Should I hire a COO or CFO?

Venturebeat declared in an article yesterday that “The CFO is dead, long live the COO”. The premise of this piece, written by a CFO, was that today’s CFOs are intimately involved in growing their businesses. Rather, than just reporting on historical results, they are a key partner working across the company to promote better strategies and decisions, leveraging current, real time data, not just histocial financials.

All of this is true, but there is a big difference in my books between an actual COO and a CFO who happens to be adding value across the business. The COO is ACCOUNTABLE for those results. She will have P/L responsibility and will be managing a large team that is directly tasked with delivering those results.

If you’re just supporting the delivery of those results with insights and analysis, then you’re not a COO.

The question that comes up in this then is what should you hire when? When do you need a CFO and when do you need a COO?

When should I hire a CFO?

I have a pretty simple framework for when to hire a CFO:

  • Seed stage: Have an advisor or investor with this experience
  • Series A: Hire a part time CFO
  • Series B: Go full time

There’s a lot more to think about when it comes to hiring a great CFO. Check out my talk on the High Performance CFO here.

When should I hire a COO?

A great many companies never hire a COO. So the answer here is not as obvious. If you look at companies that do have them you tend to see a common pattern: a founding CEO with a functional specialty who has hired  a right hand to take care of the stuff that the founder doesn’t want to manage directly. 

Facebook illustrates this well. Zuckerberg is a technical, product-focused founder. So, he hired a COO  early on to drive sales and operations. There are many more examples of this.

If you’re always on the road bringing in deals or if you are in the office but want to go deep on a particular function, like product, then it probably makes sense to hire a COO.

Unlike the CFO role, COO is not something that can be done part time. So, I would not really think about COO until Series B. Once you’re into scaling mode, that’s the time.

If you’re interested in this role, there is a great book on the subject: Riding Shotgun.

Getting Started

At the early stages, you don’t need all those fancy C level titles running around. The fact is your first finance or Operations hire will likely be neither a CFO or COO. Instead, this person will head of finance or Ops position. This person will be doing everything from annual budgets to ordering computers and chairs for new hires. 

Hold off on the fancy titles until you hit scaling mode.

  • ianmtl

    I couldn’t agree more with “At the early stages, you don’t need all those fancy C level titles running around.” An early stage startup with a CEO, CTO, CMO, COO, CXYZ looks off to me. I believe a seed stage should usually have a CEO and a CTO, that’s it. There shouldn’t be 5 “C-level” positions.