Why Your Startup Doesn’t Need a COO

Posted on Sep 12, 2011 | 104 comments


It’s very common for startup companies to have COO’s. So I know I’m getting myself into a bit of trouble by writing this. But …

Startups don’t need – shouldn’t have – COOs. I have this conversation with every startup that comes to see me and has a CEO & a COO. I think usually a COO title at a startup is an ego thing. You have two founders and it was agreed that one would get the CEO role so the other needs to call themselves president or COO.

But ask yourself, what does a COO actually do? In a mature company it’s often like a presidential chief of staff. They will often run all of the daily reports into them covering off for finance, sales, marketing, biz dev & HR. Many times they also pick up product and tech, too.

In an early stage start I believe it’s the CEO’s job to manage these functions. It’s pretty tough to convince me in a company of less than 50 people that the CEO can’t handle 6-8 direct reports to manage the various areas of the business.

Often times you find the CEO who really just likes to do product or tech. You can always spot these types because they can’t tell you what their revenue number for last month was or what their sales target is for next month. It’s actually not that uncommon for me to encounter this with young CEOs. What it tells me is that they’re not properly managing their business. They’re not allocating their time properly across all of the business functions, they’re favoring those that they like best.

Similarly I talk to CEOs who can’t do a sales pipeline review with me. They don’t know the details of the deals. They can’t name the key decision makers at their prospect, they can’t tell me who they’re competing against, etc. I once did due diligence on a potential investment where the CEO was projecting $9 million in sales for his next 12 months. His largest account was Coca Cola for which he was projecting $3 million alone. I asked him for a deep dive on the Coca Cola sales campaign and he said, “that ones’ not my deal.”

Ha. And I decided that his startup company was not MY deal.

CEO’s run things. They run their business. If they’re not running their business then perhaps the wrong person was picked as CEO or perhaps they need more mentorship / coaching to better allocate their time.

So what does a COO at a startup do if the CEO should be managing things?

Usually it’s a line function but they’ve been given a lofty title. Of course they “need” the title to convince customers, biz dev partners and VCs that they’re to be taken seriously. Sure.

I think it’s better to take the title of the job for which you will fulfill.  If you’re running sales & marketing then why not VP, Sales & Marketing? If you run product then it’s easy – VP Product.

If the CEO is the “chief strategist” while the COO “runs the company” then I think it’s time for a coup d’état.

What harm having a COO or worse a president? Clarity for staff and decision making.

Like most everything in business I learned by making mistakes at my first company. I was the CEO of my startup and my co-founder was the president. None of our staff really knew what that meant but they knew that he was a co-founder and that he was, well, the president. So from time-to-time he would be talking with the product team about his vision and they would react unbeknownst to me. They were taking direction from the president. But I ran product management.

He liked to weigh in on biz dev deals. We had a VP of Biz Dev. We gave him conflicting view points. He wasn’t really supposed to meddle with these job functions, but as president and co-founder he kind of had the authority to do so. It took me a while to figure out this was going on and when I did I put an end to it.

Over the years I’ve talked to enough startup staff members at respective companies to know that this lack of clarity in decision making can be a real problem at many companies. It’s far more effective to check your ego at the door and align your job function(s) with your title.

When should a company get a COO then?

I’ve had this debate with some very successful VCs who are pro COO. They talk about freeing up the time of the CEO to think bigger picture and plan for the long haul. They talk about the need of the CEO to be chief evangelist, speak at conference, lead executive recruiting, etc. They say that having a COO allows the CEO to remover herself from the continual politics and personnel management that can be a drag on management time. I know this one as I’ve often said, the main job of a CEO is chief psychologist.

I can buy this argument as a company becomes bigger. I think when the company has the complexity of large customers, customer service & SLA management, well established sales processes, continual recruiting because you’re growing, constant press, etc. it may make sense to appoint a COO to handle more of the day-to-day management. I never chose to do that, but I could see how it would work for some.

We were never Google but we got as large as 120 staff and I never felt the need for a COO. I had an amazing CFO who helped me lead budgeting, planning, board reporting and legal matters. I had heads of sales, marketing, business development, product management, technology and customer service. We had team meetings where we discussed each other’s areas and I mostly stepped in when conflicts needed resolving. But at that stage of the company as we were approaching $20 million in sales I think, sure, a COO might have freed up my time a bit.

For now, if you’re early stage, I’m not convinced. It isn’t something that would dissuade me from investing in a company, but I’d want to be very clear with the team what their respective roles were and make sure they were also very clear with their employees.

