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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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I Don’t Believe in COO’s

Comments (12)

I was at a board meeting recently and the notion of potentially hiring a COO came up.  I blurted out "I don’t believe in COO’s."  An interesting conversation ensued, including someone pointing out that I’d recently supported hiring a COO at another company I’m an investor in (never underestimate the contradictory nature of a VC’s brain.)

I’ve modified my statement to be "I don’t believe in COO’s 98% of the time for companies smaller than 200 people.

In almost all cases, you only have a two level executive hierarchy – CEO and VPs.  The VPs are often creatively titled (SVP, EVP, CxO, something else) – but they are the direct reports to the CEO and have meaningful span of control over the business.  Many of these VPs would report to a COO if one existed, and this is generally a bad idea in a very young company (again – with a 2% exception.)

There are two situations that are common that I think are silly:

  1. The sales guy (VP Sales) wants to be the COO.
  2. The finance guy (VP Finance) wants to be the COO.

Somewhere along the way there was an infomercial that said "if you are a VP and you want to advance in your career, become a COO."  I’ve never understood this and it just confuses things.  There’s a logical progression here – the VP Sales wants to be VP Sales and Marketing, the VP Sales, Marketing, and Business Development, then SVP of Sales and Marketing, then COO.  Huh?

Same drill with the VP of Finance.  There’s a logical path to be CFO.  Then the CFO wants all HR, legal, and IT.  Then the CFO argues "hey – I’m running operations – I should be COO."

Neither of these has ever made sense to me.  The VP Sales path is particularly confusing since most great VP Sales suck at managing operations (which is ostensibly what a COO does.)  I struggle less with the CFO situation – although by the time a company needs a CFO rather than a VP Finance (usually 100-ish employees), the CFO is going to be slammed with dealing with managing the normal "CFO-ness" of the universe, including dealing with investors; subsequently taking over "operations" usually makes no sense.

The 2% exception holds.  In really young companies when the two senior execs "split up the business", a CEO / COO relationship can apply.  I’ve even had one co-CEO situation work beautifully (ServiceMagic) even though every time I thought about it I was sure it wouldn’t work long term (I was wrong.) 

Overall, titles don’t (and shouldn’t) matter much in an early stage company, other than for helping people on the outside of the company understand who does what to whom.  In my experience, the idea of a COO almost always muddies the water.

  • Peter Biro

    I think this is directionally right — a structure where all VP's report to the COO and the COO reports to the CEO can be a head-scratcher. But it can be organized other ways as well — , COO can be helpful in organizing customer-facing areas (support, ops, acct mgmt) into a cohesive unit, to make sure smooth business processes exist as companies scale or be the go-to person by virtue of his/her title if the CEO if off dealing with investors. Depends on the individual and their abilities.

  • Dave

    I'd agree and go even further. Speaking only with respect to companies under 100 people, if there are executives within the company that are pushing to be named COO, they have the wrong attitude for an early-stage company and probably shouldn't be there. They are focused on progressive career steps, ego, and power, rather than on selling product or securities and building the company's prospects. In my (limited) experience with this, the people who take this approach are either (a) big-company people or (b) they're actually not very good at what they do and they want their career to progress through external validation rather than actual accomplishments.

    A great early-stage senior exec takes on COO-like tasks and responsibilities without needing the title. If he/she feels the need for more stock or more salary, that's not necessarily unreasonable, but changing the organization to satisfy an executive's career growth needs is not.

    And if the *CEO* is looking to hire a COO, there's a much simpler answer: the CEO is not qualified to be running the business and should either be transitioned to another role (e.g., CTO if a technical founder; VP Business Development if a relationship person) or simply fired.

    After 100 people (and of course the boundary is rough), it's possible that a COO is a good idea. The situation where this is a good idea is when the CEO is charismatic – inspiring to the troops, marketplace, customers, and investors, i.e., a leader – and is good but not great at management. Once again there is still the option of the CEO transitioning to another role, and that's still better in some cases, but sometimes having a person at the top who is a great leader counts for more. Again, though, in the early stages the leadership and management need to be sufficient in one person.

