How can CFOs be seen as the voice of reason by Sales and Marketing who often view the
This question was asked at a recent webinar, now available on-demand: "CFO to Chief Trusted Advisor: Earning that Role with Your CEO"
Please add your thoughts about it below. Thanks!
I think the CFO has to appreciate that you can't just cost cut your way to profitability. The organization depends on the S&M team to be the gas pedal. But like any good car, you need an equally sized caliber of brakes to compliment the size of the gas pedal. S&M typically only see top line. Working together with finance, they can also be sensitized to the bottom line.
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The time I'm in a meeting where someone want to simply cut cost, I am going to use this example. I'm in the early stages of a company in transition. I keep hearing about adding value to our internal customers. Then in the same breathe it is being said to reduce cost.
I think it was Wayne Spivak (correct me if I'm wrong, Wayne) who has said too many times to recall, cutting costs is only a temporary solution, which can only be done once.
Yes, it was :) You can only cut costs once (and some possibly twice) but after that you'll either run out of items that can be cut or cut too deeply thus having the opposite effect on the bottom line (lowering even further).
The CFO can and should work on several fronts; from curbing excessive spend to channeling spend to more productive programs; improving process and productivity to thinking out of the box with marketing, sales and all the other departments on changing the paradigm that the company works under and in.
Competitive advantage, customer service, publicity, M & A/strategic alliances to assist in moving and increasing the value of the brand.
Cost cutting, anyone can do that....
I will reply to Wayne and Chris with some personal history. I was hired by First Interstate Bank of California in August 1990. We had our first round of RIFs five months later and we had a total of three RIFs in 21 months. It was a VERY unpleasant time to be in banking.
I found out later that the first round of RIFs was their way of clearing out the C performers - those people who were not 'bad' but they were also not 'keepers'. The second RIF involved bringing in McKinsey to do a 'cost-rationalization' project which was one of their overpriced cookie-cutter project. The third RIF was simply an exercise to see which managers had the juice to protect their departments.
In retrospect, it was done poorly BUT no one predicted how badly real estate was going to do in CA, AZ, NV and TX from 1991 to 1993. It was a heck of a crash. The bank had gotten much too fat and it needed successive rounds of cost-cutting to get to a rational level.
Most, if not all, of you made the leap from 'the devil' to cutting costs. I didn't interpret the question that way at all when I first read it. I simply looked at it as requiring measurement, accountability and profitability analysis of clients. I know plenty of sales and marketing people that look askance at that.
"The role of the CFO is to temper the enthusiasm of marketing and sales" - professor Stroumpos UC Davis and CSUS circa 1978.
Full disclosure: That was the opening sentence of one of his lectures. He went on to explain the thought in great detail. To detailed to go into here.
And, as a young college upper classmen, I didn't fully appreciate his insight (he was a CFO who had taken a sales company through bankruptcy after all).
But, I subsequently worked for two sales companies where the owner/execs were all sales people who only knew "go, go, go" and saw finance in general as a wet blanket.
Both of those companies failed and ended up out of business after years of great success coming out of the starting gate at a full gallop. Both failed for the very reason professor Stroumpos had told us. The enthusiasm of sales and marketing had not been properly tempered at the corporate level and thus, like the bottle rocket, they burned brightly and then ended with a bang.
I tend to think of it as cost control more than cost cutting.
The latter is a reaction to a particular problem. The first is just sound business.
"Working together with finance, they can also be sensitized to the bottom line."
Personally, I've always found that sales and marketing types are only sensitive to their personal bottom line. Much more so than the entity's bottom line.
They are money driven. And thus, the best way I've found to keep them in line, is to hit them in the pocketbook.
For example when they espouse some great idea to increase sales with no consideration as to the cost of the idea (frequently some sort of giveaway) rather than fight with them about it and get called a "bean counter" I just agree that it is probably a fantastic idea. And then I tell them to go ahead and I'll fully support them and we'll just deduct the extra cost from their commissions.
You wouldn't believe how fast they become mathematical and financial geniuses when they hear that their commissions will be reduced by these extra costs. ;-)
The CFO will always be considered a non-
Marketing is critical to the health of any organization. Some departments spend too much and others do not spend enough. The goal is to understand why you are spending the funds and what you hope to achieve from the spend.
