Succeeding in a Critical and Complex Role: A Research Study on Chief Operating Officers from Around the Globe 2 | COO Circle Research Overview Table of Contents

Foreword ...... 5

Why this study now? ...... 6

Executive Summary ...... 8

- Key findings ...... 8

- Key implications ...... 8

- For current and aspiring COOs ...... 8

- For directors, CEOs and executive search firms ...... 8

- For businesses ...... 8

Shedding light on an elusive role ...... 9

- Understanding perceptions of the role: COO reporting relationships across regions and industries ...... 10

- COO direct reports across regions ...... 10

- COO direct reports across industries ...... 11

- Understanding perceptions of the role: COOs’ views ...... 11

- COO perceptions of role focus ...... 11

- COO perceptions of needed knowledge and skills ...... 13

- COO perceptions of how they are evaluated ...... 14

- Challenges today and tomorrow ...... 15

- The impact of cost cutting ...... 15

- Issues keeping COOs up at night ...... 15

- Changes in skills needed ...... 17

- Expectations about growth plans ...... 17

Research methodology ...... 19

- Respondents and research approach ...... 19

- A note about the sample sizes ...... 19

- A closer look at our COO respondents ...... 21

About Accenture ...... 24

About the Accenture COO Circle and C-Suite Networks ...... 24

About the Authors ...... 24

COO Circle Research Overview | 3 4 | COO Circle Research Overview Foreword

A foreword by Sander van ‘t more than US$500 million. This initial boards, CEOs and executive search firms Noordende, Group Chief Executive- research into the often neglected role of who seek their next “second in command,” Management Consulting, Accenture, the COO identified a number of missed and for businesses and organizations and Executive Sponsor of the opportunities that stem from incomplete around the world who want to extract support provided to the position. COOs more value from their COO. Accenture COO Circle often face poorly defined responsibilities, Perhaps one of the least understood experience a haphazard on-boarding We hope this research continues to roles in business today is that of the process, or confront limited opportunities stimulate the global discussion and chief operating officer. There are about to network with peers both inside and debate of the unique value of the as many interpretations of the role as outside the company. Surmounting these COO, and furthers a more complete there are COOs. Are they just the CEO- hurdles is key to unlocking the potential understanding of the critical and in-waiting? Are they the hands-on effectiveness of the COO. complex role of the COO. manager overseeing everything from technology and human resources, to supply chains and procurement? Or are Expanding the understanding of they the agile, adaptable troubleshooter, the COO role globally brought in to cut costs, determine where In 2012, we completed a much more investment is needed, and secure the extensive research study to better best talent to remain competitive in an understand the role of the COO outside increasingly dynamic and often volatile of the U.S. Accenture commissioned a global business environment? first-of-its-kind study involving 220 COOs from North America, Europe, Africa, Latin The varied and evolving role of the America, Greater China and India who COO directly reflects the complexities held COO positions at organizations or of running a modern global organization. at divisions with at least US$1 billion in With organizations having to contend annual revenue. with ever-changing competitors and Each COO shared their views on how ecosystems, increasing pressure from the role is changing, what kinds of skills investors, adapting to new governmental it take to be successful in the role, regulations, and shifting economic and how can COOs best help their and trading power, strategic bets organizations survive and thrive in have never been more critical. challenging economic times. By investigating the differences and The COO Circle and our initial COO similarities among COOs from various research study on U.S. CEOs regions and industries, we wanted In 2008, Accenture founded the COO to better understand the value and Sander van ‘t Noordende, Circle to better understand the challenges challenges associated with the COO role. Group Chief Executive-Management and concerns of the highest ranking Consulting, Accenture, and Executive operating executives in the corporate and This Accenture report, based on original Sponsor of the Accenture COO Circle public sectors. In addition to providing research led by Dr. Nathan Bennett, a unique forum for select COOs and Professor of Management at the Robinson equivalent operating executives to College of Business at Georgia State interact with their peers in a thought- University, builds on a collective body provoking exchange of ideas, we also of COO research and is just one of many launched a research study conducted activities Accenture has undertaken to with 52 COOs from large U.S.-based further the understanding of the role for companies with annual revenues of current and aspiring COOs, for directors of

COO Circle Research Overview | 5 Why this study now?

