Are chief operating officers going out of style?
When hyperlocal social network Nextdoor picked a new chief executive in October, it didn’t couldn’t promote its chief operating officer (COO) because it didn’t have one. Rather, it brought in Sarah Friar from Square, Twitter founder Jack Dorsey’s payments start-up, where she served as the top financial officer.
More and more corporate-finance professionals are discovering that the title of CFO is not necessarily the apex of their careers.
That realization stems from the diminished status of the COO. Although a company that offers such a position will likely have its HR department write up a list of roles and responsibilities that accompany it, there is no real standard. A COO is essentially a spare CEO. Increasingly, however, companies of all sizes are coming to view them as a waste of money.
Observers first detected the trend away from COOs around 2005, but it has picked up pace in recent years due to the CFO’s emergence as one of the most data-savvy executives on the top floor.
“For today’s CFO, it’s no longer just a numbers game,” venture capitalist Sergio Monsalve recently wrote in VentureBeat, an online news source for business leaders. “If they can instill a culture of analytics and leverage the right technologies, they’ll be well poised to fully become the second in command and perhaps even claim the head spot at the executive table.”
The tipping point occurred in 2014, when the COO of McDonald’s retired and the fast-food chain didn’t replace him. Since then, it’s been all downhill for the boss-in-waiting.
Looking at the top 10 publicly traded companies in the world—the likes of Amazon, American multinational conglomerate Alphabet and Johnson & Johnson—Global Finance discovered that seven of them currently have no COO.
Most notably, Microsoft never replaced Kevin Turner when he left in 2016; when he first joined in 2005, the job had been unfilled for three years. Going against the flow, JPMorgan Chase has two COOs.
Executive-search firm Crist Kolder Associates recently published a report stating that barely one in three Fortune 500 and S&P 500 companies currently employ a COO, and that almost 7% of current CEOs were promoted directly from the CFO rank.
“CFOs absolutely love it,” managing director Josh Crist told Global Finance. “Everyone we spoke with wants the challenge and embraces the challenge.”