Chief Operating Officer (COO)

A chief operating officer (COO) reports to the chief executive officer (CEO) and usually has responsibility for the daily internal operations of the company. COO is primarily a function, because other titles are sometimes used to designate substantially the same role: chief administrative officer, chief of staff, executive vice-chairman, and president without any further designation. A study in 1964 of 433 large companies in the United States showed no use of the title. By the 1970s, it was gaining popularity.

Although reporting lines in companies vary with their organizational structures, commonly most business units and some staff areas (e.g., information technology, marketing, human resources, and procurement) report to the COO. In a company with operating subsidiaries that have their own presidents, sometimes the presidents of the most significant entities report directly to the CEO.

In organizations that have a CEO/COO structure, the CEO is generally said to be responsible for external matters and for broad corporate issues such as vision, strategy, long-range planning, acquisitions, and corporate governance. In contrast, the COO's role is to function internally as the operational head of the company. As will be discussed later, the COO could also have a significant role in developing a climate of ethical conduct in the company. All this is not to say that the COO has an entirely internal job, because there are situations where he or she must deal with external customers and suppliers. However, these are [Page 296]generally limited to matters that have a significant bearing on operational issues.

Some observers maintain that a stark distinction between external and internal roles does not accurately characterize the actual working team relationship between the two top officers in most companies. Rather, they are more likely to be partners in most things.

Being a COO is sometimes said to be the most difficult job in a corporation because the level of responsibility is high, yet the most senior level of authority still resides with the CEO. This power imbalance can be the source of friction, especially if the COO was hired as the CEO-in-waiting, not a permanent number two in the hierarchy. Many of the qualities that are sought when the COO is recruited are precisely the characteristics that can lead to being impatient or jealous of the CEO.

Given the potential for a mismatch between the CEO and COO, it is important that the recruiting process give due consideration to the need for an alignment of competencies, values, and strategic orientation between the two top executives. As well, the selection process must result in giving the new COO a clear set of expectations with respect to succession planning for the CEO. Since the CEO is normally responsible for recruiting the COO, some commentators recommend that members of the board be involved to provide some independent judgment on the likely fit between the two executives.