Accenture initiated this research study This Accenture research report builds on now because in the past five years, the collective body of COO research. It is one attention invested in understanding the of many activities Accenture is undertaking role of the chief operating officer (COO) to understand more about the executives has focused mostly on North American we have come to know as the “guardians of companies. And because we know that strategy in action.” Over time, this research corporate governance looks different in will provide thoughtful and rigorous different parts of the world, we wanted to responses to questions that are central to investigate those differences and consider understanding the value and challenges their implications for chief operating associated with the COO role, such as: officers everywhere. • How is the role changing and what forces are shaping those changes? As just one example, in Europe, chief executive officers (CEOs) and board chair • What forms of value are COOs generating roles are typically occupied by separate for companies around the world and in individuals. In North America, the two different industries? What forms of value roles have often been filled by the same should they be generating? person. We also wanted to see how • How can businesses best leverage the value changes in corporate governance may provided by their COO? be affecting the COO role. For instance, • What kinds of skills, knowledge and some North American companies have workplace relationships does it take to begun separating the CEO and board succeed in the role? chair positions to meet more stringent governance rules defined in the wake • How can COOs best support their of corporate scandals and economic organizations’ strategic objectives, including volatility.1 growth and globalization plans? • How can COOs best help their companies survive and thrive in tough economic times?

1Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the COO Out of the C-Suite,” Accenture, 2012.

6 | COO Circle Research Overview COO Circle Research Overview | 7 Executive summary

Our study findings uncovered For directors of boards, CEOs and In the other regions examined in our several themes that may have executive search firms seeking study, the relatively constrained definition implications for COOs as well as to recruit a promising “second in of the COO role could be putting command” for an organization— companies at a disadvantage in their other key stakeholders. But one one who could later advance into target markets. Specifically, companies theme in particular struck us as the top spot that under design or undervalue the especially relevant. Understanding how the COOs in our COO role may be creating a disconnect study view their role and what their between their present and future priorities Key findings expectations are can help inform because they tend to manage the present Definitions of what the COO role is all recruiting and onboarding strategies. without sufficient understanding of the about—including where COOs should Indeed, in a 2008 Accenture survey of 52 desired future direction. When executives focus their energy, what their primary COOs from large U.S.-based companies, a focus their actions on addressing near- purpose is, what skills and types of significant percentage of the companies term challenges and opportunities, they knowledge they need and what their represented had ad hoc onboarding may unwittingly set the wrong direction succession prospects might be—vary by processes that left newcomers to the for their company’s future. Is the COO region and industry. We suspected this COO role frustrated. One key mistake subordinate or partner to the CEO? before we began the study, and our that has contributed to this problem is If such companies can view the COO findings have confirmed our suspicions. that companies often make unwarranted through a fresh lens—understanding the The existence of these differences in assumptions about how well new COOs real value that a talented chief operating perceptions of the COO role have several understand expectations about the officer can bring to the table—they may key implications—for current and aspiring role. Moreover, more than one-third of be able to strengthen their competitive COOs; for directors of boards, CEOs and respondents in this earlier survey said position in their target markets by getting executive search firms seeking to recruit that the responsibilities of the new role more from this key C-suite player. Keys a promising “second in command”; and did not meet their expectations of those Accenture Customer Innovation Network could include seeing the COO as a partner for businesses and organizations around responsibilities.2 the world—namely Europe, Africa and to the CEO, not merely a subordinate; Latin America (EALA), as well as Greater For businesses in Europe, understanding the importance of the China (GC) and India (IN)—that could be Africa and Latin America; COO role for grooming successors for extracting more value from their COO. We and the Asia Pacific region the CEO position; and grasping the fact that a good COO helps infuse discipline consider these below. Companies in EALA, as well as those in into strategy execution as well as foster Greater China and India, may have an synergies across business functions.3 Key implications opportunity to extract even more value For current and aspiring COOs from the COO role than they are already Since COOs’ understandings of their getting. These companies’ current definition role—including focus of their energy, skills and expectations of the role—characterized and knowledge needed and succession by non-strategic responsibilities—suggests prospects—vary so much across regions that they view the role as that of operator and industries, aspiring COOs will need guiding day-to-day action rather than to thoroughly familiarize themselves strategic partner to the CEO with an with the contextual factors shaping the orientation toward their company’s future top operating role in their particular strategic needs. By contrast, companies in geography and industry. Only then can North America seem to have discovered how they take the right steps to build the to get maximum value from their COOs. competencies needed for success in the They view the role as providing another role and, if they want, set the stage for “brain” to help work through the strategic moving into the CEO position. issues on the CEO’s agenda.

