CMO and CFO collaboration will maximize profit and efficiency
Marketing and finance often “clash”. Marketing wants to spend money, and finance wants to control it. From a marketing perspective, the bigger the budget, the more chance for growth and success, but this doesn’t always fit the financial vision of the organization. But what if instead of countering each other, the 2 departments can come together to collaborate and exchange ideas in order to propel the company ahead?
It starts with leadership
The CFO and CMO lead the way in collaboration as they are the heads of their respective departments. That doesn’t mean that interaction from other finance or marketing team members isn’t important, rather that the leaders have more say and influence in executive meetings and decisions. More than half of CFOs in an EY survey said that collaboration between them and their fellow CMOs has increased considerably in the past few years.
What has caused the change?
The main reason is the huge economic changes that have taken place. Many organizations have had to rethink their strategy and methods due to inflation, supply chain disruptions, and worker shortages, to name a few of the challenges. Many found that the old fashioned way of conducting business wasn’t working and thinking outside the box and implementing quick changes was the only way to adapt.
Communication across company departments has increased tremendously as executives have started valuing input a lot more during fast-paced changes. This includes collaboration to understand what is and isn’t working from all business aspects. Automatically, the communication gap between departments has narrowed and this allows many executives, and even “average” employees to grasp the bigger picture of department and company goals.
Another factor is the increase of quantifiable data and digital analytics, which is increasingly driving corporate metrics. Technology implementations have caused change in 3 different ways:
To begin with, it improves the communication aspect mentioned above, simply by adding technology. Whether working from home, outsourcing, or connecting between offices in different countries, companies not only have the ability to communicate better, but communication is now established and part of the new norm.
In addition it helps everyone be on the same page, as oftentimes the data and goals are consolidated into simple and easy to read reports that even non-finance experts can understand. Without FP&A technology platforms and concise data reports, inter-department communication wouldn't have improved as much as it has over the past few years.
Lastly, it simply frees up more time for finance professionals to spend on analyzing and critical thinking instead of manual inputs and reports. Before implementing FP&A solutions, financial teams spend only 25% of their time on analysis. That’s a far cry from the goal of 50% in which finance experts are aiming for. With automation and consolidation, finance teams have more time to spend on communicating, analyzing, and figuring out solutions to improve the company’s efficiency.
Understanding the disconnect
CFOs and CMOs not only contrast because they have different ways of achieving the goal of profit and efficiency, but also because they use different metrics in order to get there.
Georg Muller, of Deloitte Consulting sums it up well: “Serving customers is fundamentally the job of the CMO, and understanding costs is fundamentally the job of the CFO.”
CFOs want to see results in terms of ROI and many aspects of marketing don’t fit with this. While growing the company, the marketing ROI may not produce good results, but the beginning stage of a business is critical even if the immediate results aren’t there. In addition, brand marketing and consumer goodwill are intangible marketing concepts, yet they are also extremely important for a successful business. CFOs need to think from a broader marketing perspective, and collaborate with CMOs on concepts that are difficult to quantify.
At the same time, CMOs need to be ready to dig a little deeper into marketing activities in order to try to provide a detailed measurement of ROI or other metrics through scrutinizing from a financial perspective.
4 ways to increase collaboration
1) Finding the price action balance
In the age of inflation and supply chain disruptions, raising or rethinking prices has affected almost every business. CFOs often want to allocate quantifiable costs and numbers to every part of the sale; meaning that when one part of the process becomes more expensive, the end price should be offset to make up for the loss, keeping the profit the same. A CMO on the other hand, thinks in terms of the customer, and raising prices will have a negative impact on consumers who may look elsewhere for the product. Communicating is the best way to make sure the happy medium is achieved, without losing too many customers. In addition, removing certain services or features to cut down on costs while keeping the price the same can be a good solution achieved by communication between the two.
2) Learn your customer
This applies more for the CFO, but the CMO can help bridge the gap as well. Although finance experts don’t intrinsically need to understand consumer patterns, the more they do, the more complete their work will be. Numbers and data don’t tell the whole story, therefore the CMO can explain the vision and concepts behind the customer. Deeper marketing analytics helps drill down into each campaign and gives insights that weren’t available before. However, that won’t fully replace human interaction, so a good ol’ cup of Joe and sitting down to discuss marketing techniques is still the best way forward.
3) Individualize dashboards and KPIs
Every business is unique, and not all marketing metrics are created equal. For example, ROI and PPC are worth more or less depending on the company and what stage they are in. Therefore, breaking down the data into strategic KPIs that are unique to the company and understandable by everyone will help broaden the view of both finance and marketing. Here are a few examples of harder to quantify marketing analytics:
Velocity- how fast opportunities are created?
Reach- what is the scope of all development programs for the company?
Value- are opportunities created at the rate necessary, either in the present or setting up the future?
Oftentimes, the challenge is figuring out what’s been committed budget-wise and what’s left to spend for any given period. Executives need a real-time view into actual spend vs. plan, among other dashboard details, and collaboration between the 2 will help map it out in an efficient way.
Plan ahead and prepare for tough decisions
Understanding each other’s long term goals and future budget plans will help avoid unnecessary and unexpected surprises. If budget cuts are necessary, then good communication between the two will ensure that the CMO knows about the budget change in order to be most prepared. On the other side of the coin, long term marketing programs can underperform against goals at the start. With a CFO’s understanding and support, it is much easier for the marketing team to power through slow starts, if everyone involved understands that it is a long term process. Data models and FP&A solutions will help keep both teams on the same page and make the long term goals accessible and easier to follow.
With the workplace changes that have occurred in the past few years, inter-organizational communication has been reimagined as well. Although many times this was out of necessity, (company transformation, working from home, supply chain challenges, etc.) communication between the CFO and CMO has been on the rise. In addition to creating a more friendly and open environment, improving communication also helps provide more efficient solutions and helps the company be prepared for future challenges.