Every successful business is the result of a great vision. But a vision alone just isn’t enough. Efficient business operations are essential to make that vision a reality.
So, businesses need dedicated senior executives who can create and execute this vision to perfection.
In many companies, the chief executive officer (CEO) and chief operating officer (COO) work together to ensure the organization’s growth and success. However, they have different duties and priorities.
Understanding the difference between a CEO vs. a COO and their responsibilities will help you evaluate whether your business needs both roles.
Responsibilities of a CEO
The CEO is the highest-ranking employee and is essential for the organization’s growth and success. This role involves many top-level responsibilities, like defining a company’s strategies and culture.
Here are the key responsibilities of a CEO.
Define the company’s vision
Every business needs a long-term vision and a road map to fulfill it. The CEO has a crucial role in defining a company’s vision. For example, the CEO of a software startup might envision the company becoming a torchbearer for a new technology.
Early on, a startup’s CEO determines the values upon which the company stands, like customer obsession, innovation, inclusion, and integrity. These values will guide the company as it grows and strives to meet its vision.
The company’s vision also helps determine the business’s long-term goals.
Make long-term strategies
Strategic planning is one of the primary responsibilities of a CEO. These strategic decisions will uncover opportunities and mitigate business risks.
In addition, these strategies influence the direction in which the business will grow. For example, they determine which new product lines and markets the company will pursue. They also define the business’s policies for mergers and acquisitions.
Strategic planning involves setting long-term goals for the company’s performance and choosing key performance indicators (KPIs), metrics to measure its progress. The KPIs might include:
- Net profit
- Customer retention
- Customer lifetime value
- Monthly recurring revenue
To help make these long-term plans a reality, businesses often rely on the CEO to bring in investments by negotiating with investors and uncovering new funding sources.
Communicate with the board
In most companies, the CEO is a part of the board of directors and acts as a bridge between the board and the rest of the organization. They inform the board about the company’s performance, financials, and potential risks.
The CEO communicates the board’s decisions to the C-suite executives, like the COO, chief technology officer (CTO), chief information officer (CIO), and chief financial officer (CFO). The executive team then works with individual departments to implement these decisions.
Represent the company in public
Building the organization’s reputation is an essential part of a CEO’s job. They’re the face of the company and represent it in public events, like conferences and press meets.
The CEO needs to engage with the media, stakeholders, potential investors, the government, and the public on behalf of the company.
Craft and uphold the company culture
A company’s culture is a crucial factor for its success, and the CEO plays a significant role in crafting it. For example, they may make inclusion and diversity a part of the culture, resulting in a welcoming work environment.
They also have a role in deciding the organization’s structure and hierarchy. The entire company looks up to the CEO, and it’s the CEO’s responsibility to uphold its culture and values.
Responsibilities of a COO
The COO is second in command and reports directly to the CEO. While the CEO is responsible for long-term planning, the COO is in charge of execution.
Here are the primary responsibilities of a COO.
Oversee the day-to-day operations of the company
The COO works closely with different departments — like production, sales, marketing, human resources, and finance — to ensure smooth operations.
As part of this process, they should identify and eliminate bottlenecks. For example, the COO might get involved when a delay from a vendor causes an issue with production.
The COO monitors the daily operations of each department and helps them achieve their short-term goals. In addition, the COO ensures that everyone works steadily toward the company’s long-term goals.
Create processes and workplace policies
It’s the duty of the COO to ensure operational effectiveness and efficiency. As part of this, the COO must create and monitor processes to ensure smooth business operations. For example, they might define an efficient expense-reporting process for employees.
The COO also creates and enforces workplace policies and standards. For example, they might decide to use the Scrum agile project management model for better productivity. This involves appointing a Scrum master, who helps a small team complete a project efficiently.
Monitor performance metrics
While the CEO defines the KPIs, it’s the COO’s job to ensure the organization achieves its performance goals. To this end, the COO needs to monitor the KPIs closely.
For example, if a COO observes an increase in customer churn, they’ll look for the cause. Likewise, a dip in revenue might point to a production issue. By analyzing the performance data, the COO recognizes and corrects any operational issues.
Work with the CFO to plan budgets
The COO needs to team up with the CFO to ensure that each department stays within budget. They should monitor overall department expenses and ensure they align with the company’s financial goals.
If a department needs a budget increase to perform better, the COO might step in and evaluate the new budget requirements.
Difference between CEO and COO
A company’s CEO focuses on the larger picture, creating a vision and long-term strategies. In contrast, a COO works hands-on in the company’s day-to-day operations.
The CEO has an external focus, upholding the company’s culture and reputation. The COO has an internal focus, working closely with departments to ensure the business runs smoothly.
While the CEO communicates with the board to make crucial business decisions, the COO works with departments to translate these decisions into actions.
Bryan Clayton, CEO of GreenPal, a lawn care services company, believes that a COO doesn’t just oversee operations.
“Having a COO is not just about delegating tasks,” he says. “It’s about having a trusted partner who understands the intricacies of the business and shares the same passion for the culture and product.”
The differences between a CEO and a COO don’t end with their job descriptions. According to Salary.com, the average salary of a CEO in the US is $823,245, whereas the average salary of a COO is $480,378.
Advantages of having both a CEO and a COO
In an organization with well-defined executive roles, the CEO and the COO complement each other. For example, the CEO could be a visionary who makes strategic decisions and drives innovation, and the COO could be a taskmaster skilled at implementing these decisions.
In terms of a startup, the COO could have hands-on experience in running a business, while the CEO could have the technical know-how and vision for the company.
Does every company need a COO?
While most companies have a CEO, McKinsey reports that only 40% of top businesses have a COO. Does that mean your company can work without a COO?
In theory, the same person could handle both CEO and COO roles. However, they must have different mindsets when acting as the CEO vs. the COO.
For example, when working in a CEO capacity, they should think of the long-term goals and visions of the business. And when they’re acting as the COO, they need to work directly with departments to ensure operational efficiency and reach those goals.
Josh Amishav, founder and CEO at Breachsense, a cybersecurity firm that doesn’t have a separate COO position, explains how he splits his duties to balance his strategic and operational responsibilities.
“As the CEO, I focus on setting the company’s strategic direction, building relationships, and representing the organization. In my role as the COO, I manage day-to-day operations, oversee departments, monitor performance, and address operational challenges.”
Jeff Matlow, president at By Title Only, a business consultancy firm, feels that a single person can handle the roles of CEO and COO only in the initial stages of a company.
As the company’s size increases, things should change. He notes, “Once a company reaches about 30-50 people, one of the main reasons they don’t grow further is that there isn’t a split in CEO and COO labor. Usually, the founder/CEO spends so much time as COO that they don’t have time to be a real CEO.”
So, for small businesses, it might be possible to do without a COO role.
But as the company grows and operations become more complex, the CEO needs the help of a COO to run operations and coordinate with teams. This allows the CEO to concentrate more on long-term growth and the business’s vision.