Questions that Reveal Harmful Levels of Frailty in a Critical Corporate Operations Function

“One of the tests of leadership is the ability to recognize a problem before it becomes an emergency.”

This is part 2 in our Putting Muscle into Operations Management series. You can review part 1 here.

Recognizing there’s an issue and working towards a solution can sometimes seem like a world apart. At Cerius Executives, we know the challenge for CEOs and business owners to be able to address known issues in their organization. That’s why we asked our corporate operations warriors – interim Chief Operation Officers (COOs) – to lift the veil off some common scenarios that could be hiding or masking potential emergencies.

We know that COO job descriptions can be broad, or narrowly defined. Our interviewed executives addressed the broader aspect of a COO’s job description. They brought to light questions CEOs should ask to assess if their Operations function is strong or weak.

Are you leveraging current technology to maximize performance – and reduce waste – in each department to strengthen corporate operations?

Manufacturing companies frequently evaluate new technology for the factory when gains in productivity, assembly rates, quality, and waste reduction can be justified. However, is your head of corporate operations also working closely with IT to bring technology-driven advantages to all the other departments? Are computer systems so old they can no longer run the latest software? Do employees have difficulty collaborating efficiently on projects? Can remote offices and employees access files and databases as easily and securely as HQ staff? Are you connecting and communicating with your customers and suppliers in ways they prefer, or are you forcing them to do business your way? Is your company spending more on IT and IT support than your competitors? Is this extra investment paying off?

One of our COOs even looks at Marketing to see if they are leveraging Web-based technologies, such as web analytics and search engine optimization (SEO) that can provide a competitive edge. Your COO needs to embrace advances and be open to their implementation if it makes sense to the performance of the company.

Why it’s important and what it suggests: Not taking advantage of what current technology has to offer is wasting valuable time in corporate operations. Technology is vital for quality control, to maximize production, and many other valuable business functions, and each department should present a business case to the COO for how a technology upgrade or implementation will benefit the company.

Do you know your RFQ hit ratio?

“In my experience,” says one interim COO, “if a company is winning approximately one third of its RFQs (request for quote), they are handling their pricing fairly well. Higher than that could mean the pricing is too low, and a lower hit ratio could mean it’s too high.”

Why it’s important and what it suggests: Tracking and understanding your hit ratio can provide strong indicators on price, quality, and sales effectiveness.

Are you spending too much of each day on corporate operational issues that should, or could, be handled by others?

If your company is running efficiently – meaning there are adequate systems in place and top talent at your right hand to guide management and growth – one of our COOs believes a CEO’s time should be spent about equally both in- and outside the company. Internally you may be overseeing several functions, such as sales and marketing, client relations, finance, operations, product development and more, but externally, “your top priorities are maintaining existing customers, expanding sales within those customers, and exploring new opportunities,” he says.

If you started your company, you may need to consider another issue: Startup CEOs are used to wearing different hats – it comes with the territory. Many start it as a family business. If that applies to you, you need to ask yourself if Uncle Bill the CPA is prepared to handle a $30 million dollar company; or if Cousin Vickie is really a customer service person, as opposed to a VP of sales. And the hardest question of all: Are you better at product development than leading the company into its next growth phase; are you in the business, as opposed to leading the business?

Why it’s important and what it suggests: If you put a dollar value on it, the reason becomes fiscally clear: Assign a dollar-per-hour rate on your time as CEO, versus your manager’s rate. Your company’s growth mandates that you look at it from a higher level – you need to lead the business, or find someone who can. “A CEO needs to look for that champion – such as a top-tier COO – or he will have a hard time executing that long-term strategy,” warns our COO.

Additional Insights on fortifying corporate operations:

• Do you know what you would do with an extra $1 million to put into your company? This is a question one of our COOs likes to pose to every CEO. “Each CEO should know that if they invest another few hundred thousand into X, it will increase sales by Y,” he says.

• Consider an operational assessment to examine these and other corporate operations functions and identify possible pitfalls. While many answers to our questions can be found in your financial reports, such as trends, profit and ratios, finance cannot talk about what the numbers mean – that’s an operational function; and, while a financial audit talks about the past, operational experts can make projections.

If your frank answers to the questions in this paper have left you feeling uneasy, it means one of two things: Either you need more from your Corporate Operations function than what you’re currently receiving, or you’re overdue to create the role of a VP Operations or Chief Operations Officer.

In both cases the solution need not necessitate the recruiting and hiring of a full-time executive. Smart CEOs and their Boards will seriously consider the advantages of an interim COO to close the performance gaps quickly.

To learn about how Cerius Interim Management can help you, please visit our home page by clicking here.