(Editor’s note: Firas Raouf is a partner with OpenView Partners. He submitted this story to VentureBeat.)
Most early stage tech companies don’t think they have room for a chief operating officer.There are several reasons behind that, of course. Sometimes, the CEO feels he/she needs to “be close to the business” and all aspects of the operation. Others feel strategy and execution shouldn’t be separated, while some feel early stage companies are too small to have a COO. The saddest of instances is when the CEO believes recruiting a COO would be an admission of failure.
While I’m sympathetic to those arguments, I do believe the role can be highly beneficial — and even necessary in certain situations – and shouldn’t be dismissed offhand due to a company’s size or the CEO’s ego getting in the way.
When Hiring a COO Makes Sense
Many early stage companies are founded by young and inexperienced CEOs. This is the nature of the beast, where a founder blends the entrepreneurial spirit and technical skills to launch a venture. Operational experience is largely irrelevant at that point. To succeed, the founder often leverages their inexperience by being totally unencumbered by the past. This allows the company to adapt and adjust to a highly dynamic and changing market environment.
But once the company passes the startup phase where the product, customer and distribution model have been identified, operational expertise starts to become more critical – and a functionally experienced senior management team becomes valuable. Hiring, motivating, challenging and retaining such managers all require significant operational experience. This is where the founding CEO often begins to falter, but it’s when a COO role makes the most sense.
A COO’s value is designed to be complimentary to the CEO. The truth is that no CEO, no matter how experienced, can possibly cover the complex aspects of managing all the functions of a technology company. It’s better to divide and conquer. By recruiting a COO, the CEO can focus on the aspects of the role that he/she truly excels at – and enjoys the most.
Of course, these areas of interest will vary by CEO. For example, they may be more technical than operational, preferring to focus on product strategy and management (like Steve Jobs, for example). In that case, the COO can take over the rest of the operation, focusing on sales, marketing, support and operations. Then again, the CEO could also be more of an “outside” visionary, preferring to set the strategy and be the spokesperson while evangelizing with prospects, customers, analysts and bankers (such as Larry Ellison). This is when the COO can take on the actual execution of the strategy.
By thinking of it as a yin-yang division of responsibilities, the CEO-COO relationship begins to make more sense.
Naturally, there are also certain risks involved with hiring a COO. Foremost is the misalignment of the roles and a lack of trust, which can lead to division and disharmony. To ensure the success of the COO role, the CEO needs to work with the board of directors to develop the appropriate set of expectations, responsibilities and required qualifications. Specifically:
Establishment of trust — This is the absolute most important aspect of a successful CEO-COO relationship. Trust (in this case) begins with the CEO truly coming to terms with the need for a COO and having clarity as to why. The CEO must then convey that, with humility, to the prospective COO.
Finding chemistry — The CEO and COO must have mutual respect. They need to recognize and appreciate the skills that each brings, and be completely open with each other.
Defining the role — The role of the COO needs to be crystal clear. I’ve personally found capable executive recruiters to be very valuable in helping the CEO develop the role with clarity. The recruiter tends to bring an objective view as well as the view of prospects.
Defining the rules of engagement — In the final stages of recruiting, the CEO and COO should get together and map out on a whiteboard the specific roles each will take. That might seem contradictory to the previous point, but initial definitions are the ideal. Reality often forces refinements, based on the skills of the prospect. This is where the yin and yang are melded into one circle. Part of that is the definition of rules of engagement for managing and communicating internally with the senior team and the rest of the employees.