COO vs. CEO: How They Differ in a Small Business

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Structuring the executive branches of a small business can be more difficult than it seems. Large corporations can have huge organizational trees depending on their business units, with many related roles: CEO, COO, CFO and president. Understanding the differences between these roles will help a small business leader determine how much of the large corporate structure they should expect to import into their business enterprise.

Definitions of Important Business Roles

The first thing to do is to define these roles and how they relate to each other. The similar abbreviations, along with the modern approach of combining certain roles, can make all of it seem like alphabet soup. These roles are all different in key ways that link together to make the executive structure hold.

Board of Directors

At the top of the hierarchy is a collection of shareholders (or their representatives) and senior officers who make decisions on big-picture corporate direction and management strategy. For a small business without public shares, this collective might be the people who helped fund the initiative, the owner and the top executives.

Chief Executive Officer (CEO)

The chief executive officer is the highest-ranked executive. Their job is to make major corporate decisions, with the help of the board, and then execute them within the company. They are the liaison between the board’s stakeholders and the rest of the company and communicate the overall vision for the company. In small businesses, this might be the owner, or it could be an individual hired by the owner to enact their vision.

Chief Operating Officer (COO)

The chief operating officer is the CEO’s right hand, taking their policy decisions and translating them into daily operations. The COO is often viewed as the second-in-command, reporting directly to the CEO. In a small business, the COO is usually someone with direct experience in the field, who can understand an owner or CEO’s vision and turn it into practical, meaningful steps to take when launching the business.

Chief Financial Officer (CFO)

The chief financial officer reports to the CEO and is in charge of managing the company’s financial planning. They oversee budgetary reports, keep required records and advise the CEO and COO on the corporation’s financial risk. Again, in a small business, this might be a leader brought in to manage the financial side if the other executives have no experience in that manner

CMO and CIO

These roles are less common, but constitute the directors of marketing and information respectively. The chief marketing officer (CMO) is responsible for growing sales through marketing and customer service. The chief information officer (CIO) (often confused with a chief technology officer) is a newer role that focuses on the organization's information technology and integrated system strategies. These roles may or may not be relevant in a small business’ organizational structure; the tasks themselves are obviously important, but a small business may integrate these roles into other management positions.

Other Important Small Business Roles

Interrelated with these abbreviations are titles like President and Vice President that seem to be confusingly aligned with certain roles.

  • President: In some corporations, the President holds the role of the second-in-command executive and acts as the COO, so the names are interchangeable depending on the company’s internal image. In a small business, the President might be the owner of the company if they have no other executive role. In most setups, the President reports to the CEO, although in a small business, the CEO may choose to take the role of President. The title of President is often used for the individual who becomes the visible face of the company through speeches and press releases. 

  • Vice President: In a corporate structure, Vice Presidents are often used as executive heads of internal business modules. The role isn’t always consistently applied, so it’s hard to track it to a specific role in the hierarchy.

  • Owner: If one person owns all of the equity in the business, they are the owner; multiple people who own the equity are co-owners. For small businesses, the overlap between the owner and other roles depends entirely on the owner’s experience, shareholders and their decided corporate structure. An individual can take CEO and Owner as their title, if they desire; it depends on how the small business is structuring itself.

COO vs. CEO

You might wonder about the differences between the COO vs. CEO vs. CFO or COO vs. CEO vs. President. The most critical roles are the CEO and COO, because they are the one-two punch that decides where the company is going and how it will get there.

For the CEO, execution is the focus: their tasks include translating the goals of the board of directors into a set of objectives for the company, thinking about the long-term picture of the business, focusing on building the internal culture that will make this a reality and envisioning success.

The COO then takes these concepts and figures out how to operationally execute them. The COO has the understanding of the day-to-day business needed to translate long-term concepts and vision into specific, practical tastes and then depends on their operational team to filter these down to a level where they can affect day-to-day business.

Overlap of Roles

In a small business, it’s likely that these roles overlap somewhat, with each other and with random roles. The CEO may be the owner, for example, and/or take the title of President, depending on the way they intend to present themselves externally. Or there may be more overlap between the CEO and COO responsibilities.

Small Business Executives

With a small business – especially one just starting out, with a limited number of leaders to fill these roles – what’s important is for the owner(s) to select the structure they would like to see and clearly define the roles for each executive position they decide to initiate. Since these roles are less definable than they are in the corporate world, it’s important to specifically spell out who has what responsibilities. In some cases, an owner may want to be CEO: the person who sets the strategy, establishes the workplace culture and leads the executive team.

Other times, an owner may want to establish a separate CEO position, where the owner can put their time into their vision and passions, and the CEO can manage the overall strategy. In this case, the owner would remain a member of the board of directors but wouldn’t hold the overall responsibilities of the CEO.

Likewise, the owner and CEO may appoint a COO or President as the business grows, to more clearly delineate the two sets of responsibilities. This happens when a company grows far enough that the CEO needs to delegate some of the operational responsibilities in order to better focus on the company’s strategic growth. It happens more frequently when the owner is the CEO and finds he needs support in helping his growing business continue to be successful.

Making Executive Structure Work

Overall, for a small business, the executive structure can be whatever works for that particular team. The most important thing is to decide which roles will best define each position to the public — investors and customers both — and to make responsibilities clear between the positions. Decide which organizational structure makes the most sense for the new start-up, and commit to it, to ensure everyone stays on the same page moving forward.

References

About the Author

Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, Wordsmyth Creative Content Marketing (www.wordsmythcontent.com) and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.