Say hello again to the chief operating officer

Murphy USA

05/03/2024 13:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Jeffrey Goldfarb
       NEW YORK, March 4 (Reuters Breakingviews) - If the devil
is in the detail, it’s a hot time to be chief operating officer.
As chief growth, revenue and marketing officers crowded
corporate headquarters, the job of implementing business
strategies and overseeing day-to-day functions got lost. Now
there are renewed reasons to install a clear second-in-command.
    About half of S&P and Fortune 500 companies had a COO in
2000, but by last year only 37% did, according to executive
search firm CristKolder Associates. A controversial 2004 study
that found companies with COOs generate lower returns on assets
might be partly to blame. It raised questions about
bureaucratic, accountability and compensation flaws, and whether
bosses enlist this sort of deputy because they feel overwhelmed.
    There are potent counterexamples. During her 14-year run as
COO of Meta Platforms  META.O , Sheryl Sandberg helped founder
Mark Zuckerberg turn Facebook into a juggernaut, while Tim Cook
successfully held the title as Steve Jobs’ right-hand man at
Apple  AAPL.O . Wall Street also regularly embraces the power
structure, with John Waldron handling operating responsibilities
at Goldman Sachs  GS.N  and Daniel Pinto doing so for JPMorgan
 JPM.N . 
    Corporate boards nevertheless remain divided about the
position’s value, with more than half of last year’s COO roles
left vacant when the person in the seat departed. Starbucks
 SBUX.O  eliminated the COO job in 2022 even after the coffee
chain conceded it was “operationally challenged,” but gas
station operator Murphy USA  MUSA.N  and airplane maker Boeing
 BA.N  added the role to their organizational charts to enhance
profitability and improve supply chains, respectively.
    Technology entrepreneurs may desire lieutenants who can
turbocharge sales. More broadly, however, higher interest rates,
trade protectionism and fickle consumers call for those who can
spearhead efficiency efforts and prepare workforces for the
artificial-intelligence age. Net profitability across the S&P
500 Index  .SPX  slipped to 11.2% in the second quarter of 2023
from a recent peak of 12.9% two years earlier, and was expected
to fall further, according to LSEG data.
    There’s another good reason to welcome back COOs. Many
companies tend to look for their next CEO internally when
economic times get tougher, and CristKolder found that half of
those in the corner office today got there after serving as COO
or president. Given what probably lies ahead, a number one
priority is to hire a solid No. 2. 
    Follow @jgfarb on X
    
    CONTEXT NEWS
    Gas station operator Murphy USA said on Feb. 21 that its
board of directors had elected Chief Financial Officer Mindy
West to the newly created role of chief operating officer to
“drive strategic initiatives and enhance the performance and
profitability of the entire business, including synergistic
activities” across its namesake and Quickchek brands. 
    On Dec. 11, airplane-maker Boeing said it had appointed
Stephanie Pope to a newly created COO position to oversee
performance at the company's three business units “with
responsibility for driving supply chain, quality, manufacturing
and engineering excellence.”

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Graphic: Rebirth of the COO    https://reut.rs/4bZb4GI
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 (Editing by John Foley and Sharon Lam)
 ((For previous columns by the author, Reuters customers can
click on  GOLDFARB/ 
jeffrey.goldfarb@thomsonreuters.com; Reuters Messaging:
jeffrey.goldfarb.thomsonreuters.com@reuters.net))