Tuesday, November 6, 2007

The Role of the Chief Operating Officer Is Transforming Radically in Corporate America

The position of Chief Operating Officer (COO) in leading corporations is being transformed — not eliminated — according to a report released by The Conference Board, the global research and business membership organization.

The report — “The Changing Role of the COO: Is the Chief Operating Officer Headed for Transformation or Extinction?” — is based on in-depth interviews with executives from companies representing diverse industries and a literature review. Executives surveyed include heads of human resources, regional heads, COOs, CEOs, heads of business unit, and heads of company research.

The report finds that the need for and the definition of the COO role is determined by the relationship between the COO and CEO, including their personalities, in the context of the needs of the particular business. A risk assessment of the CEO "going it alone" and internal talent management considerations are also used for determination.

Some of those interviewed say that the COO position is evolving from the number two spot in a company to a leadership "on demand" role that changes focus with changing business strategy. The report finds that companies — to grow more quickly in an increasingly competitive business world — are becoming flatter, with the CEO now going directly to the heads of lines of the business for answers.

The position of COO, though born sometime in the 19th century, reached its apex in the 1970s, when more and more prominent firms began adding the position to deal with greater management needs spurred on by increasing diversification.

Its popularity dwindled in the '80s, but was revived with the growth of the dot-com era, only to fall with the era's demise. Most recent studies indicate that only a small percentage of leading U.S. companies currently employ a COO.

Because the role of top corporate leadership is evolving, the COO's job is becoming "situational."

External considerations that affect the COO role include:

  • Strong global, regional, and local competitors.

  • The increased power of customers.

  • Impatient institutional investors.

  • Talented managers who are ambitious and open to opportunities offered by others.

  • Global product overcapacity.

  • Increased regulatory oversight.

  • Relentless pressure to update, or even change, the company's fundamental business model.

  • The most pressing internal considerations are: the reduction of layers of management and emergence of numerous project-based formats; greater levels of investment in the IT infrastructure, which enable enhanced vertical and horizontal operations and communications processes; and an extensive use of alliances along with robust amounts of mergers and acquisition activity.

    The Conference Board report offers a three-step analysis process that companies can use when deciding whether they need a COO:

  • Analyze your company's leadership and general management requirements in the context of your strategy and company culture — including the relationship between the CEO and COO.

  • Consider the central arguments in favor of and against the COO role in terms of your company's immediate goals and longer-term strategy.

  • Assume the COO role is unlikely to add value to the general management of the enterprise and build the strongest case to the contrary.
  • More information can be found at www.CRMindustry.com

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