Why You Need a COO or Operations Manager

Many of our clients are reaching out to us at a time of growth. Either their operations have grown quite a bit or they are in the midst of growing. Many founders and CEOs ask us this question:

Do I need an operations manager? Or a COO?

We answer with a resounding yes. But there are a few questions: 

  • Why is it necessary to hire an operations person?
  • What is the difference between a COO and an operations manager?
  • How do I best structure the role of an COO or operations manager. What is part of the job description, what isn’t?
  • What qualifications should an operations manager or COO have?

You’ve come to the right place. Read on to get answers to these questions. 

Why is it necessary to hire an operations person? 

There’s a variety of reasons to feel the need for operations support. Usually, the underlying dynamics have to do with business growth.

More revenue means a bigger team, more coordination, higher complexity and an increased need for management.

Some of the most common reasons our clients mention are these. 

THE NEED TO STABILIZE BUSINESS OPERATIONS. 

Business growth might have brought your business to a point where you can’t constantly deliver great product or service

New people come on board, and your team gets bigger. Despite people having the right skills, it requires additional effort to coordinate more people.

The systems and tools that have brought you where you are not necessarily the ones that will carry you further.

Example: For a small B2B firm, it might be feasible to manage contacts in a spreadsheet or a contact database of the email program.

But soon enough, you will need a full-fledged CRM system to keep track of all communication and client interactions.

In this situation, you can’t ensure that all clients or customers are served equally well. This jeopardizes your business’ success and future growth potential.

Fixing inconsistent quality will require an additional pair of hands and a fresh view on the operation. Process improvement is necessary to bring the company back to what made growth possible in the first place: Good products and services. 

THE NEED TO SYSTEMIZE BUSINESS OPERATIONS. 

Similar in nature to the first reason, the need to systemize business operations might also be present without any pressing operational issues.

Your operations might be working without any major problems at the moment. But you know that the current operational setup won’t work when you execute on your strategy and grow.

A few signals that this is the case:

  • A high degree of informal communication ensures good delivery
  • Your success is hero-based, either because you or someone from the team goes the extra mile to make things work
  • You lack documentation and structure to onboard new team members
  • There’s no clear organizational structure or job descriptions
  • You have the above structures in place, but your team doesn’t use them

The good thing about this situation: You can work on improving it in a controlled way while your staff executes well on existing processes.

SHEER WORKLOAD PREVENTS THE CEO FROM WORKING STRATEGICALLY

This is a common reason to bring on an operations person. The CEO and founder is occupied with managing the day-to-day of the company so there’s no time left for building the company.

There are a few issues with this:

  • Wasted potential because no one on the company can work on seizing market opportunities
  • Stress and a risk of burnout for the CEO
  • Poor decision-making and availability of the CEO for the team (I need to wait for a week to get feedback from the boss)

Also business administrations in the classical sense of the word can keep the CEO busy. Taking care of tax, banking, regulatory or other administrative work is often times a good part of the operative tasks of the CEO.

The COO or Operations Manager can help by taking the operative workload of the CEO’s plate and enabling her to work strategically.

COO or Operations Manager – What’s the difference? 

If you plan to bring someone in that helps with operations, there’s still the question of what role exactly you need. To answer that, let’s see what the difference between a COO and operations manager is.

THE DIFFERENCE BETWEEN A COO AND AN OPERATIONS MANAGER

Here are the few dimensions that differentiate the COO from the Operations Manager.

(Please note: There are one billion definitions out there. The following is how we structure the decision-making for our clients.)

Scope

The COO has a wide and deep scope of work and is responsible for the actual work results. She is “running the show” for parts of or the whole company.

The role oversees a variety of functions on a high level (strategy execution). At the same time, she’s responsible for performance on a granular level, at least indirectly via her direct reports.

The Operations Manager’s is usually not as wide or as deep, focusing on a more specific task, either on methodological or functional level.

They will often be responsible to create the right work environment and implement the appropriate tool sets. The responsibility for the work results will still lie with the functional or divisional leaders.

Management and role in the organization

The COO manages business functions or divisions. This might include:

  • the actual value creation in the company, e.g. manufacturing or service delivery
  • administrative roles
  • financial responsibility (the COO can be paired with the function of CFO)

In the classic model, the COO is the number 2 in the business and is responsible to execute the CEO’s vision.

In this capacity, the COO operates as a form of General Manager. All department heads or other senior management would report to the COO. This classical setup is not found too often anymore. But it illustrates well how the COO is the integral part of the chain of command.

The Operations Manager on the other hand will either manage no team at all or an operations team. Their task is not to oversee business functions, but to create the operational foundation for the rest of the organization to work on.

Which of the two roles is best for my company?