I would like to see the analysis that was conducted to understand the benefit of the program. From there I need to understand if the assumptions are attainable or pie in the sky. Provide me with the expected Return on Marketing Investment. If you can not provide that information, I am probably not going to approve the spend.
If you spend $1.00, will I earn $1.50 or $1.75 or $2.00? For a business to survive, it must allocate its capital resources properly and efficiently. I say no many times; but I say yes often.
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I remember you having a chapter in your book explaining this in detail, don't I?
Good memory. Yes my book "Redesign to Turnaround Underperforming Small and Medium Sized Businesses" touches on the subject of capital allocation to projects and programs that offer the highest returns. As such, I could not resist but respond. Thanks for remembering Chris. Hope all is well.
Regis
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This is an excellent reference book and should be read and then be an arm's length away on your professional bookshelf.
Appreciate the kind words Wayne.
Aside from the good answers above, I approach this question from a different perspective.
I think it is a CULTURAL problem to see (and be seen) the CFO as "the devil". I think that this is still the OLD mindset of a CFO and a symptom of an organization still stuck in old culture.
In this era, everyone understands their roles and supports the company's unified goals and objectives, Sales & Marketing or any division for that matter view (or should) the CFO as a partner in achieving their goals and objectives.
From experience, it starts at the C-Level! What is the relationship between the CFO and the CMO? What culture (and the ensuing relationships) the CEO wants to have for his company. What the CMO thinks about the role of the CFO (against the backdrop of his division's role and goals) usually trickles down.
Cutting costs is easy versus growing revenue so if you really want to add value to the organization, try to figure out ways to help your sales and marketing people do a better job growing revenue. If you do it right, you will not be viewed as a 'devil". For example, see if you can modify customer contracts to make it easier to close deals, rework comp structures to better reward performers, help pour on more resources to a program that is obviously working, analyze results to better show what is having results and what is not. You should try to be the marketing person's "go-to" executive and not the one they dread seeing.
This is a good discussion, with valuable insights added thus far. I agree with Emerson, along with the other comments above. Although it is possible for finance to build relationships and processes that help the CFO be seen as a valuable partner as opposed to 'the devil', it is very difficult and nearly impossible to do this well if proper relationships and respect is not formed at the top of the house.
In my experience, businesses can thrive when both finance and Marketing (including sales, order planning etc.) are seated at the same table and act together to determine the best route for the business, with an appropriate level of discussion and debate of course. I have found that both finance and marketing/sales can make poor decisions without understanding and truly considering the factors and potential impacts on the other. Both teams need to understand the objectives and strategies of the other.
Key strategic and tactical processes such as new product developments, targeted volume growth, market strategies, product strategies, people initiatives, cost-cutting initiatives and many other major decisions need to have robust processes supporting them and with all necessary groups at the table.
The only other comment I want to add is that there needs to be mutual respect throughout both finance and marketing, to aid the collaborative relationship that needs to be in place. As with all relationships, doing this well requires work. It starts in the C-suite but needs to be pervasive throughout both teams.
The secret is to hire a CFO with broader experience than just being a controller and/or CFO.
Quoting one of our more successful administrators; "The goal is not to cut costs, it's to cut waste"!
First, the CFO needs to be reasonable if he/she wants to be seen as the voice of reason. Too many times I have seen both sides dig in their heels to the benefit of no one.
I spent the last 2 1/2 years working within the Marketing department of SAP (marketing their Cloud financials), so I can offer a view from both sides of the fence.
For marketing and sales (both view CFO differently, by the way), I think they do not feel the CFO is often a 'business partner' - in that, the CFO lacks a strong appreciation of the impact of marketing investments or how ROI is generated (even more so with marketing
Where the marketing team focuses on "potential revenue generation' or 'brand awareness' as worthy achievements, the CFO looks at the expense. The devil comes from focusing on only expense is likely to take away what gives the Marketing team their sense of value - the ability to run effective programs.
The goal to bridge the gap is to work toward the 'net' result together - I've done this by walking through the economics of a 'marketing' transaction. To my surprise, with today's multiple channel approach, the net impact can be bigger than what we may believe - especially given that 50%+ of the sales cycle is completed before a customer contacts you.
To the marketer's surprise, the walk-through can reveal an imbalance of brand recognition and demand generation - which the first is much harder to tie a net result (e.g. sale)
Marketing is a calculated
Cheers,
Mark
