Do CMOs Really Add Value? Harvard Business Review

It’s been a long-running debate in academic research and the business press: Do companies benefit financially from having a marketing executive in the C-suite? A widely cited 2008 study, for example, found that the presence of a chief marketing officer has no effect on firm performance—contradicting a 2003 paper showing that these leaders boost sales growth. Then came a 2012 Forbes article proclaiming, “The CMO is dead.” The uncertainty plays out inside organizations themselves: According to a recent survey, two-thirds of CMOs feel pressured by the board or the CEO to demonstrate the value of marketing.

Seeking a once-and-for-all answer, a team led by Frank Germann, of Notre Dame, examined the question through a wider lens than those of previous studies. The researchers looked at 155 publicly traded U.S. firms across a broad range of industries, applying a variety of econometric models to analyze performance from 2000 to 2011. Their conclusion: Companies with a CMO perform 15% better, on average, than companies without one.

The researchers then wondered, Do some types of organizations benefit more than others? They found that three characteristics make a CMO’s presence especially valuable. One is robust sales growth. Previous studies have shown that high-growth firms are the most apt to benefit from generating and acting on customer-oriented information, so it stands to reason that having a CMO—in effect, a customer advocate in the C-suite—would disproportionately help those companies.

The second characteristic is small firm size. That often means a relatively small senior management team, and the researchers posit that each member, including the CMO, then has more influence over strategy and direction. The third characteristic is short CEO tenure. Studies suggest that a chief executive’s power increases with time in office, so it may be that the CMO, like other top managers, has more impact when the CEO is fairly new.

Correlation isn’t causation, however, and Germann’s team warns that simply bringing a CMO on board won’t necessarily boost the bottom line. The research results may reflect the strength of companies’ overall marketing functions rather than CMO presence per se. “If firms employ a CMO, marketing is likely to play a more prominent role…and that could be the source of the performance effects,” the researchers write. Still, their findings could help quiet the debate and bolster the CMO’s clout at the strategy table.

About the Research:“The Chief Marketing Officer Matters!” by Frank Germann, Peter Ebbes, and Rajdeep Grewal

A version of this article appeared in the October 2015 issue (p.32) of Harvard Business Review.
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