by Gunjan Bhardwaj, Andreas Eisingerich, and Florian Täube
Does your company have a COO today? What role does he or she play in the organisation? Does your COO have the best shot at becoming the next CEO? The answers may not be as self-evident as many executives think.
That’s what we found when we studied the top management teams of companies in Europe over the past three years. Few European companies have COOs, although their numbers appear to be growing. Of the 97 largest listed companies in the UK and the Eurozone in 2010, only 37 had a COO in their executive ranks.
Appointing a COO is a recent trend on the continent. Only two of the 37 organisations we studied had appointed more than two COOs in their history; in 27, the current COOs had only one predecessor; and in the remaining eight corporations, the incumbents were the companies’ first COOs. COOs are relatively common in service industries such as financial services, energy, information technology and telecommunications, but in manufacturing sectors — such as automotive, chemical, and pharmaceutical companies — they are relatively rare.
Most COOs in Europe are seasoned executives; they were 48 years old, on average, when they were appointed. There was quite a range, though: the youngest in our sample was 32 years old when he became COO, while the oldest three took office at the age of 58.
There appears to be a correlation between age and tenure; executives usually needed to be veterans of the same company if they were to become COOs. The COOs in our sample had worked in the same company for 12 years, on average, before their appointment. A majority of companies — 33 of 37, to be precise — recruited COOs internally.
COOs in Europe are, distressingly, predominantly male, with only one female COO in the companies we studied. Part of the problem may be in the backgrounds that companies desired: 85% of COOs had experience in operations, strategy, or finance. In several industries, such as consumer goods, financial services, industrial products, and logistics, COOs usually had backgrounds in either managing operations or information technology departments. Almost half of the COOs we studied had business degrees and around a third had engineering degrees.
The COO’s role, we find, is driven by three factors: the company’s strategy, the composition of the executive team, and the relationships between the members of the top team. In contrast to previous studies, we didn’t find evidence that the COO’s role is determined entirely by the CEO.
With markets shrinking and cash flows declining, COOs have built their credibility in most companies by focusing on operational efficiency and helping to meet their margin goals. This has helped improve their standing; COOs are increasingly becoming responsible for rolling out transformation agendas.
It still doesn’t seem necessary to be a COO in order to take over as CEO, though. When we analysed the careers of all the incumbent CEOs of the companies in our sample, we found that only 23 of them had previously been COOs. But, with COOs increasingly landing key assignments because the office lies at the intersection of strategy and operations, we feel that not promoting them to the top job may be a missed opportunity.
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