Category Archives: Business Strategy

Why It’s Important to Ask the Right Questions

The problem with many business leaders is not that they don’t know the answer; it’s that they don’t know the problem. When solving a problem, you need to listen to everyone and ask the probing (and often uncomfortable) questions. You’ll know when you’ve hit on a hot topic by the reactions.

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The best leaders are curious and are never ones to accept things just the way they are. You may think you ask a lot of questions, but when I ask executives how they know which ones to ask, they look back at me with a blank face. If this sounds like you, then it’s time to change – fast.

How well do you ask questions?

It’s a major part of your job that requires guts and skill. Most of us fall into bad habits from time to time, but excellent leaders are always asking what can be done differently and better. You also need to find the best time to ask probing questions to ensure frank and constructive responses from your team. Knowing how to ask questions that generate thought, focus and action will make a real difference to your success.

Seek out problems

“We keep looking for change in the wrong places, asking the wrong questions, and making the wrong assumptions.” Jim Collins is right. Rather than assume you know the answers and wait for problems to come to you, seek them out for yourself. Change is impossible if you are a rubbish questioner that doesn’t pay careful attention to a candid culture. A vital lesson I learned early on in my career was to seek out problems by asking the right questions. It’s that simple.

Listen and learn

Just because you have experience and a fancy title, it doesn’t mean that you know everything. It especially doesn’t mean that your only job is to boss people around and tell them what to do. When you go about asking questions, you must also genuinely listen to your workers. You’ll find questions thrown back at you. After learning a thing or two, you may even change your mind as to how you answer them.

Practice makes perfect

Always practice asking questions about yourself, projects, plans, and your company. Build relationships and ask what you could do better, how to improve a project and why your organisation does things in a certain way. Having the ability to ask questions that do not trigger a defensive response is a valuable management skill. Think about how you frame your questions in a way that can not only help to improve your success but also your workers’ motivation.

Why You Need to Challenge the Status Quo

Too often I hear “this is the way we have always done it.” I don’t care how you always did it; I want to do it better. In fact, I’ve actually told people that I will fire them if I hear them use those words.

Think differently - Being different, taking risky, move for success in life -The graphic of rocket also represents the concept of courage, enterprise, confidence, belief, fearless, daring,

 

If you’re only focused on your current success, then you’re foolish. You need to challenge the status quo, rather than stay stranded in your comfort zone. Because that’s what you’ll end up being – stranded.

Always strive for innovation

You never want to become irrelevant in the greater marketplace. Ok, so some traditional best practices may be proven to have positive effects on businesses, but you should always strive for something better. While you may argue that you don’t have the funds to experiment, I can assure you that you don’t need a super-sized budget.

Once you’ve challenged your current state of affairs, progress will depend on you as a leader. Remember, this is an opportunity to change things for the better.

Challenge all the time

“The key to change is first to understand what not to change and then to feel free to change everything else.” Jim Collins certainly knows what he’s talking about. Accept ‘challenge innovation’ and ask questions that require some level of thought to challenge your team’s mind-set. Create questions that spark energy and curiosity, and a safe space where they want to contribute.

Be careful not to sound too critical. Don’t ask “why aren’t we producing this in half the time?” Use motivational speech, such as “what if we could do this in half the time?” and “how do you think we can beat our competitors?” Motivate your people.

Have an open mind

Every brave leader with the guts to take bold risks and challenge the status quo can make a real difference. You need to be passionate about constantly learning and growing, as well as doing the unorthodox thing. With an open mind, you can entice new improvements and inspire those around you to think bigger and do better.

Don’t be afraid to try all sorts of new things and think outside of that bloody box. When something seems obvious, try something different. If you don’t, I guarantee someone else will.

Reward and exploit

Our world is increasingly competitive, and you must constantly adapt, nurture, grow and move forward. Many workers can get comfortable (and stagnant) and be resistant to change. That’s why it’s essential to create an environment where your team feels comfortable with sharing their ideas and have the freedom to express what they believe is and is not working well. I’ve lost count of the leaders I’ve met who don’t take the time to get feedback from co-workers.

Status Quo Roles Chart

From www.forbes.com

Ensure great ideas are rewarded while trusting and supporting them to take the next step. You also need to walk the walk (not just talk the talk) by committing to any change with help from your empowered team.

You’re Never Wrong If You Do The Right Thing

It isn’t always easy to do the right thing in business, but trust me, your behaviour as a manager defines you. I have witnessed so many senior managers lose sight of what is really important, which has led them to great failure while leaving them digging themselves out of gigantic holes.

Word Cloud with Business Ethics related tags

Word Cloud with Business Ethics related tags

When you do things for all the wrong reasons, also expect your ethics to be questioned at any time by your customers, co-workers, and stakeholders. It’s vital that you’re always honest and have strong moral principles. Otherwise, you might as well wave goodbye to your management title now.

Integrity is a lost virtue, but if you stay true to the intent, you WILL come out ahead.

Going from good to great

“Companies do not fall primarily because of what the world does to them or because of how the world changes around them; they fall first and foremost because of what they do to themselves.” In that one sentence, Jim Collins, nails it on the head. Only you can control what happens next.

The rest of the world doesn’t hold all the cards in the pack. You might argue that it’s your customers that have the biggest influence on your success. Don’t waste your breath.

Don’t get me wrong, I know that ‘you’ aren’t the whole story. Without co-workers and customers, you’d be a sinking ship without a paddle. But it’s the decisions you make and how you meet challenges of doing the right thing that will always have the most impact on your business.

