New KPIs are ‘creating tensions in the C-suite,’ says an MIT researcher – Fortune

Relationship

Good morning,
Being an effective CFO includes collaborating with colleagues across the C-suite. But when it comes to building modern KPIs and digital transformation, there’s a need for even more synergy between CFOs and chief marketing officers (CMOs).
Last week, I shared my conversation with Michael Schrage, a research fellow at the MIT Sloan School of Management’s Initiative on the Digital Economy, on KPIs (key performance indicators, which track a company’s performance against a set of targets or goals). Schrage noted that many CFOs are still using KPIs from 30 years ago, like customer acquisition cost and cash flow. Emerging KPIs such as employee experience, customer experience, and customer lifetime value (how much money a customer is expected to spend in your business during their lifetime) reflect modern technology capabilities, he said. I got a lot of feedback about my article on this topic which has sparked a greater discussion.
“These emerging KPIs and all the data that goes along with it is creating tensions in the C-suite,” Schrage told me in a follow-up conversation. “I’ve observed that there’s now a power struggle going on because traditionally, the CFO is the owner of the value metrics.” He poses the question: “Since modern KPIs involve customer experience, who will own the data? The CFO or the chief CMO?” CMOs are usually the owners of the customer experience, Schrage says.
Cultivating the relationship between the CFO and CMO requires “shifting from siloed, even conflicting swim lanes to building trust between finance and marketing as a ‘power pair,’” Courtney Rose, sector lead at Google, told me.
In June, Rose penned the blog post: “Why a CMO-CFO alliance is the crucial piece of the digital transformation puzzle.” Google, in partnership with Kantar, gauged the thoughts of Fortune 1000 company leaders and marketers across industries about this topic. And the CMO and CFO emerged as critical, according to the findings.
“Understanding your customers and ensuring you have the right data to measure beyond a conversion but rather to lifetime value is incredibly important when thinking about the ‘today’ of your business and the ‘tomorrow” potential,’” Rose says.
Google and Kantar surveyed 500 senior marketers in 2021, along with interviews across the C-Suite. Leaders of digitally advanced companies reported higher levels of collaboration between their finance and marketing teams compared to leaders of digitally emerging companies, according to the findings.
“We’ve found that success metrics that are clearly defined and shared between teams, so not just specific to functions by using marketing metrics only, help create a common language among all business functions,” Rose says. “This enables better communication and collaboration to meet overall business priorities.”
So, how does the CFO-CMO relationship facilitate digital transformation to serve customers? Marketing nurtures “a culture of forward-thinking,” Rose explains. “They can help others rethink the role of marketing as a driver of growth and the voice of the customer, which delivers consistent, scalable solutions for customer experience across all touchpoints.” Marketers must also “manage profit and loss that maps marketing initiatives to measurable business outcomes,” she says.
The research also pointed to the benefits of companies that recruit marketing leaders with financial analysis skills. CMOs who can translate their marketing metrics into business impact are 37% more likely to report revenue growth compared to leaders that just communicate in marketing language, the report found. An example? Linking incremental investment to a certain sales growth percentage year over year.
To help build the relationship between finance and marketing, “CFOs should streamline the growth strategies by combining market growth vectors and consumer demand landscape, as well as encourage innovation and give room to test and fail on smaller scale ideas to prove or disprove a business case,” Rose says.
Meanwhile, “CMOs should bring an outside perspective,” she says. They are expected to help the C-suite “understand what the future will look like and what that means for the business,” which is “based on category, competitor, consumer and cultural trends,” she explains. In addition, CMOs “need to recruit modern marketers with a strategic and analytical mindset and skills to drive long-term cross-functional collaboration,” Rose says. 
What are your thoughts on CFO-CMO collaboration?
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
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