Agenda – A Financial Times Service

Article published on August 9, 2010
By Amanda Gerut

The percentage of companies with chief operating officers has fallen during the past decade, and several organizations have recently revised their management structures to function without a COO. The top operations position, however, remains an internal stepping-stone to becoming a chief executive at many companies.

Observers say the definition and responsibilities of the COO vary from company to company. There’s often clarity internally among the board and management about the responsibilities and potential of the COO, and being the COO may not mean the executive is the No. 2 when it comes to CEO succession, despite being the CEO’s second-in-command.

“There are some companies where the chief operating officer [role] is just what it says: operations and taking on a lot of detailed management that the CEO doesn’t have time for. It’s still a very high-level position that usually touches every other division,” says Paul Danos, dean at the Tuck School of Business at Dartmouth and a director on the boards of General Mills and BJ’s Wholesale Club. “But that person isn’t necessarily the person that really drives the actual future of the business, although they could be.”

Data collected in an ongoing study by search firm Crist Kolder Associates shows that 47% of companies in 1999 in the S&P and Fortune 500 indexes had COOs. That was up from 1995 when 43.3% of companies had a COO. Since 2007, however, the percentage of companies with COOs has declined steadily. By 2009, the number had fallen to 42.7%, and data through June 30 of this year shows that the percentage had decreased further to 42.2%.

Several companies have recently disclosed management restructuring that gives COO responsibilities to CEOs, or spreads them among executive teams.

Rosetta Stone disclosed last month that its COO was resigning to pursue other opportunities and that the company CEO and president, Tom Adams, would assume the outgoing COO’s sales and marketing responsibilities.

Also in July, Avis Budget disclosed that current president and COO F. Robert Salerno had transitioned into the role of vice chairman. The company chairman and CEO, Ronald Nelson, took on the additional roles of president and COO.

Some boards want CEOs to be closer to the business, and the COO position adds another layer between the CEO and day-to-day operations, says Matt McGreal, a principal with Crist Kolder. When companies phase out the COO position, the CEO will often take over the executive’s responsibilities or delegate them to his or her direct reports.

Despite the slow disappearance of COOs, the position still continues to produce executives that boards and management have determined are ready for the CEO job. Crist Kolder found that over the past 10 years, 52.2% of internal CEO hires at S&P and Fortune 500 companies were COOs immediately prior to taking the top job.

“A very valid reason for having a COO is for succession planning,” says McGreal. “Elevating somebody from a division president role to chief operating officer role gives them a enterprise-wide view of the organization, and allows them to work more closely on a corporate level with the CEO so they can help groom them into that CEO chair eventually.”

Bill Shepard, the founder, CEO and executive director of the COO Forum and a former CEO of NordicTrack and Pacific Linen, notes that CEO successions at smaller companies have more recently been focused on finding a CEO who focuses less on outward-facing responsibilities and the visionary aspects of the job and can execute cost control strategies. Such responsibilities are often associated with the COO.

“The COO skill set is in demand for the CEO position in these economic times,” says Shepard.

At larger companies, Shepard says, there’s sometimes a political aspect to the COO role. When there’s a CEO succession and the COO departs, CEOs may wait to fill the role after doing an outside search because the choice will likely be heavily scrutinized. Or, if CEOs were previously the COO, they may wait as long as a year or more to fill their former position because they may want to wait until they’re comfortable in their new role, says Shepard.

In some companies there are multiple competing internal candidates for the next COO position and the new CEO may not want to disturb company chemistry for a while.

When boards look outside their companies for CEO successors, the COO role doesn’t carry the same weight as it does internally. Only 16.1% of CEO hires were external COOs during the past decade. However, operations executives or division heads who basically function as CEOs of their units were often plucked away by other companies to serve as CEO, making up 43.5% of external CEO hires.

“The operating executive or division president… [has] gotten the experience in running a business, whereas the COO isn’t necessarily responsible for the (profit and loss),” says McGreal. “They may be responsible for overall operations, but not specifically the running of a business.”

