Succeeding in a Critical and Complex Role: A Research

Succeeding in a Critical and Complex Role: A Research Study on Chief Operating Officers from Around the Globe

2 | COO Circle Research Overview

COO Circle Research Overview | 3

Table of ContentsForeword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Why this study now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Key findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Key implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- For current and aspiring COOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- For directors, CEOs and executive search firms . . . . . . . . . . . . . . . . . . . . . . . .

- For businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shedding light on an elusive role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Understanding perceptions of the role: COO reporting relationships across regions and industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- COO direct reports across regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- COO direct reports across industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Understanding perceptions of the role: COOs’ views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- COO perceptions of role focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- COO perceptions of needed knowledge and skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- COO perceptions of how they are evaluated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Challenges today and tomorrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- The impact of cost cutting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Issues keeping COOs up at night . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Changes in skills needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Expectations about growth plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- Respondents and research approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- A note about the sample sizes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- A closer look at our COO respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

About Accenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

About the Accenture COO Circle and C-Suite Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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ForewordA foreword by Sander van ‘t Noordende, Group Chief Executive-Management Consulting, Accenture, and Executive Sponsor of the Accenture COO CirclePerhaps one of the least understood roles in business today is that of the chief operating officer. There are about as many interpretations of the role as there are COOs. Are they just the CEO- in-waiting? Are they the hands-on manager overseeing everything from technology and human resources, to supply chains and procurement? Or are they the agile, adaptable troubleshooter, brought in to cut costs, determine where investment is needed, and secure the best talent to remain competitive in an increasingly dynamic and often volatile global business environment?

The varied and evolving role of the COO directly reflects the complexities of running a modern global organization. With organizations having to contend with ever-changing competitors and ecosystems, increasing pressure from investors, adapting to new governmental regulations, and shifting economic and trading power, strategic bets have never been more critical.

The COO Circle and our initial COO research study on U.S. CEOsIn 2008, Accenture founded the COO Circle to better understand the challenges and concerns of the highest ranking operating executives in the corporate and public sectors. In addition to providing a unique forum for select COOs and equivalent operating executives to interact with their peers in a thought-provoking exchange of ideas, we also launched a research study conducted with 52 COOs from large U.S.-based companies with annual revenues of

more than US$500 million. This initial research into the often neglected role of the COO identified a number of missed opportunities that stem from incomplete support provided to the position. COOs often face poorly defined responsibilities, experience a haphazard on-boarding process, or confront limited opportunities to network with peers both inside and outside the company. Surmounting these hurdles is key to unlocking the potential effectiveness of the COO.

Expanding the understanding of the COO role globallyIn 2012, we completed a much more extensive research study to better understand the role of the COO outside of the U.S. Accenture commissioned a first-of-its-kind study involving 220 COOs from North America, Europe, Africa, Latin America, Greater China and India who held COO positions at organizations or at divisions with at least US$1 billion in annual revenue. Each COO shared their views on how the role is changing, what kinds of skills it take to be successful in the role, and how can COOs best help their organizations survive and thrive in challenging economic times. By investigating the differences and similarities among COOs from various regions and industries, we wanted to better understand the value and challenges associated with the COO role.

This Accenture report, based on original research led by Dr. Nathan Bennett, Professor of Management at the Robinson College of Business at Georgia State University, builds on a collective body of COO research and is just one of many activities Accenture has undertaken to further the understanding of the role for current and aspiring COOs, for directors of

boards, CEOs and executive search firms who seek their next “second in command,” and for businesses and organizations around the world who want to extract more value from their COO.

We hope this research continues to stimulate the global discussion and debate of the unique value of the COO, and furthers a more complete understanding of the critical and complex role of the COO.

Sander van ‘t Noordende, Group Chief Executive-Management Consulting, Accenture, and Executive Sponsor of the Accenture COO Circle


1Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the COO Out of the C-Suite,” Accenture, 2012.

