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The What & Why of Hiring a Great Startup COO
This is a guest post from Stephano Kim, former co-founder of Web 1.0 success story Blackboard and veteran entrepreneur who’s held several COO and president roles at various startups.
Many startup CEOs hire COOs or launch companies with a co-founder carrying the title. But what do COOs actually do for startups? When should founders hire one? Based on what criteria? In this post, Stephano explores this critical but often misunderstood executive role.
For most of my career, I’ve served startups and early-stage companies as an operating executive or advisor. The main thing I’ve learned is that there is no single job description for a COO. The needs of each founder are so different from the next, and the challenges his/her business faces are even more diverse. And of course, to further complicate matters, personalities play a significant role in the ultimate outcome.
But there are several facts to know and key considerations to make as a founder in order to bring on a great COO — not only the function itself, but the right person for the job.
Recognizing You Need Help
Founders seek COOs for many reasons. The savvier founders recognize early what skill sets they lack and the criticality of these skills towards ensuring success. They then ask themselves, “Can I learn these skills? Should I learn them? Are they important now? Is my time better spent focused on other critical matters?”
One person cannot possibly cover all the ground needed to effectively move a company forward. It’s why every successful entrepreneur will tell you that focus is so important. The most valuable resource a founder has is his/her time and energy. Every hour of the founder’s day and every decision that is made needs to have as big an impact as possible. So when founders lose focus, they dilute their power and effectiveness, which diffuses the force of their impact.
When this dispersion of focus starts to occur more frequently, or significant parts of the organization show signs of obvious neglect, it’s definitely time to bring in help.
But do you really need a COO? Or will you be fine with a head of marketing or a controller or a sales lead? The key question is at what level you need to delegate and/or share decision making authority. Do you need highly skilled functional managers or do you need a true partner?
Beyond the work itself, founders may bring in a COO simply because they need someone to go through the journey with them (i.e. someone to be that true partner). Let’s face it: The path of a founder is a lonely one. The founder rarely has anyone to relate to, confide in, be accountable to, and brainstorm with. No one can possibly understand what he or she is going through because, by definition, each company is different. Peer groups for founders do exist, but rarely do I see any meaningful interaction between founders in these settings, as egos and fear of over-sharing and judgment tends to get in the way.
This is why I encourage almost every startup founder to find a partner or a cofounder. You need someone to share ideas with, divvy up the work, and hold you accountable.
How to Choose a COO
Once a founder or board decides to bring in an outside COO, understanding what sort of candidate the company needs can be a daunting task. Saying that you need “a COO” is like saying you need to buy a car and then needing to choose one from the sea of choices out there. There’s simply too much nuance and too many options, all with varied pros and cons, to suggest a silver bullet in your hiring process.
Additionally, like any great executive hire, several criteria need to line up seemingly against the odds: pull from an extremely finite supply of qualified candidates, at the compensation level that both the founder and candidate can agree on, within the timing an organization needs, and with mutual interest on both sides of joining forces for potentially years.
Suffice to say, if you’re hiring a COO at your startup, you’re about to make some tough tradeoffs.
That said, there are some key questions to ask yourself to improve your process. These include:
- Do I need help leading or managing?
- What qualities and character traits do I want?
- Do their qualities, character traits, or skills need to be identical or complementary to mine?
- What functional responsibilities do I need this person to manage?
- Which teams do I want them to lead?
- How much time will I give myself to find this person?
I’d suggest using these questions as part of a framework or decision matrix with three other major dimensions:
- Skills and Experience
- Personality Fit and Working Style
- Intellectual Curiosity and Strategic Thought
Using this framework in the form of a spreadsheet or slide or two, you’re more likely to succeed in hiring the right person.
So … What’s the Role of a Startup COO, Exactly?
Most people understand that COOs support and collaborate with a startup’s CEO in a number of ways, including decision-making, internal and external leadership, and idea generation. But more specifically, a COO’s duties can include any or all of the following:
1. Assessing Opportunities & Challenges
At a startup, especially in the early stages, there’s always something to optimize, something to fix, and something to change and improve upon. You as the founder need to decide which of these things take priority, which of these are mission critical — or even fatal — and which of these will propel the company forward in the biggest possible way.
Assessment becomes such a significant part of the day-to-day work that the best COOs build systems and instrumentation to help identify opportunities and risks early on. With the right tools, the COO can have the most critical data and insights pushed upward so that they have as much time to react and execute upon the information as possible. This enables the COO to decisively and proactively lead more and escape the cycle of reactive management.
2. Gathering and Unifying a Team
A “company” is formally defined as a collection of individuals, while a “business” is defined as an organization that delivers value to customers in the form of goods and services. At the core of both of these terms is people, and by definition, both a company and a business can only be as good as its people.
The primary responsibility of many COOs, then, is to identify, recruit, and retain the best executive talent, while weeding out and pruning mediocrity. A-players can produce 10X the results of B-players because they have the skills, drive, initiative, and will to lead and succeed at any level.
More importantly, A-players attract and hire other A-players. B-players tend to attract other B-players because they either can’t assess talent or will not hire someone better than them.
