Why are CMOs challenged in the C-suite? Are they lacking some of the fundamental management skills of their contemporaries? Or is it because they are not typically responsible for a P&L and its respected commercial route to revenue?
Most of today’s CEOs moved up the food chain through operational functions other than marketing, often leading to their limited understanding of the more contemporary value the marketing discipline brings to the organization. In fact, according to Heidrick & Struggles, more than 50 percent of Fortune 500 CEOs were promoted from the COO position, with the lion’s share of them starting their careers in a financial position.
So how can a CMO solidify his valuable seat at the table? “In order to be seen as a vital contributor to business strategy, the CMO will need to develop greater commercial awareness and take on more financial responsibilities than ever before,” advises Spencer Stuart research (PDF).
But there’s no reason to go at it alone. A better route is for the CMO to partner with the CFO at the outset to gain the financial literacy that drives business decisions. Build out the models with, not for, the CFO to develop a co-created initiative to demonstrate to colleagues that marketing investments matter--a key finding of the CMO Impact Survey, published earlier this year on CMO.com. This helps develop a strong cross-functional skill set that most CEOs value. In addition, the CFO can learn why and how financial marketing decisions are made, gaining the CMO greater appreciation of the challenges faced and the budget needed.
A study by the Fournaise Marketing Group found that 70 percent of marketers failed to deliver real, bottom-line (P&L-quantifiable) business results their management expected of them. To showcase marketing’s value, CMOs need the help of their CFOs to be able to prove ROI from a financial perspective (via GAAP or FASB accounting standards), rather than at the creative, campaign, and tactical level.
Put another way, CMOs must think, act, and report on results at the enterprise-level, using sound financial management to present their case on how to use shareholder money wisely.
At Black Ink, we call this collective and deductive top-down reasoning Enterprise Marketing ROI (EMROI). It’s quite simple: Time spent reporting campaign-level, tactical ROI makes marketing look tactical. Financial metrics and KPIs the leadership team wants to hear about include revenue growth, cash generation, profit, acquisition rates, market share gains, net present value (NPV), and customer life time value. These metrics elevate CMOs to a higher level of marketing performance management.
Pairing with their CFOs will give CMOs a fast track on how leaders inside the organization make decisions based on commercial requirements. It can also eventually put CMOs in the driver’s seat–not just shotgun–once marketing has proved to be a revenue driver that provides positive economic impact across all business units.
More so, this gives a CMO some latitude to compete for a cross-functional position, such as a regional leader with a P&L--which is a prerequisite to becoming a CEO someday.