Troubled times call for new CMO and CFO pact

Marketing and finance may not always see eye to eye, but in the wake of the COVID-19-related economic fallout a new bond will need to be forged

The cliche that marketing and finance are focused on different objectives and fundamentally incompatible has past its due date, according to John Batistich. 

"This belief in some ongoing conflict is completely outdated,” he tells CMO.

The former marketing leader and non-executive director, who lists Zip Co, General Pants Group and Heart Research Institute on his CV, says he has found the relationship between CFO and CMO is most effective when both roles report into the CEO.

“And when the CMO has an enterprise role, owns revenue and is responsible for strategy, innovation, product, pricing, distribution and communications,” Batistich says.

Yet it would seem in some quarters of the working world, marketing cliques remain. For instance, when it comes to describing the relationship between finance and marketing, strategic advisor and McColl Jones & Co director, Tim McColl Jones, describes it bluntly: “Misunderstood”.

“In the main, a lot of marketing departments are still considered the colouring-in department in an organisation,” McColl Jones says. “For finance people, it’s to understand the role of marketing and it's strategic imperatives to the business.”

Equally, McColl Jones concedes, for marketing, it’s building a level of respect around the function of finance and how important it is to organisations, whether it's an agency or whether it's a client organisation.

“Like any role, finance is challenging and probably also has its own stereotypes,” he says.

The COVID-19 effect

Right now, everyone’s looking to the CFOs. In this time of incredible financial pressure brought on by restrictions  to curb the spread of coronavirus, CFOs will have difficult but vital decisions to make.

GoCardless CFO Catherine Birkett sees finance chiefs emerging as the leaders of the inevitable recession and the ones to keep businesses afloat. 

“In high-growth businesses, the focus will move away from being purely about growth at any cost, to cost and profitability moving up the agenda,” Birkett says. “This means the profile of the CFO rises as CEOs and other execs realise the necessity to worry about more than just revenue. This is the case in more traditional and mature businesses, but will definitely change the profile of the CFO in high-growth environments.”

Putting aside the tremendous uncertainty caused by the coronavirus' impact on business generally, marketing will become even more pivotal to the bottom line post-Covid, BlackLine CMO Andres Botero tells CMO. He predicts more effort will be put into providing unique, differentiating customer experiences, while capturing and analysing more data to learn more about customer needs and pain points. The end result should be strengthened loyalty.

“As a result, the CMO will become a combination of a CTO, a CFO and a creative boundary-breaker, enlivening the customer experience and using technology to assess and quantify outcomes,” says Botero.

Harmonising how the CMO and CFO relate to the CEO

In a practical sense, finance and marketing don't have the same relationship with the CEO, which may give rise to uneven distribution in importance and visibility to each other and the CEO. Batistich says CFOs tend to have a more consistent range of responsibilities and reporting line into the CEO. 

“The CFO is focused largely on financial planning and performance, tracking and reporting, capital markets and funding, and controls and compliance,” he says.

Batistich contrasts this with CMOs who have a wider range of responsibilities and varying reporting lines. “Some CMOs are focused on strategy, responsible for customer insight, innovation and product. Others have a strong commercial focus responsible for brand and communications, while other CMOs have a broader enterprise role responsible for strategy, innovation, product, pricing, distribution, communications and ultimately, revenue.” 

For McColl Jones, while the CEO has responsibility for the totality of the organisation, when it comes to CMO and CFO it’s acting as a “conduit”.

“Equally having respect for both disciplines and seeking them to collaborate and work closely together rather than against each other,” he comments.

Some marketing chiefs, like Botero, point out finance expects precision from marketing, particularly when it comes to plans and budgets. 

“Finance speaks the language of numbers, results, cost-benefits and ROI,” he says. The marketing chief for BlackLine, which specialises in accounting automation software, says marketers need to be able to better communicate what they see as an opportunity or a challenge ahead “in terms that resonate with finance and how marketing is studying, modelling and quantifying it”.

“CMOs must appreciate the marketing budget is a large portion of the variable expenditures in any company - it can, and will, be adjusted up and down according to times and needs,” Botero continues.

The onus is therefore on marketing to be flexible and able to accommodate the need to spend less or more with the same amount of creativity and innovation. Marketing leaders also need to know how the business creates value and how their investments drive or influence results, according to Batistich. 

“They need to have a strong understanding of the P&L, cash flow and balance sheet for the organisation and know what levers they own to drive profitable and sustainable revenue,” he says. “This strengthens commercial acumen and builds credibility.” 

