← Second in Command: The Chief Behind the Chief with Cameron Herold
Second in Command: The Chief Behind the Chief with Cameron Herold
Ep. 447 - The COO Conundrum: Alternatives That Might Just Work Better
00:09:51
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- [00:06]
Cameron Herold
Welcome to the Second in Command podcast, produced by the COO alliance and brought to you by its founder, Cameron Herold. In the second in command podcast, we talk to top COOs who share the insights, strategies and tactics that made them the chief behind the Chief. And now, here's your host, Cameron Herold.
- [00:30]
Unknown COO Guest
This episode of the Second Command Command podcast, we're going to do a deep dive on whether or not you need a coo. Why do you need that second in command? What leverage is it going to bring into your company? Is it something that you actually should be doing now or maybe should you have done it earlier? And how do you actually decide if you bring one in and what the real ROI is going to be? Or as I call it, what's the coi? What's the cost of inaction of not bringing a COO into the company? I can tell you for sure. When Brian, who is the CEO of 1-800-got- junk, brought me into his company back 20 odd years ago, we got massive leverage and that's where a lot of the scale comes from. So today we're going to talk about if you need a coo. And how do you know? We'll see you on the inside. I like making money and I like saving money. So let's start by saving you 250,000 with a simple piece of advice. Don't hire a COO if you don't need one. The right COO in the right situation is transformative, but if they're not necessary, then they represent needless expense, disruption and commitment. You'd be better to keep your money. Try an EA first. First up, if all you're really trying to do is get shit done and free up time, try hiring an executive assistant. It sometimes drives me crazy when people say, I need a coo. No, what they need is someone who actually has time to do stuff. In which case they should try an EA who comes a lot cheaper than a coo. They need someone to get a lot of their tasks off their plate. You may have come across the old business saying that I first heard from my friend Jack Daly. If you don't have an assistant, you are one. If you wake up in the morning going, ugh. And you don't want to face the day and you constantly say to yourself, I just need some help. It's time to go look for it. Still, the wrong person can be worse than no one. So plan carefully. Go back to the activity inventory and identify the administrative tasks that you can delegate to an ea. See how much that gets off your plate before considering the next level. If you still have higher level responsibilities to offload, you may very well need a second in command, but you're going to have to pay them well, so make sure they'll be working on the areas of the business that you're not good at or that drain you of energy. Hire the right heads. You might also not need a COO if what you're really after is a functional head or heads to bring in expertise to specific domains. If you're having issues with oversight of a particular area or just need one domain off your plate, consider the makeup of your management team before you bring in a second in command. A COO can help coordinate the team, but is not a substitute for the department head. If you only need help with finance, hire a head of finance who may get the CFO title. If you're lagging on the technical stuff, hire a VP of Technology or a cto. Get people who will stick to running their own functional area. A COO doesn't necessarily have deep expertise in one domain, but strength in a number of areas. Even if they're particularly good with finance, say, or marketing or legal, that expertise will likely take a back seat to people. Strategy planning, dealing with other departments, and working with different leadership styles Use the activity inventory to identify the tasks, projects, or responsibilities you need to hire for. It may be that they point to a specific function or functions. That's a sign that you don't need a second in command yet just a very strong VP of it, finance, marketing, or sales. It's much cheaper and easier to find a person like that. Plus it's also easier to exit them from the organization when they've done their job. The time to hire a COO is when your activity inventory leaves you with multiple overflowing buckets of tasks. That's when you need strong coordinating leadership to help orchestrate them all. Hiring a COO is a much greater commitment than hiring a functional head, and you need to get it right. Cut back your core. If you're thinking about hiring a COO because you can't keep visibility across all your projects, you could always flip this problem. Perhaps rather than hiring a COO to handle all the projects you can't, you should consider whether you have too many core projects. You might be better off scaling back. Take some time to figure out whether your core projects are truly core. Remember, of course, that if you do hire a coo, they might come in and quickly identify that you have too many projects in the mix. If that happens, they'll offer suggestions to streamline with an eye toward working on the critical few projects versus the important Many Go Fractional Another possibility to consider before hiring a full time COO is hiring a fractional coo. This is comparatively recent development that has rapidly established its own core niche because it's so useful to so many businesses. A fractional COO is usually a former senior exec who has chosen to work for multiple companies rather than just one. A company usually hires them to coach an executive team to lead a core project or do whatever is required but doesn't need them on a day to day basis. Many COOs get started this way before they become permanent somewhere, if they ever do. A fractional COO can be really useful for small or medium sized companies that don't need or can't afford a full time coo. It allows them to scale up without paying a full time salary. It frees up their teams to execute while making sure that there's a clear path. With the right systems and operations to bring growth. The companies can leverage all the benefits of a full time COO in the specific areas needed and continue to look after the rest of the business themselves. Working with a fractional COO also gives a CEO a chance to analyze how they might eventually work with a full time COO when the time is right and it gives them a taste of the contribution the right COO could make to their business. In fact, when I started coaching CEOs back in 2007, I called my company Back Pocket COO. The idea being that I was in their back pocket and they could pull me out for advice and coaching when they needed me. The concept works as I had three companies in my first year paying me $120,000 each to be their fractional COO. It's something I no longer do, but I loved it at the time. A higher Must add value. You've hired an ea, you've got strong leaders for all your functions. You've made sure your core projects are all adding value. You've tried working with a fractional COO and your activity inventory is still telling you that you need to hire a second in command. The next step is to hire a coo, right? Not necessarily. Hiring a COO is such a huge step that it's worth pausing to ask yourself that last Can I afford to make this hire? The answer works on different levels, including the bottom line. Will this hire pay for itself? There's no point in hiring a COO unless they will add more value than the cost of their salary. As a rule of thumb. You should be looking for every employee to return a minimum of 2x and preferably 4x on their pay because you'll need that increase in gross margin that the company makes to pay for them and break even. A COO is no different, though. Their value goes beyond the dollar amount, which makes it essential for you to be clear on your objective. There are four main reasons to bring in a COO 1 to increase efficiency 2 make employees or customers happier 3 to grow the economic value of the company or 4 to grow profitability. Any advance a COO makes in those areas adds to the COO's value. Do you want to increase sale value as you build toward an exit, for instance, or are you aiming to free up your own time? If it's the latter, the COO might not directly drive more profitability, but you could take 50 hours a week off your plate, so you could spend 10 more elsewhere. If you can afford it, it can be worthwhile to forego some profit to gain a significant amount of time. A COO is for the long term, as we'll see later. Bringing in a COO can add a potential cost in terms of organizational upheaval. Ask yourself whether that's a price worth paying for to make the hire. You're dropping a giant boulder into the pond of your organization. It's bound to create ripples. Hiring a second command is not like onboarding a management team role that slips in almost unnoticed. If you already have strong departmental heads with good domain expertise, then the COO's arrival can easily put people's noses out of the joint. Be prepared for resentment, pushback and even resignations. The third potential cost you need to be able to afford is commitment. Hiring a COO is a decision with a long term impact. If you're just looking for a way out of a short term crisis, a consultant will likely be a better fix as well as easier to hire and let go, and won't come with any of the close personal relationship dynamics that will come with a COO.
- [09:15]
Cameron Herold
You'Ve been listening to. Second in Comm, brought to you by COO Alliance Founder Cameron Herald. If you enjoyed this episode, please be sure to like, share and subscribe to us on Apple Podcasts, Spotify and our other podcast streaming platforms. For more best practices from industry leading COOs, visit COOAlliance.com.