2Nathan Bennett and Paul F. Nunes, “Chief Operating Officers: Off to a Fast Start,” Accenture Outlook, 2008. 3Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the COO Out of the C-Suite,” Accenture, 2012.

8 | COO Circle Research Overview Shedding light on an elusive role

At the end of 2011, Accenture differences in perceptions, if they commissioned a first-of-its-kind did exist, affected COO reporting global research study of chief relationships and other aspects operating officers. (See “Research of the role. Given the impact of methodology.”) The purpose of the the global recession, we also took study was to gauge participants’ the opportunity to investigate our views on the nature of their respondents’ thoughts about how role as COO, keys to successful their companies were planning execution of the role, and the to drive growth to pull through pressing business needs their the downturn. Moreover, in light companies face today and expect of the escalation of globalization to confront in the near future. among businesses worldwide To these ends, we examined the today, we were curious about research findings to determine how our respondents viewed whether differences in perceptions their organization’s globalization of the COO role existed across activities. regions and industries. From there, we sought to find out how such

Accenture Customer Innovation Network Figure 1: Who reports to the COO? Which, if any, of the following top executives, or their equivalents, report to you?

Head of Supply Chain/Logistics 61% The average top Chief Procurement Officer 52% operations executive has at least five senior Chief Sales Officer 39% functional areas Chief Marketing Officer 39% reporting to them, with Supply Chain/Logistics Chief Information Officer 36% and Procurement being the most common. Chief Human Resources Officer 33%

Head of Research and Development 32%

Chief Financial Officer 25%

Other 63%

% 15% 30% 45% 60% 75% N=220

COO Circle Research Overview | 9 Understanding perceptions of the COO direct reports across regions In India, things may work differently. The role: COO reporting relationships One way to understand differences in Indian COOs in our study formed a smaller across regions and industries how the COO role is defined is to see sample than those from North America and EALA. But their responses shed some light One of our curiosities in conducting this where the role is situated in a company’s on how Indian leaders define the COO role. research concerned how the COO role organizational chart, including who These study participants reported that few is perceived. Reporting relationships— reports to this executive. We found that senior executives report to them. Although specifically, which executives report chief marketing officers (CMOs), chief the title of COO is common among Indian directly to the COO—can help illuminate procurement officers (CPOs) and chief businesses, the COO/top operations role is this. (Our study respondents all reported supply chain officers (CSCOs) are more still relatively nascent in that country. As a to the CEO of their organization.) In fact, likely to report to the COO in North result, these COOs may not have the same in our study overall, the average COO American companies than in businesses in span of control as some of their global had at least five senior functional areas other parts of the world. Indeed, the CMO counterparts. Furthermore, operations reporting to him or her, with supply chain/ is more than twice as likely to report to teams in India tend to be smaller, logistics, procurement or sales counting the COO in North America than in EALA. comprising just two or three people. among the most common. (See Figure 1.) (See Figure 2.) Thus these companies may see little need for the kind of fully developed While these findings are interesting, we This tighter connection between operations COO found in other regions. can gain even greater insight by analyzing and marketing could suggest that reporting relationships across regions and operations in North American companies industries. After all, given that corporate are being managed with and informed by governance in Europe differs from that a stronger understanding of customers’ in the U.S., it is reasonable to expect future needs. In EALA-based enterprises, that reporting relationships are also there may be a weaker link between those configured differently—and that these responsible for operations and those differences affect perceptions of the COO focused on understanding customers, role. Analyzing differences in reporting which could put these companies in a relationships across industries can yield vulnerable position in their markets. similarly valuable insights and reveal the strategic priorities of the organizations in which COOs are serving.

