How To Get The Most Value Out of a COO

We're more in a wartime situation than a peacetime situation. Companies need to focus on revenue and gross margin and growth and net profit much more than they did over the past 12 to 13 years when we went from 2009 till 2023, that companies could really grow even though they weren't operating properly or operating efficiently. And I think now the CEOs are feeling the stress and strain of that and they need COOs to operate more like wartime. Entrepreneurial CEOs versus spending time on back office processes and systems and perfecting everything. Right now is not the time for everything to be perfect. It's time to execute and plan later.

In many ways, one of the topics that's been kind of a hot topic just in my world, and I'm sure yours as well, is I get a lot of CEOs that reach out that say they're ready to hire a coo. In many cases they are, but in many cases they're not. And a lot of times I only get so far and I can't figure out why they don't move forward. When, in your opinion, is a CEO entrepreneur ready to hire a COO or a second in command?

So at the end of the day, we only start a company for one of three reasons. To give us money, to give us free time, or to have that feeling of accomplishment, right, that we've started something and at some point the business is up and running. So we have that accomplishment, right? We have our company, and at some point we're usually making enough money that the only real next step is you're going to fly private for the rest of your life, but you have enough money coming in, you're living a nice lifestyle. And then the third is the free time. And often entrepreneurs get trapped into this. Working because it makes them feel good and working because it fulfills them. And they lose sight of some of the hobbies and other parts of the business. In one way, you can buy yourself that free time by getting that second in command. In another way, you can leverage up your time so that you're only working in your unique ability areas, the areas that feed you with energy and that you're really good at. And having somebody else work on the parts that drain you or that you're not good at can usually amplify, you know, and get you better results. So it's often that kind of results in buying back your time is the stage that they're at. And then thirdly, it's when you're really bumping into that glass ceiling when maybe you just don't have the skill set to be able to do it, or you don't have the time to be able to get it all done. And you really do have that. Not just a to do list, but really big opportunities just to leverage and to grow the business. And you don't have time or a person that can do that. And I guess one more thing that I think about is if a leader or a CEO of a company doesn't have time to grow their people, they're just implementing day to day, they're working harder every day, and they're not spending time growing the confidence and growing the skills and growing the connection of their management leadership team. That's a huge opportunity area for growth in the company too.

Talk about how CEO entrepreneurs that are in position to bring a COO on talk about how they don't look at the investment in the ROI properly.

In some cases, when a CEO or an entrepreneur is looking to hire a second in command, they might have a dollar value in their mind. Let's say they're going to pay $240,000 for a VP operations or a COO to come into their company. First off, 240 is probably more like a VP of operations. To get a true C level of a real company, you know, you're probably more in the 350 range, but let's say you're going to pay 240,000. They get kind of worried about that $240,000. You're not paying it up front, you're not paying it tomorrow morning. So really you're only paying $20,000 a month for the next 12 months. So the 20,000 is much more palatable. And even the 20,000 is more like $5,000 a week. Could you afford to write a check for five grand next week? Yes. And then what could that person be doing to generate enough money to pay for themselves? Right. Maybe they generate 15,000 in gross margin or 20,000 in gross margin to pay for that $5,000 expense. Right. What things could they do? Could they grow people or find more revenue or do more with the marketing? Could they get more business out of your clients? Could they get more productivity in the business? They can easily, if they're focused for a week, generate enough gross margin to pay for themselves. And what could you be doing with the free time that they've created to actually increase that? So when you break it down and think of it on a weekly basis, it's not a lot of money to spend. And if you put a very simple plan in place of what you would be working on and what they would be working on to generate those gross margins. It's probably very easy to do. But I think a lot of entrepreneurs freeze when they look at the dollar value or they freeze and they're not quite sure what the person's really going to be doing. So it's all about slowing down and thinking about, you know, what's the plan that they're going to do, what's the ROI that I need and expect and then how can I make sure that that happens.

And one thing I love about your book, Second in Command, is, you know, talking about the different types of combinations and the different types of COOs, because I think there's a lot out there and I'm not knocking on EOs, but like they act like there's one combination of a visionary and, you know, integrator or an executor in an ideas person, which in a lot of cases, you know, is the case. But the irony about this is Most of the CEOs, entrepreneurs, in order to figure out this problem is they need this person on board in order to figure it out in some cases, which I think is, you know, another thing that we started on and just, you know, talk a little bit to that.

