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Marketing a product or a service is an integral part of any Business model. The authors of the research, Nath & Mahajan (2008) posit that despite the prime necessity of marketing, Top Management Teams (TMT) in most companies rarely have a Chief Marketing Officer (CMO). Quoting other management experts, the authors state that only about 50% of Fortune 1000 firms have a CMO while over 80% of the Fortune 500 firms have a Chief Financial Officer. The basic idea of conducting this research was to find out whether the presence or the absence of a CMO had any impact on a firm’s overall performance. This paper aims to summarise the findings of the authors and offer a few observations on the validity of this study.
Research Methodology Used
Since empirical research to carry out the study was not available, the authors have resorted to qualitative research which included analyses of press releases, CMO job descriptions, and interviews of senior executives from the business world. The authors chose secondary data over a five-year period (2000-2004). Basing their study on Hamilton’s findings (Nath & Mahajan 2008, p. 65, 70), the authors chose to restrict their observation only to larger firms with a sales figure of over $250 million and reports of separate R & D expenditure.
To check whether the performance of a company changed because of the absence or presence of a CMO, the authors used standard performance parameters such as sales growth, return on assets and return on sales as well as the consumer profile of the companies. Data tabulated was analyzed using the Generalised Estimating Equation Approach.
Assumptions and Analysis
Nath & Mahajan begin by assuming that the presence or absence of a CMO in the TMT depended on three basic factors namely, Strategic factors, Structural factors, and Environmental factors. Examination of the Strategic factor revealed that firms that required innovation and differentiation tended to employ a CMO. They also found out that the greater the marketing experience of the TMT more likely was it to employ a CMO.
Diversification of a firm such as Proctor and Gamble also resulted in a greater chance of the firm incorporating a CMO in the TMT. Firms employing corporate branding strategies were more likely to have a CMO to cope up with the associated complexities of brand management. The live example of AMD with a corporate branding strategy employing a CMO and Micron sans corporate branding strategy not employing a CMO has been quoted.
Amongst the structural factors, the authors examine the role of a CMO in a firm and its likely impact on interpersonal relationships within the TMT. The authors conclude that whenever a CMO is appointed in a company, he is required not only to look at the strategic aspects of giving advice to the TMT but also to have the added responsibility of executing and managing the tactical domain. This in turn possibly led to incongruence with other members of the TMT especially if they did not have a marketing background.
The authors draw attention to the concept of ‘homophily’ which states that most professional groupings coalesce around similar interests or expertise, which in layman’s terms can be more easily explained by the popular adage – ‘birds of same feathers flock together. Under such circumstances, the group shuns the inclusion of an outsider in their midst. Also, such groups are averse to ceding ‘turf’ to an outsider like a CMO. The authors through their study also found that an ‘imported’ CEO was more likely to appoint a CMO as he or she had no institutional knowledge to back upon. They also found that CEOs who have had a marketing background were more likely to induct a CMO into the organization.
For the purpose of their study, the authors have theorized the concept of the environmental factor of market concentration. The authors suggest that companies in low market concentration tended to focus on customer needs to a greater degree and were, therefore, more likely to employ a CMO rather than a company positioned in higher market concentrations. To back this presumption, the authors offer no empirical data and readily admit to having none.
Despite a restricted data set over a short period of 2000-2004, the authors conclude that the percentage of firms employing CMOS was remarkably consistent, numbering to an average of 40% per year. The authors state that though their research did not provide clinching evidence of the benefit of having a CMO, not having one, did not reduce a company’s performance. According to the authors, the apparent ‘no-result of this study’s basic premise did not reduce its utility.
They point to the fact that this study had more or less established that companies pursuing innovation, corporate branding strategies, and diversification were more likely to benefit from employing a CMO. The authors admit that the effects of imitation, which is mimicking of corporate practices by others to replicate success by the initiator company, could not be judged because of the small data set and time period analyzed.
They agree that by limiting the sampling to companies with sales greater than $250 million and only those firms that reported R & D figures, the conclusions are likely to be less accurate. Nath and Mahajan conclude by offering two suggestions for further research on the subject; namely, an examination of the role of CMO in brand equity and a study of the characteristics of a successful CMO.
In my opinion, any study that aims to quantify the effects of TMT composition on the performance parameters of a firm would require a much larger population data set than what was attempted by Nath & Mahajan. The exclusion of a significant segment of the corporate population (smaller firms) based on earlier studies may not yield results with the accuracy desired. The methodology of utilizing ‘Descriptive Statistics and Correlation Coefficients’ together with ‘Logistic Regressions’ by using the ‘Generalised Estimating Equation’ Approach may be misleading because of the ‘selective’ data set used. Nonetheless, no study or research can be termed as useless.
This study has yielded some valuable lessons for use by the corporate world such as the necessity of employing a CMO in firms engaged in diversification, employing corporate brand strategy, and those pursuing innovation.
Nath, P & Mahajan, V. 2008. Chief Marketing Officers: A Study of Their Presence in Firms’ Top Management Teams. Journal of Marketing, Vol. 72, 65-81.