Operational executives are less prevalent in the Fortune 500, but that doesn’t mean companies can ignore operational excellence.
If there’s one person whose role you could safely assume is reasonably secure, it’s probably the CEO’s second-in-command. The statistics around chief operating officers, however, suggest otherwise.
According to the 2016 Volatility Report from recruiting from Crist Kolder, which looks at executive turnover and retention across a variety of senior levels, there has been a 15% decline in the number of companies that employ a COO over the past 10 years. There is some differences across sectors – technology and industrial companies are less likely to have a COO in place, while nearly 40% of service companies utilize this role – but the overall trend seems clear.
“The COO’s role continues to diminish,” Peter Crist, chairman for Crist Kolder, told the Wall Street Journal. “The vacuum in that role allows the CFO’s prominence to continue.”
To some extent, this makes intuitive sense. “Operations” can encompass a wide spectrum of the business, from manufacturing and logistics to sales and marketing. The goal for a COO, in part, would be to ensure everything in the organization runs efficiently and effectively. The bottom line for CEOs, however, is the same bottom line that is monitored and reported on by CFOs.
As they gain a greater foothold in not only assessing the current state of revenue and expenses but forecasting how capital can be effectively allocated for maximum return, CFOs have a natural advantage in tying operations more closely to business performance. That’s not to suggest this is at all easy to do, of course.
In fact, a recent article in the Economic Times of India put a spotlight on how CFOs are taking on many of the things that might have once preoccupied the COO and several others on the senior leadership team:
It has almost become jugglery. Raising capital, dealing with investors and lenders while understanding the evolving nature of the business and hunt for opportunities to grow has become the new mandate of CFOs. This needs a lot of operational and managerial role skills that come in beyond accounting.
If the COO role is on the way out, it’s obviously not because there isn’t value in what they’ve historically done. In fact, it was back in 2006 that the Harvard Business Review looked at some of the key challenges and concluded that one of the problems is that COOs’ job descriptions haven’t been well-defined.
Those of CFOs, meanwhile, are being rewritten before our eyes as technology changes the impact they can have. Ultimately, what’s important is not which titles remain in the C-Suite. It’s what those who make up that team deliver back to the business.