I think a lot of entrepreneurs struggle with the actual planning and execution. They struggle with figuring out how to make something happen. And really they're trying to hire the person who's going to be able to figure out how to make it all happen. They almost need it to happen in tandem. So I think it's working with a really good recruiter or a coach that can help them put that plan in place to figure out what the short term and long term plan might be, what the onboarding of this person might look like so that you can get the most success out of them in the first 30, 60 or 90 days, kind of breaking it down that way and making sure they execute.

I was talking actually to Joe Polish about this yesterday on a text and kind of voice message back and forth or voice video. You know, he's talking about the interview stage and that he was asking if it's normal to have people, you know, work for a short, standard kind of a consulting gig before they accept it. In our world, in the hiring world, it's typical that they would do a project like a presentation, like the finalist, and then, you know, that would kind of get you to understand how they think, how they work and maybe, you know, kind of brainstorm with the leadership team. But what have you seen work when it comes to selection? Like you got somebody in front of you, they look good, they feel good, but you want to make certain that they, you know, can work. And in our case on the hiring side, you don't want to overcomplicate it because they may have other options. But have you seen any short stints and projects work before a COO comes on board?

More often than not, the reason that the entrepreneur wants to put a test project in place to see how the person does is because they suck or their company sucks at interviewing. And they don't really have a good skill set to do the proper interviews, to do the proper reference checks, to go through the resume, to take a look at them against their scorecard, to run group interviews or panel interviews with the candidate. They don't really to execute on the torque process. They don't understand the methodologies. They don't understand and if they did, they would know enough about the candidate day one that they wouldn't need to have test projects. Right. Often what they're doing is they're saying, I'm going to get sloppy at interviewing, I'm going to hire somebody and see how they do and see if I like them and see how they kind of perform with the team. Really? That should be the actual interview process itself, no? Agreed.

I didn't say it just like that. I kind of said, hey, we can think about it as maybe something in a that we can use in a certain circumstance, but typically it's not normal to do that, especially with a players that have options.

What about you might put a couple of hoops in part of the process that are little projects and tests that they do, but it's not coming and working inside of your company for 30 or 60 days to see if you like them. And you know, it really is get better at the interviewing process. Figuring out what behavioral traits you're going to interview for. How do you define those behavioral traits? What kind of questions are you going to ask in the interview to see how they stack up on those? How do you profile them against other candidates to see how they benchmark against each other? And then how do you interview against the core projects they're going to be responsible for doing this year? How do you see if they've actually done that work before and how they did the work before? How do you interview to see whether they stack up on P and L responsibility and strategic insights they're going to bring in? And then really understanding the threat of reference check and the reference check processes, it's more about the skills that the companies and managers need to get good at at that interviewing and hiring stage.

100% agree. Just thinking about all the successful engagements and hires, it's very few that we've actually had projects and clients have them do projects. What about a senior, a CEO entrepreneur that is ready but they're, they're still trying to figure out what, what do they need to think about. And I've got some answers on like how to define the role. But even further upstream when they're, when they're hesitant in hiring a coo, what are some of the other things to think through in order to get you to move with action or that this isn't the right time?

First, sitting down as the CEO and saying what parts of my day to day job do I suck at that I could outsource or off, you know, give to someone else? What things do I work on day to day and during the month that drain me of energy and can I find somebody who's great at that, who loves those parts of the business? How can I free up my time to work on my core unique ability areas? And if I freed up my time, how much more leverage am I going to get? How much more results can I get from that? That will allow you to understand kind of what the roles and responsibilities are going to be, maybe what metrics that person is going to be responsible for. And then you can start to put the plan in place to execute against.

We call it figuring out the success outcomes. Almost concentrating down what this person needs to achieve in the first 12 to 18 month window. And then that gives a little clarity and you know what this person ultimately needs to achieve and gives clarity to CEO. In running the CEO alliance and being on the side of the closing, what do they need most from CEOs and entrepreneurs? Because you're on the other side and you know, they probably, you hear what they talk about and I've been around groups of CEOs, but not to the extent you have. I'm just wondering like what are the top conversations or challenges that you know, continually come up in those groups?