COOs need to be ruthless about this approach to talent, given that people are your greatest asset and biggest expense.
However, simply hiring the best doesn’t make a company effective. The COO now needs to unify them in a common cause and bring them together through a shared value system. Does everyone understand the company’s mission? Do they accept it and believe in it? Do they want the same things you want? Do they share the same values when it comes to the company? Have you established a set of operating principles by which every individual will conduct themselves and interact with others, despite differing perspectives?
It is the combination of a common cause, shared values, and operating principles that forms the foundation of a company’s culture and ultimately dictates how focused and effective your team will be.
3. Tools and Instrumentation
The best COOs I’ve worked with do an amazing job at building solid instrumentation. They have clear goals and milestones and a pretty detailed view of what success — and failure — look like at each step. They’ve established a clear set of KPIs and metrics as the common language by which everyone on their team communicates performance in the business. They have a solid understanding of their unit economics which enables them to understand why and to what degree they are off plan with enough time to make adjustments. And finally, they know how everyone in the company contributes and how they influence and are affected by the inputs and outputs of that plan.
This is the platform that COOs create for their teams to build upon. Over time, the foundation of the business eventually settles in. Teams are built, culture forms, direction is chosen, plans are made, progress is tracked, and corrective measures are taken. When executing well, the company finds its rhythm and builds engines made of people, process, and technology that run on limited day-to-day oversight from the top. The company becomes a living laboratory, constantly testing, learning, and optimizing.
4. Test of Weakness: Mitigating Risk While Preparing for Uncertainty
In most situations, the founder of the company tends to be the product visionary and establishes the company’s mission. The COO then weighs this long term direction against the resources at hand, as well as shareholder sentiment, and then charts a course in the form of an operating plan.
In this operating plan, the COO meticulously outlines how the team will execute given how management expects the future to unfold. And while the best management teams have considered current market forces, potential headwinds and tailwinds in the industry, and competitive advantages, the fact remains that you just don’t know what you don’t know.
In other words, to operate a startup is to wade through uncertainty. You can see and feel the environment around you, and you know what you carry with you. These are the “knowns.” You also know what can happen to you in this environment and generally how you will react and have some sense of the outcome. These are the “risks.” However, you don’t know what’s beyond the horizon, how drastically the environment may change, and how prepared you will be in dealing with these factors. The future is uncertain. You cannot measure it, you cannot plan against it, you don’t even know where your next opportunity or challenge will come from.
But you can prepare for it. In these situations, I’ll ask management teams what disaster would look like. If disaster struck, could you recover from it? How long would it take to recover? How and when will you know disaster is about to strike? How much margin of error and fault tolerance is built into your operating plan? How much cushion/time do you have to course-correct and maneuver? Do you know where you are weakest? What are you doing about it?
5. Test of Strength: Converting Opportunities While Avoiding Red Herrings
Opportunities will arise and present themselves every day. While you’ve been anticipating a chance at a few of these opportunities, others will catch you by surprise. This is the one of the most exciting perks to being an entrepreneur. With some foresight and a little luck, you’ll be able to quickly recognize and take advantage of these opportunities. But should you?
One of the most valuable things a COO can do for the company and the founder is to be a counterbalance when it comes to weighing opportunities and the associated tradeoffs. Some opportunities will ultimately be transformative in a positive way, often unexpectedly. Others will seem critical but amount to nothing more than a distraction. Even the best management teams fall victim to a lack of discipline and focus because, after all, it’s a struggle to say no to opportunities. Every startup is trying to catch a break, so to lose one in your grip could be woefully regretful.
But the opposite is also true. The buildup of friction cost from too many failed conversions of opportunities could bleed your company to death, since mobilizing scarce resources to act on them will cost you no matter how big or small.
On the other hand, will you be prepared to take advantage of these opportunities when they arise? Can you mobilize and stretch your organization enough to capitalize on these chances? Part of being prepared to deal with uncertainty is testing the strength of the organization and system that a COO has built. How quickly, decisively, and effectively could your team move while minimizing potential damage to the ongoing operation? If these chances prove successful, could your team carry double the load in the short term while you reinforce it over time? These are moments that move the needle when accelerating growth and scale.
So Should You Hire a COO at Your Startup?
As with all hires, it depends. In some cases, if one of the co-founders of a startup isn’t playing the roles described above effectively, a startup should definitely explore hiring a COO. In other cases, a founder may have a very strong set of skills that require a complementary player. In that case, ultimately, a great COO will not only advance the company’s cause, he or she will allow you as the founder or CEO to use your time as effectively as possible, depending on your core competencies. For example, a visionary-type founder can free up time to focus on a product’s big picture plan, company branding, leadership, media/event appearances, and recruiting top talent — all enabled as a focus area thanks to a COO.
To build your startup, there’s so much to be done as it is, just given the rate at which companies test, learn, grow, and evolve today. That only increases the velocity by which leaders need to make decisions. For a founder, having an experienced COO can provide greater, more informed management and decision-making than ever before.