The most important responsibilities of a COO include the following:
- Strategy implementation
- Handling problems and unexpected events
- Customer relations
- R&D
These areas do not really correspond with what is usually expected from a CFO, who specialises in accounting and finance. What problems may appear if the CFO takes on tasks normally done by the COO?
- Combining these responsibilities could overburden the executive.
- Since COO incentives are tied to operational objectives, there is the risk that the CFO will opportunistically interfere to tweak reporting of revenues and expenses so as to ensure operational targets are met, according to an article on the cfo.com website.
CFOs can fulfil operational roles quite well
A study using data from several thousand companies was conducted by the University of Alabama. The researchers compared companies with overlap of responsibilities and with separate roles. They also compared the situation at companies which had had one person as CFO/COO for some years and at other times had these roles separated.
The researchers tried to analyse the effects of such an extended role on a company’s operations and financial reporting. They found out that in fact there were no serious concerns. Nor was there any evidence that such CFO/COO duality would have an adverse effect on operations.
There are even indications that the quality of financial reporting actually improves with CFO/COO duality. Such a set-up was good for predicting future cash flows when compared to companies where the roles were separated.
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