On Being a First-Time Small Business COO

Many small companies grow to the size where the owner can no longer run the business entirely by him or herself. In some cases, the owner never realizes that the business is beyond a single executive/manager and the consequences are dire. In others, the owner is cognizant of the need and recruits an experienced COO, or perhaps promotes from within.

In the latter case we have a newly minted COO (or VP Operations, or some other title) who has been with the business for a while and knows it well but is now asked to take on an executive role for which they might not have a great deal of experience.If you are in the latter category, here are four recommendations to help you succeed.

Know the Owner’s Mind: It is crucial in your new role to understand how the owner thinks about the business and what their expectations are for you. The real challenge to the new COO is to become the crucial link between strategy and execution and in order to do so you must understand both. Frequent well-planned meetings are a must. Some of the meetings should focus on strategic subjects and others on operational detail.

If you have been working at the business in a different capacity, then you should be able to leverage your knowledge, but do not presume to understand the owner’s thinking without serious, ongoing discussions.

Know the Business/Financial Model: Understanding the Business/Financial model comes down to a simple concept: do you know how the company makes money? Actually uncovering the model may not be so simple. First, you must understand what your product or service is and why the client buys. In other words, how does the company create value for the client? Second you must have an intimate knowledge of the business processes that create that value. Finally, you must understand how the business process affects business finance, in particular cash flow.

Even if you have been working at the company for an extended period of time, as a new COO you must gain process knowledge. Review any documentation, if it exists. As is often the case with small business, documentation will not exist, so work quickly to document basic processes as soon as possible. In addition, study the company’s financial statements so that you will understand how the financial model is affected by business process.

Set Up Feedback Loops: Once you know the crucial information that you need to understand operations and finance, set up feedback loops that will continuously provide you with the information that you need. In addition to information from operations and finance, the third feedback loop that you will want to establish early on is one that reports to you on what is happening in the marketplace. You need to know how the current economic environment is affecting the business, as well as what your competition is up to.

Find a Mentor: If you are new to the COO role, particularly in a small business, finding a more experienced person to mentor you will help you establish yourself in your role. Use your business contacts and network to find someone with sufficient experience to guide you as you grow into the role. Even if you don’t currently know a COO, you would be surprised how many of them would be willing to serve as a mentor. Work at finding someone with whom you can communicate well and who is willing to work with you on a regular basis.

If you find yourself in the position of being a new COO in a small business, you have exciting times ahead of you, so step up to your new reality with enthusiasm. Welcome to the world of the COO!

Innovation: Ideas before Technology

Recently my wife acquired an iPad. This was her first Apple product and as she was putting it through its paces, I thought about the difference between my iPhone and the first smart phone I bought back at the dawn of such technology. That phone was so clunky and hard to use that I discarded it after a couple of months and did not return to a smart phone until my current iPhone.

I thought about the fact that no matter how great the technology, the idea had to be solid in order to produce a successful device. Ideas do come before technology. All of this brought to mind a time when I was forced to turn this concept on its head.

Back in the early ‘70s I was a high school teacher and French was my specialty. The concept of Oral-Aural language education was in its infancy, but the emphasis on teaching students to listen, comprehend and speak was on the ascendant. The problem for me was that I was teaching in a school that had no technology, no language lab.

For the first two years of my teaching career I struggled. I taught classes of 35 to 40 students and during a 45 minute period it was almost impossible to engage each student for more than a minute. Needless to say, although they could conjugate verbs with the best, my students did not speak French very well.

After my second year, I realized that I had to change something in order to improve my students’ ability to listen, comprehend and speak. During summer vacation, an idea came to me. Improving the results meant changing one fundamental idea: the teacher must be at the front of the class teaching.

The following school year I came to classes with a different approach. Rather being up front for the entire class, I would only stand in front to teach a new concept, after which the students would pair off and work with each other on exercises. Most often the exercises were in the form of questions and answers. I created the materials that they would use to work together.

Then, I became a resource for the students to consult with if they had difficulty. Rather than spend a minute speaking with me, the students spent 35 minutes speaking with each other. The students in each class became a “virtual” language lab, all with no technology!

