Time to claim the spotlight: COOs have potential to shape future success for organisations
- Emerging market COOs require a wider range of skills compared to their developed market counterparts
- Forty-nine percent of COOs thrive on today’s constant change and challenges
- Big data’ a powerful opportunity for the COOs to identify emerging trends and create new insights
- Forty percent of COOs aspire to be promoted to CEO within the next five years but have to prove their value to the business first
With the toughest job in the C-suite, Chief Operating Officers (COOs) who can combine deep operational knowledge with broad strategic insight are ideally placed to innovate and create future growth for organisations according to Ernst & Young’s DNA of the COO (pdf, 4mb) report. The report, based on a survey of over 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 last decade from an operational to a strategic role – with real power to change an organisation. Just less than half of surveyed COOs were headquartered in emerging markets.
The DNA of the COO in emerging economies
Running a business in emerging markets that have unique local challenges and often frantic growth rates requires an operations leader with quite a different set of priorities to their mature-market counterparts. COOs in rapid-growth markets:
- Are younger and increasingly female, with sharper business backgrounds
- Have a tougher role and more in need of skills development
- Have closer ties to the C-suite
- Are emphatic about adding value and supporting growth opportunities
- Pay greater attention to risk management and control frameworks
- Are closely measured on their ability to build, develop and retain talent
The economic prospects of slow-growth developed markets and newer rapid-growth markets have sharply diverged, with companies from around the world looking to the latter for opportunity. Therefore emerging market executives face a very different set of challenges. With companies seeking to capture growth in markets where per capita incomes and budgets are rising rapidly, COOs here need to be more entrepreneurial and focused on gaining market share and scaling up capacity. “Their role is therefore more strategic and externally facing than an equivalent role in developed markets” believes Hennie Human, Africa Advisory Director for Africa at Ernst & Young.
While taking advantage of significant growth opportunities, COOs in rapid-growing countries can’t ignore efficiencies. If they focus exclusively on scale and capacity, they will store up problems for later, because not enough thought has been given to how they can grow efficiently and sustainably.
COOs in rapid-growth markets that can combine the skills of managing growth and innovation with the ability to drive efficiency and change throughout their organisation will find themselves in a very strong career position. In many respects, they will have the edge over their developed market peers, simply because of the breadth of their responsibilities.
Overall, rapid-growth market COOs see a wider range of skills that they need to master as part of their job. At the same time, in recognition of this more challenging remit, they are also far more likely to have set their sights on the top CEO job. Over half (54%) believe they will make this switch in the next five years, compared with just 27% among developed market COOs.
General Insights from the DNA of the COO
The ability of a successful COO to extract structural clarity within today’s complex and fast-changing environment can be a clear benefit for any organisation looking to innovate and grow. However, combining the operational focus with a strategic perspective is not straightforward and 49% of the COOs C-suite peers strongly agree that it is one of the most difficult roles in the management team, requiring strong leadership to catalyse and implement the strategic agenda.
On the role of today’s COO, Hennie, comments, “Operations are increasingly of strategic importance addressing both the revenue and the cost challenges that organisations face. If you think of the critical role that the COO now plays in new channels to market, and in enabling revenue growth, then it becomes clear why the role is now so fundamental to the success of a business.”
Growing scope of COO role increases the complexity
With one in three respondents indicating the most striking changes to the role over 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 strongly agree that 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; harnessing the focus and capabilities of the COO to manage the pace of change, which continues to accelerate within the business environment.
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. While ‘big data’ presents operational challenges, it also provides a powerful opportunity to identify emerging trends and combine data sets to create new insights into the business, with 46% of COOs reporting that understanding analytical and predictive models as very important in their role.
A focus on analytics is also increasing the transition, within the COO role, away from a purely operational focus to one that also encompasses a forward looking, strategic perspective. 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 reports that highly developed leadership qualities and interpersonal skills are the most crucial attributes, yet many COOs (57%) recognise a need for improvement. This lack of leadership confidence and profile is reflected in the perceived value of the COO amongst the C-suite.
Hennie comments, “When asked whether a company would perform worse if it had no COO, only 51% of C-suite executives were very certain. Therefore COOs have more to do in order to prove their value to the rest of the organisation and for those who aspire to the CEO position, it is essential to make their input more visible to both internal and external stakeholders.”
When looking at the evolving role of the COO going forward, Hennie concludes, “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 have a clear opportunity to help define the strategy that underpins a CEO’s vision and then take the lead in implementing it. Perhaps more than any other executive, COOs have the power to change the organisation. And as companies look to an uncertain future, this is a skill that will remain in high demand.
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Following on from Ernst & Young’s successful integration in 2008 of 87 countries into one area from across Europe, Middle East, India and Africa (EMEIA), the firm has launched its Africa Business Center™ (ABC), which aims to enhance the effective and efficient links between its geographic reach and areas of expertise. The firm enjoys representation in 33 countries across Africa.
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