  • Ed Daniels

    Brad, I really enjoy your comments – few “experts” really understand the start-up world like you do. As the COO of a startup company, I actually agree with what you say about COOs – it is usually an inflated title and too much hierarchy for a small company. However, as you point out (2%?) there are exceptions. Thank you for sharing your thoughts.

  • http://www.thefeinline.com Mike Feinstein

    Brad, I often agree with not hiring a COO, but one of my companies was the exception. A company that becomes very complicated operationally (with international manufacturing) while still small needed to hire a COO. In this case, the CEO was capable of managing it all but needed her time freed up to focus on big customers, future technology development, and being the 'outside' person for the company. I think that these situations fit into your 2%, but you always have to keep the exceptions in mind.

    • http://www.feld.com Brad Feld

      Mike – totally agree. Good example of a valid exception.

  • http://www.intela.com Jim – Intela

    This post hits home. In my first company (under 30 people) I hired a person to “run the operations and finance” because I sucked at it. The person, with big company experience, eventually worked himself into the COO role and positioned himself with the investor to have everyone report to him and then he reported to me (the naive CEO). As it ended up when I wanted stuff done the COO didnt agree with, I had a fight on my hands that I would have to argue to the whole management team, and the company was effectively run by the COO or by committee.

    Needless to say I got out of the situation and now have another company with 30 employees and a very capable “director of operations”. :)

    Oh and the company I left now has 50ish employees with the investor as the CEO, the Sales guy head became President, and the COO still runs everything that matters. LOL

  • http://www.cpa2be.com cpa2be

    I agree that the COO seems to make things a little crazy in an organization. The path to COO is what really amazes me. It seems that any high-level director or manager works toward that position; even it does not match their skill. More often than not, it appears to be someone that is “title hunting” and looking to add COO to their resume.

  • doug

    Interesting post… Companies where people argue over titles have bigger problems, but as companies get bigger, the amount of necessary, but non-strategic, operational chores expands rapidly. The venture investors, in my experience, have rarely been CEOs in such situtations and don't appreciate how much of the CEOs time gets spent dealing with things that aren't problems in stable, long-running companies. Further, this is not the comparative advantage of most founder/CEOs.

    Occasionally, you end up with a clueless investor who shares Dave's attitude–fire the CEO–and a big company guy is brought in too early and the company inevitably deteriorates. I got tired of running one of my companies and recruited a very smart & polished exec to run it. He was a great people manager and the board (all top tier VCs who had never actually worked in a startup) loved him. He cleaned up the organization and made the trains run on time (no mean feat–this was the stuff that was killing me & he was much better at it than me). The only problem was that he had no strategic sense and we went from 100%+ annual growth to 0% for four straight years until a much bigger company thankfully hired him away. In the meantime, all of our smaller competitors passed us by.

    Having a strong CFO in place early can help. The main problem is that few CFOs have strong technical or industry backgrounds, so their operating role needs to be carefully balanced with that of the that of the founder/CEO. When the CEO and CFO really work well together, it can be fabulously productive. When they're in conflict, the organization stops functioning. This happened in one situation where I was a board member. The CEO certainly had his problems, but the CFO was dishonest and manipulative. And also stupid. He threatened one of the board members–a legendary VC–with the damage he could cause to the company if he didn't get his way. We fired him the same day. To my surprise, however, he turned up shortly thereafter at another VC (who knew the story) as a consultant. They later made him CEO of one of their companies (probably another case of “fire the CEO!”), and he promptly ran the company into the ground.

    If only this stuff was easy.

  • http://chrisyeh.blogspot.com Chris Yeh

    While I don't think it's necessary to have a COO, I think it is important to make sure that you have enough management bandwidth.

    Startup CEOs are asked to perform several key functions, from strategy and vision to public relations to administration and finance to people and process management.

    Realistically, it's unlikely to find a single person who excels at all of those tasks, and even someone with all those capabilities is unlikely to do a good job at any of those tasks if he/she has to divide efforts among all of them.

    I think it is a good split to go with the classic “inside/outside” split…visionary CEOs tend to make mediocre administrators, and vice versa. I think it's harder to find the outside skills than it is to find the inside ones.

