COOs can feel like 'chief optional officers' in hard times

Corporate and managerial employees may feel anxious as health systems reduce administrative headcount amid negative operating margins. In such times, one role has historically faced more uncertainty than others: the COO. 

The larger the health system, the more ins and outs there can be to administrative workforce changes. Unless an organization opts to outsource an entire department or function, layoffs or the elimination of administrative roles do not occur in large swaths but rather on a department-by-department basis with managers making hard personnel decisions to meet a certain dollar amount. A health system doesn't eliminate all of its assistant vice presidents, or a marketing department doesn't lay off all of its specialists, for instance. 

This is what makes the elimination of COO roles so distinct, not only in healthcare but in corporate America. It has been one of the few positions targeted for elimination entirely, or frequently goes unfilled or unreplaced if a COO departs, with duties split up and reassigned to other executives. This can result in COOs being seen as optional. 

Scott Becker, publisher of Becker's Healthcare, generally views this trend as a horrendous idea. 

"First, CEOs don't have the capacity to engage in close day-to-day management and need COOs to oversee the daily overall operations at systems and hospitals," Mr. Becker said. "Second, CFOs have involvement in overall strategy and operations, but first and foremost must make sure the financial ship is in order. This is a multifaceted and very complex job today." 

In 2000, 48 percent of large companies on the Fortune and S&P 500 had a COO. By 2018, that percentage dropped to 32 percent, according to executive search firm Crist Kolder Associates.

Closer to 2018, headlines followed what seemed like a big business shift and an irreversible fade-out. "The Decline of the COO," read one from Forbes. "The case of the disappearing chief operating officer," read another from The Washington Post. McDonalds eliminated the COO role in 2014 after its incumbent retired. That same year, software company Symantec did the same. More recently, in 2022, Starbucks eliminated its COO spot, moving day-to-day business operations to the CEO.

The trend was reversible after all. COOs made a comeback at large companies since that 2018 low point, with about 10 percent more of firms simply having one. Nonetheless, healthcare is the least welcoming industry for the executive role. In 2022, only 26 percent of healthcare companies among the Fortune and S&P 500 had a COO. That compares to 48 percent of companies in finance, 48 percent in energy and 40 percent in tech. These figures are tracked by executive search firm Crist Kolder Associates.

Sovah Health, part of Brentwood, Tenn.-based Lifepoint Health, is the latest health system to drop COOs. The organization dropped COOs at both of its campuses in Danville and Martinsville, Va., and eliminated the position from its operating structure.

Reasons cited for COO fragility vary. Some thinking goes that COOs can demotivate or detract strong talent by being seen as a successor-in-waiting for the CEO's chair, or by serving as a middle layer between other executives and the COO. Flattened organizational structures bring about flattened corporate structures, with more executives reporting directly to the CEO in a hub and spoke model versus the COO funneling things up to the CEO. Fewer CEOs hold onto the dual role of chairman, which allows more bandwidth for operational details and decision-making. 

A 2019 study found nothing to lose by combining the COO and CFO jobs, according to research published in the Journal of Management Accounting Research. The analysis, believed to be the largest of its kind at the time on dual COO-CFO executives, looked at financial and operational metrics of companies with the dual role and compared them to metrics of companies that separate the positions. There was no evidence that the creation of the hybrid CFO-COO position hurt operations.

Beyond following their mere existence, there seems to be a stubborn lack of curiosity and broader understanding about the COO. Business publications — of which there are none to few tailored specifically to the COO — follow CEO activity and behavior closely, but their second-in-command tends to fall under the radar unless the question at hand is one about succession or operational dysfunction. 

Perhaps one reason why is the variation COOs share. "When you start to examine COOs as a class, one thing immediately becomes clear: There are almost no constants," authors wrote for Harvard Business Review in a 2006 article, "Second in Command: The Misunderstood Role of the Chief Operating Officer." 

At that time, researchers said the reason COOs aren't more common is because they are poorly understood, with the role they play varying among seven archetypes from "the executor" to "the change agent" depending on the company's reason for hiring the leader.

The fuzziness around this demanding, contingent and mystified role seems to have persisted 17 years later. 

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