At the end of the first year, I brought a native French speaker to class to test out the results. He was as amazed as I was at how well the students could carry on conversations about the various topics they had learned during the year.

The lesson that I brought away from this experience was an important one. While technology is important and can change the world, without good ideas as the foundation, technology will be found lacking.

I’ll Just Do It Myself

We have all experienced it in our small business, time is tight and a crucial task must get done. You have explained it (you thought) to an employee but the task is not getting done. Or worse, it is not done the way that you want it done. In order to cope with the frustration, you decide that it is just easier to do it yourself. Then, you wonder why you are working 16 hour days, staying longer than any employee.

I am sure that most of you have been in this situation on many occasions. The problem is that if you can’t find a way out of it, not only will you continue to work those long hours, but it will be very hard to grow your business. You just can’t do everything yourself! What to do? Here are three ideas that may help: concentrate on your strengths and delegate your weaknesses, document well any process that you will delegate, outsource any business process that is not in your businesses’ core competencies.

Concentrate on your strengths and delegate your weaknesses. We are all better at some things than others. Some of us are detailed oriented and well organized, while others work well with the overall themes and direction of a company. The former will probably be better at operations and the latter at setting strategy and guiding marketing campaigns. One of the keys here is to completely honest with about what you do and don’t do well. It is hard to assess yourself by yourself, so don’t be afraid to call on a trusted advisor to help.

A useful exercise when you are trying to determine your role in your company is to create a diagram of the “buckets” or areas of work that you do. You might be surprised by what you find! Once all of your buckets are defined and the activities they include are outlined, you can review more objectively what you are good at and what might be delegate. Doing this exercise with a trusted advisor will add to the depth of understanding that you may gain.

Document any process that you will delegate. Since you have created most of the processes in your company, you know it really well. However, our tendency is to assume that when we explain a process to another, they will catch the nuances without a great deal of detail. I once helped a business owner that thought that a 15 minute explanation of a process that had been honed over several years was all that was necessary. Proper documentation, including the steps of the process, perhaps a diagram of the process flow and a list of the meaning of the terms used form the basics.

There are many useful tools to use when documenting process. Personally, I like to use the different tools that originated in lean concepts are helpful.
Outsource any process that is not among your company’s core competencies. In a small company that is starting to grow, there are many processes that are not among the core competencies. As the company grows, it becomes harder to perform some of these processes with internal staff that are not specialized. Payroll, human resources and benefits come to mind for many companies.

Using these three ideas can help you delegate work more effectively and find more time for yourself.

What is the Role of the COO?

Recently, I came across an article (see the reference below) that supports the idea that in general, the role of the COO is misunderstood. The authors of the article contend that the role of the COO depended largely on the CEO and posited 7 different potential roles for a COO (or any operating executive) depending on the CEO and his skills, abilities and personality.

I found this interesting, as a colleague had posited a different idea, that the Role of the COO was dependent on the nature of the business and in particular, on the ultimate responsibility of the COO for the overall operations of the company. The member pointed out that while the COO often had direct reports that were in charge of different aspects of operations, since the COO was ultimately responsible for those operations, that fact would shape the role of the COO.

The basic theory of the article mentioned above is that there are 7 potential roles for the COO:

1. To implement the CEO’s strategy;
2. To lead a particular initiative, such as a turnaround;
3. To mentor a young, inexperienced CEO;
4. To complement the strengths or make up for the weaknesses of the CEO;
5. To provide a partner to the CEO;
6. To test out a possible successor;
7. To stave off the defection of a highly valuable executive, particularly to a rival.

Since the premise of the article is that the role of the COO depends on the CEO, it should not be surprising that that only role 1 and 2 above seem to relate directly to operating a company. The article itself points out that many of the COOs and other operating executives that they interviewed did not always focus on the day to day operations of the company, but often had other significant tasks to pursue.

On the other hand, as my colleague pointed out, the type of business and the operational realities would also seem to weigh heavily on what the COO must undertake in his or her role. The day to day operations of a manufacturer, distributor or service company differ greatly. The size of a company would have a major impact on what a COO is doing on a daily basis. In a smaller company, the COO is more likely to be a, dare I say “hands on” manager than in a larger.

