During my recent interview with Lisa Cook of Pacific Portfolio Consulting and Erica Farber of Balentine for our latest COO Roundtable podcast, I relayed to them a recent conversation I had with an RIA owner. He was frustrated with his firm’s COO and was wondering what metrics he should use to evaluate the COO’s performance. I said to him, “You have a good COO if you, the owner of the business, aren’t being forced to deal with HR, technology, or other operations-related issues. But if you still don’t have enough time dedicated to growing the business through business development efforts or through referrals from your existing clients, then your COO needs to step up and take more off your plate.”
I actually thought this was a pretty good answer, but the RIA owner got frustrated with me and said, “I need concrete metrics by which to rate my COO. If I’m an advisor, I know exactly how I’m doing because I can calculate the net new assets I’ve brought to the firm, or what the satisfaction scores are from my existing clients. How should I be rating my COO?” During my conversation with Lisa and Erica, I threw the question to them and asked, “How should I have answered this RIA owner’s question differently?”
Lisa pointed out the challenge in having blanket metrics to rate a COO, simply because each COO fills a slightly different role at each firm. “Some COOs are brought in as somewhat of an au pair-type role; others are brought in to act as the CEO’s right hand; while other COOs join a firm specifically to coach a young CEO.” As the first COO ever hired at Pacific Portfolio Consulting, Lisa and the firm have defined her role as someone who will “alleviate a lot of the day-to-day ‘stuff’—I’m an obstacle remover (for employees), I’m a problem solver, I focus on employee HR items and work on culture, I help attract new employees, and (most importantly), I alleviate headaches for the CEO.” So Lisa’s answer was similar to mine (which I appreciated!).
Erica had a more direct response: “My role is intended to increase profitability. The more efficient I can make our various business lines and operations, the more (the firm) can make. That is a really great incentive, across the board.” She stated that one of her key goals for 2021 is to “provide some factual analytics and data to be used to evaluate (the firm’s) progress. Our CRM is not just a hub for client information, but it’s built to give us really key metrics in terms of efficiency, profitability, how our new account paperwork times (have improved) from a month ago, a quarter ago, two years ago…”
Based on both Lisa’s and Erica’s responses, therefore, a very interesting answer to the question, “What metrics can I rate my COO against?” is simply, “has your COO built metrics for the entire firm to rate itself and hold itself accountable to its goals—whether those goals are net new assets, or client satisfaction, or efficiencies around account opening or any other client service task.” Erica continued, “We don’t currently have a way to assess how many clients a particular team can manage, how much revenue a team can handle. It’s not a dollar amount, and it’s not a (simple) client amount. Instead, it’s a factor of complexity.”
This year, in Balentine’s new CRM, Erica is “going to start really monitoring client complexity—number of touchpoints, number of entities and new accounts … the things that really impact the stability of the team to continue to provide really great service.” Erica concluded her response by saying, “That’s something (COOs) can be measured by—how are you documenting and really designing the firm to have the information it needs to make better decisions across the board?”
Regardless the exact role a COO is brought in to handle, their biggest impact will always be “Is the business running better?” When Mark Tibergien joined the podcast last year, he used the same six metrics used to rate the success of the overall firm to rate the success of the individual COO: Pricing, Client Mix, Service Mix, Productivity, Cost Control and Growth.
Measuring the COO’s impact on all six key business elements will determine their success.
Matt Sonnen is founder and CEO of PFI Advisors, a consulting firm that helps financial advisors build more impactful and profitable enterprises. He is also the host of the popular COO Roundtable podcast. Follow him on Twitter at @mattsonnen_pfi