I think the best way to protect the ego of the rightly deserving status of non-CEO co-founders is to preserve the co-founder name in their title as is, “VP Product & Co-Founder” or “VP Sales & Co-Founder.” Your right place as a member of the team that was there at inception is protected while your functional role is crystal clear.

What have your experiences been?

Image courtesy of Headspring Insights.

  • http://bothsidesofthetable.com msuster

    Company doing $4m in sales and looking at acquisitions = cluster fuck. It means that the business isn’t strong enough in it’s core business to grow rapidly. It’s a sign of immaturity and often of ego on the part of the founder / CEO. I did it myself and now recognize that flaw. Deals are “fun” – you become a deal junky. But they seldom are worth your time or energy at that stage and the acquisition often becomes counter-productive.

  • http://bothsidesofthetable.com msuster

    You wrote this much better than I did in my actual post. Anyone still reading comments here … what HE said!

  • http://bothsidesofthetable.com msuster

    I accept VP titles as a necessary evil and they don’t bother me much. But I agree with your point. my work around was to call people, “Head of Technology” or “Head of Marketing” as I thought it more accurately described their role. On the other hand, it becomes harder to change that if you hire above them! ;-)

  • http://bothsidesofthetable.com msuster

    “What is it that you do on a day to day basis?” … I ask that to every team that pitches me with ambiguous titles.

  • http://reecepacheco.com reecepacheco

    another case where traditional businesses and roles get carried over into startups when they don’t really need them

    really, startups shouldn’t even have titles until maturity save for a few outward facing positions

  • Joe Ciarallo

    Hi Mark, Nice post. I think Kass Lazerow, Buddy Media’s COO, would disagree : )

    Joe

  • Joe Tillotson

    Hey, NOT COOL!  (they snuck a white dude in the back)

  • http://twitter.com/garyjaybrooks Gary Jay Brooks

    Awesome Read.   I also took this route with CloudAccess.net – Everyone in the company has a zone they work in but we do not have a role.  I have a system that identifies people as “time keepers” if your a time keeper then you have to track logistics and times.   In fact internally within the company as the CEO I do not label myself as CEO.   Its contiguous if you give everyone a path to leadership.

    Gary Brooks

  • http://twitter.com/davidsmuts David Smuts

    Yep- agree fully with you on start-up COOs. Funny thing is though Mark, we’re approaching selected institutional investors (LPs) for investments and they inevitably ask: “So who is going to be the COO!” There’s a good example for you between start-up investors and institutional ones- 

    So yes, we will have a COO albeit without Sales-Marketing or Product Dev under his/her belt. So what’s left for our “COO”:  admin, premises, security, customer service, hr, payroll, international(early) and possibly legal.

    I know what you’re thinking now…., “why on earth are you speaking to Institutional Investors?- they don’t understand or do early stage”.   All for a good reason Mark.

    btw- stop carrying around heavy cement umbrellas!

  • http://about.me/nelking Nancy King

    I find it’s usually suggested by a Board member and they always seem to have the perfect person for the role.  When I hear about it, my reaction is to say the same thing. You do not need a  COO and you need to find out why they think you do if you want to keep your role as CEO. 

    And besides, in small organizations, the title COO or President end up meaning different things and require strong definition so that there’s little ambiguity. Right there is a reason it shouldn’t exist. 

  • http://life20.tumblr.com/ Peter Fleckenstein

    Great post Mark. I can’t even fathom a CEO of a startup or any other company saying “That’s not my deal”. 

  • Rich Caproni

    There is much credence to this position but naturally it depends on the nature and complexity of the business, the type of CEO, and the chosen roles for the members of the executive team. For start-up teams below twenty people or that has not gone fully commercial, I strongly agree. It look silly and also usually leads to conflict and having to sideline one of the founding members much sooner. 

    On the other hand, pretty early in the venture there should be a clear number two Executive with which the CEO can divide some of the CEO role. Some of the main reasons for this include:
    1) Things will get held up if all major developments need to be run by the CEO;
    2) If things aren’t being held up, then they go forward without the proper feedback from someone with a sufficient ‘wholistic’ view to ensure proper consistency and coordination with other key activities and functional areas; and
    3) there need to be a clear designated person that can fill in for the CEO when he/she is travelling, fundraising, speaking at conferences, gets sick, etc.; and
    4) the CEO will be able to continue focusing in his/her strong areas and the number two should be chosen to provide leadership in the other areas.  

