COO vs. CEO: Knowing When it’s Time to get Some Help
CEOs at high-growth businesses contend with long days, heavy responsibilities, and a demanding work life that can seem overwhelming at times. However, those pain points come with serious benefits in getting to chart a path for an organization, put a personal stamp on an industry, and engage in work that really makes a difference. At some point in a company's development, CEOs will typically reach a crossroad in which they are stuck dealing with the downsides of the job and not really experiencing the benefits. This is where receiving some help becomes invaluable. Adding to your leadership team by bringing on a COO can be vital in positioning your business for long-term success.
We've worked with a lot of CEOs over the years. Occasionally, we run into a common thread between great executives. We discovered that most CEOs who have gone through a couple of startup phases and are still involved in executive leadership will quickly move to secure the help of a COO instead of trying to do everything on their own.
Typically, the best time to seek a COO is when the business moves beyond its initial growth phase and starts to shift toward enterprise scale. We recommend this for a variety of reasons, but before we go there, it's important to consider the COO vs. CEO situation, delving a bit into each role.
COO vs. CEO: the core differences
Let's start off with the simplest distinction. The CEO's core responsibility comes down to providing strategic direction and leadership of the business. The COO's task is to deal with the day-to-day operations and tactics needed to execute on the larger strategy.
In most cases, the CEO will have more power within the organization and will directly oversee the COO and leadership team. Essentially, the CEO is the chief of the executive team, with other C-level executives taking charge of specific aspects of the business. The COO handles operations, the CFO manages finances, and the list goes on depending on what roles you want to incorporate into your business. In a typical hierarchy, vice presidents then oversee specific departments and report to the relevant C-level executives.
One analogy we like to use when distinguishing between CEOs and COOs comes from the sports world. Imagine your business as a football team. The CEO is the coach, watching everything, acquiring input from various places, and working to make decisions on how to act next. The COO is the quarterback, taking those instructions out onto the field, analyzing what is happening in the moment, and making immediate decisions and adjustments in response.
A CEO can do many of those tasks we just discussed for COOs, but keeping up with the workload becomes unrealistic as the business scales. In light of the rising challenges that come with growth, let's look at the typical stages a company goes through and when introducing executive help in the form of a COO becomes particularly valuable.
Typical business scaling and its impact on execs
The startup phase of a business typically involves a few founders coming together with a great idea and doing whatever it takes to get something off the ground. If you're lucky, you'll find a few devoted friends or colleagues to get on board with your team's ideas and work for a relative pittance. They'll get equity and the potential for significant benefits including the chance to have a major influence on where your product goes and getting in on the ground floor comes with its fair share of risk.
In our experience working across the industry, we've found that startups generally achieve success when they have trust between founders. If those initial founders have similar goals, clear lines of communication, and a willingness to make the necessary sacrifices to get the business moving, then the potential gains are great. But if trust is lacking, visions aren't aligned, or roles aren't clear, things can fall apart fast.
When you're in the startup phase, you're not typically thinking about what your C-suite looks like and probably haven't even defined a CEO. Instead, founders take leadership roles that make the most sense based on their skill sets. It's flexible, fast moving, and informal. It also tends to work when the foundation of trust is in place. But having a few founders work closely with a small group of employees to form a strong team won't work for long. Once you've gotten your products and services moving, you'll need to start formalizing roles a bit.
Once your startup phase is successful, your business will typically reach a period of stabilization in which you'll need to evolve and become more structured. With a clearly defined product that has gone through a few iterations, you've built a stable customer base and are starting to grow. You may have anywhere between 10 and 100 employees with annual revenues between $1million and $10 million.
At this stage, your founders are still doing most of the heavy lifting in terms of leadership, with each focusing on specific aspects of operations where they're strong. This is also typically when a business will look to founders to self-fund or push for Series A funding.
While there are times when a single founder can push a business into this stage of growth, most successful businesses have a team of founders working closely together in partnership. In many ways, the day-to-day operations look a lot like they did during the startup phase, with one key distinction: Founders will typically identify one individual among them or bring in a specialist to function as the CEO. The founders still play a vital role in the business, but having a single leader to point to is essential in giving the business some stability.
Reaching toward enterprise scale
So, you've made it through the thrilling startup phase and gained some stability. This is where life starts to get really complicated. The stage usually takes off when businesses achieve annual revenues between $10 million and $100 million. At such a large scale, some of your founders will likely start to move on. Some will simply lack the high-level business skills needed to handle the degree of complexity of operating at this scale. In other instances, individuals who fell in love with the startup excitement may want to move on to another opportunity. As some of the founders start to back off from their heavy leadership role, your CEO can take on even more responsibility in shouldering the demands of the business.
This is where trying to do it alone isn't feasible. In our experiences, CEOs that don't create a strong leadership team end up dealing with issues like burnout. The COO role is vital in taking key work off the CEO. A COO typically will step and take on a few direct reports from division leaders and function as a senior executive within the corporate structure. Getting the most value out of this type of leadership move doesn't just involve dealing with the COO vs. CEO situation by putting the leaders in complementary roles. Instead, it typically requires rethinking how leadership is handled across the organization.
Establishing a new leadership model
As businesses scale, they typically move in one of two directions within their leadership team. The first is a hub and spoke model in which the CEO is surrounded by other executives each leading a functional team. This can be a useful model, but it often introduces too much bureaucracy for a company that will need to scale quickly. A tag team approach, in which a COO reports directly to the CEO and serves as a second in command can be more effective.
By taking the tag team approach to leadership, CEOs in a growth-stage business can get the help they need in the form of a sounding board for ideas and an operational partner who can relieve the stress of a heavy workload. The COO can take reports from lower-level organizational leaders and make day-to-day decisions, allowing the CEO to focus on the big picture and the company's financial health.
Finding success with a bit of help
The CEO’s job can be as demanding as it is rewarding. At times, the demands become unrealistic for any person. We've seen organizations set up hub and spoke leadership in which CEOs were dealing with as many as 400 direct reports and so much day-to-day stress which limited growth. Finding the right second in command, whether it's a COO or a separate C-level role that helps with operations, is crucial to sustaining larger-scale operations. Ultimately, great people are what drive continued success.