Any COO scanning the economic forecasts for the UK at the end of last year could have been forgiven for wanting to batten down the hatches in 2023. The prospect of a lengthy bout with stagflation doesn’t exactly encourage business leaders to make bold expansion plans.
But the smartest operating chiefs are approaching this year with cautious optimism. They have formed layered strategies that will not only prepare their firms for a downturn but also support growth in carefully chosen areas. They’ve recognised that, if they can act promptly, uniting all departments in pursuit of targeted changes, they’re likely to secure a lasting competitive edge for their companies. In pursuit of such an advantage, they’re tending to focus on five key tasks this year.
1. Analyse impending macro changes
COOs have historically tended to be reactive rather than proactive. This is changing, given the high level of macroeconomic instability and disruption in global supply chains, along with shifting expectations among customers and employees.
To succeed in this environment, COOs need to “look far ahead, so that they can prepare experiments that fail fast or scale fast accordingly”. So says Professor Scott Hutcheson, senior lecturer in organisational leadership at Purdue University, Indiana, who works with business leaders to make their companies more innovative and adaptable.
Some firms that have benefited unexpectedly from the pandemic made unrealistic assumptions that the growth they achieved in the depths of the Covid crisis in 2020-21 would continue, notes Ben Leet, CEO and COO at market research provider Delineate.
“Many businesses that built themselves around the ‘now economy’ may need to change their operating models, especially in the face of a recession,” he warns.
To ensure that the right changes are being made, COOs must work alongside their C-suite regularly to analyse emerging trends, risks and opportunities.
“No one can get everything right all of the time,” Leet says. “But, if the members of an executive team can talk, think and plan together, they will give their company a far better chance of being ready for the future.”
2. Look to the longer term
COOs must be ready to use their cross-organisational expertise to exert more influence on their firm’s strategic direction, according to Hutcheson, who says: “One of their biggest challenges is to shift focus from keeping the lights on to working as part of the core strategy team.”
By combining a deep knowledge of internal processes with a high-level perspective, COOs can enable their firms to harness new production methods and deliver more relevant offerings to their target customers, he adds.
Without sustainable operations, no business can be ready for the future. Even as budgetary pressures mount, environmental considerations must remain a priority for COOs. That’s the view of Jo Heneker, founder of Sust. Consulting, which advises small and medium-sized firms on how to become more sustainable.
The best operating chiefs will “begin with an ‘as is’ assessment – understanding where sustainability fits into their operations and where it needs to get to. They will set realistic goals to achieve in several key areas,” she explains. Equally, they recognise that sustainability is becoming “increasingly important in attracting and retaining the talent they’ll need”.
3. Maintain harmony in the C-suite
The process of instilling significant changes in a business, especially during a downturn, is likely to heighten any existing tensions among members of the senior team. At smaller firms, COOs often assume several C-suite responsibilities. Having fewer cooks in the kitchen can be beneficial in such situations.
Tom Allin is one such COO. The co-founder of Flown, a provider of productivity software, he says that his firm is “relatively young and small, so I have quite a broad remit, with a focus on finance, business development and wider growth.”
His counterparts in larger businesses may have to deal with a wider range of colleagues with starkly differing perspectives. While the marketing chief of a big company may be focused on bold exploration, for instance, the CFO may be far more interested in cost-efficiency. When such varying agendas come into conflict, the operational chief may need to take a delicate approach in helping the CEO to decide which voice is most worth heeding, Hutcheson notes.
“COOs can think of themselves as producers in a recording studio, listening carefully and deciding when to fade down one sound and bring in another,” he says.
Heneker says that, whenever the sensitive topic of sustainability arises, there may be a fierce debate about the right direction to take. In such situations, COOs “will need to make a pincer movement. This includes appealing to the human, ethical side of fellow C-suite members and their long-term financial side too.”
4. ‘Walk the floor’ regularly
Even though 2022’s superheated recruitment market is starting to cool, the fierce competition for talent has prompted many HR chiefs to focus on employee satisfaction. COOs are uniquely placed to help them assess the situation, given that their role entails regularly meeting staff at all levels. They can listen to people and discover which factors are keeping them at the company and which may be prompting them to look elsewhere for employment.
In his former job as general manager at YouGov, Leet took his laptop from the executive office and sat among different teams. He is replicating the approach at Delineate.
“The more a COO can stand in the shoes of different employees, the more chance their business has of being strong on staff retention,” Leet explains. “People are uncertain at first about having the boss around, but they warm to it once they see that they can talk to me about anything.”
Given the rise of hybrid working in the UK, operational chiefs may need to be more proactive about holding these useful face-to-face conversations because people are spending less time together in the office. They may also need to make time to conduct short video meetings with remote workers if they’re to gain useful insights from a broad range of employees.
5. Get closer to the customers
Millions of consumers and businesses are keeping a closer eye on what they’re buying and how much they’re spending on it. Faced with this widespread belt-tightening exercise, COOs need to review all the models underpinning the products, services and customer experiences offered by their firms.
For Allin, the key here is to seek close interactions with Flown’s client base. He explains: “With the macroeconomic situation significantly affecting consumers’ disposable income and discretionary spending, we must maintain a high-quality customer experience.” Doing so entails retaining “an effective two-way dialogue with users” and adapting quickly to both their responses and broader trends in the market.
Leet predicts that COOs will focus increasingly on information that’s normally the preserve of marketing chiefs devising campaigns: brand-strength insights. His company tracks consumer sentiment using surveys and data on online searches and social media usage. It can then feed this information directly into businesses’ decision-making systems.
A smart operating chief can use such material to understand consumers’ changing expectations and “make the right choices for the short, medium and long term” regarding their firm’s position in its markets, Leet says.
Given their highly connected position, forward-thinking COOs will devour this and other information, applying it relentlessly to their work in planning and changing processes. It will enable them to play a leading role in their organisations’ preparation for, and adaptation to, whatever challenges await in 2023 and beyond.