BOSTON - A Lynn woman is among four persons indicted by the state attorney general's office for allegedly running a multi-million-dollar scam that gave kickbacks to sober houses in return for using their Woburn-based drug-screening services.

A Middlesex grand jury returned 42 indictments Friday against Callow Laboratories, also known as Calloway, two of its principals and two employees of a sober house. The charges resulted from a Medicaid fraud investigation.

The indictments alleged that Calloway Chief Executive Officer Arthur Levitan, 38, of Weston, and Chief Operating Officer Patrick Cavanaugh, 46, of Gloucester, "engaged in a pervasive kickback scheme involving two straw companies that funneled kickbacks to sober houses, as well as paid middlemen and a medical office to illegally obtain a urine drug-screening business paid by MassHealth, the state's Medicaid program," according to Jill Butterworth, spokesman for Attorney General Martha Coakley.

The other defendants are Kelli Ann Cavanaugh, 41, of Lynn, and William Maragioglio, 41, of Malden.

Both were charged with Medicaid fraud and accepting kickbacks.

The state has alleged that MassHealth paid in excess of $10.6 million for urine drug screenings obtained by Calloway through the kickbacks. Other indictments in the case alleged the defendants submitted false claims to MassHealth, larceny over $250 and corruption of a witness. Sixteen kickback allegations were leveled against Calloway. The scam was carried out between 2005 and 2007, when Calloway set up two corporations, JAC Resources, Inc. and MJK & Associates, along with a bank account for the purpose of carrying out the kickbacks, Butterworth said.

Calloway "made inappropriate payments to Maragioglio, owner and manager of New England Transitions, and to Cavanaugh, the sister of Patrick Cavanaugh and a former manager of New England Transitions - a group of sober houses - in return for ordering, arranging for or recommending that urine drug screens for the residents of the sober houses be performed by Calloway," according to the indictment.

The indictments further allege that Calloway paid an office manager and the salaries of office staff of a Brighton medical office to induce the ordering of drug screens from Calloway. The company purportedly falsified laboratory records and submitting claims to MassHealth for urine drug screens that were not ordered by an authorized prescriber for a medically necessary purpose, a requirement of the MassHealth program.

NEW DELHI: Consumer durable maker LG Electronics India on Monday announced top-level management changes with the elevation of YV Verma to the position of chief operating officer (COO), besides the appointment of a new head for the mobile handset unit and reshuffle in the sales and marketing portfolios.

Mr Verma has been with the company since its inception. Although he was primarily the head of human resource, over the past few years he had assumed additional responsibilities. Before the new appointment, he was serving as the director (HR and management support). In his new role, he will be responsible for LG’s operations in India and spearhead the sales and marketing function.

Those tracking people movement within LG said he was closely involved in operations even before the elevation and the designation just makes it official.

Meanwhile, LG has restructured its sales and marketing portfolios. Till now, marketing was headed by V Ramachandran, while there was no national level sales head. In the new structure, it has been reversed. Amitabh Tiwari, who was looking after home entertainment business, will now be the overall head of sales at LG India, a position that was vacant since the company split the role of sales and marketing with sales being managed by independent business heads.

The marketing portfolio will be handled by the product marketing executives and Mr Ramachandran has become head of strategy. Rohit Pandit has been elevated as business head for home entertainment to take the place of Mr Tiwari.

Sudhin Mathur, former marketing chief of Sony Ericsson, has been appointed as the head of mobile handsets unit, a position that was vacant since Anil Arora moved out of LG a few months back.

“With these changes at the top management, we aim to increase operating efficiency and establish greater autonomy at the operating level, strengthening the independence of LG India as a subsidiary to LG Electronics. All these changes will come into effect from January 1, 2010,” said Moon B Shin MD LG Electronics India, in a statement.

A kick-off and information session is set for Tuesday, February 10, from 7:30 to 9:30 a.m. to introduce the Chief Operating Officer (COO) Business Forum to Second-in-Command Executives in the Dallas/Fort Worth area.

The event will be hosted at Colonial Bank, 8214 Westchester Drive, S-400, Dallas, Texas  75225.