    I do agree that it makes no sense for startups to have all the VPs reporting to a COO, who then reports to a CEO. Clearly, someone there is unnecessary. Rather, think of “Mr. Inside” as more of a chief of staff, who makes sure that the trains run on time, and provides a helpful sounding board for the CEO.

  • Yann

    Live. I am living this live. My company has been hiring a COO as the CEO could just not manage anything else than the vision… but the CEO should have become the CTO – The only glitch is that the CEO is also the only investor and doesn't want to let go.

    There has been such a big gap between the CEO and COO that the whole company is turned on its head and can't execute. It has become a multi-direction environment with hectic decision

  • N. Oke

    Brad, I totally agree. I know a small startup company where one of founders named himself COO. He felt it basically gave himself the right to try to control everyone, even though no one reported to him. This same company also liked to allow title inflation – i.e. Senior Executive Directory of Strategy, External Partners, and Business Development. Okay, it wasn't quite that bad, but pretty close!

  • Dan Cornish

    Another problem with a COO is that they want to become CEO. Many management cycles can be waisted with political battles between the CEO and the board.

  • http://intensedebate.com/people/peter_biro6660 peter_biro6660

    I think this is directionally right — a structure where all VP's report to the COO and the COO reports to the CEO can be a head-scratcher. But it can be organized other ways as well — , COO can be helpful in organizing customer-facing areas (support, ops, acct mgmt) into a cohesive unit, to make sure smooth business processes exist as companies scale or be the go-to person by virtue of his/her title if the CEO if off dealing with investors. Depends on the individual and their abilities.

  • Dave

    I'd agree and go even further. Speaking only with respect to companies under 100 people, if there are executives within the company that are pushing to be named COO, they have the wrong attitude for an early-stage company and probably shouldn't be there. They are focused on progressive career steps, ego, and power, rather than on selling product or securities and building the company's prospects. In my (limited) experience with this, the people who take this approach are either (a) big-company people or (b) they're actually not very good at what they do and they want their career to progress through external validation rather than actual accomplishments.

    A great early-stage senior exec takes on COO-like tasks and responsibilities without needing the title. If he/she feels the need for more stock or more salary, that's not necessarily unreasonable, but changing the organization to satisfy an executive's career growth needs is not.

    And if the *CEO* is looking to hire a COO, there's a much simpler answer: the CEO is not qualified to be running the business and should either be transitioned to another role (e.g., CTO if a technical founder; VP Business Development if a relationship person) or simply fired.

    After 100 people (and of course the boundary is rough), it's possible that a COO is a good idea. The situation where this is a good idea is when the CEO is charismatic – inspiring to the troops, marketplace, customers, and investors, i.e., a leader – and is good but not great at management. Once again there is still the option of the CEO transitioning to another role, and that's still better in some cases, but sometimes having a person at the top who is a great leader counts for more. Again, though, in the early stages the leadership and management need to be sufficient in one person.

  • Mike Feinstein

    Brad, I often agree with not hiring a COO, but one of my companies was the exception. A company that becomes very complicated operationally (with international manufacturing) while still small needed to hire a COO. In this case, the CEO was capable of managing it all but needed her time freed up to focus on big customers, future technology development, and being the 'outside' person for the company. I think that these situations fit into your 2%, but you always have to keep the exceptions in mind.

  • http://intensedebate.com/people/bfeld bfeld

    Mike – totally agree. Good example of a valid exception.

  • http://intensedebate.com/people/ed_daniels6662 ed_daniels6662

    Brad, I really enjoy your comments – few "experts" really understand the start-up world like you do. As the COO of a startup company, I actually agree with what you say about COOs – it is usually an inflated title and too much hierarchy for a small company. However, as you point out (2%?) there are exceptions. Thank you for sharing your thoughts.

  • Chris Yeh

    While I don't think it's necessary to have a COO, I think it is important to make sure that you have enough management bandwidth.

    Startup CEOs are asked to perform several key functions, from strategy and vision to public relations to administration and finance to people and process management.

