The Tricky Waters at C-Level
May 1, 2014
Lack of C-Suite Alignment Causes Companies and Careers to Flounder
BY ANNE FIELD
It might have been funny — if the snafu hadn’t involved millions of dollars.
Recently, the CMO of a major pharmaceutical company got his CEO’s blessing to spend $5 million on a major brand campaign promoting a suite of products at a national health-care conference. So he was quite surprised to later learn that his boss had given a similar go-ahead to his sales counterpart, allotting another $5 million “to make a splash at a different meeting that usually attracted a lot of doctors,” says Angela O’Donnell, co-founder of 3D Leadership Group, a Wellesley, Mass., executive coaching firm.
In the end, both executives went ahead with their plans. But it was hardly an ideal situation. Because many of the same people attended the two conferences, making a big, costly push at both was a flat-out waste of money — a lot of it. “The budget needed for any major brand campaign is huge,” O’Donnell says. “But there was a significant misalignment in this case, and it could easily have been avoided.”
So much for collaboration in the C-suite. While the average tenure for a CMO has increased from 23 months in 2006 to 45 months, according to executive recruitment firm SpencerStuart, there hasn’t been a similar level of improvement in teamwork at the top. Leaders and their direct reports still tend to operate in uncoordinated silos. As a result, the left hand often doesn’t know what the right is doing. Worse, in some cases, CMOs and other C-suite executives may have conflicting agendas — the inclination to move quickly versus the need to reduce risk or a desire to develop pricey marketing campaigns versus a directive to keep costs under control.
This failure to collaborate has significant consequences for CMOs and companies in general. Important initiatives take longer than necessary to complete — or don’t get funded at all. Furthermore, when the folks at the top aren’t on the same page, the rest of the troops lower down probably won’t be either. “With a misaligned C-suite, there’s a ripple effect throughout the organization,” O’Donnell says.
The truth is, tight partnerships at the top can mean healthier sales growth and a better bottom line. A recent PricewaterhouseCoopers study, for example, showed that organizations with strong working relationships between CIOs and CMOs consistently outperform the average in revenue and margin growth as well as advances in innovation. And better results aren’t just a matter of a collegial bond between those two roles: Alignment between the CMO and the entire C-suite provides important benefits too.
The Marketing 2020 survey of more than 10,000 marketers in 92 countries found direct and impressive results when marketing was aligned with its C-suite partners. Conducted last year, the study is part of ongoing research by the ANA, EffectiveBrands, SpencerStuart, Forbes, Adobe, the World Federation of Advertisers, and MetrixLab into ways marketing can be improved. In companies where marketing worked more closely with HR, more than 25 percent outperformed expectations; when marketing was tightly aligned with IT, the total was nearly 30 percent; and when finance and marketing cooperated, the number soared to 40 percent.
The reason, in large part, has to do with the increasing importance and power of the CMO. “Used to be marketing was viewed as the people with crayons and scissors who did creative work,” says Jim Speros, executive vice president and chief creative officer of Fidelity Investments. “Now it’s seen as central to driving growth.” That, of course, has happened as social media and the use of data analytics — and the CMO’s role in managing them — have become vital to brand success.
What are the issues that keep the CMO and the rest of the C-suite misaligned, working in silos, or at cross purposes? “While some problems span disciplines, many are specific to certain roles,” says Jake Sorofman, research director of Gartner. Those key roles include the following.
The CFO: It’s the ROI, Stupid
Marketing budgets constitute an ever-larger share of the total pie — 10.7 percent of revenues on average in 2013, compared to 10.4 percent the year before, according to Sorofman. And as budgets have increased, so has CFO scrutiny, along with a demand for marketing to provide evidence of an expected ROI before launching major new initiatives. “Marketing is the largest variable spend, and the CFO is charged with being the protector of that investment,” says Lisa Arthur, CMO of Teradata Corp. Unfortunately, it’s not always possible for CMOs to propose metrics that satisfy their finance chiefs or even to figure out how best to measure projected results. That’s particularly true in so-called open loop transactions, which involve several parties, like a retailer, distributor, and wholesaler. “It’s more difficult to understand how investments will be turned into revenues,” Sorofman says.
