The Chief Executive Officer (CEO) and Chief Operating Officer (COO) are two of the most important leadership positions in any company. Both roles have significant responsibilities and impact on the organization, but there are some key differences between the two.
What Does a CEO Do?
The CEO is the highest-ranking executive and leader of the company. The CEO is ultimately responsible for the overall success and failure of the organization. Their key responsibilities include:
- Setting the company’s vision, mission, values, and strategy
- Making major corporate decisions, mergers and acquisitions, financial planning
- Leading and managing the executive team
- Driving company culture, leading change initiatives
- Serving as the public face of the company, managing external communications and relationships with stakeholders, government entities, etc.
- Reporting to the Board of Directors on company performance and issues
- Ensuring the company meets its goals and objectives
In summary, the CEO takes full ownership of the company’s direction, financial health, culture, and public reputation. They are the top decision maker and lead the development and execution of long-term business strategies. The CEO is focused on the big picture vision and future growth of the organization.
What Does a COO Do?
The COO is the second-in-command after the CEO. Their key role is overseeing the company’s day-to-day administrative and operational functions. Typical COO responsibilities include:
- Overseeing daily operations and workflows
- Managing policies, procedures, systems, and infrastructure
- Leading and developing the operations management team
- Driving operational efficiency, process improvement initiatives
- Overseeing supply chain logistics and fulfillment
- Coordinating and communicating between departments
- Implementing the company’s business plans and strategies
- Analyzing internal data and preparing performance reports
The COO is focused on the internal execution of the company’s goals and strategies. They ensure smooth daily operations, efficient systems and processes, and that policies are being followed across the organization. The COO is a hands-on executive who manages the day-to-day workflow and administration of the business.
Differences between a CEO vs COO
Some key differences between the CEO and COO roles include:
Leadership focus
- CEO – External focus, represents the company publicly, manages external stakeholders
- COO – Internal focus, manages operations and employees
Priorities
- CEO – Strategy, vision, financial performance, growth
- COO – Operations, efficiency, workflows, implementation
Authority
- CEO – Highest executive authority, reports to board of directors
- COO – Second-in-command, reports to the CEO
Decisions
- CEO – Ultimate decision maker for company’s overall direction and future
- COO – Key decision maker for daily operations and resource allocation
Responsibilities
- CEO – Leader of the executive team with wide span of control
- COO – Manages operations divisions and frontline workforce
While the CEO oversees the top-down direction of the organization, the COO executes strategies from the bottom-up through effective operations and administration.
Can a COO Become a CEO?
The COO role is often viewed as preparation for becoming a future CEO. According to a Stanford Graduate School of Business study, nearly two-thirds of CEOs served as a COO at some point in their career. However, the direct promotion from COO to CEO is relatively rare – less than 15% directly advance to the CEO role.
There are pros and cons of appointing an internal COO as the next CEO:
Pros
- In-depth knowledge of the company’s operations and industry
- Existing relationships with managers and employees
- Proven leadership experience as second-in-command
- Smoother leadership transition and continuity
Cons
- COOs may lack external experience with stakeholders, public communications
- COOs are oriented towards internal operations vs. long-term strategy
- Passing over outside CEO candidates with fresh perspectives
- COO and CEO require different skillsets and mindsets
Boards need to assess if an COO has well-rounded experience and capabilities before appointing them as successor to the CEO role. Cultural fit and chemistry with the board is also important.
Common Career Backgrounds
Here are some common career paths and backgrounds of CEOs and COOs:
CEO Backgrounds
- Entrepreneurs and founders of companies
- Product or service line managers
- Executive leadership of related companies
- Investment banking and private equity
- Strategy and management consulting
- C-suite roles like CFO, CMO, CIO
- Ivy league and top MBA backgrounds
COO Backgrounds
- Internal promotions from SVP/VP of Operations
- Experienced plant, production, or regional managers
- Supply chain and manufacturing leadership
- Operational and process engineering
- Top MBAs combined with consulting careers
- Former CFOs with operations financial expertise
The COO role tends to be filled by experienced managers with deep expertise in operations, logistics, andImproving company processes. CEOs are more often strategic thinkers and visionaries with strong external leadership skills.
CEO vs COO Salaries
CEOs have significantly higher average salaries and compensation packages than COOs. According to Salary.com data:
| Executive Role | Average Base Salary | Total Annual Compensation |
|---|---|---|
| CEO | $765,140 | $1,737,160 |
| COO | $432,907 | $961,054 |
However, COO compensation can potentially rise to CEO-level depending on the specific organization and industry.
CEO vs COO: A Summary
In summary:
- The CEO is the top leader of the company, responsible for the overall vision and direction.
- The COO is the second-in-command, overseeing the daily operations and execution.
- The CEO looks outward at the big picture while the COO looks internally to manage procedures and performance.
- The COO implements the strategic decisions made by the CEO.
- While COOs may move up to CEO, relatively few make that direct transition.
- CEOs earn significantly higher salaries but COO pay can approach CEO-level.
- CEOs tend to have general leadership backgrounds while COOs have operations-focused careers.
Understanding the differences between the COO and CEO roles is important for executives striving for those positions and for organizations looking to fill them. The division of duties between the CEO and COO allows each executive to focus on their core strengths and provides a balance of strategic leadership and operational execution.
Frequently Asked Questions
Does every company have a COO?
No, not every company has or requires a COO. The COO role only exists in larger organizations that need an executive dedicated to overseeing company-wide operations. Small businesses likely will not have a COO.
Can a COO be on the board of directors?
It is rare for a COO to be on the board of directors while the CEO is in place. However, a COO may take a board seat temporarily during a CEO transition until the new CEO assumes the chair role.
Do CEOs or COOs have more power?
The CEO generally has higher formal power and authority in an organization. However, an influential COO with strong ties across the company can wield significant persuasive power in driving execution priorities.
How long do COOs stay in their role?
According to one study, the average COO tenure is around 5 years. Some COOs may stay longer if they are not interested in or unlikely to be promoted to CEO. Others may only stay 2-3 years before moving jobs to advance their career.
What makes a successful COO?
Traits of excellent COOs include operational expertise, leadership abilities, collaboration, communication skills, critical thinking, and a thorough understanding of the industry and company goals. They are results-focused and able to streamline processes and improve efficiency.
Conclusion
The CEO and COO have clearly delineated responsibilities that together allow an organization to craft strategic vision and execute operational plans. The CEO focuses outwardly on growth, strategy, and financial oversight. The COO focuses inwardly on streamlining operations, improving processes, controlling costs, and implementing business plans. While the COO supports the CEO’s agenda, they also handle key leadership duties and often serve as the heir apparent to the CEO role. Understanding the dynamics between the two allows businesses to structure their leadership for success.