Develop a strong sense of ethics

Whatever the chapter or challenge in your career, you must decide on what you will and won’t do, and stick to it. All successful institutions are built on values and delivering excellent results, rather than just being focused on making as much money as possible.

You should use your strongly developed sense of ethics as a guide when taking actions. Most importantly, take responsibility for both the good and bad times, and never pass the blame onto others if the shit hits the fan.

Giving up is never an option

If your product or service doesn’t sell, it doesn’t have to be the end. Whatever your line of business, if something doesn’t work as well as you hoped, giving up isn’t an option. All great leaders that deliver exceptional results are kings at turning poor sales around.

With the right leaders, plenty of companies have overcome failure, and so can you. You just need to make the right decisions and do the right things.

Take Ken Iverson at Nucor Corp in the US for example. In 1965, Nucor Corp was a stone’s throw away from bankruptcy. But when Iverson was given the green light to try and turn the company around, the results were outstanding. Without his talent and determination, Nucor Corp would have never achieved 41 years of consecutive profitability or become creators of the lowest cost steel in America.

Understand and practice your company values

Better still, create some new ones. Values define what is important to both you and your company. From honesty and loyalty to open communication and security, any decent exec should be passionate about ensuring their environment aligns with the company values.

However, your personal values are likely to evolve with experience. I don’t have the right to tell you what those values are. That can only be up to you. I’m just pointing out that they don’t have to be set in stone, but should help your decision making as a leader.

One thing I do know for certain is that if you want others to trust and respect you, taking responsibility for your actions and a fixed desire to achieve great things is essential.

Do Australian retailers practice great leadership?

Written by Mike Holtzer for Inside Retail

Do Australian retailers practice great leadership? By ‘great leadership’, I’m referring to the concepts from one of my favourite books, Good To Great by US business consultant and lecturer, Jim Collins. Collins describes a level five leader as, “Self-effacing, quiet, reserved, even shy – these leaders are a paradoxical blend of personal humility and professional will”.

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This says a lot in a few words, but using this definition of a great leader, I don’t believe there are currently many great leaders in retail in Australia.

In addition to the various other stages of taking a good company and making it great, Collins defines what level five leadership is and why it is so important. He uses detailed in-depth analysis of companies that transformed from ‘good’ to ‘great’ over a 15-year period. The list of companies analysed is very impressive.

A level five leader never lets their ego get in the way of successfully transforming a business. They put the long-term success of the business ahead of their own achievement. A proper leader makes decisions that benefit the long-term transformation of the company, instead of short-term decisions that have a short-lived benefit and the glory that goes with it. This can be an issue with Australian retail leaders that is sometimes exacerbated by private equity firms and public companies.

The mirror/window notion is a key concept for level five leaders. They look in the mirror, at themselves, when something goes wrong and blame themselves. When things go right, they look out the window and credit other people for the success. They do not crave the attention and the celebrity status of success.

Often times, people outside the company or industry don’t even know their names. Think of the most successful companies and see if their leaders are front and centre, or if they put the company front and centre. Look at some of the troubled or failed retailers and see if there was finger pointing at who was at fault.

The willingness to set up a proper succession plan and understanding when the business would be better served by a successor is an important aspect of a great leader. The best ones don’t care that they get credit for the success; whereas lesser leaders actually take pride in the fact that the company would fall apart without them.

Level four leaders are effective leaders who push towards a clear and convincing vision, but they lack the humility needed to achieve true greatness. Their egos get in the way of transforming a business. They typically have short-term success and even some great transformation triumphs, but fail to transform companies in the long run. Think Al Dunlap (Scott Paper) and Lee Iacocca (Chrysler). Collins’ Good To Great outlines many examples of these types of leaders.

There are five levels of leader in all. A level five leader is a combination of all of the levels. With stoic resolve, they do whatever it takes to make a company great. As an apt description, a level five leader is referred to as a ‘plough horse’ and a level four leader a ‘show pony’.

It is no small irony that the determination and motivation that gets people into positions of authority often conflicts with the modesty that is required to be a great leader. Many business owners and boards mistakenly believe that they need a CEO who is larger than life.

You will find a potential level five leader where you find extraordinary results and no person is singled out taking all of the glory. As former US President, Harry S. Truman, put it, “You can accomplish anything in life, provided that you do not mind who gets the credit”.

A level five leader has a blend of personal humility and professional will, where they channel ambition into the organisation, not the self. They are not high flyers or larger than life. They look in the mirror when something goes wrong and look out the window when giving credit.

Now, based on this definition, do we have great leaders in retail in Australia?

 

What is a Retail COO?

Having been a CEO, COO and CFO I find that there is still some confusion in the industry about the role of COO. My real passion and ability is to understand complex situations and simplify them, which falls within the remit of a COO.


A Chief Operating Officer (COO) is the executive who oversees ongoing business operations within the company and usually reports to the CEO (Chief Executive Officer) and is second-in-command within the company.

The COO role exists to allow the CEO to play his role outside the company and at the board level while the COO concentrates on internal day to day operations and supply chain.

A COO is responsible for facilitating smooth functioning of organization’s operations and ensuring that these meet their objectives. The COO is the head of Operations. He/she mentors and leads a team with multiple responsibilities, ensuring that the organisation gets the right structure to deliver and grow to be the best in the industry.

