Private Equity COOs & CFOs - Private Equity Executive Search

      Private Equity | How a COO & CFO Can Work Together

      In private equity-backed companies, C-suite leaders often work in a fast-paced, results-driven environment with unforgiving timelines for delivering results. For these reasons, leaders commonly use aggressive business strategies to stay on track and advance companies. The issue this need for results can create, however, is a power struggle between top company leaders. 

      Leadership capabilities and collaboration are critical to the overall operational success of a company.

      The chief executive officer is often the main driver of the business strategy, but a CEO can’t do it all alone. A chief operating officer and chief financial officer are two other important positions working to enhance the business. 

      When hiring a Chief Operating Officer COO or Chief Financial Officer CFO for a private equity company, background and experience are important to consider, but collaboration skills should be a top quality you seek out.

      You need a leadership team that aligns with the strategic vision of the business and who can smoothly work together to move the business forward. 

      A Private Equity Executive Recruiter on “Good Portfolio Company COOs”

      Private equity COOs are tasked with handling the company’s internal affairs. In many cases, that means that private company COOs are brought on to complement a CEO’s skill set. While this dynamic can benefit C-suites and companies, the private equity COO and CFO relationship is equally important. 

      According to today’s top private equity executive search firms, COOs at portfolio companies are typically retained to:

      • Manages a company’s daily operations: Consequently, leadership skills, organization abilities, and analysis capabilities can be focal during the hiring process. This is one area where hiring leaders may benefit from the insights of a DISC evaluation.
      • Collaborate with the CFO: While most companies don’t consider a COO’s financial understanding during the hiring process (often because they view finance as the CFO’s wheelhouse), a COO with the ability to competently discuss the financial impact of operational changes will have an easier time collaborating with the CFO on important business decisions. 

      As the COO works to implement new operating procedures, lead a strategic plan, or facilitate a major organizational change, conversations about the financial side of the business can make a huge difference to the overall success of the plan.

      Defining the financial impact of a project is a great motivator the COO can use to engage employees and leadership in needed changes. When the financial aspects of a project are clearly laid out, it also helps a COO direct resources to the most impactful projects. 

      What Makes a Good Portfolio Company CFO?

      A chief financial officer is all about the numbers. A good private equity CFO ensures the financial growth of a company through careful tracking of the company’s finances and assets. What most businesses don’t realize, is that you don’t want a CFO with P&L tunnel vision. A CFO who is too focused on seeing immediate profits from a business decision won’t be able or willing to implement strategies with a long-term impact. Certain strategic plans take longer to produce results for the bottom line and a CFO hung up on immediate growth won’t be able to see the long-term benefits of implementing change. 

      A CFO with proper foresight makes an excellent addition to any portfolio company. Understanding the long-term benefits of productivity gains and operational adjustments will make a CFO more willing to consider investing in changes that will benefit the company further down the line.

      When a CFO is able to assess an operational investment from a business strategy perspective, it also makes collaboration between the CFO and COO easier. These two vital leaders can work together to assess the best choices for the business and move forward confidently with the business strategy.

      A Private Equity COO & CFO Partnership

      You need leadership members who will flourish in their individual roles but who will also thrive as a team to drive value for the company. A COO and CFO who can work together will take your business far. Instead of working against each other and causing dissent among employees, a COO and CFO on the same page will bring efficient updates and changes to the business. 

      Private equity companies don’t have time to waste on arguing C-suite leaders. If one position is unwilling to view a project or business decision from the other role’s perspective, then the road to success will be extremely bumpy. On the other hand, if your C-suite leaders are excellent communicators and understand the importance of the other leadership positions, the company will be much more successful. 

      Which Private Equity CFO Profile Does Your Business Need?

      The role of the chief financial officer (CFO) has evolved a lot over the years. In addition to the financial responsibilities of a company, many CFOs are now handling technology transformation, outsourcing personnel, and talent management, among other business needs. Given the diverse role a CFO can play within a company, it can be difficult to put together your ideal CFO’s profile.

      Naturally, the CFO role varies by company, but it can be helpful to have a general profile pinpointing the top characteristics of the CFO you need.

      4 Private Equity CFO Profiles

      Below are four types of CFO profiles, each with different competencies and areas of expertise. Understanding how each of these roles works within a company can help you determine which CFO profile is best for your business.

      1. CFO as the Financial Guru

      The financial guru CFO in private equity has years of experience with different roles related to financial functions within a company. This typically includes duties such as financial planning and analysis, auditing and compliance, treasury, financial reporting, and controlling. The financial guru is often an internal hire, frequently a Controller or Chief Accounting Officer prior, and comes with a comprehensive understanding of the company as a whole. You can expect the financial guru to have an advanced accounting degree, CPA, and to excel at standardizing procedures.

