Are CMOs Unfit For The Job? How the CEO Can Make a Difference
July 10 2013 by Kimberly A. Whitler
“The death of the CMO.” “The end of the CMO.” “The failure of the CMO.” These headlines demonstrate the prevalence of articles, writers, and researchers discussing issues related to an important C-level position, that of the Chief Marketing Officer (CMO). While these articles are often incendiary, it’s intriguing that they are almost always written by people who have something to sell, having never been a CEO or CMO. As a result, they are often long on accusations and short on solutions. As the saying goes, it’s easier said than done when it comes to solving problems.
Overall, 80% of CEOs claim they have lost trust in their marketers. This has resulted in CMOs “losing a seat at the strategic table” and often ranking lower in title and stature and having a reduced scope of responsibility. Because of the lack of trust in their marketers, these CEOs have stopped imposing Key Performance Objectives (KPOs) and Key Performance Indicators (KPIs) for marketers. Below are some of the key findings:
- 73% of CEOs think CMOs lack business credibility and are not the business growth generators they should be. CMOs are unable to demonstrate how the cross-channel marketing strategies and campaigns they deploy grow their organizations’ top line in terms of more customer demand, more sales, more prospects, more conversions or more market share. As a recent example, Michael Francis, the EVP/CMO of Target from January 2001 – October 2011 had long been considered a strong and capable CMO when he took over the presidency at JCPenney. However, after spending less than at the firm, Francis was ousted after a well-publicized strategic shift resulted in 20% decline. While it’s debatable who was accountable for the failed strategy, the firing suggests that the CEO and the board clearly attributed at least a part of the blame to Francis.
- 77% of CEOs believe CMOs keep talking about brand, brand values, brand equity and other similar parameters that their top management team has great difficulties linking back to results that really matter: revenue, sales, EBIT or even market valuation. Relatedly, 72% of CEOs say Marketers are always asking for more money, but can rarely explain how much incremental business this money will generate. Gene Morphis, the prior CFO of CVS suggests that: “In my experience, there are few CMOs who can truly demonstrate ROI, incremental profit, let alone predict program performance accurately. However, this isn’t all the CMOs fault. Successfully accounting for the financial performance of marketing programs requires an integration of the CFO and CMO’s knowledge and skills.”
- 74% of CEOs think Marketers focus too much on the latest marketing trends such as social media – but can rarely demonstrate how these trends will help them generate more business for the company. For 67% of CEOs, Marketers don’t think enough like businesspeople: they focus too much on the creative, “artsy” and “fluffy” side of marketing and not enough on its business science. Caren Fleit, Senior Client Partner at Korn/Ferry International and leader of Korn/Ferry’s Global Marketing Center of Expertise indicates: “All marketers are not created equal. It’s critical to define the right balance of capabilities with the specific business mandate—-marketers run the gamut from ‘Growth Champion’ to background support function; from strategic commercial business partner to someone who focuses on brand and communications only. Most often when a CEO is frustrated with the CMO, it is because they have not selected the right kind of CMO with the right capabilities and experience.”
While 80% may be disappointed, 20% of CEOs consider their CMOs to be considerable and valuable contributors to firm performance. This begs the question – what are these CEOs doing that the other 80% haven’t been able to figure out? After all, either the dissatisfied CEOs don’t know how to hire ROI-centric CMOs or they are hiring them and not supporting their CMO’s efforts, but ultimately, “the buck stops at the CEO’s desk”. According to Fontaine, the challenge is locating CMOs who speak “ROI language;” while he notes that finding one of these rare CMOs is akin to trying to find a needle in a haystack, one in five CEOs is doing just that.
Fontaine believes the source of the problem is twofold: 1) inconsistent training in what sound marketing is, and 2) no formal accreditation system to ensure a consistent knowledge. Fontaine suggests that educational institutions are failing to help future marketers understand how to measure marketing performance. However, this problem is exacerbated because many “marketers” actually don’t have degrees in marketing. As a result, it’s even more important to have some sort of credentialing vehicle that ensures a basic level of “marketing” knowledge. Unlike accounting, law, and other disciplines, there isn’t a standardized test that ensures all marketers have a basic competency in the subject. As a result, you have a universe of marketers with disparate training, education, and capability.