The CEO is typically more focused on the long term strategic goals of a business and is commonly the “face” of the business.  The COO generally manages the day to day operation of the business.

The focus of the CEO is strategic and the focus of the COO is tactical.

Functions reporting to the Retail COO can include some, or all, of the following depending on the organisational structure of the business:

  • Accounts
  • IT
  • Merchandise Planning
  • HR
  • Supply Chain
  • Logistics
  • Store Ops
  • Admin
  • Purchasing

Types of COO: (not mutually exclusive) – A COO can usually wear 2 of these hats, but cannot wear all of them at the same time. Interestingly, I have acted as COO in each of these types at different points in my career:

  • Executor – Execution of strategies / right hand man – makes the CEO’s vision a reality
  • Balancing – Complementary to a CEO with different skill sets – the yin and yang – often times the CEO is a strong sales and marketing expert and needs a pure operational COO
  • Advisor / Mentor – Guiding an Entrepreneur / Founder – an experienced COO can take a young entrepreneur and guide them through business obstacles
  • Co-Leader – Partnering with a CEO – similar to the Balancing COO but in this case the CEO and COO are a true team that have equal authority
  • Change Agent – Turnaround, projects, structural change, expansion

What makes a successful COO:

  • Good communication between the CEO / COO / Board – they all must be on the same page and be strategically aligned – they cannot allow employees / clients / vendors play one off the other.
  • Trust / Chemistry – if trust does not exist between the CEO and the COO, it will not work – regardless of how good the CEO and COO are, if the chemistry and trust are not there it is near impossible to make the situation work.
  • Ability to take a back seat with recognition – the CEO is the face of the company and the COO is the person that pulls the strings behind the scenes – someone with a big ego will not succeed in the COO position.
  • Clearly defined responsibilities and authority – there needs to be very clear lines of authority between the CEO and COO – there is no right or wrong way to divide the responsibilities, but they need to be specific – there can be no stepping on toes, or the feeling of stepping on toes.
  • The right TYPE of COO to fit the particular position – as seen above there are different types of COO’s and different fits – a COO that might fit perfectly into one organisation may not fit at all into a different organisation.
  • Clearly defined expectations on succession – as with all positions, there needs to be clear KPI’s that define whether the COO is succeeding – these KPI’s may be different and less specific than typical KPI’s but they need to be in place.
  • Adaptability – the COO has to role with the punches and pull different strings as the company changes – every successful business evolves and the operational needs evolve with it.

The role of COO is often misunderstood, and yet, it is a key position in running a successful retailer. A good CEO/COO combination can turn a good company great (more on that in future blogs).

Second in Command: The Misunderstood Role of the Chief Operating Officer

When Larry Ellison, founder and CEO of Oracle, and his chief operating officer, Ray Lane, parted ways in 2000, the event inspired the kind of breathless reporting usually reserved for celebrity divorces. Forbes.com reporter David Einstein wondered in print, “Did Lane quit or was he fired?” and wished he had “a clue as to why Ellison’s second banana for the past eight years suddenly was cleaning out his office.” Soon afterwards, CNET News.com weighed in with this: “The story of Lane’s plight at one of the most powerful companies in technology is one of hubris, greed, betrayal and personal epiphany…” Readers were left with two puzzles to sort out. First: why Lane was leaving his position, given what seemed to be an unbroken string of admirable achievements. And second: why the event was wrapped in such drama. Executives change posts all the time, yet the story, with its hints of palace intrigue and titanic clashes, was inherently captivating.

 

For us, it was another example suggesting that the role of the COO is, well, different. Our research since then has put a finer point on the difference. Through in-depth conversations with dozens of executives who have held the position and with CEOs who have worked with COOs, we’ve gained insight into a subject that has been largely neglected by organizational scholars. Our discoveries shed light not only on the dramatic executive breakups that intermittently make headlines but also on the successful experiences of many unsung COOs. In this article, we share the success and failure factors we’ve identified, as well as our analysis of such related questions as: Are there circumstances in which a number two role is particularly useful? Are there situations when it will inevitably produce tension and discord?

Understanding what makes for a successful chief operating officer is vital because the effectiveness of COOs (or ranking operations executives by whatever name they are called) is critical to the fortunes of many companies—and could be to many more. As we will suggest, the second-in-command executive is a role that by rights should become increasingly prevalent. It is prevented from doing so, perhaps, because it is so misunderstood.

A Unique Point of Reference

When you start to examine COOs as a class, one thing immediately becomes clear: There are almost no constants. People with very different backgrounds ascend to the role and succeed in it. This variability makes the job difficult to study; it’s hard to know whether you are making proper inferences when comparing one COO with another.

Salespeople or marketers who have developed the tools of their trade in one company can usually apply them to good advantage in another, even in a dramatically different industry. Financial and human resource executives likewise are schooled and practiced in standard ways of doing things. But it’s hard to discern whether a COO who has succeeded in one company has what it takes to be COO in another; the skill set is neither generic nor very portable. Even within a single company, the right qualifications for the COO role can shift. Maynard Webb, COO at eBay, described for us the difference between his own technology background and that of his predecessor: “The first COO, Brian Swette, had a job that was nothing like my job….Brian was a sales and marketing guy. He had the business units reporting directly to him and spent no time on any of my role.”

It’s difficult to pinpoint the kinds of environments in which COOs thrive. While there is a general sense that COOs are most prevalent in operations-intensive businesses, they appear in every kind of company, and every sector also features firms without them. Moreover, the same organization may sometimes operate with a COO and sometimes without one. A 2003 study by Crist Associates, for example, showed that only 17% of the corporations that promoted a COO to CEO in the previous year had replaced the COO.