COO Forum is a professional association that enables confidential peer-to-peer discussion and sharing on vital business topics. The group was founded in California and is expanding nationally, with chapters forming this year in Dallas, Denver, Boston, NYC, Washington DC, Seattle, Chicago, Atlanta, and New Jersey. The chapters meet monthly and there is also a COO eForum for broader-based exchange among members throughout the country as well as monthly chapter tele-meetings. 

Nancy Keene, director in the Dallas office of Stanton Chase, a global executive search firm, is serving as volunteer facilitator for the organization locally.  “We are living in unprecedented times and the playbook is being developed as new changes and challenges unfold,” she says.  “COOs play a critical role in delivering day-to-day and moment-to-moment results for the company – enabling the CEO to focus on strategic growth, critical relationships and forward-facing direction.  COO Forum can deliver an invaluable ‘been there/done that’ perspective on what has worked – and what hasn’t – with other companies in similar situations.” 

The Dallas chapter is targeting Second-in-Command Executives of companies and operating units with revenues of $50-250 million – to provide a commonality of stage-of-growth and relevant business issues. 

The Dallas steering committee includes:

• Drew Kiesling – COO, Staubach Retail
• Sultan Poonawala -- COO, American Fuel Distributors, LP
• Phil Slingerland -- COO, The Warrior Group
• George Assenheimer -- former COO, TXU Communications;  currently CapGemini
 
Bill Shepard, Founder and Executive Director of the COO Forum indicates “as a former resident of Dallas in the 90’s where I was President and COO of a division of Philips, I am delighted that Nancy Keene and the COOs of the steering committee have shown the leadership and passion to launch our Dallas COO Forum Chapter.”

There is no charge to attend the informational meeting. Space is limited and pre-registration is required.  Those interested should contact: 

Nancy Keene, Director
Stanton Chase International
972 404 8411
n.keene@stantonchase.com

With chief operating officer positions becoming rarer all the time, companies are relying on CFOs for a lot more than keeping score.

When Starbucks announced on Tuesday that it was eliminating its chief operating officer position, it became the latest member of an ever-growing club. And as COOs slowly fade from the C-suite, CFOs are stepping in to fill the gap, assuming more responsibility for areas that redound to the bottom line.

CFOs are gaining a higher profile in their organization as a result, along with, apparently, more compensation. But the downside is more pressure — more hours in the day required to accomplish more tasks, and more blame when profits fail to meet expectations or just fail altogether.

"Over time, it's become more critical for organizations to have financial input on business decision-making," says Tom Kolder, president of recruiting firm Crist|Kolder Associates, which specializes in C-suite searches. "They need to have a finance leader who is more than just a scorekeeper; who is a key partner to the CEO.

"But as CFOs take on more intensive business activities like operations or strategy," adds Kolder, "they become more culpable if things go wrong. You're no longer in a support function; you're on the front lines, accountable for the good and bad."

According to Crist|Kolder's latest Volatility Report on the movement of CEOs, COOs, and CFOs at top U.S. public companies, issued late last year, the prevalence of COOs is headed downward and is now at its lowest level in at least a decade. Among the 548 companies that have been part of either the Fortune 500 or the S&P 500 since 1995, there were 227 COOs in 2006 compared with a high of 255 in 1999, an 11 percent decrease.

Kolder says concurrent trends for both CEOs and CFOs to be more involved in operational details squeeze COOs: "When you have the combination of those two elements, the need for a COO goes away."

Jonathan Schiff, founder of the Finance Development and Training Institute, an alliance of 15 global companies dedicated to deepening the bench strength of their finance organization, attributes the decline of COOs in large part to Wall Street's demand for a single strong leader at the company helm. "Wall Street rewards companies that have clarity in their stories," says Schiff, who is also an accounting professor at Fairleigh Dickinson University. "But when there's both a CEO and COO, there's less clarity about who's running the show. Accountability is at the core here."

Even at many companies with COOs, the position seems more CEO-in-waiting than a career goal in itself. While slightly less than half of Fortune 500 companies with a CEO age 58 or older employ COOs, the percentage increases as CEOs age, to 58 percent for companies with CEOs 62 or older, according to the Crist|Kolder report. (Just over one-third of Fortune 500 companies have a CEO who is 58 or older.)

