VideoWhen directors at DHL Express say there's a close working relationship between finance and marketing at the company, it's not just a turn of phrase — CFO Oliver Gritz sits in an office right across the hall from George Kerschbaumer, the firm's head of marketing. The physical proximity is symbolic of the connection between the two functions at the €14 billion express mail subsidiary of Germany's Deutsche Post. In the past, Gritz says, marketing and brand awareness was such an area of focus for DHL Express that it led to "very peculiar organisational structures," whereby business analytics and costing, for example, were looked after by the commercial department rather than finance. Although these areas are now the responsibility of his team, the CFO adds, "the close co-operation between the two [departments] has prevailed."
Not all finance chiefs can say they share Gritz's close ties with marketing, physically or philosophically. In many businesses, the departments may seem worlds apart, even if their bosses are separated only by a cubicle partition.
This matters now. While economies contract and consumers tighten their belts, it's more important than ever for companies to get the right message to the right customers. But in a downturn, any business spending without a clear link to profit runs the risk of being scaled back. According to Sharan Jagpal, professor of marketing at Rutgers Business School in New Jersey and the author of Fusion for Profit: How Marketing and Finance Can Work Together to Create Value (Oxford University Press), this means that "marketing looks like the easiest and most logical [budget] to cut because [companies] don't know how to measure its productivity."
It doesn't have to be like this. New metrics won't appear overnight and companies cannot change the interplay between finance and marketing teams easily. But the finance chiefs of companies that have built closer ties between the two agree that there is still room for improvement. If CFOs want to understand the link between marketing and their financial performance better, they say, they'll need to work more closely with their creative counterparts to agree which aspects of their marketing initiatives to measure and how to monitor them.
Where There's a Will, There's a Way
Measuring the effectiveness of marketing with mathematical precision has eluded even the most proactive CFOs and chief marketing officers (CMOs), but it's still worth trying. Following a poll of more than 600 European CFOs and CMOs, a study by document-management group Xerox and consultancy Coleman Parkes found that nearly all the respondents on both sides of the fence believe marketing can have a positive impact on profitability. But they also agree that the effect is difficult to assess. Some 40% of the CFOs polled didn't know whether their company even attempted to figure it out.
Yet for those companies that have made an attempt, the results are confusing. Not only did the CMOs who were polled say they report more marketing information to their CFOs than the CFOs say they receive, but CFOs believe more measuring is taking place than CMOs say is the case.
The findings suggest that the problem is not that there isn't enough interaction between marketing and finance; it's just that the quality, rather than the quantity, of interaction needs greater attention. "Strategically, they're talking the same language," says Ian Parkes, a director at Coleman Parkes. "The delivery of [marketing] and the reporting of that delivery — that's where the breakdown happens."
High-quality reporting that makes sense to both sides is a benefit that DHL Express's CFO doesn't take for granted. There, the co-operation between finance and marketing means that Gritz's team runs all analysis related to product reporting and volume forecasts for the marketers. Finance also looks after billing, which the CFO says customer surveys show is the interaction with the company most valued by them, after the physical shipment of a delivery and customer service. The result is that although Gritz admits the two teams have a "sometimes adversarial" relationship when it comes to budgets, "those differences of opinion don't end up in open warfare." And rather than worrying that numbers from the marketing team aren't reconciling, Gritz — who's been CFO since 2006 — knows the teams have worked closely enough to have confidence that there is "one acknowledged source of the truth, not one party saying their numbers say this and [another] saying, 'That's not quite right.'"
Indeed, Gritz's advice to finance chiefs who want a more fruitful relationship with marketing is to make sure IT systems allow the teams to share data quickly. "The companies that have had the luck to go through a fully fledged [ERP] implementation had to think about all of those data inter-relationships very carefully," he says. "But if you're coming from a more traditional background of having production systems, commercial systems and so forth that are not fully integrated, it might be that you get to many different data points that do not necessarily tell the same story." That shouldn't be news to the 40% of respondents to Xerox's survey still using paper-based measurement systems rather than proprietary tools or spreadsheets.
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