Finally, there is no single agreed-upon description of what the job entails or even what it’s called. Often, companies turn responsibility for all areas of operations over to the COO—this typically includes production, marketing and sales, and research and development. In some firms, the job is to be Mr. Inside to the CEO’s Mr. Outside. In others, the mission is focused on a specific business need. For example, last summer Microsoft filled the long-vacant position of COO with Kevin Turner from Wal-Mart. In announcing his appointment, the company stated that Turner was expected to use his retail experience to lead Microsoft’s effort to grow the consumer products business. The most cursory survey of COO job designs shows real disparity in spans of control, decision rights, reporting structures, and the like.

How can a title accommodate such diversity and still be meaningful? Answering that question requires a shift in perspective. The key is in the orientation of the role. While other jobs are primarily defined in relation to the work to be done and the structure of the organization, the COO’s role is defined in relation to the CEO as an individual.

How can a title accommodate such diversity and still be meaningful? Answering that question requires a shift in perspective.

As we will explore in the following section, that relationship can take various forms. In many cases, the COO is there to help make the CEO’s vision a reality. Sometimes, the COO is expected to make the CEO more effective or more complete. Often, the plan is for the COO ultimately to fill the CEO’s shoes. But in all of these constructions, the CEO is the magnetic force with which the COO must align. This makes asking the question “What makes a great COO?” akin to asking, “What makes a great candidate for U.S. vice president?” A Southern Baptist? A foreign-policy wonk? A charismatic campaigner? A centrist? It all depends on the other half of the equation, the first name on the ticket. This, then, is why COOs remain mysterious as a class: The role is structurally, strategically, socially, and politically unique—and extraordinarily situational.

Seven Kinds of COO

If the COO role is defined primarily in relation to the CEO, and no two CEOs are exactly alike, does that mean the job simply defies definition? Not quite. What became clear in the course of our research is that the differences among COO roles arise from the different motives behind creating the position in the first place. It turns out there are seven basic reasons why companies decide to hire a COO, and these yield seven roles that COOs can play vis-à-vis their CEOs. Readers will recognize that the seven reasons are not mutually exclusive, though in this initial presentation we treat them as such.

“Asking what makes a great COO?” is akin to asking, “What makes a great candidate for U.S. vice president?”

The executor.

One role of a COO is to lead the execution of strategies developed by the top management team. It’s simply a concession to the complexity and scope of the CEO’s job today, with its numerous external commitments. Managing large, often global, enterprises sometimes requires two sets of hands; in such cases, the COO typically takes responsibility for delivering results on a day-to-day, quarter-to-quarter basis.

This is why the COO position is nearly ubiquitous in businesses that are operationally intensive, like the airline and automotive industries, as well as in organizations that operate in hypercompetitive and dynamic marketplaces like high-tech firms. At Seagate Technology, for example, CEO Bill Watkins relies on COO David Wickersham to keep the business performing at its peak. It’s not that Watkins lacks an execution mind-set himself; in fact, he ascended to his post after excelling as COO to the previous CEO, Stephen Luczo. But the demands of managing an $8 billion vertically integrated disk drive business are substantial. By bringing in a COO to lead and oversee the day-to-day operations, Seagate allows Watkins to focus on the strategic, longer-term challenges the company will face. CEO Watkins is clearly oriented with his “head up” to understand success in the future, whereas COO Wickersham has his “head down,” focused on the operational details necessary for success today.

The change agent.

Just as Microsoft did when it hired Kevin Turner, some companies name a COO to lead a specific strategic imperative, such as a turnaround, a major organizational change, or a planned rapid expansion. While the mandate is not as broad as the general execution of strategy, the magnitude of the challenge demands that the change-agent COO have a degree of unquestioned authority similar to that of an executor COO. This was, in fact, what led to Ray Lane’s arrival at Oracle. Larry Ellison hired Lane from consultancy Booz Allen Hamilton and tasked him with turning around the deeply troubled sales and marketing organizations. His efforts ultimately contributed to a tenfold increase in sales, from $1 billion to more than $10 billion, and a threefold increase in net profits. Similarly, AirTran CEO Joe Leonard recruited COO Robert Fornaro to lead a dramatic turnaround. The company, in Leonard’s words, was “running on fumes” and needed dramatic efforts to stave off bankruptcy.

The mentor.

Some companies bring a COO on board to mentor a young or inexperienced CEO (often a founder). A rapidly growing entrepreneurial venture might seek an industry veteran with seasoning, wisdom, and a rich network who can develop both the CEO and the emerging business. One could logically hypothesize that as the CEO develops, this COO role might either disappear or be heavily restructured.

By many accounts, this was what prompted the young Michael Dell to hire Mort Topfer in 1994. Dell was growing at a pace that threatened to get ahead of its founder’s managerial experience. Michael Dell was self-aware enough to acknowledge that he needed some seasoned executives around, both to capitalize on the market opportunity and to accelerate his own development as a leader. Topfer was in his mid-fifties at the time and was completing a successful career at Motorola. He clearly had no aspirations of becoming the chief executive officer at Dell—he was there to help the 29-year-old Michael. We’ve seen very similar arrangements at Netscape, where James Barksdale has served as mentor to cofounder Marc Andreessen, and at Google, where Eric Schmidt was recruited to support the cofounders, Larry Page and Sergey Brin.