Why this study now?Accenture initiated this research study now because in the past five years, attention invested in understanding the role of the chief operating officer (COO) has focused mostly on North American companies. And because we know that corporate governance looks different in different parts of the world, we wanted to investigate those differences and consider their implications for chief operating officers everywhere.

As just one example, in Europe, chief executive officers (CEOs) and board chair roles are typically occupied by separate individuals. In North America, the two roles have often been filled by the same person. We also wanted to see how changes in corporate governance may be affecting the COO role. For instance, some North American companies have begun separating the CEO and board chair positions to meet more stringent governance rules defined in the wake of corporate scandals and economic volatility.1

This Accenture research report builds on the collective body of COO research. It is one of many activities Accenture is undertaking to understand more about the executives we have come to know as the “guardians of strategy in action.” Over time, this research will provide thoughtful and rigorous responses to questions that are central to understanding the value and challenges associated with the COO role, such as:

• How is the role changing and what forces are shaping those changes?

• What forms of value are COOs generating for companies around the world and in different industries? What forms of value should they be generating?

• How can businesses best leverage the value provided by their COO?

• What kinds of skills, knowledge and workplace relationships does it take to succeed in the role?

• How can COOs best support their organizations’ strategic objectives, including growth and globalization plans?

• How can COOs best help their companies survive and thrive in tough economic times?



Accenture Customer Innovation Network

Executive summaryOur study findings uncovered several themes that may have implications for COOs as well as other key stakeholders. But one theme in particular struck us as especially relevant.

Key findingsDefinitions of what the COO role is all about—including where COOs should focus their energy, what their primary purpose is, what skills and types of knowledge they need and what their succession prospects might be—vary by region and industry. We suspected this before we began the study, and our findings have confirmed our suspicions. The existence of these differences in perceptions of the COO role have several key implications—for current and aspiring COOs; for directors of boards, CEOs and executive search firms seeking to recruit a promising “second in command”; and for businesses and organizations around the world—namely Europe, Africa and Latin America (EALA), as well as Greater China (GC) and India (IN)—that could be extracting more value from their COO. We consider these below.

Key implicationsFor current and aspiring COOsSince COOs’ understandings of their role—including focus of their energy, skills and knowledge needed and succession prospects—vary so much across regions and industries, aspiring COOs will need to thoroughly familiarize themselves with the contextual factors shaping the top operating role in their particular geography and industry. Only then can they take the right steps to build the competencies needed for success in the role and, if they want, set the stage for moving into the CEO position.

For directors of boards, CEOs and executive search firms seeking to recruit a promising “second in command” for an organization— one who could later advance into the top spotUnderstanding how the COOs in our study view their role and what their expectations are can help inform recruiting and onboarding strategies. Indeed, in a 2008 Accenture survey of 52 COOs from large U.S.-based companies, a significant percentage of the companies represented had ad hoc onboarding processes that left newcomers to the COO role frustrated. One key mistake that has contributed to this problem is that companies often make unwarranted assumptions about how well new COOs understand expectations about the role. Moreover, more than one-third of respondents in this earlier survey said that the responsibilities of the new role did not meet their expectations of those responsibilities.2

For businesses in Europe, Africa and Latin America; and the Asia Pacific regionCompanies in EALA, as well as those in Greater China and India, may have an opportunity to extract even more value from the COO role than they are already getting. These companies’ current definition and expectations of the role—characterized by non-strategic responsibilities—suggests that they view the role as that of operator guiding day-to-day action rather than strategic partner to the CEO with an orientation toward their company’s future strategic needs. By contrast, companies in North America seem to have discovered how to get maximum value from their COOs. They view the role as providing another “brain” to help work through the strategic issues on the CEO’s agenda.

In the other regions examined in our study, the relatively constrained definition of the COO role could be putting companies at a disadvantage in their target markets. Specifically, companies that under design or undervalue the COO role may be creating a disconnect between their present and future priorities because they tend to manage the present without sufficient understanding of the desired future direction. When executives focus their actions on addressing near-term challenges and opportunities, they may unwittingly set the wrong direction for their company’s future. Is the COO subordinate or partner to the CEO?