    I have had successful experiences being the number two Executive in different organizations but  with four different titles – CFO, Deputy CEO, VP of Strategy and Development, and COO.  My role as each was very similar as primary steward of the investment plan and budget, sidekick for all investor events, and Project Manager of new initiatives that required a full cross-functional team (launch of additional product, new pricing strategy, etc.).

    What that number two is called was really not relevant as long as there were clearly defined roles and authority consistently communicated amongst the team. In the instance that I had the COO title, the business/product was very complex legally and the CEO was a lawyer that did a great job keeping everything together and it worked fine with me overseeing Marketing, Sales, and Customer Service to ensure a fluid customer experience from first contact to retention efforts.

    There is more than one way to skin a cat.

  • Clafontaine

    I would add that a COO role is also dependant on the type of company also. An internet based company should rarely ever need one – the CEO and CFO should cover what is required, regardless of company size.

    For a hardware company – with supply chains, distribution, manufacturing, retail, etc. – then the role makes a lot of sense, even in early stages where the configuration of this infrastructure is critical to business.

  • http://twitter.com/peteskalla Peter Skalla

    Mark, in the startup CFO role I’ve found it useful to carry the title of CFO/COO.  Clarifies the number two position and the fact that in startups the CFO needs to add much more value than a controller and pitch man.  Thoughts?

  • http://twitter.com/#!/georgelbowen George Lucas Bowen

    Why would you ever want to pile on C-Level titles in any scenario??  It only confuses employees and prospects and creates redundancies in the decision process.  The CEO (who also needs to be the President to dictate both long term vision and day-to-day management) position brings a lot of responsibility but having a streamlined management structure keeps your company nimble to execute and evolve faster.  This goes for CSO, CMO, CIO, CDO, CHRO, etc.
    I’ve seen way too many discussions surrounding FAKE job titles to satisfy co-founders which have nothing to do with their responsibilities.   A huge pet-peeve of mine is when startups try to get creative and make up titles like “Chief Hustling Officer” instead of CEO… Why would you intentionally add confusion to future clients or biv dev prospects and force them to ask what your role really is?

  • http://hirethoughts.blogspot.com Donna Brewington White

    That seems like an important point — that the type of business will dictate the complexity and depth of what operations looks like and all ops is not created equal.  For instance, operations at an internet company is vastly different than at a company with a supply chain.

    Of course the title could also be VP, Operations rather than COO.

  • http://essayserve.com/ custom essays

    very interesting! thanks!

  • http://hirethoughts.blogspot.com Donna Brewington White

    BTW, thanks for the post, Mark.  I see this question come up a lot and having the perspective of someone who’s seen it 1000X will save someone somewhere unnecessary grief.  As someone who loves startups, I appreciate what you bring to the ecosystem, and your generosity in doing so.  Besides, you make the Los Angeles home team look good!

  • Darianmp

    It would be great to get the perspective of the co-founder/COO you mentioned regarding your first company. Would he have reacted differently to other departments without the COO title? It seems there may be some confusion about co-founder roles that should be worked out early on. Even the title “co-founder” suggests two “equals” where clearly that was not the case in your company…

  • Dave_ML

    Curious for Mark’s thoughts, but I’ve seen early stage CFO’s not have a COO title and when they do it mucks up operational control. The CFO is often the operating leader for the inward operationl functions–HR, internal IT, data center, finance, accounting, often the key details of fundraising, legal, often driving the details of business development deals, etc.–but rarely does an early stage CFO play a significant enough role to be COO when a company is at a product development and early sales stage.  The CFO’s that can also handle sales and development do that are typically CEOs.

  • Yanni

    Of course if you want to see a real cluster-f*ck, just look at the RIMM debacle – two CEO’s :)

  • http://blog.ideatransplant.com Jan Schultink

    One more association: the scene in the movie Pulp Fiction: “Should I talk to you, or to you?” “You can talk to me.” “I thought so” People figure out how runs the show…

  • http://pulse.yahoo.com/_FBX7NW5ZTABDEE4XLOWTXBKV4Q Eric

    Aaron – it started working fine, but we ran into unrelated problems with our investor and had to stop everything to deal with his inability to complete his investment. So we did not get to go commercial using this model.

  • http://technbiz.blogspot.com paramendra

    The earliest members of the team have to do a little bit of everything anyways. 

  • http://berislav.lopac.net Berislav Lopac

    Speaking of titles, what is the point of all the VPs? (I’ve read somewhere that Amazon has more than 300 VPs.) Why not call them simply “director”, “head manager” or “chief”?

