The case for a chief operating officer - Ernst & Young

Case study
“If you think of the critical role they now play in new
channels to market and in enabling revenue growth,
it becomes clear why the COO role has become
so fundamental to the success of the business.”
Adrian Edwards
EMEIA Advisory Markets Leader, Ernst & Young
1. “Banking bill wins favor as revised,” The
New York Times, 25 August 1935.
2. Crist Kolder volatility report, Crist Kolder,
2012.
3. “The rise of the COO,” Harvard Business
Review, 9 November 2011.
In contrast to some of the more
recent additions to the C-suite, such
as the chief privacy officer or chief
information security officer, the COO
is well established. Since at least 1935,
various US companies have counted
COOs among their leadership teams. 1
But despite this lengthy tenure, the
position has never quite gained the same
permanence on the executive management
team as other perennial staples, such as
the CEO or chief financial officer (CFO).
Indeed, during the past decade, a number
of management journals and studies have
raised the prospect that the role of the
COO may even be in decline. Between
2000 and 2012, the proportion of Fortune
500 and S&P 500 companies that had a
dedicated COO position fell from about
half (49%) to just over one-third (35%),
according to Crist Kolder. 2
What lies behind this In some
companies, there has been a decision
to split the responsibilities of the COO
across several other executives, perhaps
in response to rising complexity, or else
because it more closely fits the operational
needs of the business. For example, in
the power and utilities sector, dedicated
executives run the generation and trading,
transmission and distribution and retail
arms of the business. These roles are
effectively that of a COO, but given the
size and importance of these units, they
are often close to being a de facto CEO
of these units. Elsewhere, many of these
responsibilities have been folded into
the role of the CEO, not least in the wake
of growing legislation to clamp down on
a lack of executive oversight, such as
Sarbanes-Oxley.
But this narrative of relative decline
doesn’t quite tell the full story. In Europe, for
example, where the COO title is typically far
newer, the position appears to be on the rise.
From near non-existence just a decade earlier,
nearly 4 in 10 of the 97 largest companies
within the Eurozone and UK now have a
COO position, according to Harvard Business
Review. 3 The majority of these have only
ever had one predecessor in this position,
illustrating how recent an arrival it is.
Turnaround time
What lies behind this shift The DNA of the
COO, new research from Ernst & Young,
argues that several forces are helping to
make the case for a dedicated operational
18 Volume 5 │ Issue 1