Figure 2: Operating executives reporting to the COO, by region (%)

69

52 33 65 35 31 37 26 54 37 30 32 21 24 42 40

Chief Chief Chief Chief Chief Head of Chief Head of Financial Information Marketing Procurement Sales Supply Human Research and Officer Officer Officer Officer Officer Chain/ Resources Development Logistics Officer

North America (NA) Europe, Africa and Latin America (EALA)

10 | COO Circle Research Overview COO direct reports across industries services industry, whose competitive and even industry-to-industry. The same In addition to geography, industry can advantage hinges on savvy use of cannot be said of the COO. The nature of influence how the COO role is defined. information and data, it is not surprising the industry, the competitive landscape, For instance, when we examined that the CIO would report to the COO. the company’s strategy and the CEO’s differences we found that chief financial preferences and predilections all shape officer (CFO), chief human resources Understanding perceptions of the context for the COO. Understanding officer (CHRO) and chief legal officer role: COOs’ views these influences can help aspiring COOs (CLO) are more likely to report to the COO Another way to deepen our understanding identify the knowledge, skills and abilities 4 in the health and public service industries. of the COO role is to find out how necessary to be a great “number two.” In the consumer products industry, it is executives in this role view themselves In our study, 45 percent of the the CHRO who tends to report to the COO. and their responsibilities. Chief operating respondents reported that since 2009 In the financial service industry, the chief officers’ understanding of where they (the beginning of the most recent information officer (CIO) is more likely to should focus their energies, what kinds of global recession), their role has focused report to the COO, while the CMO is less knowledge and skills matter most in their increasingly on execution and operations, likely to do so. role, what their succession prospects may and less on finding new growth look like and how their performance is opportunities or formulating strategy. We These findings help further illuminate evaluated can provide useful insights. companies’ understanding of the COO also asked our study respondents which role. For instance, knowing that CHRO, COO perceptions of role focus of seven different terms and phrases best described their incumbency. By far, CLO and CFO report to the COO in health Our research findings suggest that they saw themselves as “executors” and and public service industries suggests the COO role depends much more on “leaders of initiative.” (See Figure 3.) that such divisions are more involved in contextual factors than other C-suite these organizations’ strategic planning of roles. CFOs, CIOs, and CMOs—they all operations and executions than they are tend to operate in positions that are in other industries. And in the financial relatively similar company-to-company

Figure 3: How COOs see their role (1 = “Strongly disagree”; 5 = “Strongly agree”)

Mean on 5-point scale % strongly agree

Executor 4.3 57

Initiative leader 4.3 54

Mentor 2.7 12

Complement to CEO 4.2 46

Co-leader (partner) 3.6 29

Heir to CEO 2.8 16

Retention purpose5 2.4 10

4Nathan Bennett and Walter E. Shill, “What Does It Take to Be an Effective COO? It Depends Where You Are,” Accenture, 2012. 5By “retention purpose,” we mean the creation of the COO role with the goal of keeping high-potential executives from defecting to competitors. For example, if the CEO is worried that a talented vice president with aspirations to advance may be poached by rival companies, he or she may create the COO role to send a message that there is a desirable career trajectory available at the company. This may discourage the individual from defecting. 6Crist Kolder Associates, “The Volatility Report 2011.”

COO Circle Research Overview | 11 Yet we also saw regional differences Finally, the North American COOs in our focused CEO can mean that the COO may in how COOs view their role. In North study were nearly twice as likely as COOs be perceived as redundant—and could get American companies, for instance, elsewhere to acknowledge that a key squeezed out of the C-suite. Indeed, our COOs were more likely than their EALA part of their responsibility is to mentor research showed that of the 96 companies counterparts to see a key responsibility of an inexperienced CEO. Evidence exists in the Fortune 1000 that replaced their their job as complementing the CEO—that that particularly in entrepreneurial firms, CEO in 2010, only about half of these is, bringing to the position something the where the CEO may not have a great deal new CEOs were promoted from the COO CEO does not. (See Figure 4.) of experience, a pair of senior hands is position. brought on as COO. Many of our North American COOs also These trends are worrisome. In the considered the position a testing ground Differences in perceptions and short run, hands-on CEOs working with for the top job—seeing themselves as expectations about the COO role raise the board may not have the skills and “heir apparent” much more frequently concerns in light of the slow but steady bandwidth necessary to provide the sum than COOs in EALA and in Greater decline in the number of large companies total of leadership required. The COO as China. Indeed, though our Greater China that have a COO role. Recent research “second in command” is especially critical sample was relatively small, none of the reveals that only 38 percent of Fortune when the CEO faces complex, numerous respondents from this region “strongly 500/S&P 500 companies currently have and rapidly changing challenges. agreed” that they see themselves as a COO—down from 48 percent in 2000.6 Traditionally, COOs have focused on the heir apparent to the CEO, with The decline may be attributed to the ensuring smooth operations, enabling the expectation of ascending to the increasingly hands-on nature of the the CEO to focus his or her attention CEO position. Interestingly, our Indian CEO position that arose in response to on the board, shareholders, external respondents, though their sample was challenges ranging from the tech-bubble constituents and the future. Without a also small, were more than twice as rupture in 2000 to the Tyco, Enron and COO, the CEO could get dragged into likely as the North American COOs to see other corporate scandals to the recent near-term, distracting issues such as themselves as heir apparent to the CEO. worldwide economic downturn. Whatever resolving conflicts and managing resource the cause, a more hands-on, internally