  • Anonymous

    Having been a COO at a start-up I concur. My role was to manage the non-technical/product functions, i.e. marketing, sales, BD, operations, finance, working with the founding-CEO who was v. technical and product-focused. Worked fine for a while, but as the team grew and we hired functional leaders/experts in sales, marketing, etc. it became harder for them and the people who reported to them to understand who was the key decision maker – me or the CEO. Knowing that this was an issue I devolved myself of responsibility as we hired VP’s – i.e. they reported to the CEO, and I ended up running admin, finance and operations – which is not what I signed up for – so left and in doing so believe the company was stronger for it. So in a nutshell a start-up doesnt need a COO, its needs strong, competent lieutenants in key functional roles and CEO who is willing and capable of wearing multiple hats.

  • http://www.RenegadeToolCo.com Timothy Lemnah

    Well said!

  • http://changespeakingout.blogspot.com/ Carl J. Mistlebauer

    Job titles only matter when you have a hierarchy of responsibility and communication.  Up to a certain point your company is a team and maybe in that case you should call the CEO the team captain.  

    As I always say, “I don’t care what you call me but I do care when you call me!”  The focus should not be on job titles but rather on core competencies.

  • http://www.repeatablesale.com/ Scott Barnett

    Have to disagree with you on this Peter.  If you are the CEO of a startup with a $9M pipeline and you have one deal worth 33% of that pipeline, you better know EVERYTHING about that deal.  Mark wasn’t talking about an issue that should have been delegated – he was talking about (in my opinion) the #1 most important aspect of that company.  You see it blogged about repeatedly, the startup CEO has 3 roles:

    (1) Set the vision for the company
    (2) Chief recruiter
    (3) Make sure there is enough money in the bank.

    The question Mark asked had to do with #3 – I would much rather close that $3M deal and not have to raise outside money (or at a minimum increase my valuation for the outside money by having this customer) than raise money without it.  I need to know everything about that deal.  I’m guessing any question Mark asks in the realm of the 3 questions above he expects the CEO to be able to answer himself – with passion.  Anything else, it’s appropriate to bring in his top lieutenants to provide color.

  • http://www.5o9inc.com/ Peter Cranstone

    You should know about everything – but sometimes we don’t. How many meetings have you been in where someone isn’t up to speed. Do you think the CEO’s or even the VC’s really understand the core technology of the companies they invest in? Probably not – they base their investment criteria on a host of other items.

    Mark didn’t pass on the deal because of this. It just allowed him to get to “No” faster. VC’s pass on “good/great deals” everyday of the week. In this case we never really learn the details – was there really a $9m pipeline? Who knows – could the CEO have done a better job – hell yes. But for a VC to pass on a deal because of that, well i find that tough to believe. I’m willing to bet there’s more to this story than an analogy for the title of the blog.

  • AlanG

    I would take this a little further even. In my startup (my 2nd), I prefer NOT to have any VPs or CxOs for the first 2 years or a little more. Why? Having exec titles early on may soothe a few egos, but unless the person in the senior role (say, VP Product as an example) is outstanding and highly experienced, then what do you do with him or her when later you have to bring in a real VP? If the first VP Product (say) needs to have someone inserted above him, then when this happens you lose your first VP, possibly someone you really want to keep. In order to head off this possibility, I use only Director titles at first, unless the person being brought in is truly exceptional. For example, in my current 20-person startup, my CTO’s last job was CTO of THE industry leader in our field, a multi-billion $$$ company (by annual revenue).  None of my Directors, even though they are very good, can argue that they should have equal titles. At first I had a few grumbles, but I held the line and it has all worked out.

  • http://twitter.com/arnie Arnie Gullov-Singh

    Most of what a COO does can be done by an experienced CFO. 

    “Operating” a business ultimately comes down to having timely access to information (i.e. metrics), using that information to make decisions on allocating resources, setting goals and measuring the results. Preparing operating information is very similar to preparing financial statements, which is why its such a natural fit for the CFO.

  • Anonymous

    I totally agree that the title of COO is useless at early stage.  Roles should be clearly defined based on function, if a CEO removes himself or herself from managing the company then the title CEO is being used for ego purposes. Ultimately every decision has to rest with the CEO who can accept or rejecting decisions from direct reports. 

    If you are a “CEO and Co-Founder”  of a early stage startup and you did not cringe when reading Mark the comment about a CEO who could not deep dive into his largest sales campaign you should seriously examine your role in the company.

  • Agaziel

    I would also add that COO’s are needed in industries where there is a prominent operational line function in the business. It can be logistics, manufacturing or even banking operations. A tech startup does not need a COO because its biggest operation is to sell. To sell you need CEO’s who want to sell, and build a client focused company. She then hires likeminded people. 