Whether a COO or Operations Manager is right for you depends on your organization and on your goals. Here are the common cases.

I WANT TO GET RID OF DAY-TO-DAY OPERATIONS

Your company is somewhat mature, and you don’t reinvent the wheel on a daily basis? You feel like you want to hand over the day-to-day to focus more on strategy.

In this scenario, you should be looking for a COO. The COO as the classical number 2 will take over the actual execution work.

While this sounds great and easy, it’s very difficult:

  • You have to find the right person. Find a senior and smart person who can run the show and at the same hasn’t built their own company yet.
  • The relationship between you and the COO will be close and at the same time critical for the business. You have to find someone who completes your skill set and matches your personal preferences.
  • You have to transition into the new organizational structure: This is not only onboarding, but rather a change management process.

I WANT TO CONTINUE OR ACCELERATE COMPANY GROWTH BUT NEED TO IMPROVE MY PROCESSES AND STRUCTURES

Your business is working well, but you understand the productivity might deteriorate as you grow further.

You want to roll out collaboration and management structures step-by-step, and need someone to own this part of the company.

The solution for you will be the Operations Manager. This role will create the relevant infrastructure for you (think: SOPs, KPIs, Collaboration tools, regular meetings etc.).

And additionally, they’ll maintain all these business systems. That’s usually where the limited capacity ends all honorable plans to improve operations.

I WANT TO FIX OR STREAMLINE MY EXISTING PROCESSES.

You have said operations problems or feel that you need to streamline processes (beyond the tools and methods that the teams use).

You know that the efficiency and effectiveness in the company could be developed to a new level. But there is no one in the team with the knowledge, ability and capacity to execute on it.

In this case, the appropriate choice between COO and Operations Manager can be a function of the size of your company:

  • For smaller, less complex teams, let’s say up to 30 employees, an operations manager might take over that job. The position in this scenario might also include functional responsibilities, like managing functional departments beyond Operation Management.
  • For larger, more complex organizations, a COO will be the better choice. The larger complexity calls for a more senior leadership position. Future growth will make a COO necessary anyway.

Now that you understand which profile is best for your company, let us examine what the job profile of each role is. And what the requirements for successful applicants are.

Lastly, you also have to consider cashflow and compensation: The smaller of a budget you can afford, the more likely we’re talking about an operations manager.

Job profile and requirements for the Operations Manager

For the job description of the Operations Manager and the requirements, consider the following:

  • The job is a management or senior management position. It depends on the size and structure of your organization and the importance you want to give the function.
  • A potential candidate must have methodological experience, e.g. has set up a process documentation for other companies before. Industry-specific know-how is a plus, but it shouldn’t be a show-stopper if a promising candidate doesn’t know your specific business. Experience in a related field will be helpful of course.
  • Successful operations managers need knowledge of human resources, general management, operational excellence.
  • They need to combine management know-how with a good technical understanding
  • Strong perseverance is a must. The candidate must be able to push through resistance.

By the way, the job is often also called business operations manager or business manager.

Today you’ll find a variety of “functional operations managers”. They are not operations managers in the classical sense, but rather are responsible for operations of the mentioned field. Examples are sales operations or revenue ops.

Contrary, you will find operations heavy roles that don’t bear the title, e.g. inventory management or supply chain management. These roles are also types of functional operations management roles.

Job profile and requirements for a COO? 

In comparison, please find the role and required qualifications of the COO here:

  • All of the skills of the Operations Manager
  • The COO is a Senior Leadership or General Management position. Where you place it in the org-structure depends on the size and structure of your organization. Also, the importance you want to give the role determines the reporting lines.
  • Given the performance responsibility, industry knowledge and quite expansive experience is a must
  • The COO must have great people management skills

Last but not least…

A suitable career path and matching work experience is more important business schools degrees and titles.

After all, you’re looking for a person that gets into the weeds of your operations. Business school know how about strategic management is not the first thing you’re looking out for. Past job success in comparable roles is.

This hire is important. Budget it accordingly.

Change Management and Onboarding

As mentioned before, a good change management and onboarding is necessary to get the most out of your new operations person.

Consider that the Operations Manager needs your backing in the organization. Often, she won’t have a team or formal power. So you must make it clear that everyone in the team know that her work is important to you.

Bringing on a COO is even more complex endeavor. You are not just adding someone to the team, you are changing reporting lines.

When the new COO takes over some of your direct reports it will put more distance between you and the team. Some of the people you previsouly worked with directly won’t like that.

Try to focus on the benefits that the team will see:

  • faster response time
  • a better flow of communication and
  • more attention for their topics.

Regardless of how you structure it, be mindful about the emotional and human changes that a new reporting structure will bring.

We’d love to hear about your experience with operations roles!

Best

Benjamin

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