      This particular profile is generally suited for businesses with inefficient financial departments or early-stage businesses that are scaling up and need to strengthen their financial functions.    

      2. The CFO Who Is a Jack-of-All-Trades

      The jack-of-all-trades CFO typically has a broad range of experience and has often worked outside the company with exposure to multiple businesses. Other areas where these CFOs have worked include marketing, general management, and operations. Management and communication skills are often prioritized in this profile over more technical skills. The jack-of-all-trades CFO can be found both internally and externally and is hired at a company where personal influence is highly valued and required for results. 

      3. The CFO Who Is the Achievement Leader

      Achievement leader CFOs are known for transforming businesses to create results. They modify financial functions and other processes within an organization to promote cost management and the use of metrics. Achievement leaders also focus on standardizing data and systems to enhance efficiency and performance within an organization. 

      The CFO with this profile is generally an outside hire with previous CFO or accounting experience. This type of CFO is beneficial for companies looking for exacting analytics and striving for aggressive growth. 

      4. The CFO as the Change Agent

      The change agent CFO is best suited for industries that experience a lot of disruptions. This type of CFO is an outside hire and has a background working in mergers and acquisitions (M&A) and has an extensive external network of resources as well as exceptional strategic insight. Businesses undergoing mergers and acquisitions as well as PE companies looking to revamp portfolio businesses are a good fit for this CFO profile. In many of these cases, the companies experience a considerable reshaping of the business as well as adjustments in resource allocation so a CFO who has experience with this type of disturbance can make the transition run more smoothly. 

      COO Role: Understanding the Role & Value of a Chief Operating Officer

      Every organization eventually comes to the point where discussions turn to the possibility of bringing on a number two or chief operations officer. But due to the rarely visible, misunderstood role that an operations chief plays, prospecting for one can be a difficult task. 

      We have addressed the question of how to hire a COO elsewhere. However, what is more often problematic for CEOs looking to bring on a trusted second is precisely defining the COO role and why it is valuable. 

      As is often the case, before an organization, and their CEOs, begin to really drill down into what they want in an COO, it makes sense to ask if the hire is really necessary and what value they will bring. Yet these critical questions frequently go unanswered.

      Experts agree that the role of the COO is one of the most misunderstood and least defined in the C-suite. It can be challenging to extrapolate specific trends from the reasons that companies and CEOs give for bringing on operations chiefs. This, in turn, makes the question of what a COO is expected to do a very difficult one to answer. 

      Here, we discuss this challenge and put forth the proposition that, perhaps, instead of screening and interviewing a COO on the basis of a set category of requirements, it may be more beneficial to considering a list of end results you want to achieve and then working back from there. 

      The Private Equity COO Role: What Does a COO Do in a Company? 

      Answering this question is often part of the problem. No one can tell with any degree of certainty exactly what a COO should be doing in an organization. Part of this is due to the limited understanding we have of the role, with Accenture describing it as “perhaps one of the least understood roles in business today.”

      While this sounds incongruous at first pass (considering that companies and their officers have been subjects of unrelenting study for decades), it does make sense. The COO role is not one that we find in every single company, compared, for instance, to other roles such as the CMO, CFO, or the all-pervading CEO. In fact, at various points in time, certain companies drop the role entirely and divide up the responsibilities amongst other offices, while some only return to fill the role after hiatuses of varying lengths, as Microsoft did. 

      Another reason for the uncertainty surrounding the role, however, is the amorphous nature of the tasks that COOs typically carry out. Ernst & Young described this trait as being “chameleon-like”, the pinnacle of adaptability, which should be a more relevant trait in a COO than a “single set of skills that can be easily identified in any business.” As a result, understanding exactly what they should be doing can be unclear, largely because they are so good at fulfilling different roles. 

      What a COO Does: The CEO & COO Relationship in Private Equity

      The COO often acts as a trusted second to the CEO, the yin to their yang. In this position, an operations chief may carry out various responsibilities, depending on what is needed. However, whatever those job descriptions may look like, their overall responsibility is often to supplement the skills, abilities, duties, or goals of the CEO. In other words, the professional CEO and COO relationship that the head of an organization wants can be pivotal in defining what the chief operating officer role ultimately looks like at a company.

      What Value Does a COO Bring to Your Organization?

      The job of a CEO can often be a tough one, and while in this role, there is often so much to do. While a lot of those tasks can be handled by other members of the C-suite, organizations can sometimes find themselves needing an enterprise-wide operational view in dealing with these problems. 

      Since the CEO will typically have a lot on their plate, our executive recruiters often see companies choose to bring on a COO at this point to provide that extra operational guidance. This frees up the CEO to pursue strategic tasks such as leading the company into the future and other public-facing roles. However, this is just one of the ways that COOs typically add value to organizations. 

