The difference between a CEO and a COO is surprisingly easy to understand, but it is also surprisingly misunderstood by too many entrepreneurs who start as CEOs and devolve to COO roles. At Leap Ventures we have had to explain these roles enough times that I feel compelled to write about it, in the hope that we can simply point to this post in the future.
So what is a CEO, how does she differ from a COO, and where’s the problem?
A CEO does what he wants to do. A COO does what he has to do.
— Hervé Cuviliez, Leap Ventures
The CEO is the Chief Executive Officer. The boss. The big Kahuna. The person whose desk the buck stops at. The person ultimately responsible for the business. Therefore, in practice, the CEO is responsible for everything including sales, operations, product development, engineering, R&D, HR and finance. On the other hand, the COO is the Chief Operating Officer, where the word “Operating” can mean many things depending on the type of business you’re in. It’s sometimes easier to state what a COO is not responsible for, rather than what she is responsible for: a COO does not do sales, finance, HR, technology or long term product development. A COO will instead focus on making the stuff that the company sells. Day in and day out. In the best possible way, the fastest and most efficient. The COO runs the ship, the CEO is at the helm.
When a team of entrepreneurs start a company, generally one of them will assume the mantle of the CEO. And at the start, that job is relatively easy: since one needs to invent, imagine, create new things, it is natural to be looking forward and doing what one wants to do to make the business better. There are few operational responsibilities, the team is small, and the opportunity to innovate is strong. The problem for the CEO starts showing itself as the company has created its first product iteration, and it is nicely received by the market. At that point there’s huge pressure to make it happen at all levels: grab more market share, produce more, iteratively improve the product, spend on marketing, push sales. And the tendency of the CEO will be to hunker down and “get shit done”. And the longer this happens, the more the CEO will lose the big picture and devolve into a “COO+”, forgetting to invest in the key CEO-only responsibilities, namely:
- Leadership: Everyone looks up to the CEO, whether consciously or not. A weak leader pulls the company in too many directions, like the proverbial headless chicken. The head is the key, although neck and body are necessary. Whereas the CEO leads the troops into the unknown, the COO ensures that the machine is well oiled.
- Vision: A strong leader must have a strong vision. A CEO must know where he wants to company to go, even in unknown waters, out of the comfort zone, and take major risks. It’s up to the COO to solve the problems that arise in getting there. So as my partner Hervé Cuviliez is fond of saying, the CEO does what he wants to do but the COO does what he has to.
- Culture: ah, the coveted “culture” word. It’s used and abused, by so-called behavioral experts or management gurus. At its core, culture is really a tool to make management easier. If you want everyone to work in teams towards a common goal, and you instill such a flat team culture, then your management headaches are minimized. If you need the company to be operating with heavy processes in a highly regulated environment, instill a by-the-book culture. And the CEO is the number one culture creator. It goes hand in hand with leadership, and the wrong culture can be disastrous. Just witness the Zenefits debacle.
The CEO must have, nurture and apply these forward-looking soft skills, and back them up by hard decisions on strong convictions, acquisition of talent or companies in fields of interest, or even culling of employees with clashing culture. Any entrepreneur who passes through the obligatory phase of “getting shit done” but doesn’t get out of it, will inevitably forget to invest into one or many of the CEO-only responsibilities, leading to potentially deadly problems that startups face in their growth phases.
And that’s what we mean when we tell an entrepreneur “You’re a COO, not a CEO”.