Figure 4: How COOs see their role, by region (%)

73 64 58

24 47 40 42 17 24 26 9 10 9 10 Executor Initiative Mentor Complement Co-leader Heir to CEO Retention leader to CEO (partner) purpose5

North America (NA) Europe, Africa and Latin America (EALA)

5By “retention purpose,” we mean the creation of the COO role with the goal of keeping high-potential executives from defecting to competitors. For example, if the CEO is worried that a talented vice president with aspirations to advance may be poached by rival companies, he or she may create the COO role to send a message that there is a desirable career trajectory available at the company. This may discourage the individual from defecting.

12 | COO Circle Research Overview allocation across functions—and thus COO perceptions of needed knowledge saw negotiation, diplomacy, interpersonal shortchange his or her more critical and skills skills, cosmopolitan background and long-term duties. Business-unit and Our respondents’ perceptions of the intercultural awareness as much functional leaders might also operate knowledge and skills they need to less important than global business more independently and thereby miss the succeed also varied based on industry knowledge. In North America and EALA, connections and synergy opportunities and company needs. For example, in these people skills were rated as far more of the business as a whole. As a result, EALA-based companies, COOs emphasized important. accountability for performance and global experience as critical to success These findings were also reflected in how discipline to execute strategies could in the role. (See Figure 5.) For chief COOs communicate with other members diminish. More broadly, if a hands-on CEO operating officers in North America, of the C-suite. In North America, COOs takes on more direct reports, decision- Greater China and India, deep industry reported having a great deal more contact making could get bogged down. experience was reported to be more with the CEO and CFO than in other necessary as preparation for the COO parts of the world. Communication takes In the long run, the picture looks even role. These differences are also reflected place several times a week, with many bleaker. Specifically, managing operations in the more granular skills and abilities respondents reporting daily conversations. without a COO could put leadership COOs reported drawing on repeatedly Among COOs in Greater China, the continuity at risk. In companies that do in their roles. In India, it was all about average interaction was reported to be not have a COO, there is no clear “second global business experience, while EALA weekly among that group. pond” where the business can fish for COOs rated a cosmopolitan background as 7 new CEOs. much more important than other regions What explains these differences? The did. In North America, a cosmopolitan deemphasizing of global experience in background was hardly considered the United States may stem from the important at all. Moreover, every region country’s legacy of geographic isolation. in our study except India rated tolerance Moreover, the premium placed on deep for ambiguity at the top. Our India COOs industry knowledge may be attributed

Figure 5: COOs’ perceptions of essential knowledge and skills, by region (%)

93 87 87 47 82 72 81 65

Deep Global P&L Broad industry operating experience organizational experience experience experience

North America (NA) Europe, Africa and Latin America (EALA)

7Nathan Bennett, Stephen A. Miles and Walter E. Shill, “Don’t Squeeze the CEO Out of the C-Suite,” Accenture, 2012.