Certainly, the heftier the financial investment, the greater the likelihood for tension and scrutiny. O’Donnell points to the CMO of a pharmaceutical manufacturer who recently decided to run a big brand campaign featuring a celebrity using the company’s drug. The plan was to pay the entertainer to appear in television commercials, at industry conferences where the product would be showcased, and other places. But when the CFO and finance department, who hadn’t previously been told about the investment, heard about the plan, “they went berserk and tried to shut the whole thing down,” she says. They really flew through the roof when marketing couldn’t provide acceptable evidence of a projected ROI. In the end, the deal went ahead as planned — but only because it had already been so heavily promoted online. The company couldn’t pull the plug without triggering a slew of negative publicity. “It created so much animosity; there was a breach of trust that still exists today,” O’Donnell says.
For CMOs, the best line of defense is speaking the CFO’s language. “Learn their nomenclature,” Arthur says. It also requires understanding how the finance chief measures success and, for the best results, proposing a timeline with key milestones that need to be reached. “You must break it down into certain steps along the way,” says Arthur, who suggests that CMOs meet with CFOs to explain what they’re planning to measure and to find out if they’ve left out anything important. “You don’t just show up with the answer. You involve them in the strategy.”
The CIO: It Won’t Work Without IT
As the use of data and digital technologies has grown more critical to the CMO’s job, butting heads with technology chiefs has become a common occurrence at many companies. For one thing, it’s easier than ever for CMOs to bypass internal IT completely when developing new applications by finding a third party to help with the development and to host the service in the cloud. For another, there’s an inherent tension between their priorities. The CIO tends to be focused on big backend, enterprisewide systems that take months, if not years, to build, while CMOs, of course, need front-end applications, websites, and the like that customers interact with directly — and they need to launch them as soon as possible to stay competitive.
But when CMOs act independently of the CIO, the result often is a disappointing and fragmented customer experience.
“Once you deploy a mobile app, it’s likely the customer will expect to use it to make transactions with the business,” says Jon Iwata, senior vice president of marketing and communications at IBM. “But now it has to be integrated with back-end systems, and doing that after the fact can take many quarters.”
What’s more, CIOs and CMOs often don’t see each other — literally. According to Iwata, over the past three years, he’s organized many conferences aimed at getting the two functions together, and “in more than a small number of situations, this is the first time they’ve met each other face to face.”
What to do? Collaboration with the CIO should include joint budgeting, Iwata says, to make sure investments and metrics are aligned and baked into all initiatives. But it’s also important to ensure that people below the C-suite work together. About two years ago, IBM launched a pilot in New York City, stationing 200 employees from technology and marketing on the same floor in joint teams. “When you serve customers via web or digital, the expectation is you’re going to be more responsive to them — and that means working with more agility,” Iwata says. “The people in this pilot have been sitting shoulder to shoulder, all dedicated to a more agile methodology while meeting digital touchpoints along the way.” Because the pilot has been so successful, the company is rolling out the approach globally this year.
The COO: Don’t Fix What Isn’t Broken
“In our industry, a lot of the potential conflict is between marketing and operations,” says Rob Lynch, brand president
and CMO of Arby’s Restaurant Group Inc. Quite simply, for CMOs to drive growth, they need to undertake new initiatives and campaigns. And that involves changing the way things are done, something that falls heavily on the COO’s shoulders. It can mean everything from training employees in new techniques to revising operating procedures, creating different manufacturing lines, or sourcing different ingredients through the supply chain. What’s more, “operations is tasked with the delivery of the most efficient model in terms of cost, labor, and operations,” Lynch says. “And sometimes those things don’t go hand in hand.”
Certainly, the real problem isn’t that COOs are lazy. To the contrary, they’ve probably painstakingly and methodically created a finely tuned machine, and adjusting it involves some potential risk. “When they have the thing working really well, the last thing they want to do is go in and make a bunch of changes,” Lynch says. “It’s about the chance they’ll become less efficient and their ability to run the business will be impacted.”
