Written by Alex Yastrebenetsky, an Entrepreneurs’ Organization (EO) member in Cincinnati, Ohio, and founder of InfoTrust, an award-winning digital analytics consulting and technology company that helps marketers use data to make…
Written by EO Germany member and CEO Feliks Eyser. A version of this article first appeared on Feliks’ Medium blog.
Building an amazing company requires more than vision. You’ve heard the saying that every success story is 1% inspiration and 99% perspiration. You have to sweat and execute! Many people have good ideas, but few can execute and build a great company around it. It’s in the execution that a great chief operating officer (COO) comes in very useful!
Why hire a COO?
My strengths as chief executive officer (CEO) of RegioHelden were typical founder qualities: I was good at designing an MVP, persuading customers and employees, raising money and defining an overall vision and strategy. Some of my greatest assets were qualities like willpower, curiosity, creativity and impatience.
These qualities got me quite far, but it took me some years to realize that those same assets could be liabilities when it came to building and managing an organization. I remember a situation where an early human resources manager quit after a few months and told me one of her reasons for leaving was she didn’t receive any management from me. Oops …
I learned the hard way that starting a company and managing one require a different set of skills.
- My willpower drove people crazy because my expectations were often too high and could very rarely be met.
- My curiosity and creativity made it hard to predict my behavior. I had plenty of new ideas and wanted to experiment!
- My impatience often pushed people to their limit (good!) but sometimes past it bad!), causing frustration.
I might have been good at setting directions, recruiting and motivating the team, which were all important things, but I basically sucked at the managerial role.
What does a COO actually do?
To define these roles, I consider the Visionary and the Integrator. The Visionary focuses more on driving innovation, creating ideas and assessing the market. The Integrator tends to work on building the organization and maintaining business harmony. A good COO/Integrator defines systems and processes, manages staff, and ensures stability.
Often the CEO role is focused externally (market, customers and investors) while the COO role is focused more inward (employees, organization design, processes and systems).
At RegioHelden my COO and I would sometimes distinguish our roles as “foreign minister” and “minister of the interior.” There may be certain organizations where one person can fill both the CEO and COO roles, but more often I see that splitting the roles between two persons with different skillsets is much more efficient—especially in scale-mode.
When is the best time to hire a COO?
As early as possible. I hired my first COO three years after I launched. That was about a half year after we raised the first million in VC. In retrospect, I should have filled the position earlier. Probably even during year one. The main reason? It’s hard to implement systems and processes in a rapidly growing company. Plus, maybe my HR manager would not have quit so quickly!
Striking a balance between growing quickly and building a solid foundation is always a challenge. But believe me, it’s worse to have a weak foundation and have the engine overheat than to grow a little slower but with a strong core.
The 4 magical steps that will produce your next killer COO
The processes I used to hire our first COO in 2012 and the second one in 2018 were basically the same and are strongly inspired by Topgrading as well as the Who Method. Of course, the methodology is not limited to COO positions; I recommend a structured process like this for every position.
The process boils down to these steps:
- Define a scorecard and job description
- Fill the funnel to the maximum
- Select with structured phone and personal interviews
- Testdrive and check references with the team
1. Define a scorecard and job description
This planning phase is the most underrated step. A lot of first-time founders just throw together a job description without thinking much about the scope of the role. Big mistake.
Above is the scorecard for our company’s COO opening in 2018 (sorry for the German!). The scorecard includes the mission of the role, expected outcomes as well as competencies, experiences and skills that the candidate needs.
Having such a scorecard has many advantages:
- All people involved in the search process (HR, assistants, direct reports and headhunters) understand what the candidate needs to bring to the table.
- It makes it easy to create a crisp job description.
- It can be used to measure candidates against competencies in interviews.
- It makes it possible for different people to have an objective discussion—versus evaluating candidates on a gut feeling.
We then created a public job description based on the scorecard. That was pretty straightforward.
