If the devil is in the detail, it’s a hot time to be chief operating officer. As chief growth, revenue and marketing officers crowded corporate headquarters, the job of implementing business strategies and overseeing day-to-day functions got lost. Now there are renewed reasons to install a clear second-in-command.
About half of S&P and Fortune 500 companies had a COO in 2000, but by last year only 37% did, according to executive search firm CristKolder Associates. A controversial 2004 study that found companies with COOs generate lower returns on assets might be partly to blame. It raised questions about bureaucratic, accountability and compensation flaws, and whether bosses enlist this sort of deputy because they feel overwhelmed.
There are potent counterexamples. During her 14-year run as COO of Meta Platforms, opens new tab, Sheryl Sandberg helped founder Mark Zuckerberg turn Facebook into a juggernaut, while Tim Cook successfully held the title as Steve Jobs’ right-hand man at Apple, opens new tab. Wall Street also regularly embraces the power structure, with John Waldron handling operating responsibilities at Goldman Sachs, opens new tab and Daniel Pinto doing so for JPMorgan, opens new tab.
Corporate boards nevertheless remain divided about the position’s value, with more than half of last year’s COO roles left vacant when the person in the seat departed. Starbucks, opens new tabeliminated, opens new tab the COO job in 2022 even after the coffee chain conceded it was “operationally challenged, opens new tab,” but gas station operator Murphy USA , opens new tab and airplane maker Boeing, opens new tab added the role to their organizational charts to enhance profitability, opens new tab and improve supply chains, opens new tab, respectively.
Technology entrepreneurs may desire lieutenants who can turbocharge sales, opens new tab. More broadly, however, higher interest rates, trade protectionism and fickle consumers call for those who can spearhead efficiency efforts and prepare workforces for the artificial-intelligence age. Net profitability across the S&P 500 Index, opens new tab slipped to 11.2% in the second quarter of 2023 from a recent peak of 12.9% two years earlier, and was expected to fall, opens new tab further, according to LSEG data.
There’s another good reason to welcome back COOs. Many companies tend to look for their next CEO internally when economic times get tougher, and CristKolder found that half of those in the corner office today got there after serving as COO or president. Given what probably lies ahead, a number one priority is to hire a solid No. 2.