In either case, Bennett and Miles do point out that in their research, the success of the COO depends to an extraordinary degree on how well the CEO and the COO develop a sense of trust, using the metaphor of “having each others back”. The relationship of mutual trust is often difficult to attain for various reasons both internal to the relationship as well as what the authors refer to as “Those seeking to drive wedges” between the two.

Personally, I believe that both the authors of this article and my colleague have uncovered different aspects of the COO’s role in the modern corporation. On the one hand, the relationship of trust between the CEO and the COO is vital to the COO’s success, but we cannot minimize the how the nature of the responsibilities of the COO will also color the role to a great extent. We will look at both aspects of the COO’s role in future postings.

In the meantime, I would be very interested to hear from the COO’s and other Operating Executives in the audience: what is your experience in your role as Chief Operating Officer?

Second in Command, The Misunderstood Role of the Chief Operating Officer, Nathan Bennett and Stephen A. Miles, Harvard Business Review, May 2006.

State the Benefit of Your Business Clearly

This past weekend my wife and I had the good fortune to see a live production of Garrison Keillor’s A Prairie Home Companion. Garrison and his crew are very funny people, sometimes because they are way out on the edge and others because they are true to point when making fun of American culture.

One of the skits they did was about a mythical organization of English teachers counseling a young job seeker who bordered on the hysterical. After appropriate coaching, the young woman could string together modern business jargon with the best. I suppose I laughed immoderately because the young woman’s answer to the dreaded “5 year” question sounded scarily familiar.

Whether you are the executive of a large company, an entrepreneur or a job-seeker, it is important for the health of your business, startup or job search to be able to express what you do clearly and in particular, to state the benefit clearly. People don’t really care that much about titles or past history; what they want to know is how your intervention will benefit them. The 3 things to remember are: tell a good story, have the right to tell your story and state clearly the benefit of what you or your company does for the client.

Tell a good story: a good story always has a proper structure; a main character, a beginning, narrative, conflict and resolution. Many of you remember that from English Lit 101. When speaking about your business, your business is the main character and the narrative is about your potential client. The conflict is the problem or area of pain that the potential client is experiencing and resolution is how you will help the potential client overcome the problem.

If told well, a good story will reverberate with the listeners who hear their own story. In the case of a potential client, a good story will lead them to say, “That person really understands what I am going through!”

Have the right to tell the story: a good story exudes authenticity. In order to tell a good story you must have a real connection to the story. A story that is truly your own will have substance to it; you will have the authority about you that people will respond to! Having the right to tell the story will enable you to create a vivid image that will be fixed in a person’s mind.

State the Benefit Clearly: always state what you or your company does in terms of the benefit. If the mission of your company is to help other companies improve their operations and lower costs, you might express the benefit be saying, “We help companies improve their bottom line”, for example. A person that I met recently, who had years of experience as an office administrator explained that her benefit was to “Analyze and organize to make you more efficient.” Of course, you must avoid the trap of falling onto the latest business jargon. When you indulge in jargon, you risk having the listener not understand what you are talking about, and feeling that you may not know either.

Following these three tips can help lead you down the road to clarity!

Focus on What is Important (On Being a Bulldog)

I have heard it said that other people often notice our qualities before we do. The story of how the COO’s Bulldog name came about may be a case in point. When a former client of mine was giving a reference, he answered two questions about me in a curious way according to the person seeking the reference. When asked about positive aspects, the former client answered, “Kevin is a bulldog, he puts his teeth into a problem and doesn’t let go until it is fixed.” When asked if there were any downside, the former client answered, “Kevin is a bulldog, he puts his teeth into a problem and doesn’t let go until it is fixed.”

Now, I would not be honest if I did not admit that I have a certain stubborn streak as described by my former client. Honesty also has me admit that without a lot of experience and several great mentors over the years, I have honed a natural stubbornness into an attitude about business that has been very useful over the years. Here are four things that I have learned over the years of being a bulldog.