The other half.

A company may bring in a COO not as a mentor, but as a foil, to complement the CEO’s experience, style, knowledge base, or penchants. Observers have viewed the relationships between Bill Gates and two of his previous COOs, Jon Shirley and Michael Hallman, in this light. Jon Shirley, according to one observer, provided a “calm, self-effacing balance” to Gates’s brilliant and often intimidating affect. In such cases, the COO role is usually not meant to lead to a higher position—but sometimes it is. When Ken Freeman, now a managing director of Kohlberg Kravis Roberts, was CEO at Corning spin-off Quest Diagnostics, he deliberately sought an heir with a different collection of skills than his. He ultimately hired Surya Mohapatra just when Quest was closing a deal to acquire another large testing business. “I thought, in a company that was going from $1.5 billion in revenues to $3.2 billion,” he explained to us, “it would be helpful to have somebody around that had strong health care experience—especially given that I had grown up in the glass business!”

The partner.

Sometimes, the CEO is simply the kind of person who works best with a partner. This can lead to what’s been called a “two in a box” model and is similar to what authors David Heenan and Warren Bennis have termed “co-leadership.” Indeed, Heenan and Bennis contend that more companies should create and cultivate co-leadership arrangements. But it’s probably true that, just as there are doubles specialists in tennis, only some executives are more effective when paired. In any case, Michael Dell and Kevin Rollins, whom Dell introduced as COO in 1996, seem to operate in this mode. Dell, as chairman, and Rollins, now as CEO, are committed to leading the firm together, even choosing to “co-office” in adjoining work spaces separated by only a glass partition.

The heir apparent.

In many cases, the primary reason to establish a COO position is to groom—or test—a company’s CEO-elect. The broad purview of the job allows an heir apparent to learn the whole company: its business, environment, and people. Recent examples of firms using the COO position to develop the successor to the CEO include Continental Airlines, where CEO Gordon Bethune (who himself originally joined the airline as COO) recently passed the torch to his COO, Larry Kellner. Similarly, in the time after Rex Tillerson was appointed to the number two position at Exxon, observers noted that he was increasingly exposed to the public—a deliberate effort to facilitate his succession to CEO Lee Raymond. And when Norfolk Southern appointed Charles Moorman as second in command, the transportation company touted him as the heir, continuing its avowed “practice of picking an executive young enough to lead the company for at least a decade.”

Certainly, being identified as a likely heir does not represent anything approaching a guarantee. On the one hand, an otherwise valuable senior executive may leave if the top job ultimately goes to someone else—or isn’t offered soon enough. On the other hand, the COO’s performance can indicate that the heir title was inappropriately or prematurely bestowed. In the past few years, we’ve seen several prominent COOs who seemed to be on the glide path to the CEO’s office instead leave their companies; they include John Brock (Cadbury Schweppes), Mike Zafirovski (Motorola), John Walter (AT&T), and Robert Willumstad (Citigroup). Regardless of whether each left because he was passed over for the CEO position, because the timing was not as advertised, or because he found greener pastures, the succession plan unraveled.

The MVP.

Finally, some companies offer the job of COO as a promotion to an executive considered too valuable to lose, particularly to a competitor. This appears to have been the case at News Corporation’s Fox Entertainment Group subsidiary. It recently announced that its president and COO, Peter Chernin, had signed a new employment agreement preventing a rumored move to rival Disney. Similarly, when McDonald’s restructured the roles of its U.S. and Europe presidents during the summer of 2004, that was interpreted by analysts as an effort to ward off poachers. With this strategy, an organization may try to hedge its bets by stopping short of identifying a specific heir or setting a time-table for leadership succession, in an effort to keep its high-potential executives intrigued about what the future might hold for them, should they stay on board.

Elusive Lessons

In truth, as we’ve said, the seven roles are not mutually exclusive. Though it’s hard to imagine a single person wearing several of these hats all at once, it’s quite possible that a COO could wear two of them simultaneously. Understanding the roles distinctly, however, and considering their differences reveals a few things clearly.

First, the typology we’ve outlined makes it easy to see why COOs have been hard to investigate in any scientific sense. Even where studies have been done, it’s often impossible to draw useful lessons from them. For example, one of the few empirical examinations of the role was conducted by Donald Hambrick of Penn State and Albert Cannella, Jr., when he was at Texas A&M. As they reported in the October 2004 issue of Strategic Management Journal, a review of ten years of data on 400 companies showed that firms with a CEO-COO structure had underperformed relative to their industry peers. It’s a provocative finding, but its implications are far from apparent. Is the structure itself to blame? Or was a COO hired to compensate for a weak CEO? Put another way, is the COO part of the problem or part of the solution? Hambrick and Cannella offered both explanations, and other theories could be constructed. Our work suggests that divining answers from such broad surveys is inherently difficult because the nature of the COO job is so deeply contextual.

Second, knowing the variety of roles that COOs play sheds light on the phenomenon of the “vanishing COO.” Some observers, counting the instances of companies declining to fill vacated COO spots, have concluded that the position is headed for extinction. After a COO departs, it often appears that his or her duties have been divided up among top managers without much disruption. When Steve Heyer left Coca-Cola, his responsibilities were dispersed in this fashion, and the position was not filled. When COO Gary Daichendt left Nortel Networks (after just three months), his tasks were assumed by the then CEO, Bill Owens. But the job is oftentimes reinstated or created in a company that didn’t use it before. At Microsoft, for example, rumors of the COO job’s death turned out to have been exaggerated. Although it sat idle for several years after Rick Belluzzo’s departure, it was revived when Kevin Turner was hired.

