As independent advisory firms have grown, many look less like traditional small businesses and more like traditional large businesses. This is particularly true with the emergence of executive positions, such as CEOs or chief operating officers.
We have advocated for the need of advisory firm owners to hire a full-time CEO to focus on devising and then implementing a client-centric strategic plan for the growth of the business. In other words, they are working on the business instead of in the business.
The COO position is an equally important executive position, and there’s much debate on when to hire a COO. With advancements in technology and the operational experience (OX), we recommend not having a “true” COO position until you pass $10 million in annual revenues. However, many argue that advisory firms need the COO position long before they hits that revenue marker.
To be fair, there is a lot of confusion among advisory firms (and little good information written) about what a COO really does. This leaves advisory firm owners believing they need one earlier than necessary.
Over the years, our firm has done much leadership development of executive positions, including the role of CEO, COO, chief financial officer, and chief marketing officer. Each of these positions are responsible for leading their respective business areas.
Their primary goal is overseeing the firm’s effectiveness in a particular area and looking toward the future of this activity as the business grows, while creating a strategic plan for enhancement in the specific field.
In terms of the COO position, we find many firm owners mistakenly believe a COO will run the operations of the firm. Their job is to oversee the operations of the firm, and there is a big difference between running the operations and setting the strategic direction for “how” the operations of the firm will run.
The COO sits on the executive team and works with other executive officers to create a strategic plan for the firm’s growth. The COO then takes the strategic plan of the business (often outlined by the CEO) and layers on a strategic operational plan and experience.
Then they oversee the implementation of that plan, ensuring that it coordinates with the strategic business plan, as it relates to the firm’s operations. The COO then reports their progress, challenges, suggestions and changes back to the CEO.
Thinking vs. Doing
Executive positions are thinking positions. In other words, good executives spend much of their time in the business thinking about how things can be improved and then creating plans to get it done. We find many advisory firm owners mistakenly believe the COO function is doing the actual implementation work.
In a thinking mode, a great COO builds the strategic operational plan and then has a team of people implements all its parts, including ensuring that the various processes and procedures of the company are integrated into the firm’s technology.
A true COO is being paid for his or her ability as a strategic thinker, not as an implementer. The implementation work of the strategic operational plan is done by either an operations manager and/or a director of operations (sometimes called a VP of operations).
It’s important for firm owners — and their CEOs — to understand that the COO roll doesn’t involve operational management work; it involves strategic creation, innovation and planning of the operations work — in particular, the creation of the operational experience.
Adding a COO to your organization can dramatically enhance the profits, efficiency and scalability of your advisory organization.
But here’s the rub: If you simply want a person to get the operational work done, you don’t need a COO. You need an operations manager and/or director of operations — the implementer — not the strategic creator and innovator of the operational function.
Therefore, before hiring a COO, ask yourself if you want an implementer or a strategic thinker? In most cases, advisory firms typically just need the implementer.
Do yourself a favor, build out your implementation team and hire an operational manager or a director of operations before you hand out the COO title.
If you do it right, through your mentoring and leadership development, that operations manager and/or the director of operations will evolve into a great strategic thinking COO as you cross over the $10 million revenue mark.