Know what is important
Whether you are taking up your personal goals and objectives or those of a large corporation, you must know what is important in order to achieve those objectives. In particular, it is important to know what your part is in achieving the objective. If you are a business owner or executive, you must also understand the proper level of involvement. Even in a small company, jumping in too low a level to micro-manage will be counter productive. A key personal response to watch out for is the temptation to “Just do it myself!” That is usually the sign that someone else has not received enough information or training.

Resist the temptation to be distracted
Novelty is enjoyable, especially when you are trying to concentrate on something that is important and perhaps difficult, or that may take a great deal of concentration. The presence of the Internet on our computers makes the challenge even greater. I have found that working at a measured pace helps to overcome distraction. In addition, when you are searching for the root cause of a problem, do not create a false finish line by saying that you must be done by a certain time. Problem solving may take longer than you originally thought and by being prepared for that you can reduce outside distraction.

Trust your experience and instinct
After a couple of years in the Real Estate profession, I developed a little voice that would say to me. “Be careful, you could have a problem with this!” It often came to me at times when I was making a decision based on the feeling best expressed as “Nah, that could never happen!” Problem was it often did. I soon learned to listen to that little voice and take it into consideration. I’d like to believe that in addition to gray hair, experience can lend a bit of wisdom.

Don’t be afraid to speak the truth plainly
This is the most difficult part of being a bulldog. Not everyone that you run into is willing to listen to the truth plainly. Some people are easily hurt or insulted when they hear the truth. This I understand. That is why I am always willing to take the blame for any upset that I cause by speaking plainly. An apology goes a long way. Also recall that the purpose of speaking the truth plainly is to improve a situation or solve a problem. You should always speak the truth with that spirit, not one of trying to get at someone for other reasons.

Not everyone is a bulldog, but for those of us that are stay focused on what is important and bulldog away!!

Who’s the Boss?

A while back I participated in a discussion with a varied group of professionals that gather weekly for discussions on interesting or pressing business subjects. The topic was about CEOs: what are the top three characteristics of a good CEO? Needless to say, we came up with many more than three; my observation being that are too many companies with top executives who thought their title was Chief EGO!

One of the characteristics that most agreed on was that the CEO had to know both how to choose good people to work for them and how to delegate work to those people. Hiring good people is not easy to do, but not always for the reasons we think. One participant noted that there are many good people waiting to be hired, but CEO’s were not good at hiring them. His comment reminded me of an occasion, quite a while ago, when I needed to hire two really good people, and both positions were filled with my former bosses! Here is how it happened.

I had been working at a software company in Montreal during an economic downturn in Canada. The COO had sent out a memo that the company needed to decrease the number of employees, but that it would be done through attrition for the most part. Of course, two weeks later my manager and I were called into the Director’s office and received our pink slips together!

My manager and I went in different directions, and in a few months she was hired by another company. She introduced me to one of her colleagues, and after a few weeks of discussions, he hired me to work at the new company. Unfortunately, before I ever started, he was given notice, as was my former manager. I did not even get a chance to start the job.

About six months after this, I went to work for a major Canadian IT consulting company, a subdivision of one of the largest telecommunications companies in the world at the time. I was part of the new “Y2K” division of the company. We had many clients to service and needed to ramp up quickly. During the subsequent 18 months, our business unit was to grow from 16 to 175 employees. As a member of the management team, I needed help and I needed it fast.

I thought back to my two former managers, one of whom I had not even had a chance to work for. I respected them both as very competent in our field as well as excellent managers. As chance would have it they were both still in transition at the time and I was able to hire them! With two great people to help lead my business group, we began to rock and roll as we ramped up. Within 12 months, both of my hires were promoted to senior management positions and one eventually became the Managing Director of the business unit.

This is an amusing story, you are probably asking now, but what is the relevance to the opening discussion of this post? The answer is easy: if you want to be successful hire the best people that you can find. You will find the best people when you try to hire someone who can potentially take your place. Chance affected the circumstances that allowed me to hire two former managers, but if I had not been willing to take the chance that one or both of them could supersede me, then my group within the business unit would not have been as successful as it was.

I also recognized that I would gain from my former manager’s wisdom and experience, and become a better manager myself. And, as a final note to all of you executives, directors and managers: when you have good people working for you, keep the relationship going when they leave your employ: you just never know when you might be looking!