Finally, the tremendous variation in COO roles and responsibilities manifestly implies that there is no standard set of “great COO” attributes. This makes finding suitable candidates difficult for executive recruiters (as one of the authors can attest). More important, it stymies the CEOs and boards who must select among the candidates. The existence of seven different roles suggests at least seven different sets of attributes on top of the basic—and infinitely variable—requirement that there exist a personal chemistry between the COO and the current CEO.

The Underpinnings of Success

Even though the role is so contingent, we have identified some success factors that came up consistently in our interviews with executives in widely varying situations. The single element most critical to the success of a CEO-COO pairing, we quickly saw, is the level of trust between the two individuals. To speak of trust is almost a cliché, but the vehemence with which our research participants stressed it suggests they consider it more crucial here than in any other business relationship. Wendell Weeks, who rose from COO to CEO at Corning, referred to the need for a “true partnership, in every sense of the word.” The trust has to be absolute, he said, “because there are those in the organization who are always seeking to drive wedges if they can.” Other executives specifically used the metaphor of having one another’s back. Hearing their comments, we were reminded of Harry Levinson’s insightful 1993 article, “Between CEO and COO,” in the Academy of Management Executive. In it, he wrote, “The relationship…is fraught with many psychological complexities. Perhaps it is the most difficult of all organizational working relationships because more than others, it is a balancing act on the threshold of power.” Levinson went on to explore the dysfunctions that can arise in such situations: unhealthy rivalries, defensiveness, overcontrol, rigidity, misconceptions, and doubt.

How can a pair of executives get past such perils and develop an extraordinary level of trust? Again, consistent themes in our interviews suggest the answer. The CEO must feel certain that the COO shares the vision, is not gunning for the top spot, and can get the job done. Conversely, the COO must be sure that the CEO will provide whatever is needed to do the job, will not put any obstacles in the way, and will not thwart future career advancement. Let’s explore this question more fully, framing it in terms of what each party owes the other.

What the COO Owes the CEO

True respect.

Because a chief executive relies so heavily on the second in command to accomplish mission-critical goals, it’s essential that the COO wholeheartedly believe in the CEO’s strategic leadership. Chief operating officers, by virtue of their inherent talents and their organizational position, are highly visible and powerful. If the COO is not aligned with the CEO’s vision, or not convinced that the CEO can find the best path forward, then that lieutenant is capable of real mischief. Dan Rosensweig, COO at Yahoo, described for us the hours he spent talking with CEO Terry Semel before joining the company. Rosensweig invested the time because, in his words, “you have to get in sync with the CEO. If you have an agenda that is different than his or hers, you will absolutely fail the company.”

An ego in check.

In the interviews we conducted—particularly those with COOs—we heard repeatedly how critical it is for seconds in command to check their egos at the door. It’s a tricky balance to achieve, given that COOs must obviously be self-confident leaders. “You have to lead while serving,” stressed eBay COO Maynard Webb, immediately adding, “It has been the hardest job that I have ever done.” Interestingly, he then followed up with another reason why the job is hard: “It is not as immediate with gratification as any of the line jobs that I had. When you are solving technology issues, such as is the site up or not, it is pretty black-and-white, and you see some of the results pretty quickly. But you are working on things through a lot more layers as COO, and the results come much slower.” These sound like two very different reasons for a job to be hard, but we suspect they may be intertwined. Often, the results do come more slowly—and often they come in a way that makes their proper attribution more difficult to discern. Regardless, the COO is not necessarily in line to receive the kudos for a job well done.

An eye on execution.

Back in the 1990s, people in organizations jokingly picked up on a phrase from the television series Star Trek: The Next Generation. In it, starship captain Jean-Luc Picard, having settled on a course of action, would simply instruct his crew to “make it so.” CEOs in general can’t quite get away with that, but to the extent that they are focused on strategy, they rely on COOs to oversee much of the implementation. They must be able to trust that they can afford to address longer-term and bigger picture issues because their second in command will maintain a focus on the here and now. Even COOs who are not primarily playing the executor role should have an execution mind-set and a bias toward action.

Coaching and coordination skills.

A COO must be able to direct and coach others throughout the business. Steven Reinemund, now chairman and CEO at PepsiCo, gave us his thoughts on the challenge. He was promoted to COO after having led a business unit and, he told us, “I had to think long and hard about whether I really wanted to move out of running the day-to-day business into a role where I coach and coordinate.” Being a division president, he explained, “is a hands-on job. You get to mold the strategy; you get to direct the efforts every day. You have the functional people that you work with, and that team performs against a mission, and it is an exciting experience.” The COO job, by contrast, requires an individual who “can step out of doing day-to-day, hands-on directing and leading of a business, and direct and teach and coach others.” Again, regardless of which of the seven roles a COO plays, the CEO must be able to trust that these skills are in place.

What the CEO Owes the COO

Communication.