The answer, according to Lynch, involves three steps. The first starts with the CEO, who has to provide clear direction about the company goals. The second requires the CMO and COO to respect each other’s areas of expertise. “I don’t tell our COO how to run his restaurants, and he doesn’t tell me how I should be developing new products and launching advertising campaigns,” Lynch says. The third focuses on incentives — making sure that C-level executives are compensated based on the achievement
of shared goals. “That way, I know that for me to be successful and for Arby’s to be successful, I have to be aware of the whole company,” he says. “I’m not going to advocate for an advertising campaign at the expense of running our restaurants in the most efficient manner.”
General Counsel: A Focus on Risk Mitigation
It’s inevitable that, in this age of heavy customer data analysis, CMOs and general counsels won’t see eye to eye. The more frequently marketing relies on gathering and evaluating data to understand customers, the greater the opportunity for legal folks to get involved — and be displeased by what they see. “As customers allow us to collect more data, there’s the chance for misuse of that data,” Iwata says. “And then you’re suddenly in very big legal trouble.”
Of course, no one wants to risk noncompliance with laws and regulations. But sometimes the issues are murkier. Take the matter of opt-out policies. In some cases, CMOs would prefer not being open about collecting data about customers, raising the specter of all sorts of legal risks. In other cases, the problem relates to the pace of change. CMOs need to move quickly, but general counsels are more inclined to operate cautiously. As a result, “legal might not let marketing go as fast as they want to go,” Iwata says.
Countering a general counsel’s natural inclination to put the kibosh on risky moves requires face-to-face negotiations and hand-holding. “When you get into a discussion about what you’re trying to achieve, they can usually come up with a way to do it without increasing risk to the company,” Iwata says. He cites IBM’s efforts to create a social media policy for employees back in 2005 as a case in point. The question at the time was whether to let employees use social media for business purposes. While marketing was all for it, “the reaction elsewhere wasn’t very positive,” he says. Doing so, for example, raised questions ranging from whether competitors would have an easier time poaching employees to how to respond to critical comments about the company and whether confidential information would be unwittingly divulged.
So, the marketing team convened a series of meetings with teams from legal, HR, finance, and IT to figure it out. Over time, they have hammered out ways to address potential risks — for example, training employees in what information can or can’t be discussed — and they forged a series of social media guidelines and processes that were acceptable to everyone.
The CEO: Failure to Create Transparent Goals
To a certain extent, the central player and culprit in creating misalignment is the person at the top. Perhaps the most pernicious situation is the CEO who doesn’t ensure the executives understand one another’s goals and plans. Instead, this type of leader holds individual meetings with each member of the C-suite and, in effect, sets goals in a vacuum. “If there is no transparency of goals and shared buy-in, you can have a highly dysfunctional team,” Fidelity’s Speros says. Hence, as O’Donnell of 3D Leadership Group can attest, the company can wind up with, say, marketing and sales working at cross purposes.
The answer? It’s all about something deceptively simple — planning as a group. That means holding an annual planning meeting at which everyone’s goals are discussed and set collectively, making clear where executives will need to work together. “The left hand understands what the right hand is doing,” O’Donnell says. In a fast-changing environment, you usually need a midyear tune-up, in which the executive team reassesses objectives in light of what has transpired since the first meeting. What’s more, O’Donnell says, the CEO has to make a clear directive: “Don’t surprise your peers.”
In addition, there should be regular evaluations of how C-suite members are faring. At Fidelity, executives get monthly reports with key performance indicators showing how each person is doing relative to goals. “Everyone sees what’s happened with everyone else,” Speros says.
The bottom line: As the CMO’s role becomes more prominent and critical to generating sales, marketing chiefs will likely continue butting heads with their fellow C-suite members. Still, while addressing the causes of misalignment is a complex task, it’s something that has to be done — if brands want to remain competitive. ■
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