Why a strong COO is more useful, most of the time, than a charismatic CEO

There is a question that comes up at conferences, sometimes from journalists, sometimes from candidates, sometimes from younger founders. They ask whether the chief executive or the chief operating officer is more important to a regulated business. The answer, which I do not give at the conference because it is unfashionable, is that most of the time the COO is.

I am not arguing the COO should be paid more. I am arguing the COO is the role that most often determines whether a regulated business runs and whether it scales. The chief executive sets direction. The chief operating officer is the reason the direction reaches the operating layer. Without the second, the first becomes a series of memos that the firm does not act on.

The pattern I see most often is a firm with a strong chief executive, a clear strategy deck, and a chief operating officer who is undersized for the job. The strategy is announced, the operating layer does not move, the chief executive blames the layer, the layer blames the strategy. The diagnosis usually given is that the strategy was not communicated well. The real diagnosis is that there was no operating function strong enough to convert the strategy into work. The COO is that function. If the COO does not exist or is overmatched, the operating layer never moves, regardless of how well the strategy is communicated.

The reverse pattern is also informative. I have worked with firms where the chief executive is less visible and the chief operating officer carries most of the weight of the business. These firms tend to be regulated, multi-jurisdictional, and quietly profitable. The chief executive's job is to set the trajectory, manage the board, and protect the COO. The COO's job is to run the operating layer. The firms that get this right tend to be the firms that look unspectacular from the outside and are deeply functional from the inside.

The case for a strong COO is sharper still in a regulated business. Regulators do not deal with charisma. They deal with management information, controls, named individuals, and the evidence that decisions have been made and recorded. The COO is the role that owns the production of that evidence. A regulator who is uncertain about a firm will ask to meet the COO before the CEO, and the meeting will tell the regulator most of what they need to know. A regulator who has never met the firm's COO is a regulator who is going to ask a lot more questions of the CEO.

There is a related point about boards. Boards spend most of their time asking the chief executive how the strategy is going. The more interesting question, which boards ask less often than they should, is how the operating layer is doing. The COO is the source of the answer. A board that does not have a regular line of sight to the COO is a board that is being told a strategy story and not asking for the operating one. The chief executive can run a meeting like that for a long time. The firm cannot.

I should make a clarification. None of this is an argument against strong chief executives. It is an argument against the idea that one strong chief executive is enough. The combination that works in a regulated business is a chief executive who can hold the direction and a chief operating officer who is, in practice, indispensable to it. The pairing is the point. The pairing is what scales.