There's definitely a few. So the first one is that they feel like their CEO, especially the entrepreneurial CEO. These are the founder. CEOs are very quick to start projects. They come up with ideas constantly. They delegate ideas very quickly without giving all the details. They're kind of perpetual motion machines that are winging it, shooting from the hip and it's hard to keep up with those people. That's number one. Number two is that they speak differently. It's almost like men are from Mars, women are from Venus. CEOs speak like CEOs and COOs speak like COs. And it's about understanding the personality profiles and what makes each other tick and understanding the other person. So it's frustrating. I'm actually working with a COO alliance member right now who's struggling with their CEO and, and they don't have the time to get in sync. And the CEO doesn't think it matters, but the CEO is frustrated with them, but it's almost like a husband being frustrated with a wife, but then they don't want to show up to marriage counseling. So it's about spending time to understand the other person, to get in sync with the other person, to work on that relationship and communication with that other person so that you can actually build that better relationship. And I think at third, it's about putting time in the calendar, almost like date night, where you have time in your calendar to get in sync, to stay in sync with the other person, to build kind of the relationship and commonality and trust with the other person so that you actually like each other more than. Than often comes out in the day to day of the business.

Yeah. Anything else that comes up that you're. That's something that's recent new or, you know, kind of something that is. You're seeing that might be different and how COOs and just business operations in general.

Well, you know, one is that the CEOs tend to overwhelm the CEO with lots of the data. Right. Most COOs like to pull. They ask lots of questions, they pull together all the facts, they get all the data together, and they want to deliver that to the entrepreneur and that overwhelms the entrepreneur and they kind of want the, the COO to stay more focused. I think today what I'm noticing is that we're more in a wartime situation than a peacetime situation. Companies need to focus on revenue and gross margin and growth and net profit much more than they did over the past 12 to 13 years when we went from 2009 till 2023, where we really had the rising tides lift all boats and so much free money and just growth that companies could really grow even though they weren't operating properly or operating efficiently. And I think now the CEOs are feeling the stress and strain of that, and they need CEOs to operate more like wartime entrepreneurial CEOs versus spending time on back office processes and systems and perfecting everything right now. Is not the time for everything to be perfect. It's time to execute and plan later in many ways.

You know, and one other thing I want to get into, you just kind of got me down this path, which was great, is when we hire a coo, they get onboarded. And even in the energy process. One thing that we're focusing a lot on, especially in like direct to consumer type companies, where you got a COO or a CEO that's creating new ideas quickly and launching products, one thing that we pay attention to is how quickly the CEO makes decisions and how quickly the COO makes decisions. And obviously the CEO is coming in to help make be a little bit more thorough in how they make decisions. But if they take too long, they will frustrate the heck out of a CEO. And so we're trying, we try to find that sweet spot. But talk about like that, what that feels like when a COO comes in and obviously has to slow down the CEO.

Yeah. So the CEO needs to be the brakes to the entrepreneur's gas, or we need to be the leash to the entrepreneurial dragon. So we need to slow them down a little bit, but not completely stifle them. And sometimes that's by understanding how to take all the random ideas that come from the CEO and put them in order of priority so that we don't just keep working on every idea as they come up. Almost like building a home. If the CEO comes in and they want to talk about the Wolf stove and the, the beautiful cabinets, that's great. But we're still pouring the foundation and putting up the walls. We can talk about the cabinets in three months. But they're like so urgently wanting to talk about the cabinets. We need to remind them to focus on building it kind of in the most efficient and most productive way. So what I like to do is anytime that the CEO comes to me with an idea is I say, I love that idea. Let me ask you a few questions so I understand it even more so that we can run with it. And then the CEO feels like, oh, great, you love my idea. Ask away. And then I can ask the who, what, when, where, why, and how to truly understand the idea they have. I can understand the ROI they're expecting. Maybe we can talk about the people and time and money inputs that are going to be needed to generate that. And then once I've asked enough of those questions, which, by the way, they've probably been rolling a lot of that through in their mind over the last two months or two weeks, but they only gave me 20 seconds to delegate the idea. I need time to catch up to them. So it is me saying, I love the idea. Let me catch up by asking you some questions. They then give me the rest of the information. And at that point, both of us can say, hey, this is a great idea. Let's green light it and start it now. And we'll bump something that's already on our list, or it's a yellow light, meaning we like it, but we'll find time when to start it, because we can't start it yet. Or now that we've asked all those questions and we understand it more, seem like a good idea, but let's kill it. And it's a really simple, elegant process that can work for any entrepreneurial CEO.

