Time to bring a COO into your scale-up?

By Daan Bak, Hayat Chedid, Menno van Dijk, Jörgen Sandig

Scaling an enterprise is like a pizza eating contest, with the first prize being more pizza.

As you generate more business momentum, you also receive more business opportunities. And as you increase the size of your organization, they also demand more time from you. Hence, the Chinese curse: I wish you a lot of personnel. With scaling your enterprise, the external and the internal request more and more attention from the CEO. At a certain moment, you may feel that this ambidextrous challenge becomes too much.

Your MT is not much help in this respect.  All the C-level management seem bound to their specific business domains. You might have handed over the commercial activities, so now a Commercial Director is managing sales. Finance is covered by a CFO and the technological side of your product is owned by the CTO. In the end, you are mostly on your own in the overall strategic development, as well as the daily operational management.

How to deal with this challenge?

First: check whether the burden has become unsustainable

Resolving any challenge starts with knowing what your situation is and having identified it as problematic. We found a measurable and objective indicator to check whether there is still a healthy internal and external demand on your time. This is: the volume of internal and external email data sent and received by you. Although many other digital means of communication exist (e.g. Slack), we found email to be the most reliable proxy, as it is generally used in comparable ways across different organizations.

To track this, the ScaleUpNation Lab developed a simple software tool (called “CEO Sanity Saver”). The tool is free of charge, keeps your data on your laptop, and is available for everyone in our community. Please reach out to Daan Bak if you are interested.

When looking at the data, many of us realized we are like the frog in rapidly boiling water: both internal and external mails keep growing and growing on a monthly basis. This starts resulting in highly inadequate response rates. Unsurprisingly, that may lead to both your people and external contacts complaining about your unreachability.

This is illustrated in the charts below. These charts depict the email volume of a CEO of a scale-up during a period when the organization grew from about 36 to 55 FTEs.

First of all – as shown in the first chart – the volume of incoming external emails, so emails from customers, prospects, partners, ecosystem participants, grew quickly. This indicates real market momentum. At the same time, the number of internal emails received by the CEO, so sent by their own employees, remained more or less constant. This means that the number of emails sent per employee to the CEO drops sharply – a signal of increased distance between the CEO and the organization.

Finally, we see that the incoming external emails far outgrew the incoming internal mails which implies that the CEO is drawn more and more towards the external. That is to be expected, as the scale-up phase is all about increasing sales and generating momentum.

Internal & External emails received by the CEO

The second slide shows the number of internal and external email sent by the CEO.  We see that the volume of external mails stalled, implying that the CEO was no longer able to respond to the rapidly increasing growth of incoming emails. This is unfortunate because  rapid follow-up of important external clients and leads is a key aspect in delighting customers.

Moreover, the volume of internal emails sent is about as large as the volume of external emails sent, which implies that the CEO is not able to focus predominantly on the external. The large spread in internal email volume means that internal communication of the CEO is becoming erratic. And finally, the growth in internal emails sent, while the volume of internal mails received hardly grew as much (see first chart), implies that communication is increasingly becoming a one-way street.

Internal & External emails sent by the CEO

Then the inevitable: appoint a COO

Some superheroes can do it all: combining the external affairs and internal matters, entrepreneurship and management, innovation and daily operations. Striking the right balance will prove challenging even for these ambidextrous leaders as the demands continue to grow. The vast majority of CEOs might find the solution in forming a CEO-COO partnership.

It is not common for a scale-up to have a COO (Chief Operating Officer) – an executive responsible for all day-to-day operations and administration of a business. In other words, a “number two” who reports directly to the CEO and has all other Chiefs reporting to him. The role of COO is typically defined on a need-to basis and can include:

Some start-ups were founded by two people and might quite naturally shift to a partnership, with one being CEO and the other COO. They enjoyed setting up the company together and now want to also manage it as a duo. They realize that they have different qualities, and some division of labor would avoid having to do everything together. However, assuming the suitability and natural flow to this duo might be deceptive. It is imperative that suitability of the leader is the determining factor, and not the easy access and history between founders.

Making the CEO-COO partnership work

The choice to lead the company together means that you will need to act as Siamese twins, joined at the hip. Being joined at the hip means having full trust and respect of each other. It means always speaking with the same voice and presenting a united front. It means making sure one constantly updates the other and regularly communicates what is happening.

Making it work requires maintaining a regular meeting schedule, having lots of one-on-ones, often just to keep each other up to speed, support each other and serve as each other’s sounding board. It requires a true investment in the relationship and a total empowerment of each other. Like in many complementary roles, having a united front preserves and helps build each other’s credibility.

It is equally important to recognize and celebrate each other’s success – both the operational work and the power of the vision – by pointing this out in all external and internal presentations. And finally, this duo should regularly discuss among themselves demonstrated collective and individual progress to maintain the confidence that this leadership set-up works. The pre-requisite for all the above is that both leaders need to operate away from the ego: adhering to the fact that “no one is perfect, but a team can be.” And practicing this with discipline, reflection and diligence.

Best practices to manage increasing demands together

In a CEO-COO partnership, or as a truly single-handed super hero, there are some concrete actions to keep the ever increasing external and internal demands under control.

1. Dealing effectively as a CEO with growing external opportunity and demand:

• Bring in a marketeer.  A communications-oriented marketeer can boost the outreach for the CEO and that is what is most critical now that you want to step up new business development.
• Engage the full MT in external contacts. Stop hoarding your external contacts and instead share them with your leadership team to empower your managers, create leverage for yourself and increase speed of follow-through.
• Be selective in follow-up. As the number of incoming external mails grows fast, be selective of the ones that are truly relevant for your business.  Do not feel compelled to answer every mail.

2. Dealing more efficiently as a COO with internal demands:

• Keep rhythm. As your organization grows, you want the internal mails sent by you to be in a controlled communication rhythm away from being an erratic avalanche of decrees.
• Keep balance. Keep the ratio downward versus upward communication in balance as the organization grows to not create a one-way street.
• Create a new organizational unit for roughly each 8 new employees. Think of Jeff Bezos’ “2 pizza-rule” Each manager has a limited span of control. Based on email cluster analysis, we found that people organically cluster into teams of around 8 employees. If the size of the organization increases, a new cluster emerges.

These practices require discipline. Fortunately, email analysis reveals whether you are on track and serves as a simple barometer. Once these practices are engrained in your leadership, tracking will be unnecessary and like a good farmer you will not need to look at a barometer to know that today will be another great day.

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This article was based on our big data analysis of all internal and external email-based communication of five scale-ups in our community over the course of their scale-up journey. We also benefited from our exchanges with Amber Bezahler, Growth & Turnaround Operations Executive, based in the US.

This research was supported by the Goldschmeding Foundation.