Who is more powerful? CFO or CMO?
View(s):Tug-a-war between CFOs and CMOs
We are all familiar with the corporate culture where people compete with one another to prove they are more important than the other, therefore this topic is not new to us. In addition, we always address the three well-known lines: the bottom line, the top line, and the less well-known middle line.
Sales are the main focus, and the CMO is in charge of boosting them. The CFO is in charge of cutting costs, which brings us to our middle line. The bottom line is the result of the other two lines and is the responsibility of both. The bottom line would undoubtedly rise with an increase in either the top line, middle line, or both.
What’s the issue in these three lines?
Out of the three lines, only one line is controllable and it’s the middle line. Therefore, the CFO would also try to cut costs but it would be referred to as cutting corners as cutting costs doesn’t sound so professional and strategic as it’s a tactical approach. The top line is the sales and it’s not in the control of the CMO. If the customers don’t buy the brand or the product, there is very little a CMO can do about the situation. Having said so, I must also highlight the efforts taken by the Sales heads to increase sales by offering discounts etc which are again more tactical than strategic. Therefore, out of the three lines, one line is controllable and it’s in the hands of the CFO.
What’s the issue in controlling the middle line?
Budgets for advertising, promotions, NPD, and HRD are the first to be cut when regulating the middle line to meet annual profit targets. In most cases, if the CEO has a background in finance, they will take financial shortcuts to meet profit targets, which will deplete money meant for brand promotion and development. When the long-term effects become apparent, the damage has already been done and it is too late to undo.
Isn’t there another controllable line for CMOs?
Yes, there is an additional controlled line that gives brands access to consumers’ minds and persuades them to spend what little money they have on your products. It takes magic for a company to persuade its target market to purchase its product in a market when there are countless brands and options. Consequently, there is an additional line known as “TOP-MOST-LINE” that is not well known. It’s the only line that the CMO has control over. By putting measures into place to boost the top line, the top-most-line continues to be the revenue-generating magic line for the organisation, standing tall among all the other lines. In other words, it’s nothing but branding which crafts the strategy to carve out a blue-ocean to stand tall among the read-oceans. Therefore, branding is more strategic than tactical and it’s more longer term than short-term.
In the majority of local organisations, the CFO holds greater authority than the CMO even though the true strategy is carving out a market niche to generate incremental sales and profit than cutting costs. There are not many fundamental explanations for this;
The CMO has to spend money to earn money (Give and take) and there is no mechanism to assess the impact and the outcome of that spending and the CEOs need to make decisions without much of a guarantee of what’s going to happen with the implementation of the decision.
The CFO has a controlling tool in deciding who is going to spend what amounts and why therefore, he has more opportunities to be in the good books of the CEOs. Also in any investments or money allocating matters, the CEO has to rely on the analysis of CFOs.
In certain unquoted organisations, at times the CFO is more powerful (At times they are even more powerful than the CEOs as they are fully aware of how the taxes are avoided for example. Therefore, the CEO has to have a special soft corner for the CFO for this reason.
Where shall we find the equilibrium for CMOs and CFOs to have a happy marriage?
Both CFOs and CMOs should be aware of why money is spent, not only how or what it is spent on. Stated differently, WHY it’s spent. Only that kind of business can succeed if the CEO can think and behave like a cross between a CFO and a CMO. The Balance Score card was created in the 1970s to draw attention to this, but there are still situations when the argument about which is more powerful than the other is still up for dispute and disagreement.
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