The COOs we spoke with understood that the onus was on them to embrace the CEO’s strategy and work to make it real. But no one can execute against a plan that’s not being communicated clearly and directly. CEOs constantly have fresh thoughts with operational implications; they must be in the habit of discussing those with their COOs without delay. Ken Freeman told us how he and Surya Mohapatra kept the lines of communication active at Quest Diagnostics. “Sunday at 4:00 pm became the time for us to have lengthy discussions….We would see each other at the office, too, of course, but there we would be scurrying around working on the integration of the [merged] companies, driving the company’s performance, and making things go. We had each other’s undivided attention via telephone starting at 4:00, virtually every single Sunday for five years.” Another CEO we interviewed admitted an early mistake: locating his new COO’s office in a separate building, thereby failing to capitalize on the rich communication afforded by physical proximity.

CEOs constantly have fresh thoughts with operational implications; they must be in the habit of discussing those with their COOs without delay.

Clear decision rights.

To a person, the executives we interviewed stressed the need for explicit and reasonable lines of demarcation between CEO and COO responsibilities. While there was no consensus on what exactly should be part of each job, everyone agreed that the matter had to be sorted out at the start of the relationship. It’s far easier to delineate boundaries when the two individuals clearly have complementary competencies and each naturally gravitates to different areas of expertise. The greater the overlap in competencies, the greater the likelihood that the COO might feel (perhaps accurately) that the CEO is micromanaging and second-guessing decisions. Such behavior on the part of the CEO communicates to the COO a lack of trust that is likely to engender friction in the relationship. When we raised this point with Bob Herbold, another former COO at Microsoft, he responded: “To me, this is a key issue. The way it gets worked out is the individuals—through trial and error, as well as through discussions—figure out who is going to be doing what and who needs to check with who on key decisions….How the pair will make that happen needs to be agreed to very early in the relationship.”

A lock on the back door.

Obviously, the creation of the COO role adds a layer of management; executives who previously had direct access to the CEO now have an intermediary to address. One of the COO’s first challenges is to develop relationships with direct reports that discourage them from seeking backdoor access to the CEO. At the same time, the COO must depend on the CEO to block efforts by those who might want to circumvent the position. This is not to say that restricting access to the CEO is the goal. Ed Zander, now CEO of Motorola, previously served as COO of Sun Microsystems under Scott McNealy. Zander says the two made it clear that any of the COO’s direct reports was entitled to go to McNealy to talk about things. But the lines of responsibility were still respected. “One thing that Scott did very well was to never undermine me,” Zander told us. “He always backed all my decisions. He would hear people out but then send them to me.”

A number of the people we interviewed noted how much personal discipline is required on the CEO’s part to maintain this kind of line. “I have been working on nailing that back door shut for a while,” eBay COO Webb told us. “I think it is a tough, tough thing to do, especially when you have a CEO that actually loves to get involved in problem solving and wants to help. I think what you have to do in that case is to enable, not control, communication and be transparent.”

A shared spotlight.

Without exception, the COOs we interviewed accepted the fact that their job was to make the CEO successful—and that in doing so they in many ways rendered their own contributions less visible. But, especially for COOs who aspire to the top job, that creates a dilemma. Jim Donald, president and CEO of Starbucks, noted that what gets executives to the role of president and COO “won’t necessarily earn them a CEO role. Once you are in the COO role, you have to…broaden the network of things you do. You need to work with the board, work with the CEO, and work to lead others to be successful.”

It falls upon the CEO’s shoulders to make sure that this development takes place and to share the spotlight whenever appropriate. If the CEO is not deliberate about this, then the board will have no reason to be impressed by the number two, who may then prove ultimately unpromotable. Kevin Sharer, who was COO at Amgen before he became CEO, lays heavy emphasis on this point. He told us that the success of the CEO-COO relationship is “75% dependent on a few things that the CEO does.” He framed those things for us as a series of important questions:

Does the CEO give the number two real authority, real operating responsibility, power that is real, power that is seen by the rest of the company as real? Second, does the number one actually encourage and let the number two person have his or her own voice in board meetings and operating reviews? Third, does the CEO give coaching, counseling, and really see the success of the number two as part of the company’s success?

A Role on the Rise?

Ask anyone who has worked as or alongside a COO—the job is demanding. Now we know it’s unique, as well. Perhaps that’s why COO is the only C-suite title to which there is no magazine devoted. It’s a trivial observation but perhaps a telling one; the common set of issues and interests that would imply simply does not exist.

Is it a role in decline? Some observers, as we have said, certainly think so. The Hambrick and Cannella study, for example, found a 22% decline over ten years in the number of firms with executives holding that title. Yet in the last few years, companies in a wide range of industries have announced new COOs, including Microsoft, RadioShack, Airbus, Allstate, KPMG’s U.S. subsidiary, Alcatel, Chiron, Nissan, BellSouth, Comcast, Eli Lilly, Apple, and Medtronic.

We can easily argue that there is a growing need for the role. First, consider the widening scope of the CEO’s job. Today, we have bigger companies, with expanding global operations, aggressively pursuing acquisitions. CEOs are asked to be public figures, communicating with many constituencies at the same time that increasingly democratic and knowledge-based organizations require them to spend a great deal of time campaigning internally for any change they hope to make. Second, companies are becoming more deliberate about succession planning. Boards are anxious to identify and groom heirs and often see the COO title as a useful step in the process. Finally, the easy mobility of top talent means companies must find ways to hold on to their most valuable non-CEO executives. The COO title can be effective in staving off wanderlust.

In light of these trends, it’s surprising that COOs are not more common. Our suspicion is that they would be if there were less variability and confusion surrounding the role. Board members aren’t sure when the position will add value. Recruiters don’t have an obvious pool to tap. CEOs don’t know whom to trust. Potential COOs don’t know whether the job is right for them. This is why it’s vital to build on the work we’ve outlined here. As we continue to demystify the role of the COO, more companies will benefit from more effective leadership.

