Cameron Herold argues that small and medium companies often call operations leaders COOs while paying them director-level salaries. A real COO should earn $250,000 to $450,000 and have strategic responsibility and P&L oversight. Match the title to what you actually pay, or lose the person.
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I have seen more small to medium sized companies mess this one thing up. And if they mess it up, it causes huge repercussions, huge reverberations for years to come. So I'm going to walk you through one of the core things that so many companies are screwing up. And it's a salary guide for that second in command. It actually applies for really any senior role in the company. But let's talk today about the COO and a salary guide for that coo. Now, you can apply the same rule to a cfo, a cmo, a cto, right? Any chief of that functional area, you can apply the same rule. The salary guide for a COO is it needs to actually match the roles and responsibilities, the level of strategic insight they're bringing into your organization, the amount of P and L responsibility that they have, the amount of autonomy that they have in their day to day operations, and the amount of people and partners and suppliers they can bring to your company. Because they've done this before. A real COO that's coming into your company, you're not going to be telling them what to do at all. You're going to be showing them the vision of where you're going and they're going to be telling you how they actually can get you there. You're not going to be delegating much to them at all. You might be giving them some core projects because it was on your plate, but you're not going to be giving them the plan of how to make your dream come true. Very similar to if someone was building their dream home. The homeowner is not going to tell the contractor how to build the house. We don't know how to build a house. Just going to say, this is what my house looks like. And the right contractor is really the COO of that home building project. They're going to tell you the plan, give you the blueprints to make your dream home come true. So the COO's pay is based on that. The pay that a true COO gets today is typically in the 250,000 to $450,000 a year. That's a true COO of a small to medium sized organization. If you're less than that, if you're less than 250, you're in the VP range, probably in the 150 to $250,000 range. If you're less than that, let's say you're in the 100,000 to 160, $170,000 range. That tends to be more a director of operations or an operations manager. So think about the title and how it actually applies to the compensation. Now, we actually did a salary survey. We have about 250 COOs or second in command. Some are COO, some are VP Operations, some are Director of Operations. Whether the second in command to the CEO or the entrepreneur, they filled out a survey and it's in a spreadsheet. It shows the people's titles, their compensation, their bonus structure, how many employees their company has, the revenue of their company, where their company is based. It's really important to actually look at the data. And the reason it's important is if you have a coo, but they're really more of a director level. Like, let's say you have a COO that you're paying $160,000 a year. Trust me, they're on Google, they're on. Indeed, they're on Glassdoor. They're looking at what compensation is of other COO roles, and they're wondering why they're getting underpaid, which usually has them skipping and leaving to go to another company. One of the core reasons why employees quit and move somewhere else is because they believe they can get paid more for the new title that they're starting to attract. So if you give them a title that is more commensurate with their roles and responsibilities in those five I just walked you through, you're going to lock the people into your company for a lot longer. So those are the kind of core ways that you need to think about salaries for that COO role.
