What Is a Chief Operating Officer (COO)?
The chief operating officer (COO) is a senior executive tasked with overseeing the day-to-day administrative and operational functions of a business. The COO typically reports directly to the chief executive officer (CEO) and is considered to be second in the chain of command.
In some corporations, the COO is known by other terms, such as "executive vice president of operations," "chief operations officer," or "operations director."
- The chief operating officer (COO) is a senior executive tasked with overseeing the day-to-day administrative and operational functions of a business.
- The COO typically reports directly to the chief executive officer (CEO) and is considered to be second in the chain of command.
- Depending on the CEO's preference, the COO often handles a company's internal affairs, while the CEO functions as the public face of the company, and thereby handles all outward-facing communication.
- Skills required to be a COO include strong analytical, managerial, communication, and leadership skills.
- There are generally seven different types of COOs that are best suited for different situations and different companies.
Chief Operating Officer (COO)
Understanding a Chief Operating Officer (COO)
The COO mainly focuses on executing the company’s business plan, according to the established business model, while the CEO is more concerned with long-term goals and the broader company outlook. In other words, the CEO devises plans, while the COO implements them.
For instance, when a company experiences a drop in market share, the CEO might call for increased quality control, in order to fortify its reputation among customers. In this case, the COO might carry out the CEO's mandate by instructing the human resources department to hire more quality control personnel. The COO may also initiate the rollout of new product lines, and may likewise be responsible for production, research and development, and marketing.
The Role of a Chief Operating Officer (COO)
Depending on the CEO's preference, the COO often handles a company's internal affairs, while the CEO functions as the public face of the company, and thereby handles all outward-facing communication.
Instead of having one or two skill sets, most successful COOs have multifaceted talents, enabling them to adapt to different tasks and solve a range of issues.
In many cases, a COO is specifically chosen to complement the skill sets of the sitting CEO. In an entrepreneurial situation, the COO often has more practical experience than the founding CEO, who may have come up with an excellent concept, but lacks the start-up know-how to launch a company and manage its early stages of development.
Consequently, COOs often design operations strategies, communicate policies to employees, and help human resources (HR) build out core teams.
Types of Chief Operating Officers (COOs)
Every company is different and in a different stage of growth. A new company will have very different needs than a company that has been around for 100 years and has a large market share of its industry. Depending on the company, its needs, the stage of its cycle, and the characteristics of the specific company, it will require a specific type of COO to help it realize its goals.
There are generally seven types of COOs:
- The executor, who oversees the implementation of company strategies that are created by senior management and has the responsibility of "delivering results on a day-to-day, quarter-to-quarter basis"
- The change agent, who spearheads new initiatives (This COO is brought on to "lead a specific strategic imperative, such as a turnaround, a major organizational change, or a planned rapid expansion.")
- The mentor, who is hired to counsel younger or newer company team members, mainly young CEOs
- An "MVP" COO who is promoted internally to ensure that they don't defect to a rival company.
- The COO, who is brought in to complement the CEO (This is a person who has the opposite characteristics and abilities as the CEO.)
- The partner COO, who is brought in as another version of the CEO
- The heir apparent, who becomes the COO to learn from the CEO, in order to ultimately assume the CEO position
Qualifications for a Chief Operating Officer (COO)
A COO typically has extensive experience within the field in which a given company operates. COOs often work for at least 15 years, climbing the corporate ladder. This slow build helps prepare COOs for their roles, by letting them cultivate extensive experience in the practices, policies, and procedures of their chosen field.
Also, because they're traditionally responsible for directing multiple departments, COOs must be resourceful problem solvers and must possess strong leadership skills. Educationally, COOs typically at a minimum hold bachelor's degrees, while often also holding Master's in Business Administration (MBA) degrees and other certifications.
Examples of a Chief Operating Officer (COO)
Ray Lane (Oracle)
Oracle is a technology firm that began in 1977. It sells database software, cloud technology, management systems, and a variety of other products. Oracle had been performing well as a company but then hit a growth cap and couldn't increase annual revenue past $1 billion for a period of time.
In 1992, Larry Ellison, then CEO and now executive chair and CTO, brought in Ray Lane to turn the company's fortunes around. Lane joined as Senior Vice President and President of Oracle USA. He became COO in 1996.
When Lane came on board, he integrated packaged software and high-margin professional service. In this aspect, he was selling two products in one cycle, increasing revenues from one sale. And according to him, because the people providing the professional service were experts on the product, the company could charge a high price for it resulting in a high margin.
In 1992, Oracle had sales of $1.8 billion and profits of $61.5 million. In 1997, it had $5.7 billion in sales and profits of $821.5 million.
In 1999, Lane received a salary of $1 million and a $2.25 million bonus. He was also given 1.125 million in stock options, at the time valued between $11.8 million and $30 million.
Mort Topfer (Dell)
The history of Dell Computers is quite famous, with Michael Dell having started the company in his dorm room in 1984. It was the first company to sell personal computers directly to consumers. The company had been performing well until about 1993 when business started to flounder.
The company's stock fell from $49 to $16 and the CFO had resigned. The problems of the company were due to rapid growth that it could just not keep up with. It had a planned launch of notebook computers that was eventually stopped because of poor production planning. At the time, the company didn't know what product lines its profits and losses were coming from. In essence, its operations were a mess.
With the company falling apart, Dell decided to bring on people with experience, older than him who had the managerial chops to turn things around. The key hire was Mort Topfer. Though he did not have the title of COO, it was vice chair, he did the job of COO and was Dell's mentor. He was the CEO's right-hand man.
As of 2020, Dell was the third-largest computer company in the world, with a market share of 16.4%.
When Topfer came onboard he implemented multi-year planning, opened more affordable factories overseas, encouraged Dell to focus on strategy while he, Topfer, would deal with day-to-day operations, and restructured management. The company, of course, turned around, becoming the powerhouse that it is today.
Topfer joined Dell in 1994 and previously worked at Motorola, heading its land mobile products division. In 2000, his salary at Dell was $700,000 with a bonus of $1.2 million. He also received 290,910 stock options.
Chief Operating Officer (COO) FAQs
What is a COO?
A chief operating officer (COO) is an executive member of a firm that is tasked with managing the day-to-day operations and administrative functions of the firm.
What is a COO in government?
COOs are not common in government, though some governors have COOs that serve the same function in a company: to manage the day-to-day operations of the governor's office.
What is the difference between a CEO and COO?
A CEO is the top-most ranking person at a firm that is responsible for the long-term health and direction of the firm while a COO is the second-highest individual in the firm that reports to the CEO and is responsible for the day-to-day operations of the firm.
What does it take to be a COO?
COOs have a strong educational background combined with extensive work experience. A strong COO will have worked in a variety of positions, particularly in a specific organization, to understand all of the different parts of a business and how they work together. This allows them to pinpoint specific issues and gaps within the organization. Having experience managing people and teams is also imperative to be a COO. In addition, COOs should be great at communication, flexible, and strong leaders.
How much money does a COO make?
The salary of a COO will vary greatly depending on a variety of factors. These factors include the company they work for, their experience, and their contract. According to PayScale, as of March 1, 2022, the average COO salary is $144,996. The base salary ranges from $74,000 to $246,000. On top of that, COOs are paid bonuses and profit-sharing plans.
The Bottom Line
A COO is the CEO's right-hand person and the second-highest in command at a firm. The COO is responsible for the day-to-day operations of a firm and for assisting the CEO in a variety of tasks. Not all firms require a COO; however, those that do often benefit from the specific skill set that a COO brings to a company, such as strong analytical, organizational, and communication skills.