The document discusses how marketers often struggle to prove their business impact and ROI to boards and executives. As a result, they frequently get fired before their marketing efforts can fully take effect. It notes that only 1% of board members are marketers, compared to 35% coming from sales. The marketing cycle of hire, learn, change, rollout, and begin to see impact does not align with the expectations of boards to see immediate results, leading to marketers being fired just as their efforts start to show benefits.
Today, there’s a ton of great marketing and a lot of superb communications. In most companies, CMOs and their teams are creating huge business impact and business value. And I don’t mean in a vague, general sense. I mean real, substantial cash-to-cash contributions that span revenue, margin and cash flow impact.
The problem is that most CMOs can’t prove it, and most business leaders can’t see it.
This question has been a dark joke among business leaders for decades, but now they’re mad about it. In the past year, they’ve signaled that they are done with the status quo on marketing and communications in the clearest possible way – the number of CMOs who have been fired has spiked. The pressure to prove marketing and communications impact on the business – the dollars and cents of revenue, margin, and cash flow – is intense in many companies. In fact, a growing number are asking their risk management teams to assess the materiality of spending so much money without any provable impact.
There’s historical precedent for this – we saw the same sort of dynamic happen to HR leaders and CIOs in the past decade. If you’re a CMO today, you have an implacable enemy that is guaranteed to reduce your success and harm your career if you don’t do something about it.
That enemy is called Time to Impact, and the profoundly negative impact it can have on your ability to show Economic Alignment with the business.
More tech than ever to “help” marketers exists, yet firings continue to increase. Technology does not live up to promises and, in turn, CMOs are unable to deliver the proof expected.
The CMO role may be about revenue, but the latest data from the CMO Council shows that not many CMOs live in that reality.
Want some proof of this?
A large number of CMOs were fired in 2016 – possibly around 700, according to data sourced from various major recruiting firms. In fact, 2016 may have been a new record.
These CMO departures were concentrated in long cycle businesses, which is very instructive.
Typical tenure is now 18-22 months – by far the shortest of any CxO function.
A new CMO Council survey showed that “failure to prove business impact” was the #1 reason for termination.
Here’s some additional data from CMO Council, Spencer Stuart, and the National Association of Board Directors:
70 percent of CMO are required to show revenue impact. But according to the CMO Council, about 94 percent aren’t doing that. 90 percent don’t know how to begin. This is despite the unprecedented adoption of martech, comms-tech, sales tech, etc. and exploding data availability.
But the biggest single indicator of how the business sees CMOs may be this:
Of the roughly 10,000 seats in Fortune 1000 companies, fewer than 80 are currently occupied by marketers. In stark contrast, about 3500 are occupied by sales leaders or executives whose careers include heavy sales and sales leadership roles. The huge discrepancy in fortune 1000 board seats is between people with marketing backgrounds and sales backgrounds is telling.
Summing up, CMOs are expected to drive revenue, but their failure to accurately compute that contribution and calibrate how long it will take is getting them fired -- even when they’re succeeding.
Business leaders and board members are looking for something called Economic Alignment. This is what business leaders mean when they talk about “failure to demonstrate business impact.” They want to see the cause-and-effect relationship between the money they spend on marketing and a multiplicity of unique business impacts. Sales gives them Economic Alignment in a whole host of ways that marketing has not, starting with the commission structure.
Defining and enforcing Economic Alignment is how the business manages their opportunity cost within a finite pool of resources. If they’re unable to compute the alignment, companies try to get at it organizationally, technologically, and via process alignment. But these are fragile and perishable approaches in comparison to computed economic alignment.
At Proof, we believe we’ve identified the major roadblock to computed economic alignment. It also is the #1 most deadly enemy of CMOs everywhere, the vast majority of which are doing great marketing and creating real business impact.
The issue is Time Lag, or what many call Time to Impact. And in most B2B companies, the amount of time separating marketing action and business impact can be 9-12 months or more. This is why Time to Impact can be the CMO’s #1 Enemy. With an average tenure of 18-22 months, the necessary Time to Impact eats up a huge amount of the CMO’s total time in the role. It’s the reason why the life of a CMO in a longer-cycle B2B company is much more tenuous than in a shorter cycle B2C environment.
Let’s look at this – Marketing and communications drop rocks in the pond of the marketplace. These rocks create ripple effects of different power, time lag and persistence. But if you can’t compute how long it takes for marketing’s power to be evident in the audience, then you won’t know where in the future to look for evidence of its strength or weakness. The failure to account for time to impact is costing a lot of CMOs their jobs. In many cases, they’re being fired even as marketing’s impact on the business is becoming evident.
External factors also play a big role. If you’re the new CMO of company X, and they’ve got external headwinds bearing against them, it’s going to take you even longer to show impact. If you’re not computing this, socializing this and handicapping the impact of these headwinds, you’ll run out of political backing and then you’ll be out of time altogether.
We’ve all seen this same dynamic in politics. A president pursues policies that are right for the nation, but they take too long to bear fruit. S/he loses the election, and their successor promptly takes the credit in Year 1 of their term. Right?
This is what it looks like right now for a CMO. Except unlike a political leader, the new CMO doesn’t even get to take the credit because no one sees marketing’s business impact or believes it. And the business often tells him or her that their predecessor had it all wrong and that everything needs to be changed. Strangely enough, that starts the cycle all over again, and time lag becomes the enemy of the new CMO too.
6 Months with interim or no leadership. Results continue to go up due to time lag.
New CMO gets started. Adjusts. Replaces agencies and team because of impression that they weren’t performing with previous CEO.
…And the cycle begins again
a vicious cycle.
What can be done? I’d like to share something that I learned as the CCO and CMO of large long-cycle companies like Honeywell and BMC Software. This is a heuristic that has proven correct again and again. We used this logic framework to unify marketing, communications, sales and the business, and then we computed everything inside that framework to deliver an integrated portrait of business impact and time to impact.
The relationship between the business metrics (Revenue, Margin and Cash Flow) and sales performance metrics (Deal Generation, Deal Expansion and Deal Velocity) is understood to be causal by business leaders.
Customer Decision Psychographics (Awareness, Confidence and Trust -- ACT) have proven to be highly correlated on a time-interval basis to corresponding Sales Performance metrics. Interestingly, ACT also is an excellent representation of the make up of Brand Power.
The sub-disciplines of Marketing and Communications are generally categorized into four elements – Paid, Earned, Shared and Owned, otherwise known as PESO. Each has been shown to deliver highly correlated impact on Customer Decision Psychographics, again on a timed basis. Paid and Owned account overwhelmingly for improvements in Awareness, as well as the early stage of Confidence. But after the customers are aware and informed about what the vendor says about themselves, vendor-owned channels and content do not help most customers deal effectively with their biggest issue, which are the real and perceived risks impacting the buy decision. As a result, independent channels dominate the mid- and late-stage decision-making process as prospects “triangulate for truth”.
This is a famous quote by Thomas Edison, adapted for the current reality of the CMO in many companies.