Myths Why Startups Don’t Need COOs and Operations Executives

Myth unicorn - Myths Why Startups Don't Need COOs and Operations ExecutivesAs my regular readers know, I am a startup operations veteran with “battle scars” from 9 startups (co-founder in 2 and early employee in most). I have acquired a PhD in operations from the school of hard knocks after years of being around some very smart people and working on difficult problems. Today, I am going to address some common misconceptions about startup operations executives. Let’s get to it!

First and foremost, let’s get the lingo and caveats out of the way, since many myths start and won’t die because of a substantial lack of clarity.

  • What’s the difference between a COO, VP, Director of Operations, or GM?

– Depending on where your company is based, how it is organized (LLP, LLC, Inc., etc.), and/or what industry you are in, one or most of these titles may be used. They’re basically the same role, so for the purposes of this article, they will be rolled into up into the title, “Operations Executive”.

  • What’s the Definition of “startup”?

- Since there is no consensus of how long a company gets to call itself a startup, let’s just leave it at that. I do, however, make a distinction between early stage pre-product/market-fit and sustainably scalable startups and rapidly growing startups, since the problems that need to be solved are often very different between them.

  • What does an Operations Executive do?

- Though this may differ slightly company-to-company, he/she is often responsible for and is reported to by finance, sales, marketing, business development, IT, DevOps, and people operations (including HR).

Now that all our bases have been covered, here are the most common myths I come across:

MYTH #1: A CEO should be able to handle all business execution alone.

In a truly early stage startup, before product/market fit and while the company is operationally simple, a founder-CEO absolutely should be able to handle everything. However, once the company starts hitting milestones that make the company more operationally complex (see the next article in the series: Signs It Is the Right Time to Hire an Operations Executive), the personal capacity and attention of the CEO and/or co-founders becomes overcrowded with “trees” rather than “forest” issues.

In this analogy, the “forest” issues are high level goals like setting the direction for the company, the culture, and the product. These areas always start suffering first, because the day-to-day operations (“trees”) issues have a tendency to suck up a lot of attention.

Just like a seasoned developer can create a better product in less time, a great Operations Executive can recognize patterns you may not; we have armies of specialist vendors, and networks of subject matter experts we excel at tapping into, which can make the company noticeably more efficient and effective while also giving the CEO time to focus on what they do best (leading and setting the vision).

MYTH #2 Having a CFO is enough.

Investors in your seed and A rounds often require your company hire a (usually part-time) CFO as a condition of their investment. Investors either want someone with a much stronger financial skillset or a non-founder overseeing their money. But this is something that happens mostly in early pre-product/market fit startups where an Operations Executive is not needed yet. Once the company starts getting traction and needs to scale, it is easy to fall for this myth, since Myth #1 has probably already taken hold.

MYTH #3: There are tons of companies with $10M + revenues that don’t have an Operations Executive.

When this happens, it’s usually because the CEO is the Operations Executive and thus the company operator. However, this also means that innovation, product, and vision is likely handled by (other) co-founders who wanted to take roles that did not require being the face of the company with associated PR duties and an endless barrage of attention and scrutiny. One person can’t lead operations, while also leading vision and product, because one or all of those areas will suffer from lack of proper attention and focus.

MYTH #4: If a co-founder already has the COO title, you don’t need an Operations Executive.

Often, when there are 2+ co-founders, the most extroverted, best in sales, and/or most dominant co-founder takes the CEO title, and the more inside-of-the-business-focused one takes the COO title. Unfortunately, in most cases this COO tends to be an expert in other areas and may not only lack the experience and skillset needed, but also abhors the duties of an Operations Executive. Those of us who head operations are used to these situations, which is why you see us take the VP or Director of Operations title. In the end, these aforementioned COO co-founders end up taking a new title more in line with their expertise and passions.

MYTH #5: Your valuation will be lower if you have a COO.

This myth has nothing to do with Operations Executives, but rather is rooted in co-founder/investor politics. I have heard this myth with CMO, CTO, CRO, and other leadership titles. Yes, investors will stay away from or reduce valuation of a company if they see that founders, who currently hold the mentioned executive titles, show an unwillingness to give up their leadership roles to better qualified non-founder talent. That said, Operations Executives actually increase the valuation of the company, because they are experts in three major company value drivers – the ability to recruit, develop, and retain the best talent, optimize profitability/revenues, and scale the company sustainably.

Whatever the myths and misconceptions are, every company that is sustainable and profitable has an Operations Executive on their team.

It may take the founders realizing their revenues are flat or shrinking no matter the effort or a major traumatic event to get an Operations Executive, but they all do in the end. As one of my CEO friends likes to say: “just like behind every great king there is a great queen, behind every great CEO is a COO covering his/her back”.

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