For McColl Jones, marketers seeking to build better links need to find a connection point. It might be the CFO or someone else in finance, but it’s a way to connect finance with marketing and bridge the gap of understanding between the two.

“Find a person or people in finance so you can expand on the relevance and role of marketing. In my experience, if you're able to do that, they can have a renewed view and appreciation of marketing,” he says.

McColl Jones also believes building that connection into finance will aid CMOs in getting those who control the purse strings to understand how marketing contributes to the business strategy and “brings that strategy to life through marketing activity”. 

“It’s understanding marketing is a source of demand and growth for the business, and that marketing is multi-faceted and is important in terms of image and reputation. It’s attached to much more of the business than just what it sells,” he says. “The alignment between marketing and finance needs to be so much stronger than it naturally is.”

Birkett says numbers need to be precise - up to a point. For finance, when it comes to reviewing marketing spend, it often involves assumptions that aren't always easily proven, because it’s not an exact science. 

“There are also instances when marketing spend doesn't have precise numerical benefits. but is to support brand awareness. But if this spend becomes significant, it can bring tension between the departments,” Birkett says. “The key is increased focus on ROI and scrutinising spend to generate the best growth opportunities."

"I also think all businesses will adopt ways of working post-COVID and the way we buy what consumers consider important will all change, so it's really important to be reactive and adaptable."

Meanwhile, the martech stack, which is occupying an ever larger part of the marketing remit, offers a practical path to demystify what goes on in the marketing department, Botero says.

“The technology tools we use to analyse and enhance marketing make what we are doing much less complicated from a finance and ROI standpoint. The data is there for examination and discussion,” he says.

Prior to the advent of advanced data analytics, it was difficult for marketing to accurately demonstrate the ROI for a prospective campaign. 

“Finance had to exercise a degree of trust in marketing that affected their relationship. This is no longer the case,” Botero notes. “All the data available today, when added to the predictive power of advanced analytics tools, gives marketing an extraordinary level of accuracy in positing the return on investment. In turn, this gives finance the assurance it has always wanted that the investment in marketing will drive strategic value.”  

Botero sees martech bringing marketing and finance objectives closer and shows their inherent interdependence. Business growth requires financial investment while cost tracking keeps the balance sheet in order and can show positive return. 

“Finance can trust that marketing is ROI-oriented, cost-benefit conscious and spending money on the right things. Finance is assured marketing funds and headcount are what they need to be,” he says. “Consequently, finance can rely on marketing to spur demand and help grow the sales pipeline, as well as the company itself, while meeting the goals set out in the strategic plan.”

What’s the role of finance?

It’s not just marketers who need to understand the language and metrics of its nominal opposite. It’s also incumbent upon finance to appreciate the complexity of marketing - creative storytelling backed up by data.

“It’s important finance understands marketing is both a science and an art,” says Botero. “We’re always innovating, experimenting, tweaking and improving. And most importantly, marketing efforts are tied to improving the bottom line, even though it may appear difficult at times to correlate company revenue growth to marketing spend.

“What we do has an impact on demand generation, employee motivation and culture, and customer and investor sentiment. Fortunately, martech provides the means - through data - to assure finance has confidence in marketing efforts and spend.”

It’s also important finance looks at its own data - statistics and numbers - so they’re clear and not cloaked in esoteric fashion, confusing or unclear to those not in the know.

“Relationships are a two-way street, of course. Marketing must trust that finance’s processes, numbers and reports are correct and transparent,” Botero argues. “For example, are administrative processes too detailed and onerous for marketing team members? Do these processes offer marketing clear visibility into what has been spent, accrued, paid and what is forthcoming?”

For Batistich, finance has a responsibility to understand the marketing levers “external context, customer, brand strategy and revenue”. And overseeing this is the CEO, whose role is ensuring alignment across the senior executive team.

“Aligning on the current reality, purpose, objectives, strategy, plans, investments and resources, with clear accountabilities, can help build co-operation and a high-performance culture,” he says.

The notion of alignment is echoed by McColl Jones, who says various functions working well together is “the key to the business working well”.

Birkett says it’s important there is respect on both sides. Practically, this means finance supporting marketing in building models to support investment which enables accurate measurement of ROI and cost of generating leads. The finance chief argues finance should always be able to challenge marketing to ensure there are robust models in place, but with a strong caveat. 

“Finance also has to realise that marketing isn't always a science and should be allowed to take some risks,” she adds.

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