COO Circle Research Overview | 13 to business leaders’ view of the COO role COO perceptions of how they are Paradoxically, when we asked which as heavily oriented toward leadership. evaluated functions COOs believed they had to In Europe, Africa and Latin America— When we asked our study respondents “own” to be successful in their role, the regions with less geographically isolated how their effectiveness is evaluated, only difference we found was in attitudes histories—it is perhaps not surprising that the overall response was that specific toward the CFO role. (See Figure 6.) much more of a premium is placed on types of financial performance (such as COOs in Greater China and India, more global experience. For example, European operating efficiencies; overall corporate than their North American and EALA executives have long recognized that performance including profitability and counterparts, reported that they need their decisions and actions can have an growth; and financial ratios such as extensive knowledge of the CFO role— international impact, so they may be return on assets or investment) influenced even though they tend to have minimal more sensitive to global dynamics. With their evaluation more than other general communication with their organization’s the rise of globalization of business and measures. However, COOs in North chief financial officer. This may indicate the impact of the most recent worldwide America and Greater China gave the that North American and EALA COOs are recession, North American executives “specific financial” metric greater weight more confident in their understanding may eventually place more emphasis than their counterparts in EALA and India. of the specific financials on which their on global experience. This emphasis on financial performance effectiveness is evaluated. Alternatively, may stem from North American it may suggest that the specific financial The COOs in our survey from Greater and Greater China COOs’ perception metric used to evaluate their performance China and India cared relatively little (suggested in our findings) that they hold is narrow in the context of their about global experience. This may suggest a C-level position and serve as overseers organization’s operations. (For example, that they see their companies’ future of operations. the metric may relate to specific kinds as being centered firmly in their region of initiatives.) and view other regions as primarily markets for their products and services. If this is true, then they may focus their operational efforts on local conditions.

Figure 6: COO beliefs regarding “ownership” of the CFO role, by region (%)

North America (NA) 34%

Europe, Africa and Latin America (EALA) 23%

% 10% 20% 30% 40% 50%

14 | COO Circle Research Overview Challenges today and tomorrow The impact of cost-cutting Issues keeping COOs up at night In this study, we also took the opportunity We were curious about which cost-cutting What keeps COOs up at night? What to gain insight into the challenges moves made during the recent recession battles must they prepare to fight every COOs believe their organizations face were most likely to pose challenges to day? Once again, our respondents’ answers today and in the future. To that end, companies during the recovery. Overall, varied across geographies and industries. we asked our respondents several our respondents identified cuts in talent To illustrate, for North American COOs, it questions regarding the recent global as presenting the greater challenges— is growth and operational efficiency that recession and plans to get out of it, as even more so than cuts affecting R&D, they worry about most. (See Figure 8.) In well as the impact of growth strategies manufacturing, IT and customer service. EALA and Greater China, it is operational (including globalization) on their role. (See Figure 7.) Most notably, 60 percent efficiency and change management; These questions centered on cost-cutting of the Greater China COOs in our study in India, it is primarily operational moves, issues keeping COOs up at night, believed that talent cuts in the form of efficiency.8 perceived changes in the skills needed to layoffs would pose the biggest challenge— be effective and expectations about their perhaps because an unlimited supply of Such findings suggest that COOs have companies’ growth plans. people is traditionally what the Greater different beliefs regarding the question China region has had to offer. The of whether the global recession has percentage of North American and EALA placed organizations in a position of COOs who agreed with this was 46 and lesser efficiency despite the “trimming of 30, respectively. fat” associated with layoffs. The findings associated with the Asia Pacific region fall in line with common perceptions of Asia Pacific being a low-cost product- producing region; hence, the worries about operational efficiency.

Figure 7: COO perceptions of talent cuts as presenting the biggest growth challenge, by region (%)

North America (NA) 46%

Europe, Africa and Latin America (EALA) 30%

% 10% 20% 30% 40% 50%

Figure 8: Issues keeping COOs up at night, by region (%)

Operational Change Growth efficiency management

North America (NA) 38 36 26

Europe, Africa and Latin America (EALA) 25 44 32

8Bennett and Shill.