If such companies can view the COO through a fresh lens—understanding the real value that a talented chief operating officer can bring to the table—they may be able to strengthen their competitive position in their target markets by getting more from this key C-suite player. Keys could include seeing the COO as a partner to the CEO, not merely a subordinate; understanding the importance of the COO role for grooming successors for the CEO position; and grasping the fact that a good COO helps infuse discipline into strategy execution as well as foster synergies across business functions.3

2Nathan Bennett and Paul F. Nunes, “Chief Operating Officers: Off to a Fast Start,” Accenture Outlook, 2008.

3Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the COO Out of the C-Suite,” Accenture, 2012.


Accenture Customer Innovation Network

Shedding light on an elusive roleAt the end of 2011, Accenture commissioned a first-of-its-kind global research study of chief operating officers. (See “Research methodology.”) The purpose of the study was to gauge participants’ views on the nature of their role as COO, keys to successful execution of the role, and the pressing business needs their companies face today and expect to confront in the near future. To these ends, we examined the research findings to determine whether differences in perceptions of the COO role existed across regions and industries. From there, we sought to find out how such

differences in perceptions, if they did exist, affected COO reporting relationships and other aspects of the role. Given the impact of the global recession, we also took the opportunity to investigate our respondents’ thoughts about how their companies were planning to drive growth to pull through the downturn. Moreover, in light of the escalation of globalization among businesses worldwide today, we were curious about how our respondents viewed their organization’s globalization activities.

Figure 1: Who reports to the COO?Which, if any, of the following top executives, or their equivalents, report to you?

Head of Supply Chain/Logistics

Chief Procurement Officer

Chief Sales Officer

Chief Marketing Officer

Chief Information Officer

Chief Human Resources Officer

Head of Research and Development

Chief Financial Officer

Other

% 15% 30% 45% 60% 75% N=220

The average top operations executive has at least five senior functional areas reporting to them, with Supply Chain/Logistics and Procurement being the most common.

61%

52%

39%

39%

36%

33%

32%

25%

63%


Figure 2: Operating executives reporting to the COO, by region (%)

Chief Financial Officer

Chief Information Officer

Chief Marketing Officer

Chief Procurement Officer

Chief Sales Officer

Head of Supply Chain/Logistics

Chief HumanResources Officer

Head of Research and Development

North America (NA)

26

3352 65

37

69

3135

2137

24 42 40

543230

Europe, Africa and Latin America (EALA)

Understanding perceptions of the role: COO reporting relationships across regions and industriesOne of our curiosities in conducting this research concerned how the COO role is perceived. Reporting relationships—specifically, which executives report directly to the COO—can help illuminate this. (Our study respondents all reported to the CEO of their organization.) In fact, in our study overall, the average COO had at least five senior functional areas reporting to him or her, with supply chain/logistics, procurement or sales counting among the most common. (See Figure 1.)

While these findings are interesting, we can gain even greater insight by analyzing reporting relationships across regions and industries. After all, given that corporate governance in Europe differs from that in the U.S., it is reasonable to expect that reporting relationships are also configured differently—and that these differences affect perceptions of the COO role. Analyzing differences in reporting relationships across industries can yield similarly valuable insights and reveal the strategic priorities of the organizations in which COOs are serving.

COO direct reports across regionsOne way to understand differences in how the COO role is defined is to see where the role is situated in a company’s organizational chart, including who reports to this executive. We found that chief marketing officers (CMOs), chief procurement officers (CPOs) and chief supply chain officers (CSCOs) are more likely to report to the COO in North American companies than in businesses in other parts of the world. Indeed, the CMO is more than twice as likely to report to the COO in North America than in EALA. (See Figure 2.)

This tighter connection between operations and marketing could suggest that operations in North American companies are being managed with and informed by a stronger understanding of customers’ future needs. In EALA-based enterprises, there may be a weaker link between those responsible for operations and those focused on understanding customers, which could put these companies in a vulnerable position in their markets.

