The business to board link: why COOs are growing in importance
Harry Vossebeld, the COO of the Dutch Pension Service Provider PGGM, tells us why his company believes in the role of a COO – and why he expects more and more organizations to hire COOs in the years ahead.
Why do you think your company feels it is necessary to have a COO?
I think it’s related to the importance that we attach to the daily operation of the company reflected in service levels, cost reduction and cost ownership.
Companies haven’t always employed chief operating officers (COOs) and not every business today does so. However, the trend is clear: while there were barely any COOs a decade ago, EY’s research suggests that nearly half of Europe’s largest companies have now established this role.
The role of a COO in the world in which we’re living – both the world of pension funds and the wider commercial world – is crucial, because the issues around time to market and transparency of costs get more important each year. Every company needs to produce faster at lower cost, but with the same or better quality; the role of the COO is to make that happen.
These objectives are, of course, integrated into the responsibilities of all board members and managers within their own areas, but a COO is able to put a specific emphasis and focus on quality and efficiency. At PGGM, we do that through a “lean” program that has the objective of, step by step, improving the processes within the company; I’m at the center of that.
In my case, my targets are set very specifically according to these responsibilities – my most important goals are related to the lean program, and I also have targets relating to service levels, cost control and cost reduction.
Are there specific skills that COOs bring to the organization?
It’s certainly important – at PGGM and elsewhere – to have a good understanding of modern information technology, because ICT in today’s business is becoming the most crucial driver of change. I think you also need to have what we might call in the Netherlands a “Calvinist” approach, the understanding that every euro has to be earned first, and that you must spend the money wisely.
In addition, you need to have a great deal of common sense. You need to be able to ask the right questions and put your finger on the good ideas that will improve the performance of the company.
Something else is important too. As I look at successful COOs, I see people who are not only able to act at the board level but who are also able to communicate with staff on the floor and to move vertically throughout the organization in that way. You can’t just run a company from the boardroom; in order to implement the company’s strategy, the COO must spend time on the floor, blinking eyes communication between the board and the rest of the organization.
Are you saying the relationships with the people on the floor are more important for a COO than their relationships with other board members?
No, I think they’re equally important, but, as a COO, you must be very aware of how much time you spend with your fellow board members and the time you spend in the rest of the company. What I think a COO needs is the talent to inspire people, for example, by exchanging new ideas with them.
In a way, it is a skill more often associated with a CEO, but it’s just as essential for a COO. After all, COOs are responsible for the core operations that the company needs to make its strategy successful. It is the people on the floor who make the difference. You need their expertise. You need to inspire them and show them that you are listening and understand the problems they are encountering in their jobs, even if these originate outside the company. I think, in summary, it’s about being able to present a human face.
Many of those skills might be described as softer – certainly, they are non-industry specific. Do you think the role of the COO is one that is easily transferable from sector to sector or industry to industry?
Well, if you were to put me in an industrial environment, for instance, I think I would manage. I would still need to invest a lot of time on the floor in understanding what people are doing and learning what my own purpose should be within the company.
If you want to succeed within an organization, you need to know and understand the basics of the processes that people are working with, providing the right products or services on behalf of the customer. If you don’t, you can’t be successful in one of your most important goals, which is to improve these processes. The COO’s job is partly about general knowledge and partly about specific knowledge because, for example, pension products and processes are different from insurance products processes. And manufacturing and industrial processes are far from that.
Still, those things can be learned, maybe more easily than the softer skills, so the job can be transferable.
Is the trend toward having a COO now firmly established? Will an even greater number of companies have such a position in, say, 10 years’ time?
I’m sure that’s the case. One other aspect is really important: companies continually need to come up with new products and services, but you need a board that can manage the balance between change and stability. I think the COO can bring that balance. If the balance isn’t right, and this is the classic case study of how organizations fail, the tension between managing today’s operations and looking to the future can tear the company apart.
That’s why it is so important to have a COO at the board level, because that’s where these discussions are held – if you’re not there as a COO, you’re always running behind the decision rather than being part of it. The COO on the board is the ideal person to bring those two sides of the company together and to manage that paradox.
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