Kolder explains that an heir-apparent to a chief executive might be given the COO title until he or she takes over as CEO. "We see a significant number of cases in which a COO seems specifically in place to satisfy career development," he says. "When that person moves up, the COO position is not necessarily backfilled."

A study released last month by Robert Half Management Resources, which provides companies with temporary finance executives, ranked the different components of CFOs' expanding role as COOs gradually disappear. Of 1,400 CFOs surveyed throughout the United States, the largest percentage of respondents, 25 percent, said a greater focus on increasing profitability represents the biggest change in the CFO role over the past five years. Second was increased interaction with other departments, at 20 percent; third, an expanded leadership or management role, 17 percent; fourth, more strategic planning, 15 percent; and fifth, increased focus on corporate-governance initiatives, 12 percent.

"CFOs are more involved in discussions that don't involve their typical bean-counter role — discussions like build versus buy, offshore operations, and political impacts," says Paul McDonald, executive director of Robert Half Management Resources.

In part, board members seek counsel more often from their CFOs because of compliance issues, says McDonald. "Board members have more responsibility post-Sarbanes-Oxley," he explains, "so they draw CFOs into more kinds of discussions." Still, he says, "Any boardroom discussion can be taken from the operational perspective to finance and accounting and produce a positive impact as it relates to the bottom line."

Another Robert Half survey of CFOs, released in December, shows that CFOs place a high value on nontraditional skills for people they hire for their own organization. In answer to the question "Would you be willing to hire someone with fewer technical skills if the candidate had stronger soft skills, such as communication and interpersonal abilities?" 53 percent answered "Yes"; only 39 percent said they would not. (Eight percent didn't know or refused to answer.)

In adjusting to the new C-suite reality, CFOs must acquire a whole array of new skills to successfully manage areas that have recently come under their direct responsibility, according to 25-year finance veteran Andrew Hyde, CFO of privately held broadband provider Speakeasy. At various times in his career, Hyde has been responsible for such traditionally nonfinance functions as human resources and reviewing legal contracts.

In human resources, for example, Hyde says CFOs must learn not just the soft skills of human interaction, but their subtleties as well. "It's not just about being nice to people when you have to terminate them," he says. "It's also about when it's appropriate to celebrate success. That's not on the CPA exam."

When it comes to reviewing contracts, he says most CFOs probably possess the analytical skills to scrutinize contract terms, but they typically are not prepared to understand what's missing from a contract.

"Many smaller companies will have a contracts administrator but no legal counsel inside the company," he says. "So do you want to pay a high-powered, outside counsel $500 an hour to review what seems like an innocuous contract? I've taken a contract to the lawyers a time or two, and they'll say that a whole area is missing. It's on-the-job training."

And in an area now commonly under CFO supervision, information technology, CFOs must keep up with the rapid changes in technology to ensure their organization maintains the most cost-effective IT systems. "Thousands of people are coming at you with solutions that they claim will save tons of money," says Hyde. "Figuring out what's real and what's not takes a lot of time. It is an incredible challenge."

Far-sighted — and, typically, resource-rich — companies implement programs to train finance professionals to be well-rounded business people. "Great companies groom finance people to be business leaders," says Schiff. Many of the companies he works with not only target promising future finance leaders in their ranks for rotation into operational areas but also offer mentoring and outside coaching.

More companies also demand that future finance leaders rotate into their international operations as they generate an increasing share of revenue. "Companies that once did 10 percent of their business outside of the United States are now doing 40 to 50 percent, and it's going to continue in that direction," says Schiff.

While it's unclear how much more compensation CFOs are receiving as a result of their expanded responsibilities, Kolder says there has been a positive impact. "As CFOs become more strategic and operational and become more of a change-agent in their organizations, either supplementing or replacing COOs, their compensation goes up commensurately," he says.

Hyde also acknowledges rising compensation for CFOs but says, perhaps not surprisingly, "The numbers are not moving as fast as they should for the extra time and burden of responsibility across broader areas." And while he says those added responsibilities increase his job satisfaction ("it makes things more interesting"), he also enjoys having a COO at his present company.

