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Banks must come to grips with the fact that adapting to the industry's transformational changes means having new faces in the corporate suite.
July 8 -
A push for having an independent chairman gained traction immediately after the financial crisis. Years later, the effort seems to be losing momentum.
June 7 -
Tim Sloan, president and COO at Wells Fargo, is widely viewed as next in line to take over as CEO of the bank. He discussed the speculation as well as energy lending, credit standards, living wills and a number of other topics in a recent interview.
June 16
The chief operating officer position seems to be a sensible approach to handling management succession and dealing a chief executive officer's
But many other institutions, of all sizes, are increasingly choosing to go without the COO position. Some new CEOs would prefer not to have the COO in a bank's leadership structure. Meanwhile, across numerous industries, the COO position has been in a long-term decline. According to a report last year by
There are many reasons why including a COO in a bank's management lineup is not attractive.
First, a COO can actually inhibit succession planning by complicating the search process. COOs can deter from attracting qualified external candidates, who may be hesitant to consider joining institutions where the succession plan appears fixed. This is a problem in the current competitive and digital environment, where banks need new talent with a fresh change agenda.
Also, many CEOs fear becoming a lame duck. Consequently, they are uncomfortable with the potential threat posed by a strong "CEO-in-waiting" COO. Thus, they are likely to favor less aggressive and potentially less qualified COOs who will not rock the boat. Succession issues should be
But the problems surrounding the COO position go beyond succession complications. While some say that COOs can alleviate overstretched CEOs, who have too much to manage, they arguably can add another layer of management and additional complexity — slowing decision-making, hindering communication and even harming moral. Having a COO also complicates recruiting and retaining other talented senior management, like a world-class chief financial officer. Such talent would find it demotivating to report to an intermediary instead of directly to the CEO.
Also, a confusing shared command structure creates potential conflict with subordinates; a COO and CEO could pitted against each other if they are conveying conflicting messages to staff.
Authorizing a COO to take on CEO-like duties also diminishes accountability, since it obscures who has the right to make the ultimate decision and who takes responsibility for outcomes. As I heard one senior manager recently say, it is an abdication of leadership for a CEO to be split into two jobs. That role should fall to one person.
If the firm is too complex and the CEO's span of control is too large, then companies should address that problem directly by simplifying the firm and making its goals more focused. As the 21st century sees more firms streamlining their missions, there is less of a need for a COO position.
Finally, and perhaps most concerning is the
Changing corporate organizational
J.V. Rizzi is a banking industry consultant and investor. The views expressed are his own.