2. Fill the funnel to the maximum
At the top of the funnel, it’s just a numbers game: The more applications, the better. A lack of alternatives is never a good reason to hire a candidate. So focusing energy and some investment will create a big funnel and ultimately pay off.
A lack of alternatives is never a good reason to hire a candidate.
We used the following methods to generate applications:
- We spread the job description on all the relevant job boards as well as social networks like LinkedIn and XING. The investment for this was probably 5 to 10,000 EUR.
- We mandate give external recruiters in non-exclusive performance-based deals. That means that we pay the agency 20 to 30 percent of the first yearly salary only if we hire their candidate. (Of course, recruiting agencies don’t like to work non-exclusively, and will advise against it. In our case we were pretty confident that we could fill the position without an exclusive deal so we went without one.)
- We use my personal social media accounts to cold-contact more than 1,000 people who could fit the role on LinkedIn and XING. The message is very short—something like, “Hi XYZ, we have an interesting COO opening at RegioHelden. Maybe it’s interesting for you or someone from your network. Here is the link: XY.de/link. Best, Feliks.” Many people actually replied to the messages because they were sent from a CEO’s profile instead of a typical recruiter’s account. Also, people forwarded the message to their contacts and helped spread the word.
- I personally contact more than 200 people from my network as “multipliers.” These people were fellow entrepreneurs, CEOs and COOs as well as investors and business angels. I sent them the job description and offered 8,000 EUR for a successful referral (much less than a headhunter).
- We incentivised all of our 200+ employees the same way as the external multipliers to gain even more candidates.
These actions combined resulted in more than 250 applications in a timeframe of 6 to 8 weeks—pretty good for such a specialized role in a not-so-common city (Stuttgart).
3. Select with structured phone and personal interviews
For the incoming applications we used the scorecard to measure candidates against the criteria in structured job interviews. To keep the process efficient my HR manager would first conduct a 30-minute phone interview. Then, the good candidates came to me. I would either do phone interview or invite the candidate to our office for an in-person interview.
After the first interviews, we’d enter numbers on the scorecard to grade applicants for competencies and experience.
The goal here is to bring structure and objectivity into a traditionally emotional and biased part of the process.
We used the same scorecard for both the phone interviews as well as in-person interviews but would reduce the number of questions in the phone calls.
4. Testdrive and check references with the team
For the final five to six candidates, we complete testdrive days. We send each person the same three assignments to prepare and present in our office in front of the C-level team as well as their future direct reports (six to 10 people). The workshop meetings took 60 to 90 minutes, and included the candidate’s presentations as well as a question and answer session. Afterward, the candidates would sometimes talk with their potential reports or we would all go to lunch together.
Including the direct reports is very important for several reasons:
- More eyes in the room meant different perspectives to discuss after the meeting. It’s easy for a candidate to fool one person, but very hard to fool seven.
- Giving the team the opportunity to weigh in and even veto showed that the organization takes employees’ input seriously.
- The candidate has a chance to interact with their future reports and do their own vetting. (I always found it very suspicious when candidates would not ask to speak with their potential team.)
In the first COO search, we also allowed board members to interview the final candidate.
After the testdrives and final interviews we completed checks on references that the candidate provided as well as contacts from our network who have worked with the candidate.
When we found the perfect candidate the rest was just negotiation of their compensation package and legal paperwork. Usually at this point the candidates were pretty committed. In both cases, we got very lucky and we were able to sign the candidates in under 4 months. As a rule of thumb, I would allow six to 12 months from the start of the recruiting process until the candidate actually starts. That includes the recruiting process itself as well as the cancelation period of the candidate with their old employer (in our case, usually three to six months or until end-of-quarter). To that, I add another six to 12 months for the new COO to be properly on-boarded and trained before he or she is fully effective. (Two more reasons to start the recruiting early. )
Use this methodology to hire a killer COO, and drive your startup to the next level!