"I've had more time to do CFO things like risk management," he says, "because I don't have to think about things like office space. I'm delighted."

CONTACT:
Bill Shepard
Chief Operating Officer Business Forum, Inc.
(408) 292-1593 phone
(408) 521-2180 fax
bshepard@COOForum.org
http://www.COOForum.org


Chief Operating Officer Leadership in Recessionary Times

Saratoga, California, March 3, 2008 -- Last month at the COO Forum, six Northern California meetings were held in San Jose, San Francisco, San Ramon, San Carlos, Monterey, and Marin. During these meetings, Members explored the challenges of leadership and decision-making in a recession. The meetings were attended by 46 COOs and Second-in-Command Executives across a spectrum of company sizes and industries.  This article documents consensus thinking of the Members and guests at the COO Forum during these February 2008 meetings. 

The Members drew no conclusion on whether the economy is or is not in a recession, knowing that the usual definition of two quarters of negative growth can only be determined after a recession has been in effect for six months.  The Members also acknowledge that in a recession, not all regions, industries, and companies will experience the same brunt.  While the overall opinion of the COOs is that if a company is being run 100% effectively, there are few, if any, changes necessary.  Recognizing the truth that many companies will not hold up to the 100% standard, the Members identified best practices for being a COO of a company heading into recessionary times.

Scenario Contingency Planning
The initial best practice for COOs and their companies is to create a ‘no surprises’ approach to short-term scenario and contingency planning.  The belief of COO Forum Members is that a divergent spectrum of ‘what if’ approaches must be explored in conjunction with multiple options and outcomes.  As one COO indicated “We have created several different plans that only the Board and C-level knows about.  We don’t want to scare our employees or stockholders, but we must be able to move with agility and efficiency if a recession begins to impact our operations.” 

Maintain a Tight, Balanced Financial and Operational Approach
While this is a seen as a best practice everyday, the COOs felt that higher emphasis on tight and balanced operational and financial decision-making was crucial in recessionary times.  The discussions focused on the axiom ‘cash is king,’ recognizing that in recessionary times prudent use of cash may avoid liquidity challenges.  As one COO indicated, “If we don’t have enough cash, we won’t make the best decisions.”   The Members felt that revenue and margin pressures would occur and were concerned with demands to sacrifice margin, which was viewed as a slippery slope to watch closely.  Other discussion emphasized tight expense control; thoughtful deployment of capital and longer term outlays; strong inventory level management; forceful collections; scrutinizing customer credit limits; and negotiation of better terms from suppliers, service providers, and contractors.

Look to Shedding Unprofitable Assets and Activities
The COOs felt that companies often hang on to unprofitable efforts due to the robust nature of their entire business.  In a time of projected slowdown, extricating marginal and losing efforts may prove to be most sound.  Area of suggestion from the COO Forum meeting included the following: plants, offices, equipment, product lines, suppliers, customers, divisions, businesses, and business processes.

Deal with Unnecessary Headcount  
“Now is the time start the process of shedding low performing and unneeded employees and contractors before it’s too late,” indicated one COO.  When those around the table reflected on lessons learned from prior recessions, getting the head count number right early on would have had a huge positive impact on a company’s success in riding out the recession. 

Dial-up Communications
With all the media noise, COO Forum Members see employees becoming nervous.  Employees sense the job losses and companies in trouble all around them and worry about their company.  The prevailing COO message from the meetings was that increasing communication is the best practice.  Employees want to know that leadership understands the economic realities and has plans to succeed in the potentially more challenging time.  Employees want to hear from leadership more frequently.  “If we don’t answer the employee communications need, the water cooler talk will answer it for us” said one COO. “What we say to our people is far more helpful to us and our company’s morale than leaving it to the grapevine.”

Hold Back Some of the CEOs Exuberance
COOs have the highest regard for their CEOs and appreciate the CEOs important responsibility to inspire, create a bold vision, and lead the company into the future.  However, there is a belief that recessionary times call for the CEO to adopt a less optimistic and more down-to-earth charter for the company.  The role of the Second-in-Command is one of appropriate tactics to deliver results.  Bringing their CEO closer to the factual realities of the economic times becomes a COO mandate.

