Republican-Democrat. Mars-Venus. CFO-CMO. Conventional wisdom holds that the two executives most at odds in the C-suite include the chief financial officer and chief marketing officer.
Yet conventional wisdom may be changing. Over the past few years, the relationship between the two has become closer and more collaborative according to a recent EY study titled Partnering for performance: the CFO and the CMO. In fact, we found more than half of the 652 CFOs surveyed reported an increase in cooperation with their CMOs.
That said, in many organizations, this collaboration must happen faster to adapt to digital business. While their collaboration has improved, only 43% of C-suite executives feel there is a strong CFO-CMO bond , according to the study. The primary barriers are separate and disjointed processes, tools and key performance indicators (KPIs), as well as predictable cultural differences.
Most Commonly Cited Barriers To CFO−CMO Collaboration
Source: EY Partnering for performance: the CFO and the CMO
Forging an effective CFO-CMO partnership is a big undertaking. After all, historically the two titles seem to have as many differences as similarities in their operational objectives. And at the same time, a successful alliance between the two is possible. There are four important ways CFOs and CMOs can make it happen.
1. Agree On Metrics That Matter
First, define common terms. The CFO and CMO might work together to define the performance metrics that contribute to the enterprise’s strategic objectives.
For different reasons, this can be a challenge for both. Finance leaders must be mindful to move beyond hard financial measures such as return on investment and accommodate more nuanced, qualitative measures, such as brand equity.
Similarly, while CMOs increasingly rely on metrics, they must be certain they are using the right numbers to resonate with the CFO. “If metrics for the marketing group are … purely creative based, then you’re not going to get focused investment and effort on the things that drive the highest return on investment,” according to Benjamin Karsch, CMO of Revlon Consumer.
How might marketing effectiveness be measured? Kurt Binder, CFO at VIZIO, mentioned that CFOs should view marketing through the following two lenses:
- How a marketing investment impacts the brand to drive long-term equity, value and loyalty (which, in turn, fuels consumer demand)
- How a marketing investment can accelerate short-term sell-through, using pricing and promotion to help manage channel inventory in line with the supply chain
“Both types of investments are important to drive the overall business,” Binder told EY, “so you’ve got to get a good balance, to ensure you’re able to be nimble and adjust to short-term changes in the market, while still building preference and demand for your brand over the long run.”
2. Bridge The Cultural Divide
CFOs and CMOs have historically been driven by differing objectives and assessed against different metrics. Traditionally, they have held dissimilar biases in their preferred ways of operating, and there is often a cultural void between the two departments.
If an organization is to realize the benefits of a CFO-CMO collaboration, one key is to establish trust between two functions that sometimes sit on opposite sides of a company’s culture.
Bridging the cultural divide can only occur with commitment from leadership.
The CFO and CMO must clearly communicate the organization’s strategic priorities, while recognizing the different mindsets of the two groups and encouraging dialogue. It’s also about creating a mutual awareness of each other’s approach and finding common ground in areas of disparity — such as risk tolerance, where finance professionals are typically more conservative than marketing and sales.
“I try to create a mutual awareness, so that marketing and sales understand the logic of why the company doesn’t want certain risks,” Joost Quist, CFO at SHV Energy China explained. “Likewise, it’s important that finance understands that certain risk-taking is permissible. I try to get people in senior positions to have more conversations about what is possible, or how they can be made possible, while still protecting the limits.”
3. Collaborate On Marketing Analytics
The emergence of big data and advanced analytics is transforming corporate marketing functions. This presents both good news and bad news for CMOs. The positive: more and better intelligence than ever on which to base strategic decisions. The negative: collecting, managing and mining data for marketing purposes is a complex undertaking.
The use of multiple customer channels has dramatically increased the volume of incoming data, while the critical need to manage sensitive data and protect it from cyber attacks grows every day. Challenges such as these can be daunting to a CMO.
Enter finance. Many CFOs and their teams are well versed in data aggregation and analysis. CFOs can play a leading governance role in analytics , putting in place effective structures and investments to maximize an organization’s enterprise-wide analytics capability. They can also help CMOs address marketing’s skills and capabilities challenges.
A strong collaboration between the CFO and the CMO can result in the development of analytics competencies in marketing being better coordinated with enterprise-wide efforts and investments.
4. Team On Marketing Planning
Effective marketing planning is essential for driving corporate growth because it’s forward thinking, even visionary . Led by the CMO, the best planning processes push an organization to stretch its goals and energize its approach by looking beyond the tried and true. How does a company encourage and maintain this enthusiasm for a future vision without running counter to overarching enterprise goals?
The answer can be the finance function. If marketing involves finance early and often, it can help better align marketing’s strategic planning with enterprise objectives, changing circumstances and shifting corporate priorities.
For help maximizing this involvement, a CMO can tap into a CFO’s responsibility for creating and executing plans that drive the organization forward. “The role and expectation of the CFO has become more strategic and growth oriented, as opposed to being the finance and accounting perspective,” according to Kurt P. Kuehn, recently retired CFO of UPS. “In the finance function, we have tried to become more integrated into the commercial side of the business to decide on, and implement, strategies. Finance needs to be more engaged in strategic planning and market orientation than ever before.”
Given this new reality, the time is right for CFOs to strengthen their ties to the marketing function, and vice versa. As digital technology has revolutionized marketing and made customers more informed and more demanding, marketers need new skills and tools, particularly when it comes to capturing and interpreting data. CFOs can bring their data expertise to bear on marketing, and the CMO can seize this opportunity to get closer to the CFO. Working together in terms of making the investment to stay ahead in an increasing digital business landscape.