December 2022

Better together: What research tells us about the future of CFO-CMO relationships

The nature of the relationship between finance and marketing is changing rapidly. New research finds the best leaders realise they can work better together.

Shane Schick

Let’s start by getting all the stereotypes out of the way: in one corner sits the bean counter, the penny pincher, focused solely on the numbers and how much money is going out the door.

In the other corner sits the executive who oversees what is largely perceived as a cost centre – the place where valuable resources are put towards developing creative assets that may or may not help the bottom line.

Like most stereotypes there may have been a grain of truth to this in the past, but hopefully most CFOs and CMOs don’t see each other this way today. They need to have a healthy relationship based upon mutual respect and a shared understanding of their common objectives. Otherwise, a lack of alignment between these two functions can make it difficult for organizations to weather the challenges in front of them.

As they look ahead to 2023, for instance, Canadian businesses are grappling with high inflation, prolonged supply chain disruption and ongoing questions about where employees should work. CMOs need to continue building strong brands despite these issues if they are going to appeal to cost-conscious customers. CFOs, meanwhile, have to ensure marketers’ efforts deliver the intended return.

The data behind the stereotype 

Toronto-based media consulting group Empathy Inc. has been conducting a research study that surveys about 50 representatives from both leadership functions for the past two years. The most recent iteration shows conversations between CFOs and CMOs are improving, but there are important discussions they still need to have.

Despite ongoing economic uncertainty, for instance, 83 per cent of CFOs believe they will increase marketing budgets in the next fiscal year. This was substantially higher than those in the CMO camp, where 73 per cent predicted they would have more resources in 2023.

According to Empathy’s president Mo Dezyanian, greater finance and marketing alignment may be a byproduct of the COVID-19 pandemic, which forced many in the C-suite to work more closely together than ever before.

“For the past few years, all of a sudden marketers have had to be concerned with things like cash flow, which traditionally wasn’t their problem, or their jurisdiction,” Dezyanian told Retained Learnings. “The gaps in terms of their outlooks and their priorities aren’t as wide any more.”

When it comes to setting goals, however, six out of 10 CFOs feel they don’t have enough information to set marketing goals, compared with 73 per cent of marketers who have greater confidence in identifying the right targets. Amrita Gurney, Float’s head of marketing, said this is part of an education process that has been ongoing between CMOs and their peers in finance. 

The gaps in terms of their outlooks and their priorities aren’t as wide any more.

Mo Dezyanian, President of Empathy Inc

“Marketing is understandably a black box to people who don’t work in this department,” she said. “It’s a broad discipline and there isn’t a perfect science to measure direct returns from every investment.”

Building a better budgeting process

One way to get a better handle on ROI could be fine-tuning how budgets are developed. For example, the research found that more than half of CMOs begin the budgeting process two to three months before the new fiscal year, but only 10 per cent of finance leaders get involved that early.

During turbulent periods like the pandemic – and even now with a potential recession looming – Dezyanian said it’s more natural for businesses to condense planning cycles compared with times of relative prosperity. The real question is whether budgeting can become a more collaborative exercise between CMOs and CFOs.

At the Toronto-based CFO Centre, COO Paul Nagpal and his team help pair organizations with CFOs who can work with them on a fractional basis. He said marketing leaders have traditionally spent a lot of time preparing a budget for CFOs to approve, rather than getting their input and buy-in leading up to the discussion.

“When finance is engaged more often, CFOs are much more inclined to be onside with the budget for the next year, because they already know how things are going and they’re seeing that success,” he explained. “They’re also better able to understand the justification for either additional capital, or reallocated capital.”

Gurney agreed that taking the time upfront to share your strategy and decision-making process is the best way to create common ground with finance. 

“CFOs are responsible for stewarding the company financially – they are not our enemy,” she said. “In fact, they are our partners. Working closely with finance has made me a better marketer by better connecting marketing investments to outcomes and balancing short term and long term bets.”

Nagpal said the results of Empathy’s research indicate the next 12 months could be a critical litmus test for CFO-CMO relationships. The fact that finance leaders are projecting a larger marketing budget suggests they’re ready to let marketers demonstrate the kind of contribution they can make during difficult moments in business. Marketing, in other words, will be seen as more than a series of costly ad campaigns but as a strategic lever for revenue growth.

“If the market becomes more challenging next year, investing in marketing is a way to double down and continue to reinforce and build your relationships with your customers,” he said. “If CMOs can continue to build that trust, CFOs are going to see that putting a little bit more money towards it will then reap longer-term dividends.”

Regaining confidence in revenue projection

Reaching that point will likely require an advanced approach to managing and harnessing the power of data. Empathy’s report found more than a third of marketers rely on past performance to set new budgets versus 18 per cent two years ago. On the finance side, however, only 19 per cent of CFOs use forecasting based on historicals compared with 29 per cent in 2020. Instead, 33 per cent said they see market intelligence as key to informing budget decisions.

“It’s almost like they’ve sort of lost that confidence in this revenue projection exercise that they were so good at,” Dezyanian said. “Before the pandemic they lived through a long period of stability. Now they’re looking outside of the company for answers. That’s a great opportunity and a great message for the marketing side of the business, because that’s what marketing is always supposed to help with.”

For example, CMOs and their teams can empower finance leaders with research, consumer sentiment from focus groups and other forms of insight to complement or build upon the internal data CFOs have traditionally relied upon. Nagpal pointed out that marketing itself has become far more data-driven than the days where much of the impact from advertising seemed intangible or difficult to quantify.

It’s not just up to marketers to continue moving the relationship forward, of course. Gurney recalled her previous role with CrowdRiff, where she said the VP of Finance Jody Davis treated her as a peer, rather than taking a top-down approach. 

“He worked alongside me to share how he was modeling our budgets, and genuinely listened to my recommendations on how to make calls on investments in marketing,” said Gurney, adding that the situation is similar with Float’s finance leader, Jennifer McNamee. “Jen spends time with me to learn how I make decisions, how I measure returns, and we have a healthy back and forth on how to arrive at the right decisions.

“What I appreciate about both of them is that they know I am ultimately responsible for my department’s targets,” Gurney added. “They provide good perspective and top line guidelines that have helped me make better decisions while still having a lot of control over what my team does.” 

Nagpal agreed that the road to alignment between finance and marketing is inevitably a two-way street, where a commitment to communicate well and often will make the difference. This is something many CFOs have already been focusing on as they reimagine their role. 

“When the CFO comes in, they’re not just arriving to work with the CEO and the finance team,” he said. “They need to work across all departments, all divisions, to understand what’s happening in the business. That means marketing. It means sales. When you have that kind of visibility into the organization it just transforms the ability of the CFO to add more value. It makes the organization better, and it makes for a better CFO.”

About The Author

Shane Schick is the former Editor-in-Chief of Marketing Magazine, IT World Canada and a former columnist for the Globe and Mail and Yahoo Finance. Shane has helped some of the world's biggest technology brands tell stories that influence their most valuable audiences.