Here comes the catch. Most articles seems to suggest that isolating the incremental contribution of the marketer – versus all other firm activities – is easy. As every CMO knows, this isn’t the case. Academic scholars realize this as well, as there are leading thinkers who are searching for ways to measure the value that marketers contribute.
While a CMO with an ROI-centric mentality is a must, there are other critical factors that must be in place to successfully measure marketing performance:
- Systems: Being able to measure performance requires information systems that can track relevant data from marketing activity to purchase. For example, Dr. Michael Lewis, Dr. Joey Hoegg and I ran some tests for a large retailer to help demonstrate the value of different CRM programs. Initially, the company couldn’t track the information from beginning-to-end. It required that store operations, marketing, and IT work together to integrate the data so that it was possible to track and measure end-to-end consumer behavior and profitability.
- Scope of Responsibility: Fontaine suggests that part of the problem is the bifurcation of marketing into smaller pieces that makes it nearly impossible to identify incremental value. The best firms are combining marketing and sales, making accountability and measurement much easier. In a recent article which identifies the highest paid – and theoretically the highest performing – CMOs, all of the top five have a broad base of responsibility beyond just marketing. In addition to being the CMO, several are Presidents while others have sales responsibility in addition to marketing. The highest paid CMO, Albert Pimental from Seagate, earned over $6 million last year and is responsible for the firm’s global sales, sales operations, product line management, marketing, and retail activities.
- CMO Capability: Fontaine also suggests that combining sales and marketing requires a much stronger, ROI-centric CMO. This CMO has to think like a business owner and treat every dollar as if it is their own. This means that the goal isn’t to grow the budget but rather to use marketing to drive growth. This also means that ROI-centric CMOs understand finance and IT and work to build the systems, processes, and support to link marketing to financial documents. Albert Pimental from Seagate had his formative training in finance, having been the CFO at McAfee, Inc., Glu Mobile, Zone Labs, and other companies.
- Education / Training: Longer-term, implementing some sort of credentialing that ensures that all marketers have the same basic standard of knowledge would ensure that people interviewing “marketers” would have a better understanding of what they are hiring. In the short-term, investigate the formal and formative training of your potential CMO. Do they have four years of training (and perhaps an MBA) in a field that could have helped train the CMO (e.g., marketing, finance, etc.) rather than in an unrelated field? While an English degree may be beneficial if the CMO is doing a lot of writing, it doesn’t provide the background to understand finance.
- Buy Expertise: If the capability doesn’t exist in-house, CMOs can hire external experts to help analyze elasticities and determine the ROI. As someone who has interviewed and hired external partners, finding one that actually knows what they are doing can be a challenge. You have to be knowledgeable enough to prod them on the sophistication and accuracy of their methodology. Just as CMOs hire consultants to help manage the RFP process for a new ad agency, I would suggest hiring a methodological expert who is on your side to do the same with an RFP for a marketing measurement firm. This will better ensure that your interests are preserved in the process.
- Dashboard: One of the best learning experiences I had was inheriting a CMO role without any dashboard or metrics. It forced me to go through the process of: 1) determining how we would measure marketing, 2) working with IT to create the back-end infrastructure to populate the dashboard, and 3) working with other top management team partners to align on the actual metrics. While it took months to develop, test, and gain alignment, in the end, the dashboard helped educate the organization on what marketing was accountable for. While I chose not to outsource the development of KPOs and KPIs, it is always a possibility to do this as well.
As this research suggests, there is some good – and bad – news. While most CEOs are unhappy with the CMO, one in five have figured out how to maximize the results they get from their CMOs. That gives us hope. And as we move forward, what will be more important is to better understand all of the factors that enable CMOs to have greater impact. It is clear that success, at a much deeper and more nuanced level, has to be about more than just the CMO’s capability.