The ClientWise Blog

Why and When Should You Hire a COO?

Posted by Ray Sclafani on Jul 22, 2020 2:11:47 PM

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If you’re like most successful firm founders, you’re probably either a tremendous relationship manager, rainmaker and/or investment technician. And as your firm has gradually grown, you’ve been able to acquire enough business management skills to get by. But is business management truly your passion; not to mention an area where you want to devote a significant portion of your time and effort?

The unintended consequence of success in acquiring new clients and assets is the time needed to provide them with the advice and guidance they seek; all while efficiently running a business that performs the underlying technical work required. Once you reach a level of about $5MM in revenue, it’s time to earnestly consider onboarding a professional business manager for your firm. Why make the shift at this particular stage in your growth?

  • By this point, you should have had sufficient opportunity to identify your unique abilities – and it’s likely not managing a team of people, hiring staff, or sitting down regularly with a compliance officer, etc.
  • Based on our consulting work, once firms pass the threshold of $5MM in gross revenues, the complexity of the business (along with demands on the founder’s time) accelerates. Things that previously were manageable such as employee performance reviews and professional development conversations, decisions on the tech stack, and reviewing monthly financials begin to slip and get pushed off. Simply put, if the role of business manager demands too much of your time and adversely impacts your ability to focus on your unique abilities, you need to find an alternative solution.
  • And financially, at this level of revenue you should be able to deploy the capital required to bring a professional business management specialist on board.

Defining the Chief Operating Officer (COO) Role

There are five principal functions that you’ll want to offload from your plate onto the shoulders of a capable COO: compliance, technology, operations, financial management and human capital management. In assuming primary responsibility for the day-to-day operations of your firm, this individual will ideally take the reins on:

  • Financial statement oversight, including profit and loss analysis;
  • Budget and resources development;
  • Analyzing and overseeing systems development (including IT systems);
  • Developing, managing, coaching, and mentoring the firm’s human capital;
  • Overseeing and managing the firm’s sales efforts; and
  • Choosing/designing and managing processes and systems (including compliance and IT).

The simple truth is that businesses are never in stasis – they’re either growing or dying. And more often than not, the teams who are truly flourishing are those who have a professional manager running the operation. So, as you think about the continued sustainability of your firm, hiring a head of operations should probably be high on your list of priorities. The ClientWise Competency Based Interviewing Guide - Chief Operating Officer (COO) can be an invaluable resource in identifying and interviewing for this critical role. Bringing the right individual on board can not only free you (and your advisor partners) up to focus on the things you do best, it can help ignite a resurgence of growth.

Coaching Questions from this article:

  1. Think about how your time is currently being allocated? What areas of the business would you like to be able to spend more time focusing on?
  2. When it comes to developing, managing and coaching next generation members of your team, in which specific areas could a professional business manager offer much needed support?
  3. Based on your current team culture (or the culture you’re trying to create), what qualities in a potential COO candidate would be essential for a strong relational fit with both the team and your existing clients?

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ClientWise is the premier financial advisor coach focused on business development and management best practices for financial advisors.

Topics: Business and Operations Management, Team Development