Marketers on Board: The Secret Ingredient to Firm Growth
Growth. It’s a top priority for many companies. According to a recent study conducted by Gartner, it’s the number one strategic priority for CEOs.[i] It is surprising, then, that less than 3 percent of board members — those at the highest levels of firm stewardship — have executive level marketing experience. A study conducted by the National Association of Corporate Directors found that only 4 percent of board members believed that marketing experience was valuable at the board level.[ii]
This contradiction is fascinating — growth matters to those at the top of the firm but the function that is trained to drive growth does not.
With colleagues from TCU — Ryan Krause — and Columbia University — Don Lehmann — we set out to see if board member beliefs and behavior were correct. Specifically, does executive-level marketing expertise on the board help drive firm growth?
In a word: yes. In analysis we conducted of 64,086 board member biographies (from Standard & Poor’s 1,500 firms between 2007 and 2012), we found that a firm’s annual revenues can be expected to increase by nearly 6 percentage points when at least one marketer is on the board.
Many boards are composed of CFOs, COOs, chief accounting officers, counsel and other executives whose primary focus is internal operations and governance.
In contrast, marketers — including salespeople — are trained to think about demand generation in the context of a dynamic marketplace, competitive actions, consumer needs and company competencies. A marketer’s specialty is asking, “How do we grow by creating real, meaningful value for consumers?” Others often ask, “How can we improve our bottom line by reducing costs and increasing efficiencies?” These are both important questions. Ideally, you want people with different skills, knowledge and training to helps address both paradigms at the board level.
If you have a growth problem, you need to be leaning in to your growth experts.
So Why Few Marketers?
If companies want to get bigger (and presumably most do), why are marketing executives so rarely on corporate boards?
The financial reforms of the early 2000s required corporate boards to have one designated financial expert as a member. But in the years following the passage of the 2002 Sarbanes-Oxley Act, the number of finance experts on the boards of S&P 500 companies grew tremendously, at the same time the average board size decreased; according to executive search and consulting firm Spencer Stuart, “In 2003, 21 percent of boards reported having a financial expert — 146 financial experts in total — versus 2012, when 100 percent of S&P 500 boards report having at least one financial expert for a total of 1,096.”[iii]
This large increase was driven in part by regulation. However, research conducted in management has demonstrated that even board members can suffer from in-group bias.[iv] People tend to prefer working with others from similar functional backgrounds; being of like minds aids in communication, and it’s easier and faster to make decisions. Not necessarily better decisions, though.
Having even one marketer on a corporate board helps provide a consumer-first perspective that can help balance the largely “throughput,” or inwardly focused, functional paradigm.
Prior research has demonstrated that the finance and marketing functions come from “different thought worlds,” and often serve conflicting organizational goals.[v] Across a variety of different areas, the CMO and CFO are least aligned on the firm’s financial and marketing priorities, objectives and budgets. In fact, the positive effect of having marketing expertise on a board is stronger when the number of CFO board members is low. The belief is that the more finance experts you have on the board, the more monolithic the thinking and the less likely they are to seek, listen to or adopt a different perspective.
As executives and recruiters choose talent for boards, they should consider knowledge and functional diversity. This may be particularly urgent for companies losing market share; our study showed that the effect of marketing expertise on boards is greater when prior industry growth and the company’s market share growth are weak.
But it’s a two-way street. Corporate executives and recruiters need to consider marketers — and marketing executives need to seek out the career challenges that prepare them to serve on boards. Marketers need to be able to lead enterprise-wide-level growth, much like P&L marketers are trained to do.
“When and How Does Board-Level Marketing Experience Impact Firm Performance?” published in Marketing Science Institute Report No. 15-109, won the Marketing Science Institute 2017 Robert D. Buzzell Award, recognition given to the paper that made the most significant contribution to marketing practice and thought within a two-year period. “When and How Board Members With Marketing Experience Facilitate Firm Growth” was published in the Journal of Marketing. Both were authored by Darden Professor Kimberly A. Whitler, Ryan Krause of Texas Christian University Neeley School of Business and Donald R. Lehmann of Columbia Business School.
[i] Gartner (2018), “Gartner CEO and Senior Business Executive Survey 2018,” press release (1 May), https://www.gartner.com/newsroom/id/3873663.
[ii] National Association of Corporate Directors (2011), Public Company Governance Survey. Washington, D.C.: National Association of Corporate Directors.
[iii] Spencer Stuart (2003), Spencer Stuart Board Index. Chicago, IL: Spencer Stuart.
[iv] Zhu, David H., and James D. Westphal (2014), “How Directors’ Prior Experience With Other Demographically Similar CEOs Affects Their Appointments Onto Corporate Boards and the Consequences for CEO Compensation,” Academy of Management Journal, 57 (3), 791–813.
[v] Dougherty, Deborah (1992), “Interpretive Barriers to Successful Product Innovation in Large Firms,” Organization Science, 3 (2), 179–202.