    Realistically, it's unlikely to find a single person who excels at all of those tasks, and even someone with all those capabilities is unlikely to do a good job at any of those tasks if he/she has to divide efforts among all of them.

    I think it is a good split to go with the classic "inside/outside" split…visionary CEOs tend to make mediocre administrators, and vice versa. I think it's harder to find the outside skills than it is to find the inside ones.

    I do agree that it makes no sense for startups to have all the VPs reporting to a COO, who then reports to a CEO. Clearly, someone there is unnecessary. Rather, think of "Mr. Inside" as more of a chief of staff, who makes sure that the trains run on time, and provides a helpful sounding board for the CEO.

  • http://intensedebate.com/people/cpa2be6671 cpa2be6671

    I agree that the COO seems to make things a little crazy in an organization. The path to COO is what really amazes me. It seems that any high-level director or manager works toward that position; even it does not match their skill. More often than not, it appears to be someone that is "title hunting" and looking to add COO to their resume.

  • http://intensedebate.com/people/jim122 jim122

    This post hits home. In my first company (under 30 people) I hired a person to "run the operations and finance" because I sucked at it. The person, with big company experience, eventually worked himself into the COO role and positioned himself with the investor to have everyone report to him and then he reported to me (the naive CEO). As it ended up when I wanted stuff done the COO didnt agree with, I had a fight on my hands that I would have to argue to the whole management team, and the company was effectively run by the COO or by committee.

    Needless to say I got out of the situation and now have another company with 30 employees and a very capable "director of operations". :)

    Oh and the company I left now has 50ish employees with the investor as the CEO, the Sales guy head became President, and the COO still runs everything that matters. LOL

  • doug

    Interesting post… Companies where people argue over titles have bigger problems, but as companies get bigger, the amount of necessary, but non-strategic, operational chores expands rapidly. The venture investors, in my experience, have rarely been CEOs in such situtations and don't appreciate how much of the CEOs time gets spent dealing with things that aren't problems in stable, long-running companies. Further, this is not the comparative advantage of most founder/CEOs.

    Occasionally, you end up with a clueless investor who shares Dave's attitude–fire the CEO–and a big company guy is brought in too early and the company inevitably deteriorates. I got tired of running one of my companies and recruited a very smart & polished exec to run it. He was a great people manager and the board (all top tier VCs who had never actually worked in a startup) loved him. He cleaned up the organization and made the trains run on time (no mean feat–this was the stuff that was killing me & he was much better at it than me). The only problem was that he had no strategic sense and we went from 100%+ annual growth to 0% for four straight years until a much bigger company thankfully hired him away. In the meantime, all of our smaller competitors passed us by.

    Having a strong CFO in place early can help. The main problem is that few CFOs have strong technical or industry backgrounds, so their operating role needs to be carefully balanced with that of the that of the founder/CEO. When the CEO and CFO really work well together, it can be fabulously productive. When they're in conflict, the organization stops functioning. This happened in one situation where I was a board member. The CEO certainly had his problems, but the CFO was dishonest and manipulative. And also stupid. He threatened one of the board members–a legendary VC–with the damage he could cause to the company if he didn't get his way. We fired him the same day. To my surprise, however, he turned up shortly thereafter at another VC (who knew the story) as a consultant. They later made him CEO of one of their companies (probably another case of "fire the CEO!"), and he promptly ran the company into the ground.

    If only this stuff was easy.

  • Yann

    Live. I am living this live. My company has been hiring a COO as the CEO could just not manage anything else than the vision… but the CEO should have become the CTO – The only glitch is that the CEO is also the only investor and doesn't want to let go.

    There has been such a big gap between the CEO and COO that the whole company is turned on its head and can't execute. It has become a multi-direction environment with hectic decision

  • N. Oke

    Brad, I totally agree. I know a small startup company where one of founders named himself COO. He felt it basically gave himself the right to try to control everyone, even though no one reported to him. This same company also liked to allow title inflation – i.e. Senior Executive Directory of Strategy, External Partners, and Business Development. Okay, it wasn't quite that bad, but pretty close!

  • Dan Cornish

    Another problem with a COO is that they want to become CEO. Many management cycles can be waisted with political battles between the CEO and the board.

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