COOs more relevant than ever, but struggle to win support of executive

Friday, 2 November 2012 — Forty per cent of Chief Operating Officers (COOs) aspire to be promoted to CEO within the next five years, according to Ernst & Young’s DNA of the COO report released today.

However, only half (51%) of C-suite executives believe that a company would perform worse if it had no COO. Therefore, COOs have more to do in order to prove their value to the rest of the organisation.

The report, based on a survey of more than 300 senior operational professionals globally and 43 in-depth interviews with C-suite peers, highlights how the role of the COO has changed dramatically over the past decade from an operational to a strategic role – with real power to transform an organisation and drive shareholder value.

Ernst & Young Head of Performance Improvement, Advisory, Phil Harkness said the COO’s role was critical in driving productivity and bringing a cross-organisational view to both strategy and operations, especially given current economic conditions.

“Given the backdrop of an increasingly challenging and rapidly changing marketplace, if you think of the critical role that the COO now plays in enabling revenue growth, then it becomes clear why the role is now so fundamental to the success of an executive team and its business,” Mr Harkness said.

“COOs will at times need to crash through internal barriers and silo cultures to drive productivity and efficiencies to get the best results and in turn, value for shareholders.

“And for those COOs who aspire to be CEO, it is essential to make their input more visible to both internal and external stakeholders,” Mr Harkness said.

Mr Harkness said the operational focus with a strategic perspective was not straightforward with almost half (49%) of the COO’s C-suite peers strongly agreeing that it is one of the most difficult roles in the management team, requiring strong leadership to catalyse and implement the strategic agenda.

“Operations are increasingly of strategic importance to business taking in both the revenue and the cost challenges that organisations face.

Mr Harkness said COOs who could combine deep operational knowledge with broad strategic insight were ideally placed to innovate and create future growth for organisations.

Growing scope of COO role increases complexity

With one in three respondents indicating the most striking changes to the role during the past five years being increased complexity and a wider set of tasks, it is encouraging that 60% report this is fundamentally what makes being a COO worthwhile.

Indeed, 49% of respondents said they thrive on the constant change and challenges. Beyond the traditional operational demands being placed on the COO, many have become the ‘go-to’ person for handling any larger business transformation initiatives.

“New technology has played a significant part in this acceleration, with COOs now facing an ever increasing volume of data to analyse and respond to,” Mr Harkness said.

Mr Harkness said while ‘big data’ presents operational challenges, it also provides a powerful opportunity to identify emerging trends and combine datasets to create new insights into the business, with 46% of COOs reporting that understanding analytical and predictive models as very important in their role.

“‘Big data’ is just one of the powerful opportunities COOs have at their fingertips to identify emerging trends and create new insights.”

Within the COO role, a focus on analytics is also driving the transition from pure operations to a a forward looking strategist. Seventy percent of their C-suite peers consider the ability to participate in strategic discussions a vital skill for the job, along with other abilities, such as delivering business transformation effectively.

Leadership skills are vital, but confidence is lacking In order to deliver key elements of an organisation’s strategy successfully, like business transformation, clear leadership is essential. Eighty-seven percent of COOs report that highly developed leadership qualities and interpersonal skills are the most crucial attributes for their role, yet many COOs (57%) recognise a need for improvement.

Rapid-growth markets: shaping tomorrow’s leaders When looking ahead, just 40% of COOs polled aspire to be promoted to CEO within the next five years, however among rapid-growth markets respondents the proportion increases to 54%.

With many COOs in developed markets focused on greater operational efficiencies to defend their company’s market position, rapid-growth market COOs have a more enviable priority list, including the need to build capacity, scale up production and ensure that the right resources are in place to capture growth opportunities.

Mr Harkness said the COO’s agenda demanded a highly entrepreneurial and strategic mindset, along with the ability to introduce efficiency and process optimisation so that growth could be sustainable.

“The days when COOs could focus their attention on the nuts and bolts of operations are fading. Today, mastery of operational issues is a given, and COOs now have a clear mandate to help define the strategy that underpins a CEO’s vision and take the lead in implementing it.

“Perhaps more than any other executive, COOs have the power to change the organisation especially in challenging times. And as companies look to an uncertain future, this role is becoming more critical to the executive than ever before,” Mr Harkness added. For more information and to download the report, visit www.ey.com/dna-coo.

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