January 12, 2023 How COOs Can Drive Strategy in Tomorrow’s Operations

Strong COOs should understand their unique role in leading their organization in the execution of a distinctive strategy.

By Darryl Piasecki

Today’s businesses face a extraordinary challenges ranging from managing supply chain challenges and impacts of inflation, to stewarding employee wellbeing amid the “Great Resignation.” Chief operating officers (COOs) stand out among the C-suite by the increasing prominence of the role in recent years to drive profitable growth and operational resilience during these periods of uncertainty.

Until recently, COOs had decreased in prominence due to the appearance of flatter organizations and more hands-on CEOs. In 2000, 48% of Fortune 500 and S&P 500 companies had a COO, but by 2018, that number had dropped to an all-time low of 32%. Today, the spotlight is back on this ever-changing role, and it has made a resurgence, with 40% of the Fortune 500 having a COO. There are a number of reasons for this, including new/competing demands on the CEO, and an increasing complexity of operations due to evolution of technology and increased uncertainty. The role has evolved to link closely with other functions across organizations, effectively making the COO the “ultimate connector” and link between the strategy and the implementation of change.

While some COOs may be brought on for specific mandate, scope, or transformations, and others may be heirs apparent to the CEO, they do have one massive task in common: they must have a clear view of what creates distinctive value with their products and services in the market, and how that cascades through the operation.  At the same time, COOs need to understand and manage dynamics and requirements of a broad set of stakeholders: other functions (e.g., sales, finance, IT), board, employees, and customers. 

Engaging Effectively with Boards

Today, the role of the operations head is among the most complex roles in the organization in terms of agendas and interests. As such, COOs—and their CEOs—should ensure that their exposure to and engagement with the board of directors consists of regular, focused meetings and problem-solving sessions rather than scripted presentations—having equal stature with other leaders such as the CFO or CMO.

In a post-pandemic world, most boards have a greater appreciation of the need to collaborate with top-management teams on new and improved ways of working. In a McKinsey survey, more than 90% of respondents reporting an effective collaboration between the board and management say their board’s response to the COVID-19 crisis was effective—compared with only 60% of all other respondents. COOs should seize the opportunity to raise the operations profile to the board and communicate a holistic picture of the function to all stakeholders.

Managing Teams and Talent

COOs must build, develop, and retain a strong operations team. Building a strong operations team is one of the top recommendations among successful COOs. As the COO, it’s not about running the operations yourself. Several industrial COOs have emphasized this point: “the team is in control,” “find the best team and lean on them.” This includes rapidly assessing the current team and quickly making the necessary changes to the team structure. With a strong team in place, the COO can focus on those items that only the COO can address. 

Likewise, the COO should orchestrate the development of future operations. This includes deliberately investing in the employee experience, given ithe current labor environment of the “Great Resignation”. When considering the development of a successor to the COO role, this may include temporarily “giving up” a strong operator for them to get experience in a more market-facing role, setting that leader up for the cross functional stakeholder engagement in a COO role.

Driving Operations Forward

Strong COOs have a thorough knowledge of their customer value proposition and what it will take to successfully deliver on it. Close collaboration between functions — especially sales and marketing—will not only drive efficiency, but help deliver a better customer experience and increase customer satisfaction and loyalty.

However, today’s volatile environment makes achieving operational excellence much more difficult — highlighting the need for COOs to not only be agile and responsive on many fronts, but also to be better at anticipating and mitigating (or capitalizing on) disruptions. This requires a connection to the marketplace, understanding competitive dynamics and operations, and an awareness of developments in innovation and technology. 

Preparing for the Future

In our increasingly dynamic and connected world, the role of the COO is more visible — and essential — than ever before. Today’s COO is more than a great operator; they have a strategic view of how the operation can deliver on the strategy, and how it interacts with other functions to drive a compelling — and resilient — value proposition in the market.  The skills of the past aren’t enough. COOs must continue to develop new capabilities and strengths, working outside their comfort zone, to take on the complex tasks that await them.

Darryl is a Managing Partner within McKinsey & Company’s Operations Practice. He joined the firm in 2008 after serving as a F/A-18 weapons systems officer in the U.S. Marine Corps. He has led strategic and operational engagements for senior leadership teams in a variety of sectors, including manufacturing, chemicals, transport and logistics, consumer, and financial services.

For more information and further research, please visit: https://www.mckinsey.com/capabilities/operations/our-insights/stepping-up-what-coos-will-need-to-succeed-in-2023-and-beyond

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