A version of this article appeared in the May 2006 issue of Harvard Business Review.



Nate Bennett is a professor with the Robinson College of Business at Georgia State University. He is the author of Your Career Game and Riding Shotgun: The Role of the COO.


Stephen A. Miles (smiles@heidrick.com) is an Atlanta-based managing partner in the Leadership Consulting Practice of the executive search firm Heidrick & Struggles and a coauthor of “Second in Command: The Misunderstood Role of the Chief Operating Officer” (HBR May 2006).

Who should be on your Board?

I come across many retailers and wholesalers that either lack a proper board or have the wrong type of people on their boards. In my opinion, sme’s in these industries need to have retailers and wholesalers on their boards.

I know I will take some flak for this, but boards have become too much governance and not enough guidance. It is all well and good to have your lawyer or accountant on the board, but do they have the knowledge and experience to guide the direction and strategy for the business.

If you are looking to expand overseas, restructure, put in new systems, go into retail / wholesale from the other side, put in e-commerce, expand the product line, re-position, become more streamlined, outsource, cross dock, etc. you need people who have done this before and can guide you through it from the board level.

The board needs to have experience in the industry and understand the issues. It needs to challenge and guide the team and see through the fast talking executives – to call bullshit when it needs to be called. A board also needs some independence – outside the small circle of the chairman or owner.

Australian customer service – Why do we get it so wrong?!

We have all been there. Eagerly out on a shopping spree buying our favourite brands, or maybe finally ordering that special piece of furniture that we have been saving up for, or even heading out to try the new cafe that EVERYBODY in the office has been talking about. And with much anticipation you arrive….. But you find yourself instantly deflated by the complete and utter lack of ANY kind of quality of service. It’s a struggle to even get any acknowledgment from staff! So you find yourself standing alone, waiting, wondering why, oh WHY is it so hard to give you people my money!!!

Service levels in Australia are mediocre at best and it is one of the most important challenges we face today. Getting it right is one of the most important keys to success in any consumer facing business.

Why is it so important?

Obviously, poor customer service can destroy a business very quickly, but mediocre service can be just as costly. Providing exceptional customer service can create one of the most valuable marketing tools we have at our disposal – Word of mouth. Bad word of mouth can send a business to the point of failure in the blink of an eye and tarnish it forever in the eyes of the customers. Good word of mouth can propel a business into the dizzying heights of success without breaking a sweat. The problem is that as consumers we are geared to talking about our bad experiences. There is a saying in hospitality and retail – “every customer that has a bad experience tells 20 people while a customer that has a good experience might tell 5”. I believe this rings true in all industries, especially in today’s world of online review sites and forums. Now, more than ever we need to work for that good word of mouth. Your business NEEDS those 5 people to hear about how great you are, so you need to work for it.

The thing that really annoys me is that the people who are running businesses are consumers themselves! They share these same experiences and same frustrations. So, why can’t we get this right?!

How do we get it right?

  1. Hire the right people – It’s that simple. Hire the right people. Hiring people who are naturally geared towards providing exceptional service will get you half way there. You can teach anyone to serve well, but under stress people always revert back to their natural preferences. What you need are employees that revert back to providing excellent service when they are under stress. These people are invaluable to your business- get them on board!!!!
  2. Mix it up – Even the most customer focussed employee will get bored performing the same monotonous tasks day in and day out. So, mix up the shifts. Having staff that are trained in multiple areas not only makes them more valuable to you, it allows you to rotate them through different duties during their shifts, keeping them fresh, focussed and poised for excellence.
  3. Motivate! – This is crucial- you need to find a way to motivate your staff to consistently go above and beyond. This is part of the reason we see such high service levels in other parts of the world. For example the legendary service standards in the US are primarily driven by a tipping culture. Waitresses rely on tips to survive and if they don’t provide exceptional service, they don’t get paid very much at all. While this is an extreme example, it illustrates that with the right incentive, we are all capable of more. If you can find a way to incentivise your staff to go above and beyond, you will undoubtedly see better performance.
  4. Budget for it – Excellent customer service is essential to growing your business in today’s market but it doesn’t come for free. I have seen so many operators get this wrong. They try to run on a skeleton crew even during peak trading periods in the hope of controlling their labour percentages. In fact they would be much better off concentrating on driving top line sales in peak periods and growing their business. I believe labour costs need to be seen less as a cost to your business and more as an investment in the growth of your business. It is an investment that will always pay off and needs to be budgeted for. Create that good word of mouth and the sales will follow!

But more than anything else, I think we need to re-evaluate what it is that we are trying to achieve. Essentially we are trying to find a way to have our customers leave feeling something positive. Exceptional customer service is integral to the success of your business but it’s only a small part of something bigger – your consumer experience. An exceptional consumer experience incorporates exceptional customer service but doesn’t stop there. It starts there and goes way beyond it into the sensory experience of your customers. Getting the lighting and music right can be just as important to your consumers experience as your customer service levels. So, you need to revisit your consumer experience through their eyes. You need to forget what you think you know about your service levels and see it from your consumers’ point of view. You need to see what they see, you need to hear what they hear and you need to feel what they feel when they shop with you.

Herein lies the dichotomy – how can you possibly see the business through their eyes when you work so closely with it? Answer this question and you will discover the key to tackling this issue.

Mike-107