In India, things may work differently. The Indian COOs in our study formed a smaller sample than those from North America and EALA. But their responses shed some light on how Indian leaders define the COO role. These study participants reported that few senior executives report to them. Although the title of COO is common among Indian businesses, the COO/top operations role is still relatively nascent in that country. As a result, these COOs may not have the same span of control as some of their global counterparts. Furthermore, operations teams in India tend to be smaller, comprising just two or three people. Thus these companies may see little need for the kind of fully developed COO found in other regions.


COO direct reports across industriesIn addition to geography, industry can influence how the COO role is defined. For instance, when we examined differences we found that chief financial officer (CFO), chief human resources officer (CHRO) and chief legal officer (CLO) are more likely to report to the COO in the health and public service industries. In the consumer products industry, it is the CHRO who tends to report to the COO. In the financial service industry, the chief information officer (CIO) is more likely to report to the COO, while the CMO is less likely to do so.

These findings help further illuminate companies’ understanding of the COO role. For instance, knowing that CHRO, CLO and CFO report to the COO in health and public service industries suggests that such divisions are more involved in these organizations’ strategic planning of operations and executions than they are in other industries. And in the financial

services industry, whose competitive advantage hinges on savvy use of information and data, it is not surprising that the CIO would report to the COO.

Understanding perceptions of the role: COOs’ viewsAnother way to deepen our understanding of the COO role is to find out how executives in this role view themselves and their responsibilities. Chief operating officers’ understanding of where they should focus their energies, what kinds of knowledge and skills matter most in their role, what their succession prospects may look like and how their performance is evaluated can provide useful insights.

COO perceptions of role focusOur research findings suggest that the COO role depends much more on contextual factors than other C-suite roles. CFOs, CIOs, and CMOs—they all tend to operate in positions that are relatively similar company-to-company

and even industry-to-industry. The same cannot be said of the COO. The nature of the industry, the competitive landscape, the company’s strategy and the CEO’s preferences and predilections all shape context for the COO. Understanding these influences can help aspiring COOs identify the knowledge, skills and abilities necessary to be a great “number two.”4

In our study, 45 percent of the respondents reported that since 2009 (the beginning of the most recent global recession), their role has focused increasingly on execution and operations, and less on finding new growth opportunities or formulating strategy. We also asked our study respondents which of seven different terms and phrases best described their incumbency. By far, they saw themselves as “executors” and “leaders of initiative.” (See Figure 3.)

Figure 3: How COOs see their role(1 = “Strongly disagree”; 5 = “Strongly agree”)

Mean on 5-point scale % strongly agree

Executor 4.3 57

4.3 54Initiative leader

2.7 12Mentor

4.2 46Complement to CEO

3.6 29Co-leader (partner)

2.4 10Retention purpose5

2.8 16Heir to CEO

4Nathan Bennett and Walter E. Shill, “What Does It Take to Be an Effective COO? It Depends Where You Are,” Accenture, 2012.

5By “retention purpose,” we mean the creation of the COO role with the goal of keeping high-potential executives from defecting to competitors. For example, if the CEO is worried that a talented vice president with aspirations to advance may be poached by rival companies, he or she may create the COO role to send a message that there is a desirable career trajectory available at the company. This may discourage the individual from defecting.

6Crist Kolder Associates, “The Volatility Report 2011.”


Yet we also saw regional differences in how COOs view their role. In North American companies, for instance, COOs were more likely than their EALA counterparts to see a key responsibility of their job as complementing the CEO—that is, bringing to the position something the CEO does not. (See Figure 4.)

Many of our North American COOs also considered the position a testing ground for the top job—seeing themselves as “heir apparent” much more frequently than COOs in EALA and in Greater China. Indeed, though our Greater China sample was relatively small, none of the respondents from this region “strongly agreed” that they see themselves as the heir apparent to the CEO, with the expectation of ascending to the CEO position. Interestingly, our Indian respondents, though their sample was also small, were more than twice as likely as the North American COOs to see themselves as heir apparent to the CEO.

Finally, the North American COOs in our study were nearly twice as likely as COOs elsewhere to acknowledge that a key part of their responsibility is to mentor an inexperienced CEO. Evidence exists that particularly in entrepreneurial firms, where the CEO may not have a great deal of experience, a pair of senior hands is brought on as COO.