I agree. I mean, it's. It's kind of like saying, you know, not right now, but in a more a way that doesn't feel the CEO or they're stymied on their ideas. It's like, hey, I love that, but let's talk about it more so I can understand it, which is, you know, obviously a great way to build trust, which is the next thing I kind of want to get into. You know, I think in order to do what you just said and tell a CEO that, hey, I like that idea, but not right now, or I like the idea, let's get some more data. Talk about how important it is to build trust and how to build trust as you first start a COO role with the CEO.

The real starting point is in the interview process, is doing a really good, thorough interview and reference check so that you know everything about the candidate before you hire them. Kind of like dating and living together and having sex and meeting each other's families and kind of behaving badly for a few years. And then you know enough about the person to get engaged, and then you even have some more time to then get married. I think you need to spend that same amount of time in the interviewing process and in the onboarding process, because that amount of rigor and depth and work then allows you to have that trust right at the very beginning. Once you have the trust and you operate with that implied trust, it's about constant communication and collaboration and understanding the other person and remembering that they probably have the best interest for the company too, that any of the conflicts and problems that come up are often just misunderstandings or not spending enough time talking to each other. But you can often get yourself back on the same page when you remember that the other person is approaching it the same way you often are. Yeah.

Another thing that comes up a lot that I do think matters, but it's kind of a squishy like term is when we ask for feedback, you know, on interviews, CEOs will talk about like they love the energy of the person they interviewed and it's you know, other roles as well. You know, we always ask, kind of define that, but talk about how important that is and, and why energy is, you know, alignment and similar energies are similar between the CEO and the coo.

But much more so in the early stages or in the more entrepreneurial size kind of pre 30 employee companies. As an employee gate goes from 30 to 100, you start to almost appreciate the differences. Brian and I were like nitroglycerin. When I was the COO for Brian's company, 1,800got junk. We were so similar in many ways that we were both quick starts, we were both able to execute quickly, but we were a startup going through massive hyper growth. But I came into the organization with so much more experience at having done what needed to be do or needed to be done that Brian could kind of say let's just run with it. And I knew what had to happen. He didn't even know. So we were very much more like two entrepreneurial type people scaling. But once we got to the 100 million mark, he actually needed someone to balance him out. He needed someone to slow him down, to be more strategic, to be more thoughtful, to be more considerate. Of all the employees, you know, we had 13 operating P. Ls we were operating in four different countries, 330 cities. We didn't need two very quick to act people. We needed to understand how and I, I couldn't morph into that. His new COO is a very different personality profile to me but absolutely perfect to take them from the 100 million to the 600 million they're at now over the last 15 years. It's important to figure out what do you need the person to do, what are the behavioral traits you need them to have, what are your company's core values and do they live those already and what's the season of growth that your company is going through right now so that you can and they can kind of stay in sync. I think those are important things to consider.

The typical profile that I talk to as an entrepreneur that needs somebody to come in, build processes and systems or a non structured person, they've gotten to where they're at just you know, kind of winging it and they get de energized, and now they're holding people accountable. And it's, you know, they're kind of a mess. So that's usually the combination. And when I talk about, you know, bringing somebody in that actually enjoys doing that, that really, you know, sings to a lot of CEOs. What other main topics would you point out? There's a lot of them, but what other main ones would you say? Hey, this is why a bringing in a good coo. These are the things that they'd help you do.

They help you say no. They help you make the tough decisions. They help you deal with conflict with which most entrepreneurs don't like. They help you fire the people. They help you get rid of the wrong contractors. They help take all the crap off your plates to allow you to be kind of that iconic leader, which is really powerful. That's number one. Number two is they really allow you to free up your time and your energy so that you're working on those unique ability areas. You can truly scale things up. Right. To truly work on the stuff that feeds you with energy.