Business owners can use a strong second in command to take market share from the competition. The proper chief operating officer is the performance-enhancing drug of your company.
As a rule of thumb, a growing business should have a full-time COO when it hits $2.5 million in revenue. By then, companies often cannot scale up without adding employees. Some owners find by then that much of their time is consumed handling day-to-day administration and managing teams.
All these voices distract the owner, often the chief executive officer, and lead the company to miss opportunities. Meanwhile, those distractions also cause expenses to increase.
The COO can be a bridge between the CEO and the staff. The CEO is the person who sets the vision and plants the seeds of projects designed to achieve that aspiration. The COO finds the plants that aren’t being watered and nurtures them. That’s how the company grows.
When hiring a COO, don’t limit yourself to your industry. A report by the Harvard Business Review found that COOs “who have developed the tools of their trade in one company can usually apply them to good advantage in another, even in a dramatically different industry.”
Your COO must keep up with best practices. Unfortunately, there is a dearth of COO support.
My company, Berkshire Money Management, has found value in the COO Alliance and PFI Advisors. Most likely, you won’t be attracted to PFI Advisors, as it’s focused on COOs of wealth management firms. But, you should be.
PFI is smart enough to market toward a niche, but business is business. When BMM has an operations issue, it’s not a wealth management problem, it’s a business problem that gets solved with business solutions.
Some of those solutions are found in the PFI Advisors interview with BMM’s COO, Natalie Wheeler at pfiadvisors.com/the-coo-roundtable-episode-31.
Given the labor shortage, let’s start with the hiring problem.
As Natalie puts it, “We’re so active in the community it has not been difficult thus far to find amazing staff. … I am working on an internship program to launch next year to give local students the opportunity to shadow our talent and fall in love with the investing world. … [A new employee is] usually a referral or someone who knows someone. … As we grow, we may need to utilize another platform, but right now just being out in the community is what does it for us.”
As you push past the startup phase, you’ll find that many of your clients ask for similar things, and you’ll be able to build products and services designed for that group. The COO sifts through the data to identify the ideal client and tries to attract more people like them. This information is used to build standard operating procedures. SOPs lead to scalability, worker expertise, improved profit margins and a better customer experience.
The goal of the second in command is to improve operations, which impacts the client experience. The COO collaborates with customer-facing employees to discuss the transaction and onboarding involvement. Theoretically, the CEO has been doing that all along. However, you’ll find that employees often give candid responses regarding challenges when they aren’t face-to-face with the person who signs the paychecks.
COO-employee conversations are not limited to customer-facing employees. Nor are they limited to just the end-user experience. There is much more connective tissue between the CEO’s vision and the point at which someone buys from your company.
Over time, every industry changes, and successful companies change along with it. Guiding the company is the role of the CEO. The COO communicates with employees to redefine changing roles and responsibilities.
Employees should know how their job connects to the customers. And owners should also know what the employee likes and doesn’t like. It’s an old-school way of thinking that if an employee is getting a paycheck, then it doesn’t matter if they enjoy their job or not. Happy employees are productive, easily retained and take on more responsibility.
The COO determines what the company should not do. She may find that the business is best served by focusing on core functions and outsourcing other tasks. Outsourcing is a viable alternative to hiring more employees, which requires providing office space, benefits and training.
For example, Dan is the COO of a manufacturing firm in Worcester and relies on AIM HR (the human resources subsidiary of Associated Industries of Massachusetts) for talent management, training, compliance and compensation analysis. On Phantom Concept’s website, you can see examples of how local companies such as Lenco Armored Vehicles and Smith & Wesson outsourced marketing expertise.
Outsourcing allows the COO to focus on how a company best serves clients and use that information to drive organic growth.
For example, Natalie meets with client-facing employees to best answer the questions, “What is driving clients to use us?” “What could help?” “What maybe isn’t working?” She determines if we should direct more resources to support or augment a service. Or if we should terminate a service line because clients don’t see value in it.
The COO walks a fine line as she finds a balance between profitability and growth. Owners often want to close as many clients as possible and worry about the pain points when they occur. The COO will point out that you can’t win those new clients unless you have the infrastructure to attract their attention and service them.
As Natalie points out: “I can’t help people develop without growing. … [We need to] make decisions that will pull our income back a bit to create capacity to grow a bigger, more valuable business that will create more income. … We’re reviewing … what’s best for the firm, what’s best for our clients. To grow, we need to make sure our team’s talent is utilized and in its best capacity while making sure we’re not overspending on things.”
Owners have as many hours in the day as those competitors who are accomplishing twice as much. Getting more done isn’t magic; it’s utilizing a great COO.