From the Ask Tom mailbag –
Question:
I read your book, Outbound Air, again.
And I was thinking there might be a conflict with trendier/newer business models. A lot of companies seem to be pushing flatter structures and mixed function work-groups. So there isn’t really a role for COOs as say, the CEO’s internal quarterback
My understanding is that COOs exist to corral the various functions i.e. highest timespan
while the CEO is dealing with strategy, major threats etc.
So does the timespan model change for these flatter-structured businesses where the COO is supposedly irrelevant?
Response:
Elliott’s response to a similar question goes like this –
“I hear these things, and I just have to ask, who is kidding whom?” It is not that the role of the COO disappears, but it is certainly different.
Small Organizations
First, many organizations (small ones) are not level (V) organizations in the first place. Indeed, many companies are level (III) organizations, so they have production, supervision and a CEO, who really plays the role of a level (III) manager. Nothing wrong with this small company, the CEO can make a wealthy living out of it.
Growing Organizations
As the company grows, the level of work will necessarily increase to level (IV). There are multiple functions (systems) inside the company that must be integrated together. Again, the CEO in a level (IV) company will play the role of the integrator. In a larger, more mature company, this would be the role of the COO.
Maturing Organizations
In a level (V) company, the CEO must leave the integration role and truly focus on strategy. Without an effective COO at level (IV), the CEO will necessarily be dragged down into the weeds (back into integration activity). And, as long as the CEO is doing work at level (IV), the company will not grow, likely grow and contract in fits and starts, never effectively integrating their multiple systems. Yes, it is possible to have a dysfunctional level (IV) organization.
Digital Technology
Over the past two or three decades, technology arrived. Indeed, computer systems (note the word system) supplant many level (III) functions. MRP and ERP software systems, in their algorithms, require very specific steps in specific sequences, level (IV). The algorithms were created by some very smart teams who created systems and system integration in a variety of disciplines.
However, with effective technology implementation, the managerial work changed. So, let me pose this question. If we have a technology platform that serves to move data between multiple functions in the company, integrating those functions together, a level (IV) role, then what is the work of the COO?
Here is a hint. Work is decision making and problem solving. In the presence of an effective ERP system, what decisions are left to be made and what problems are left to be solved by the COO? There is an answer to that question.
Your thoughts? -Tom
HI Tom – good insights on CEO vs. COO.
In answer to your question about COO and automation tools – here is my experience:
Silos get created by various departments, with or without good automation tools. The natural conflicts between departments can only be resolved by the COO: cross-department resource allocation, deliverables, etc. The COO has the company-wide perspective and is the final decision-maker.
In my experience, poorly designed ERP systems & processes can be bureaucratic obstacles to good decision-making. This is another role of the COO – make sure the cross-department processes and systems are well designed to serve their intended purposes.
I think increased specialization of businesses (as opposed to the previous mantra of diversification) and market fragmentation will lead to new levels of complexity. The CEO is too busy responding to major threats and market movements. Perhaps the COO still has a spot on the team to be the single accountable leader spearheading collaboration among functions; all the while mixing the right cocktail of workforce, technology and process. A constant challenge in the face of rapid change.
Speaking of technology: it’s certainly moving the goalposts. But I have a feeling it will simply replace today’s status quo with a new norm. Like what’s happening in German manufacturing. For example, Adidas, a stalwart of outsourced overseas manufacturing, is experimenting with running a Germany-based shoe factory. Less human hands touch the shoes than in their Asian partner factories to factor for the significantly higher labor cost. Yes, robots outnumber humans in this factory. But those robots need to be supervised, bringing us to a new form of labour – technologically skilled but not sitting in an office.