Exploit the Upside Opportunities
As with all downturns, there is an increase in turmoil and change which always presents opportunities for strong companies to become even stronger.  The COOs indicated many ideas including: new acquisitions; attracting new customers from weak competitors; availability of great new employees; opportunities to open new markets; a great time to launch new products; and improving relationships and effectiveness within the supply chain. “We are a very solid company and I know that we’ll benefit from the shake-out of our weaker competitors,” said one COO.


About the COO Forum: The COO Forum was founded in 2004 in the Greater San Francisco Bay/Silicon Valley Area by Bill Shepard, Executive Director.  The association has become the professional development home for Chief Operating Officers and Second-in-Command Executives.  The association recognizes the significant role the COO plays as the senior leader responsible for taking their company’s vision and delivering results.   As a result of the COO Forum’s continued success and growth in Northern California since its inception in 2004, the COO Forum 2008 initiative is to include COOs and Second-in-Command Executives globally. COO Forum and Chief Operating Officer Business Forum are registered trademarks of the Chief Operating Officer Business Forum, Inc.

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Monday October 27, 2007, the Wall Street Journal published a story highlighting the COO Forum and focusing on CEOs and COOs. The article, written by Phred Dvorak, is on the front page of the Marketplace section. At our COO Forum meetings in October 2007 we explored "To Be or Not to Be a CEO" as our Best Practice topic in all our COO Forum Northern California meetings which provided substantial background for the story. The article can be found here.

As operating ranks drop, finance folks fill gap
By Jeff Nash
October 30, 2006

When Dick Bond jumped from chief operating officer to chief executive at Tyson Foods earlier this year, he didn’t fill his old post.

Instead Mr. Bond chose to directly oversee the company’s attempt at a turnaround—sans that extra layer of top management—which included more than $200 million in spending cuts, as well as efforts to drive up demand and prices for its chicken and other food offerings.

Mr. Bond’s decision to go without a COO has become an increasingly popular move at the nation’s biggest companies. The rise in shareholder activism following the high-profile blowups of Enron and WorldCom, among others, has forced many CEOs off their lofty perches and into the operational trenches, thus rendering the COO position unnecessary.

In fact, since 1999 there are 17% fewer COOs in the S&P 500, a steady drop to 213 from 255, according to Chicago-based executive search firm Crist Associates. And although more than half of these COOs have been promoted to chief executive jobs, internally or at other firms, their former positions are often left vacant—creating a big opportunity for the right chief financial officer.

“The investment community wants CEOs closer to the business, which takes away the need for a COO,” said Peter Crist, chief executive of Crist Associates. “And with more and more scrutiny on executive compensation, it’s not necessary to have this redundant position if you have a good CEO and a good CFO.”

Indeed, just last week Kellogg announced that it would not fill its COO chair when current holder David Mackay becomes chief executive on Dec. 31. Like Tyson Foods, Kellogg said it wants management “reporting directly” to the chief executive. Walt Disney Co. and home builder Centex have also recently followed suit.

Corporate observers agree that the COO’s loss is often the CFO’s gain.

“Inevitably, when you take a COO out, that means more for the CFO,” said John Challenger, chief executive of recruiting firm Challenger Gray & Christmas in Cincinnati.

For starters, many of today’s top dogs are offloading the duty of communicating financial performance and forecasts to Wall Street to their chief financial officers. Many CEOs are also hiring CFOs that can think beyond the bean-counting duties of managing risk, financial planning and record keeping to overall company strategy and improving day-to-day operations.

“More often, the CEO’s skill set goes down the ladder a little bit, while the CFO’s skill set is blended upward to cover the void,” said Mr. Crist.

Consider Tyson Foods. Four months ago, Mr. Bond hired Wade Miquelon as CFO precisely because he wasn’t an old-fashioned CFO. With 11 different jobs in four countries over a 16-year career at Procter & Gamble, the 41-year-old Mr. Miquelon has a breadth of experience Mr. Bond said he needs to return Tyson to profitability.

