The case for a chief operating officer

Among the world’s major companies, relatively few have created a dedicated chief operating officer (COO) position. Indeed, in some respects, the role appears to be on the wane. But The DNA of the COO, new research from Ernst & Young, argues that several forces are helping to make the case for a consolidated operational leader more urgent, not least thanks to their ability to improve business performance.

The most obvious force is the lingering economic crisis, which has made it imperative for businesses to have a firm grasp on their overall costs and operational efficiency. A related force is a wave of regulation, especially within sectors such as financial services, which obliges companies to get a far tighter grip on operational processes to ensure compliance.

From near non-existence just a decade earlier, nearly 4 in 10 of the 97 largest companies within the Eurozone and UK now have a COO position.

Another factor is that globalization and the pursuit of growth has pushed companies to expand beyond their national borders and enter high-growth markets. These markets typically require far closer operational attention, given more challenging business environments.

From a macro perspective, COOs have the ability to make a positive contribution toward improved overall performance in three broad areas. First, and most obviously, on execution: keeping control of daily operations and optimizing the company’s operational processes. Second, in enablement, by helping translate the CEO’s vision into an achievable strategy. And third, through development, by overseeing change and business transformation and helping shape the future of the business.

But while this is generally true, the reality is that COOs must focus their efforts in line with their environment. The most obvious example of this comes from the divide between operational leaders in slow-growth developed markets versus those experiencing rapid change and growth.

A common side effect of the COO’s role, which necessarily oversees wide swathes of the business, is that it makes the position an ideal successor to the chief executive. Indeed, in many companies, the role has effectively become part of their overall succession planning.

For COOs, this is part of the appeal. The majority of these executives are highly ambitious – and rightly so, given their diverse and strong mix of skills and experience. In a survey of over 300 COOs, Ernst & Young found that 40% noted a personal aspiration to step up to the top job, a higher proportion than the 30% who felt that their current role was a suitable final career destination.

But whether seeking to defend the business or help it grow, more CEOs will recognize the logic of a consolidated operational leader who can deliver on their vision and bolster performance.

The complete article was written by:

  • Andrew Caveney
    Global Supply Chain & Operations Leader, Ernst & Young
  • Hennie Human
    Performance Improvement Advisory Leader for Africa, Ernst & Young
  • Markus Heinen
    Performance Improvement Advisory Leader for Germany, Switzerland and Austria, Ernst & Young

Read the full case studypdf1.61 MB

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