Differences in perceptions and expectations about the COO role raise concerns in light of the slow but steady decline in the number of large companies that have a COO role. Recent research reveals that only 38 percent of Fortune 500/S&P 500 companies currently have a COO—down from 48 percent in 2000.6 The decline may be attributed to the increasingly hands-on nature of the CEO position that arose in response to challenges ranging from the tech-bubble rupture in 2000 to the Tyco, Enron and other corporate scandals to the recent worldwide economic downturn. Whatever the cause, a more hands-on, internally

focused CEO can mean that the COO may be perceived as redundant—and could get squeezed out of the C-suite. Indeed, our research showed that of the 96 companies in the Fortune 1000 that replaced their CEO in 2010, only about half of these new CEOs were promoted from the COO position.

These trends are worrisome. In the short run, hands-on CEOs working with the board may not have the skills and bandwidth necessary to provide the sum total of leadership required. The COO as “second in command” is especially critical when the CEO faces complex, numerous and rapidly changing challenges. Traditionally, COOs have focused on ensuring smooth operations, enabling the CEO to focus his or her attention on the board, shareholders, external constituents and the future. Without a COO, the CEO could get dragged into near-term, distracting issues such as resolving conflicts and managing resource

5By “retention purpose,” we mean the creation of the COO role with the goal of keeping high-potential executives from defecting to competitors. For example, if the CEO is worried that a talented vice president with aspirations to advance may be poached by rival companies, he or she may create the COO role to send a message that there is a desirable career trajectory available at the company. This may discourage the individual from defecting.

Figure 4: How COOs see their role, by region (%)

Executor Initiative leader

Mentor Complement to CEO

Co-leader (partner)

Heir to CEO Retention purpose5

73 64

17

58

24

24942

47

10

40

269 10

North America (NA) Europe, Africa and Latin America (EALA)


allocation across functions—and thus shortchange his or her more critical long-term duties. Business-unit and functional leaders might also operate more independently and thereby miss the connections and synergy opportunities of the business as a whole. As a result, accountability for performance and discipline to execute strategies could diminish. More broadly, if a hands-on CEO takes on more direct reports, decision-making could get bogged down.

In the long run, the picture looks even bleaker. Specifically, managing operations without a COO could put leadership continuity at risk. In companies that do not have a COO, there is no clear “second pond” where the business can fish for new CEOs. 7

COO perceptions of needed knowledge and skillsOur respondents’ perceptions of the knowledge and skills they need to succeed also varied based on industry and company needs. For example, in EALA-based companies, COOs emphasized global experience as critical to success in the role. (See Figure 5.) For chief operating officers in North America, Greater China and India, deep industry experience was reported to be more necessary as preparation for the COO role. These differences are also reflected in the more granular skills and abilities COOs reported drawing on repeatedly in their roles. In India, it was all about global business experience, while EALA COOs rated a cosmopolitan background as much more important than other regions did. In North America, a cosmopolitan background was hardly considered important at all. Moreover, every region in our study except India rated tolerance for ambiguity at the top. Our India COOs

saw negotiation, diplomacy, interpersonal skills, cosmopolitan background and intercultural awareness as much less important than global business knowledge. In North America and EALA, these people skills were rated as far more important.

These findings were also reflected in how COOs communicate with other members of the C-suite. In North America, COOs reported having a great deal more contact with the CEO and CFO than in other parts of the world. Communication takes place several times a week, with many respondents reporting daily conversations. Among COOs in Greater China, the average interaction was reported to be weekly among that group.

What explains these differences? The deemphasizing of global experience in the United States may stem from the country’s legacy of geographic isolation. Moreover, the premium placed on deep industry knowledge may be attributed

Figure 5: COOs’ perceptions of essential knowledge and skills, by region (%)

8747

87 93

7265

81 82

Deepindustryexperience

Global operating experience

P&L experience

Broad organizational experience


7Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the CEO Out of the C-Suite,” Accenture, 2012.