    In other words, C class titles in startups should be reserved for those making or selling the product. If a CEO does not see herself as both of the latter, it’s time to update the CV’s…

  • http://www.vegasstartups.com John

    What did you do to resolve the issue you had with your co-founder being President?

  • http://twitter.com/moneymedia Stephen Howard-Sarin

    Way too simplistic, Rohan. A fast-growing company will by definition have tons of new people. Those enthusiastic new people need to learn on their feet. You *want* new people asking lots of questions — “Is this important?” or “Who do I talk to about [blank]?” — And they’ll believe the answers they get from someone with a C-level title. Bingo! Instant recipe for too many chefs.

  • http://twitter.com/moneymedia Stephen Howard-Sarin

    That POV sounds like trouble to me, Jeff. The user-facing product and the advertiser-facing product are tied together — sometimes like a three-legged race. They are complementary, and decisions made to enhance one impact the other. 

    It’s easy to build products that please the user and screw advertisers. And it’s easy to build products that please the advertiser and screw the users. The magic happens when you build something that pleases both. 

    Case in point: Careers 2.0 from Stack Overflow.

  • jesal sangani

    I think it is a broad general statement “Start up does not need COO”.. my thoughts are it depends on the strength of the other management team members(read CEO), growth rate, etc.

  • 234

             322222222222311244

  • Wesley Wise

    I think a COO is just like a co-captain of a football team. If the captain gets injured or something, the co-captain takes his position. Same with the COO, if the CEO is ‘injured,’ the COO takes his place. But basically, they have no difference in their job description. :)

  • http://pulse.yahoo.com/_UKGS6F3JP3OYPRSELLCSCFFJKE Alex

    Keith Rabois is the COO of Square.  What are your thoughts on that? 

  • http://www.alearningaday.com Rohan Rajiv

    I agree with you on the asking questions part Stephen. And I guess I don’t agree with the fact that they’ll believe the answers they get from a C-level title. I think it comes down to the perception. 

    The more you stress on titles, the more they take hold of you. My $0.02 :)

  • http://www.yo27.com Machbio

    sadly the CEO is a Black Woman…

  • http://twitter.com/inscitekjeff Jeff Szczepanski

    Stephen, I agree completely with what you are saying, but at the same time don’t think that idea is in conflict with the point I was making. As always, clearly, the persons involved still need to communicate with each other. :-)

    Put another away, besides the workload and daily focus aspects, there are actually advantages to the separation in a “church and state” kind of way that keeps the monetization activities value enhancing to the users and simultaneously valuable to the paying customers.

  • http://www.altgate.com/ fnazeeri

    I agree with everything you write…except the first sentence. Having been part of the CompStudy (http://compstudy.com/) survey of startup company compensation for many years, I can report that the COO title is very uncommon. In fact it is so uncommon that we have had to lump it together with President and still it occurs in less than 20% of companies surveyed. In the most recent survey, only 1/3 of COOs in tech companies were founders, so one theory is that this is the position that VCs hire “CEOs-in-waiting” to insure against founder-CEO underperformance. What’s more, compensation for COOs varies wildly leading me to believe it is the “junk-drawer” of company titles…ie it’s where you put something you don’t know where else to put!

  • http://theleanstartupmachine.com Trevor Owens

    What kind of CEO abdicates leading the team? More likely a CEO needs a good exec assistant than a COO. IMO COO is like having two CEO’s in an early startup.

  • Larry

    Very timely for me too.  I’ve been spending a lot of time thinking I need to find a great COO too.  Your article has made me think and I think for my situation you are right.  I need to gain clarity first and then make sure my team is aligned, process and training is in place and hold everyone accountable.  The problem is, we continue to grow quickly.  My comfort zone is in certain areas of the business.  I need to make some changes with myself (and I can) before I can even begin to hire a COO.  Starting and growing the business was almost too easy for me.  But now, with many employees and customers, getting to the next level is tough.  I was thinking a COO would be the “magic pill.”  “If I can just find the right guy, ”  I won’t have to worry about all of this stuff.  Your article has really challenged me to think differently.  Heck, your article may have changed the course of my business and has made me think differently – about myself and what I need to do.  Thank you!

  • Fly on the wall

    Spot on! A small dinghy does not need a navigator, a captain and an engine room attendant. But a big ship does need all those roles. A COO’s mandate is scaling operations.

  • Anonymous

    Why does the COO we don’t need gotta be black???

  • Avani Nagwann

     I agree