/5S, continuous improvement, from Kaizen to Kanban — it’s high risk, high reward — and if it’s something like medical devices, aerospace, clean tech, cyber, you don’t want to leave your operations functions under-managed and at risk.
It’s always interesting to me that the company that can’t afford to hire a proper COO always has 3–6X that amount of money to throw at after the fact “solutions” to try to remedy all of the carnage and bleeding that ensued because no one was watching the lollipop factory.
Whether it’s a COO role, or another critical role in your company — for example — is there a head of business development or another person who is responsible for cultivating new customer relationships- ask yourself what is the cost of not having the third leg of the stool in place.
Paul Fioravanti, MBA, MPA, CTP, is the CEO & Managing Partner of QORVAL Partners, LLC, a FL-based advisory firm (founded 1996 by Jim Malone, six-time Fortune 100/500 CEO) Qorval is a US-based turnaround, restructuring, business optimization and interim management firm. Fioravanti is a proven turnaround CEO with experience in more than 75 situations in more than 40 industries. He earned his MBA and MPA from the University of Rhode Island, and completed advanced post-masters research in finance and marketing at Bryant University. He is a Certified Turnaround Professional and member of the Turnaround Management Association, the Private Directors Association, Association for Corporate Growth (ACG), Association of Merger & Acquisition Advisors (AM&MA), the American Bankruptcy Institute, and IMCUSA.
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