Figure 6: COO beliefs regarding “ownership” of the CFO role, by region (%)

North America (NA)


% 10% 20% 30% 40% 50%

34%

23%

to business leaders’ view of the COO role as heavily oriented toward leadership. In Europe, Africa and Latin America—regions with less geographically isolated histories—it is perhaps not surprising that much more of a premium is placed on global experience. For example, European executives have long recognized that their decisions and actions can have an international impact, so they may be more sensitive to global dynamics. With the rise of globalization of business and the impact of the most recent worldwide recession, North American executives may eventually place more emphasis on global experience.

The COOs in our survey from Greater China and India cared relatively little about global experience. This may suggest that they see their companies’ future as being centered firmly in their region and view other regions as primarily markets for their products and services. If this is true, then they may focus their operational efforts on local conditions.

COO perceptions of how they are evaluatedWhen we asked our study respondents how their effectiveness is evaluated, the overall response was that specific types of financial performance (such as operating efficiencies; overall corporate performance including profitability and growth; and financial ratios such as return on assets or investment) influenced their evaluation more than other general measures. However, COOs in North America and Greater China gave the “specific financial” metric greater weight than their counterparts in EALA and India. This emphasis on financial performance may stem from North American and Greater China COOs’ perception (suggested in our findings) that they hold a C-level position and serve as overseers of operations.

Paradoxically, when we asked which functions COOs believed they had to “own” to be successful in their role, the only difference we found was in attitudes toward the CFO role. (See Figure 6.) COOs in Greater China and India, more than their North American and EALA counterparts, reported that they need extensive knowledge of the CFO role—even though they tend to have minimal communication with their organization’s chief financial officer. This may indicate that North American and EALA COOs are more confident in their understanding of the specific financials on which their effectiveness is evaluated. Alternatively, it may suggest that the specific financial metric used to evaluate their performance is narrow in the context of their organization’s operations. (For example, the metric may relate to specific kinds of initiatives.)


Challenges today and tomorrow In this study, we also took the opportunity to gain insight into the challenges COOs believe their organizations face today and in the future. To that end, we asked our respondents several questions regarding the recent global recession and plans to get out of it, as well as the impact of growth strategies (including globalization) on their role. These questions centered on cost-cutting moves, issues keeping COOs up at night, perceived changes in the skills needed to be effective and expectations about their companies’ growth plans.

The impact of cost-cuttingWe were curious about which cost-cutting moves made during the recent recession were most likely to pose challenges to companies during the recovery. Overall, our respondents identified cuts in talent as presenting the greater challenges—even more so than cuts affecting R&D, manufacturing, IT and customer service. (See Figure 7.) Most notably, 60 percent of the Greater China COOs in our study believed that talent cuts in the form of layoffs would pose the biggest challenge—perhaps because an unlimited supply of people is traditionally what the Greater China region has had to offer. The percentage of North American and EALA COOs who agreed with this was 46 and 30, respectively.

Issues keeping COOs up at nightWhat keeps COOs up at night? What battles must they prepare to fight every day? Once again, our respondents’ answers varied across geographies and industries. To illustrate, for North American COOs, it is growth and operational efficiency that they worry about most. (See Figure 8.) In EALA and Greater China, it is operational efficiency and change management; in India, it is primarily operational efficiency.8

Such findings suggest that COOs have different beliefs regarding the question of whether the global recession has placed organizations in a position of lesser efficiency despite the “trimming of fat” associated with layoffs. The findings associated with the Asia Pacific region fall in line with common perceptions of Asia Pacific being a low-cost product-producing region; hence, the worries about operational efficiency.

Figure 7: COO perceptions of talent cuts as presenting the biggest growth challenge, by region (%)

North America (NA)


% 10% 20% 30% 40% 50%

46%

30%

Figure 8: Issues keeping COOs up at night, by region (%)

GrowthOperational efficiency

Change management

North America (NA) 38 36 26

25 44 32Europe, Africa and Latin America (EALA)

8Bennett and Shill.