“Wade’s a strong financial manager,” said Mr. Bond, “but he also has other skills we believe are valuable to the future of our company, such as his understanding of the intricacies involved in operating a business globally.”

Last month, Mr. Miquelon addressed investors at Bank of America’s annual investment conference in San Francisco, a gig traditionally reserved for the chief executive. Mr. Miquelon is also spearheading the company’s strategy to raise prices on its chicken, beef and pork products, hoping to increase profit margins—typically 4% to 5% in this part of the food business—by a full percentage point next year, a feat that could add as much as $250 million in earnings a year.

“There’s fun, sexy, cool stuff like strategy, and if you do it well, you get promoted,” explained Mr. Miquelon. “But there’s some other stuff—accounting, governance—and if you don’t do that well, you get fired. I do both, but the one that has the highest leverage on the organization is strategy.”

Clearly, the payoff for the ever-expanding CFO job is a more direct shot at the chief executive title. In August, PepsiCo appointed Indra Nooyi chief executive after she had served five years as CFO and president of the food and beverage company. Likewise, Allstate, Southwest Airlines, General Motors and Tenet Healthcare have all tapped finance pros to become their chief executives in recent years.

That said, experts doubt the COO will become extinct anytime soon.

“The COO was the easiest C-level person to eliminate during the economic downturn in the early 2000s,” said Bill Shepard, founder of the COO Forum, an association for chief operating officers. “I see that reversing itself.” Mr. Shepard added that the rise of the “COO-style CEO” means a lot of the best COOs have been snatched up for the top job and not yet replaced.

Nate Bennett, a professor of organizational behavior at Georgia Tech University, said many companies go without a COO, but only temporarily. “Often a CEO wants to learn how to run the company,” said Mr. Bennett. “Once that learning is done, or the need for a succession plan comes up, a COO is put in place.”

A well-rounded CFO could be the beneficiary. For example, Mr. Shepard said, in many small companies—those with market caps under $100 million—a new hybrid position has popped up, the “operational CFO.”

FW

By Bill Shepard
Founder and Executive Director, COO Forum
February 5, 2007

2007 will continue the excellent momentum in the economy of the Greater San Francisco Bay/Silicon Valley Area according to the 83 Northern California COOs and #2s surveyed by the COO Forum in December 2006 and January 2007.  Coming off a year where 76% indicated that 2006 exceeded their original expectations, 80% anticipated that 2007 would be showing more improvement, and only 6% indicated they expected a decline.  Of those reporting improvement, 19% expected robust improvement while the remaining 81% indicated a more modest expectation of growth.

78 % of surveyed COOs and #2s anticipate growth in employment.  7% reported no change, and 15% said they felt employment would decline in 2007.  Interest Rates are projected to have no change according to 58% while 23% expect a modest increase, and 19% a modest decrease.  Real Estate growth was neutral to slightly lower with 23% indicating improvement, 44% no change, and 33% declining.

COOs and #2s were bullish on the revenue growth for their own companies resulting in 63% projecting significant growth, 21% modest growth, 10% no change and 6% a decline.  They were not quite as optimistic about their company’s anticipated employment growth in the Greater Bay Area:  15% projected significant local employment growth for their company in 2007, while 51% reported modest growth, with 22% predicting no change, and 12% see a decline.

COO Forum Survey participants cited many diverse factors for their optimism:  an active Venture Capital and Private Equity community with a presence in the area, Web 2.0/Office 2.0 and a host of new technologies, Internet, software, devices, growth from Bio-Tech and Bio-Med, new opportunities in the alternative energy/environmental area, State of California infrastructure initiative, stable interest rates, stable Real Estate, strong employment, and the Pelosi-factor-favoring of the San Francisco area from Capitol Hill.

2007’s economy is not without risks and threats.  COOs and #2s indicated their concerns with residential real estate, uncertainty over Democrat’s control of Congress, difficulty of Iraq, energy supply and foreign oil threats, challenging and expensive local business climate, off-shoring of jobs, companies leaving California, continued loss of manufacturing, and potential terrorist strike(s).