      According to a Harvard Business Review article, there are at least seven other ways in which operations chiefs are brought on to add value. These include being brought in to catalyze firm-wide change, retaining a valuable lower-level officer, recruiting a more experienced hand to mentor the CEO, and procuring an executor to transform operations. 

      For Linda Kozlowski, former COO at Etsy, the value that a COO brings is in business operations, particularly “how you operate your business, think about strategy, and move the business forward in growth.” Although she admits that the “role is custom to every company and requires deep self-awareness from the CEO and founder to outline the specific skills and qualities they need in a partner.”

      Therefore, at the core of it, the value that a COO brings largely depends on how clear the vision for their intervention is and how this is communicated in prospecting for and finding the right candidate. 

      What Should the CEO-COO Dynamic Look Like in Private Equity?

      As explained earlier, the CEO and COO will typically maintain a close working relationship. Therefore, one of the most important things to get right during the recruitment process is to ensure that this is a hire both individuals are comfortable about. 

      There needs to be a healthy degree of trust and chemistry between CEO and COO. There should be a(n):

      • Honest, open relationship between the CEO and the COO
      • Ability for the CEO & COO to function as complementary roles to each other
      • A solid to strong level of comfort in exchanging ideas and working with each other 

      The COO should also be versatile enough to adequately hold the ship when the CEO is not in office. As Kozlowski emphasizes, “the most successful COOs are Jacks – or Jills of all trades.” In addition, the COO “should exude similar leadership traits to the ones you possess so the team feels confident relying on them – and the business doesn’t skip a beat.”

      One red flag to look out for in this relationship is a potential tussle for relevance or power with the CEO. The COO absolutely needs to be someone who recognizes that “their job is to run the plays, not call them.” The CEO also should be willing to share the spotlight so they and the COO can function as a truly effective team. 

      Great COOs: How to Hire a Highly Functional & Effective COO

      With a clearer idea of the COO’s role in mind, identifying what organizations want or need in their chief of operations becomes easier. Kozlowski advises conducting a bit of self-assessment on the part of the CEO in fleshing out this part. Here are the questions to ask and answer to determine what would make a great COO for your company. 

      What Am I Drawn to?

      A great COO will have the most impact when they are not trampling on the same space as the CEO. Instead, knowing what tasks you prefer to be doing as CEO allows you to identify what tasks your COO will be doing instead, giving you both space to work. 

      What Do I Procrastinate On?

      Just as you have identified what you prefer to do, also identify what you prefer not to. Often, we procrastinate tasks for various reasons including lack of time. But while you truly may not have enough time for those tasks, the problem may be more a matter of interest or even a skills gap that you’re unwilling to admit. If that’s the case, then these are likely the tasks you want your COO to be skilled in. 

      What Do I Wish I Knew & Liked?

      Amongst those things you delay, there are a few you wish you did better. A great COO can come in as a mentor or instructor and guide you in these over the long term while also providing those skills right now. 

      It also makes sense to seek input from your executive team and board of directors on these questions. Having that broad insight will help you create an accurate picture that you can then draw on in identifying what the perfect COO will look like for you. 

      CAOs vs COOs: Discover the Difference

      A chief administrative officer is responsible for day-to-day operations while a chief operating officer is an executive position responsible for improving efficiency.

      The CAO typically reports to the chief executive officer, acting as a go-between for the CEO and upper management while taking on the daily operations of the company and fielding questions from management.

      In contrast, the COO often works with personnel management, sales, and production, engaging with these departments to find opportunities to optimize efficiency.

      Hiring a CAO vs a COO

      Carefully review the tasks typically assigned to a CAO versus a COO to determine which position is most important to your company. You may need both a CAO and a COO but understanding the different roles will help you prioritize the positions and focus on the pain points of your business. 

      Final Thoughts on the Role of a Great COO

      Prospecting for a COO is never an easy one, and it’s even harder when you’ve never had one. But with a clear idea of what value you expect a COO to bring to yourself as a CEO and your organization as a whole, you will be in a better position to make a hire that not only helps your company grow but that also helps you become a better leader.

      Find Your Next Leader Faster with One of the Nation’s Top Private Equity Executive Search Firms

      Cowen Partners has an enduring record of excellence in the executive search private equity space, with deep experience recruiting and placing private equity COOs, CEOs, CFOs, and other leaders. Contact us if you would like to discuss recruiting an exceptional C-suite leader for your company.

      We also invite you to explore our industry-leading resources below to see why Cowen Partners continues to be an award-winning private executive search firm in New York City, ChicagoSeattle, Dallas, Los Angeles, and major metros in every state nationwide.

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