COO Circle Research Overview | 15 There are industry differences in terms of The communications industry is facing what keeps COOs awake, too. Specifically, other kinds of challenges. In particular, financial services and health services the industry is consolidating, and some COOs are focused on change, while in markets have become very mature, which communications, products and resources makes driving new growth particularly companies, chief operating officers difficult. Thus, executives may need to are worried most about operational rely on operational efficiency as a key to operational efficiency and growth. growth. (See Figure 9.) Meanwhile, the products and resources This difference in focus may stem from companies represented in our study the different challenges facing these showed a similar pattern in their industries. For instance, the financial responses—with more attention to growth services industry is facing an erosion and operational efficiency than to change of respect deriving from the recent management, but with more of an overall collapse of banking. In the U.S., the balance across these three priorities. This health services industry is wringing its may represent a more normative picture hands over health care reform. Aware of how COOs think, absent the extreme of the tumult affecting their industries challenges facing the other industries we in the past few years, executives in examined. financial services and health services are focusing more on surviving in a hostile environment than on driving growth. And survival is all about change management.

Figure 9: Issues keeping COOs up at night, by industry (%)

Communication and media 34 46 19

Financial services 14 37 49

Health and public services 9 30 61

Products 40 43 19

Resources 32 46 24

Growth Operational efficiency Change management

16 | COO Circle Research Overview Changes in skills needed Expectations about growth plans But we saw regional differences regarding We also asked COOs which personal skills When we asked about growth plans for expectations about how much capital had become more important because their companies in the next three to investment companies will be making. of their companies’ growth plans and five years, 61 percent said they expected Almost all of the COOs in our study globalization efforts. Tolerance of their companies to grow capacity levels at stated that their organization planned at complexity and risk (which could take forms their existing facilities, while 59 percent least some capital investment. However, including currency volatility, more stringent reported expecting their companies to those in EALA anticipated more extensive regulation, geopolitical instability and expand capital investments in existing investment (see Figure 11.), as did the natural disasters) as well as interpersonal facilities. Fifty-one percent said they Indian COOs we interviewed. Regarding the skills were ranked as the most critical. (See anticipated seeing their companies take Indian responses, perhaps Indian executives Figure 10.) These findings suggest that products to new geographic markets and to believe that as long as the global economy COOs believe they must be more aggressive make capital investments in a new country. is growing overall, their companies’ in their strategic planning and execution These findings may indicate intentions to return on investment including capital of initiatives to help their organizations drive fresh growth. investments in infrastructure will make recover from the recent recession and carry sense. Because India offers low-cost labor, out their globalization strategies. foreign companies will still want to do business there; thus investment is justified.

Figure 10: Skills important for the COO role, by region (%)

79 81 68 71 61 74 66 62 28 83 73 71 85 74 67 56 63 66

Global Negotiation Cosmopolitan Diversity Tolerance for Self Intercultural Interpersonal Diplomacy Business Background Complexity/ Assurance Awareness Knowledge Risk

North America (NA) Europe, Africa and Latin America (EALA)

Figure 11: Extent of expected capital investments in the next 3-5 years, by region (%)

North America (NA) 33%

Europe, Africa and Latin America (EALA) 39%

% 10% 20% 30% 40% 50%

COO Circle Research Overview | 17 18 | COO Circle Research Overview Research methodology

Purpose A note about the sample sizes The purpose of the study was to gauge Our study sample initially focused on participants’ views on the nature of comparing responses from COOs in their role as COO, the keys to successful companies within North America and execution of the role and the pressing Europe, Africa and Latin America. Later in business needs their companies face today the study, we were able to add responses and expect to confront in the near future. from a relatively small number of COOs in Greater China and India. These latter Respondents and research approach sample sizes represent preliminary data, To be included in the study, the COOs had so we have not included them in most to hold positions at global organizations of the graphics presented in this report. or divisions with at least US$1 billion However, despite their small sizes and the in annual revenue and had to report preliminary nature of the data, we believe to the CEO. Industries represented in that the responses from Greater China and our sample included: communication, India open a window onto how executives media and technology; financial services; in these two regions view the COO role. health and public service; products; They may thus light the way for additional and resources. A total of 220 COOs, valuable questions about how the COO or equivalent senior-level operations role is defined around the world. executives, from North America; Europe, Africa and Latin America; Greater China; and India participated in a 25-minute phone interview comprising 37 questions. (Some respondents chose to respond to the questions in writing via a web survey.) The research was conducted between July 2011 and April 2012. (See Figure 12.) The survey’s margin of error is +/- 7 percent at the 95% percent confidence level. Although the title of the COO may differ across the regions represented in our study, we took pains to ensure that we interviewed individuals who can arguably be considered COOs in all cases. (See Figure 13.)