There are industry differences in terms of what keeps COOs awake, too. Specifically, financial services and health services COOs are focused on change, while in communications, products and resources companies, chief operating officers are worried most about operational operational efficiency and growth. (See Figure 9.)

This difference in focus may stem from the different challenges facing these industries. For instance, the financial services industry is facing an erosion of respect deriving from the recent collapse of banking. In the U.S., the health services industry is wringing its hands over health care reform. Aware of the tumult affecting their industries in the past few years, executives in financial services and health services are focusing more on surviving in a hostile environment than on driving growth. And survival is all about change management.

The communications industry is facing other kinds of challenges. In particular, the industry is consolidating, and some markets have become very mature, which makes driving new growth particularly difficult. Thus, executives may need to rely on operational efficiency as a key to growth.

Meanwhile, the products and resources companies represented in our study showed a similar pattern in their responses—with more attention to growth and operational efficiency than to change management, but with more of an overall balance across these three priorities. This may represent a more normative picture of how COOs think, absent the extreme challenges facing the other industries we examined.

Figure 9: Issues keeping COOs up at night, by industry (%)

34 46 19

14 37 49

9 30 61

40 43 19

32 46 24

Growth Operational efficiency Change management

Resources

Products

Health and public services

Financial services

Communication and media


Changes in skills neededWe also asked COOs which personal skills had become more important because of their companies’ growth plans and globalization efforts. Tolerance of complexity and risk (which could take forms including currency volatility, more stringent regulation, geopolitical instability and natural disasters) as well as interpersonal skills were ranked as the most critical. (See Figure 10.) These findings suggest that COOs believe they must be more aggressive in their strategic planning and execution of initiatives to help their organizations recover from the recent recession and carry out their globalization strategies.

Expectations about growth plansWhen we asked about growth plans for their companies in the next three to five years, 61 percent said they expected their companies to grow capacity levels at their existing facilities, while 59 percent reported expecting their companies to expand capital investments in existing facilities. Fifty-one percent said they anticipated seeing their companies take products to new geographic markets and to make capital investments in a new country. These findings may indicate intentions to drive fresh growth.

But we saw regional differences regarding expectations about how much capital investment companies will be making. Almost all of the COOs in our study stated that their organization planned at least some capital investment. However, those in EALA anticipated more extensive investment (see Figure 11.), as did the Indian COOs we interviewed. Regarding the Indian responses, perhaps Indian executives believe that as long as the global economy is growing overall, their companies’ return on investment including capital investments in infrastructure will make sense. Because India offers low-cost labor, foreign companies will still want to do business there; thus investment is justified.

Global Business Knowledge

Negotiation Diversity Tolerance for Complexity/Risk

SelfAssurance

Intercultural Awareness

Interpersonal DiplomacyCosmopolitanBackground


Figure 10: Skills important for the COO role, by region (%)

6168

66

79

62 7471

73

28

5671

6385

666774

81

83

Figure 11: Extent of expected capital investments in the next 3-5 years, by region (%)

North America (NA)


% 10% 20% 30% 40% 50%

33%

39%



Research methodologyPurposeThe purpose of the study was to gauge participants’ views on the nature of their role as COO, the keys to successful execution of the role and the pressing business needs their companies face today and expect to confront in the near future.

Respondents and research approachTo be included in the study, the COOs had to hold positions at global organizations or divisions with at least US$1 billion in annual revenue and had to report to the CEO. Industries represented in our sample included: communication, media and technology; financial services; health and public service; products; and resources. A total of 220 COOs, or equivalent senior-level operations executives, from North America; Europe, Africa and Latin America; Greater China; and India participated in a 25-minute phone interview comprising 37 questions. (Some respondents chose to respond to the questions in writing via a web survey.) The research was conducted between July 2011 and April 2012. (See Figure 12.) The survey’s margin of error is +/- 7 percent at the 95% percent confidence level. Although the title of the COO may differ across the regions represented in our study, we took pains to ensure that we interviewed individuals who can arguably be considered COOs in all cases. (See Figure 13.)