About the Survey

Eighty-three Chief Operating Officers and other #2 in the Company Executives in the greater San Francisco Bay/Silicon Valley Area participated in this survey conducted in person and by email and telephone from December 21, 2006 through January 26, 2007 by the COO Forum.  Responding COOs are both members and non-members of the COO Forum and are from Greater Bay Area companies representing a wide spectrum of industries and sizes.  These COOs responded to fifteen questions about their perception of the greater San Francisco Bay/Silicon Valley Area economic outlook for 2007. 

About Chief Operating Officers

Chief Operating Officers are uniquely positioned in their company as the second highest-ranking officer reporting to the CEO.  They are responsible for integration and process excellence throughout their companies and for driving the tactical efforts to transform vision into results.  They are the day-to-day senior leaders “on the ground” running their company. 

About the COO Forum
 
The COO Forum began in 2004 in the San Francisco Bay/Silicon Valley Area.  In 2006 its COO eForum was launched providing Chief Operating Officers and #2s a Web 2.0 confidential and private collaborative that enable Members to engage in discussion forums, participate in Industry Forums and search Members and other Member posted content.  The COO Forum’s goals include:  providing a forum for Chief Operating Officers and #2s seeking peer learning and collaboration to expand their professional development, sharing and developing best practices for COOs, and improving the understanding, awareness and professionalism of COOs and their important role throughout the greater business community. The COO Forum can be found on the web at www.COOForum.com.

About Bill Shepard

Bill Shepard is the Founder and Executive Director of the COO Forum (Chief Operating Officer Business Forum, Inc) based in Los Gatos, California. He is a Director at the Alliance of Chief Executives based in Walnut Creek, California and consults to CEOs and Ownership.

Media Contact

Bill Shepard
bshepard@COOForum.com
408-376-0204
 
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Contact: Cynthia Lucido
Director of Marketing
Phone: 415.602.0719
clucido@manexconsulting.com

Expanding Knowledge and Improving Business Performance through Executive-Level Collaboration

SAN RAMON, CALIF. –April 4, 2007 – The Corporation for Manufacturing Excellence (Manex) is teaming with the COO Forum to regularly host the San Francisco East Bay senior executive peer group meetings in their corporate headquarters located in
San Ramon, California.

The COO Forum provides a collaborative environment for Chief Operating Officers, Presidents, General Managers, and other second-in-command executives to expand their professional development through monthly peer group meetings and discussions. These peer group meetings provide a roundtable setting for executives to engage in confidential discussions on strategic and operational issues, and to share best practices.

Michael Honeycutt, Manex Chief Operating Officer and Chief Financial Officer, is an active member of the COO Forum with considerable involvement in the East Bay senior executive peer group, sharing insights from his experience with expanding the operations of the firm.

“Manex is delighted to work with the COO Forum to provide an environment for executives to exchange ideas on critical issues and gain creative strategic insights from their peers. We look forward to helping the Forum nurture a strong community of senior leaders to drive breakthrough performance in their businesses,” said Honeycutt.

“With Manex now located in the heart of East Bay, I’m thrilled that the company will host the East Bay executive peer group on a regular basis,” said Bill Shepard, Founder and Executive Director, COO Forum. “Their focus on helping enterprises drive performance excellence, along with their recognition of the importance of professional development and the power of bringing leaders together to exchange ideas on critical strategic and operational issues, makes the Manex-COO Forum a natural and high-value fit.”

Please visit www.cooforum.com to learn more about the COO Forum.

About Manex
Founded in 1995, The Corporation for Manufacturing Excellence (Manex) (www.manexconsulting.com) provides a broad array of proven advisory and implementation solutions exclusively to manufacturers, distributors and their supply chains, enabling them to increase growth, productivity, quality and profitability. Manex delivers high-impact solutions in four key areas: strategy, people, process and performance. Meaningful, rapid impact and ROI are achieved through a modular-yetholistic approach encompassing corporate strategy and planning, marketing strategy, training and development, lean manufacturing, supply chain and logistics, Six Sigma, ISO and performance management systems.