COO Circle Research Overview | 19 Figure 12: Study sample profile Country and region of respondents' organization headquarters

By Country By Region Spain U.K.

Italy 10% 10% North 10% America 40% Germany 10% 35% U.S. Europe 55%

10% France 5% 5% 5% 5% Greater Asia China Canada Brazil Pacific

N=220

Figure 13: COO title, by region (%)

75

57

12 6 7 23 17 3 COO Executive President Other Vice President of Operations

North America (NA) Europe, Africa and Latin America (EALA)

20 | COO Circle Research Overview A closer look at our COO However, the larger the companies respondents represented in our study, the greater the likelihood that the COO was promoted Eighty percent of the COOs in our study from within. This may be because larger had been in their position less than 8 companies offer better developmental years but had an average of 13 years opportunities for executives, and because of experience before taking on the role. the increased complexity might favor Globally, COOs were most likely to have selection of an insider who is thoroughly come from a division or department head familiar with the enterprise. role. Not surprisingly, 75 percent of our respondents were hired from inside their company. Of the remaining 25 percent, over half (54 percent) were attracted from another employer within the industry. (See Figure 14.)

Figure 14: Internal or external appointment of COO, by region (%) Where were you hired from?

100

External 80 81 24% 80 77 75 72 60

40 Internal

76% 20

0 North America EALA Asia Pacific <$3B >$3B

Internal appointments to the top operations executive position are more common than external appointments by a 3-to-1 ratio.

This is the same across each of the three regions studied.

Larger organizations (>$3 billion) are significantly more likely to appoint the COO from within their organization than smaller organizations (<$3 billion).

Internal hire External hire

North America (NA) 75 25

Europe, Africa and Latin America (EALA) 77 23

COO Circle Research Overview | 21 22 | COO Circle Research Overview COO Circle Research Overview | 23 About Accenture Accenture hosts peer communities for About the Authors Accenture is a global management other members of the C-Suite, including: Walter E. Shill is a senior managing consulting, technology services and • CFO Circle for chief financial officers director with Accenture Management outsourcing company, with 257,000 and equivalent finance executives. Consulting and an advisor to the people serving clients in more than Accenture COO Circle. Mr. Shill’s • CSO Circle for chief strategy officers 120 countries. Combining unparalleled consulting work spans more than 20 years and equivalent strategy executives. experience, comprehensive capabilities focused on a wide range of business issues across all industries and business • CIO Council for chief information facing Fortune 500 companies, including functions, and extensive research on officers and equivalent technology organization design and transformation, the world’s most successful companies, executives. strategic planning, mergers and Accenture collaborates with clients to acquisitions, and corporate governance. • CHRO Circle for chief human resources help them become high-performance He is based in Washington, D.C. officers and equivalent human businesses and governments. The [email protected] resources executives. company generated net revenues of US$27.9 billion for the fiscal year ended • CPO Circle for chief procurement Nathan Bennett, Ph.D., is a professor of Aug. 31, 2012. officers and equivalent procurement management at the Robinson College of executives. Business at Georgia State University and an advisor to the Accenture COO Circle. About the Accenture COO Circle • CSCO Circle for chief supply chain Mr. Bennett’s research on chief operating and C-Suite Networks officers and equivalent supply chain officers and other management-oriented Chief operating officers and equivalent executives. topics has been published in Harvard operating executives face considerable Business Review, The Wall Street Journal, challenges as they strive to help their To learn more about the Accenture Guardian and Financial Times. He is organizations compete in a dynamic COO Circle or C-Suite Networks, co-author of Riding Shotgun: The Role and often volatile global business please contact Christian Winslow at of the COO and The Career Game. environment, yet there are few ways for [email protected] He is based in Atlanta, GA. COOs to interact with their peers that can or +1 917 642 7867. lead to a thought-provoking exchange [email protected] of ideas. In 2008, Accenture founded the COO Circle to provide a unique forum for select COOs and equivalent operating executives in which small groups of members convene virtually and in person to determine the topics to share, issues to debate and the best ways to interact. Today, the COO Circle has more than 100 global members from the world’s leading organizations.

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