A note about the sample sizesOur study sample initially focused on comparing responses from COOs in companies within North America and Europe, Africa and Latin America. Later in the study, we were able to add responses from a relatively small number of COOs in Greater China and India. These latter sample sizes represent preliminary data, so we have not included them in most of the graphics presented in this report. However, despite their small sizes and the preliminary nature of the data, we believe that the responses from Greater China and India open a window onto how executives in these two regions view the COO role. They may thus light the way for additional valuable questions about how the COO role is defined around the world.


Figure 12: Study sample profileCountry and region of respondents' organization headquarters

N=220

Brazil

U.S.

10%

10%

10%

10%

10%

5%5% 5%

35%

U.K.Spain

Italy

Germany

France

GreaterChina Canada

55%

5%

40%

Europe

AsiaPacific

NorthAmerica

By Country By Region

Figure 13: COO title, by region (%)

75

127

6

57

17 323

COO Executive Vice President of Operations

President Other



75 77 72

80 81

Figure 14: Internal or external appointment of COO, by region (%)Where were you hired from?

76%

24%External

Internal

Internal appointments to the top operations executive position are more common than external appointments by a 3-to-1 ratio.

This is the same across each of the three regions studied.

Larger organizations (>$3 billion) are significantly more likely to appoint the COO from within their organization than smaller organizations (<$3 billion).

0

20

40

60

80

100

>$3B<$3BAsia PacificEALANorth America

Internal hire External hire

North America (NA) 75 25

77 23Europe, Africa and Latin America (EALA)

A closer look at our COO respondentsEighty percent of the COOs in our study had been in their position less than 8 years but had an average of 13 years of experience before taking on the role. Globally, COOs were most likely to have come from a division or department head role. Not surprisingly, 75 percent of our respondents were hired from inside their company. Of the remaining 25 percent, over half (54 percent) were attracted from another employer within the industry. (See Figure 14.)

However, the larger the companies represented in our study, the greater the likelihood that the COO was promoted from within. This may be because larger companies offer better developmental opportunities for executives, and because the increased complexity might favor selection of an insider who is thoroughly familiar with the enterprise.



Copyright © 2012 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012.

About the Accenture COO Circle and C-Suite NetworksChief operating officers and equivalent operating executives face considerable challenges as they strive to help their organizations compete in a dynamic and often volatile global business environment, yet there are few ways for COOs to interact with their peers that can lead to a thought-provoking exchange of ideas. In 2008, Accenture founded the COO Circle to provide a unique forum for select COOs and equivalent operating executives in which small groups of members convene virtually and in person to determine the topics to share, issues to debate and the best ways to interact. Today, the COO Circle has more than 100 global members from the world’s leading organizations.

Accenture hosts peer communities for other members of the C-Suite, including:

• CFO Circle for chief financial officers and equivalent finance executives.

• CSO Circle for chief strategy officers and equivalent strategy executives.

• CIO Council for chief information officers and equivalent technology executives.

• CHRO Circle for chief human resources officers and equivalent human resources executives.

• CPO Circle for chief procurement officers and equivalent procurement executives.

• CSCO Circle for chief supply chain officers and equivalent supply chain executives.

To learn more about the Accenture COO Circle or C-Suite Networks, please contact Christian Winslow at [email protected] or +1 917 642 7867.

About the AuthorsWalter E. Shill is a senior managing director with Accenture Management Consulting and an advisor to the Accenture COO Circle. Mr. Shill’s consulting work spans more than 20 years focused on a wide range of business issues facing Fortune 500 companies, including organization design and transformation, strategic planning, mergers and acquisitions, and corporate governance. He is based in Washington, D.C. [email protected]

Nathan Bennett, Ph.D., is a professor of management at the Robinson College of Business at Georgia State University and an advisor to the Accenture COO Circle. Mr. Bennett’s research on chief operating officers and other management-oriented topics has been published in Harvard Business Review, The Wall Street Journal, Guardian and Financial Times. He is co-author of Riding Shotgun: The Role of the COO and The Career Game. He is based in Atlanta, GA. [email protected]

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Succeeding in a Critical and Complex Role: A Research