Second in Command: The Chief Behind the Chief
Episode: Ep. 447 - The COO Conundrum: Alternatives That Might Just Work Better
Release Date: February 6, 2025
Host: Cameron Herold
Guest: [Unknown COO Guest]

Introduction

In Episode 447 of the Second in Command podcast, host Cameron Herold engages with an experienced COO guest to explore the critical decision-making process behind hiring a Chief Operating Officer (COO). Titled "The COO Conundrum: Alternatives That Might Just Work Better," this episode delves into the factors that determine the necessity of a COO, the potential alternatives, and the return on investment (ROI) associated with such a pivotal hire.

Do You Really Need a COO?

The episode kicks off with the guest questioning the conventional push to hire a COO. He emphasizes the importance of evaluating whether a COO is genuinely necessary or if other roles could better serve the company’s immediate needs.

"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."
— Unknown COO Guest [02:10]

The guest shares a personal anecdote about joining 1-800-GOT-JUNK with CEO Brian, highlighting how the addition of a COO provided significant leverage and contributed to the company's scalable growth over two decades.

Alternatives to Hiring a COO

Before committing to a full-time COO, the guest suggests considering less intensive and more cost-effective alternatives:

1. Executive Assistant (EA)

For leaders whose primary need is to delegate tasks and manage time more effectively, hiring an Executive Assistant can be a practical first step.

"First, try an EA. 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."
— Unknown COO Guest [03:45]

The guest advises conducting an activity inventory to identify tasks that an EA can handle, thereby freeing up the executive’s time without the significant investment of a COO.

2. Functional Heads

If the challenges are specific to certain domains, hiring heads of those particular functions (e.g., Head of Finance, VP of Technology) can address the issues without the need for a COO.

"Hire a head of finance who may get the CFO title if you only need help with finance."
— Unknown COO Guest [05:20]

This approach ensures specialized expertise is brought into the management team, maintaining focus and efficiency within each department.

3. Fractional COO

For companies that may not yet require a full-time COO, engaging a fractional COO offers flexibility and expertise without the long-term commitment.

"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."
— Unknown COO Guest [06:50]

Fractional COOs typically work with multiple companies, providing strategic guidance and helping to scale operations as needed.

When to Hire a COO

Determining the right time to bring on a COO involves a thorough assessment of the company's operational demands and growth trajectory. The guest outlines key indicators that signify the need for a COO:

• Multiple Overflowing Buckets: When the activity inventory shows an overwhelming number of tasks that need coordination.

• Increased Efficiency Needs: If there's a clear demand for enhancing operational efficiency across the organization.

• Desire to Grow Economic Value: When the company aims to expand its economic footprint or profitability significantly.

The guest underscores the importance of ensuring that the COO's role will generate value exceeding their cost, recommending that each employee, including the COO, should return a minimum of 2x their salary, preferably 4x.

"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?"
— Unknown COO Guest [07:45]

Assessing ROI and Value Addition

A critical discussion revolves around the ROI of hiring a COO. The guest advises leaders to meticulously evaluate whether a COO will contribute more value than their salary and how their role aligns with the company's long-term objectives.

• Efficiency Gains: Streamlining operations to boost productivity.

• Employee and Customer Satisfaction: Enhancing workplace culture and customer experiences.

• Economic Growth: Expanding the company's market presence and profitability.

The guest also highlights the intangible benefits a COO can bring, such as freeing up the CEO’s time to focus on strategic initiatives, which can indirectly lead to increased profitability and growth.

Potential Costs and Organizational Impact

Hiring a COO is not without its challenges. The guest warns of potential organizational upheaval, including:

• Disruption: Introducing a COO can create ripples within the organization, especially if strong departmental heads are already in place.

• Resentment and Pushback: Existing leaders may feel threatened or sidelined, leading to tensions or even resignations.

• Long-Term Commitment: Unlike consultants, COOs represent a long-term investment, making it crucial to ensure alignment with the company's vision and culture.

"Hiring a second command is not like onboarding a management team role that slips in almost unnoticed."
— Unknown COO Guest [08:30]

Conclusion and Key Takeaways

The episode concludes with a comprehensive guide on making informed decisions regarding the integration of a COO into an organization. Key takeaways include:

1. Evaluate Necessity: Before hiring a COO, consider whether an Executive Assistant or functional heads could address immediate needs.

2. Consider Fractional Options: For flexibility and cost-effectiveness, a fractional COO can provide strategic support without the full-time commitment.

3. Assess ROI Carefully: Ensure that the value added by a COO justifies their cost, both in direct financial terms and in intangible benefits.

4. Prepare for Organizational Change: Understand and plan for the potential disruptions a COO might bring to maintain organizational harmony.

By carefully considering these factors, leaders can make strategic decisions that align with their company’s growth and operational efficiency goals.

Notable Quotes

• "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."
  — Unknown COO Guest [02:10]

• "First, try an EA. 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."
  — Unknown COO Guest [03:45]

• "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."
  — Unknown COO Guest [06:50]

• "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?"
  — Unknown COO Guest [07:45]

• "Hiring a second command is not like onboarding a management team role that slips in almost unnoticed."
  — Unknown COO Guest [08:30]

About the Host

Cameron Herold, the founder of the COO Alliance, brings a wealth of experience as a top business consultant, best-selling author, and speaker. Through the COO Alliance, he provides COOs with unparalleled professional development opportunities, reinforcing his mission to empower second-in-command leaders across the globe.

For more insights and best practices from industry-leading COOs, visit COOAlliance.com.