The research by Nath and Mahajan (2008) develops theory to investigate what factors defines whether or not a firm’s top management team (TMT) will have Chief Marketing Officer (CMO) and does the presence of CMO affects firm performance in the face of these factors. None of the research prior to this tries to relate firms branding strategy with TMT’s structure choice. However, there has been increasing need to develop and enhance ability to account for marketing’s contribution to firm performance and has been voiced in earlier researches [
The authors propose that presence or absence of CMOs is influenced by innovation, differentiation, type of branding strategy, diversification, industry concentration, top management’s experience in marketing and general management, and whether or not the CEO is an outsider. In addition the CEO’s presence affect positively towards firm performance in the face of above factors. Nath and Mahajan tested their hypothesis by secondary analysis of corporate data obtained from Security Exchange Commission, Standard and Poor’s COMPUSTAT, Bloomberg, Dun and Bradstreet’s Register of Corporations, corporate documents and press releases covering five years for total 167 firms across different types of industries using regression analysis. The data collected from above high quality sources has limitation in a sense that it lacked control variables to measure marketing performance in terms of financial variables.
During their deductive theory approach Nath and Mahajan outlines hypothesis based on strategic, structural and environmental factors.
Strategic Factors: The firm who pursues product innovation and differentiation into new market segments are need to employ marketing expert to compete in complex and ever changing market. Thus, differentiation and innovation are positively related to likelihood of CMO presence in firms TMT. Nath and Mahajan further assume that a firm using the corporate branding approach has a higher likelihood of CMO presence on the TMT. Diversification inversely affects presence of CMO, as more the firm diversifies into different areas; each unit will be responsibility of dedicated management team. Thus, CMO is more likely to be recruited in single-business firms than in diversified.
The research results support the three of above hypothesis. Companies investing in Research and development (R&D), companies that pursue differentiation and firm’s with a corporate branding strategy more likely to have CMO in their TMT. There was a mix result for diversification hypothesis.
Structural Factors: Nath and Mahajan examined how organizations structure affects likelihood of CMO presence. They predicted that if TMT has greater marketing experience and greater general management experience it will boost the chances of having CMO in the TMT. Similarly authors predicted that CMO who are recruited from outside the firm and not promoted through the ranks of organization increases likelihood of CMO presence as being ‘outsider CMO’ they are aware of their limited knowledge about the firm’s marketing complexity and strategy.
The Research finds partial support for TMT’s general management experience. However, CMO’s presence is likely in case TMT has greater marketing experience.
Environmental Factors: Highly concentrated industries have few large firms and wining customer takes back seat and focus is primarily on competition. Therefore, companies in concentrated industries negatively affect likelihood of CMO presence. Unfortunately, the research found no evidence for this relationship.
The research by Nath and Mahajan concludes that the presence of CMO is related to innovation, differentiation, branding strategy, the CEOs operational experience in the firm, the diversification strategy and size of a firm. How CMOs presence affects firm performance was calculated using sales growth, market share, return on assets, return on sales and Tobin’s q which are accounting and market based performance variables. Authors found no direct impact of CMO presence in TMT and improved financial performance of the firm (page 76). Performance of the firm having CMO does not improve or degrade with respect to firms who do not have CMOs in their TMT. However the authors agrees that “results cannot be generalized to firms in industries, such as retailing, that do not report R&D expenses” (page 79). The research study focuses on financial performance metrics such as sales growth, return on sales and market share but, does not consider brand equity and other marketing parameters.
David Kiley (2008) points out that “Marketing is not the same as sales, and should not be treated as such. Sales can be impacted by so many things that have little do with marketing.”
In today’s competitive world, marketing has become more significant and to stay ahead, firms are spending more than 30% of corporate budget on marketing
Although the marketing capability has a far greater impact on firm performance than research-and-development and operations capabilities
The research provides new insights about CMO presence or absence from TMT and its correlation on the firm’s strategic and structural factors. Based on the result from this research firms pursuing innovation and differentiation, with corporate branding strategy and large diversified firms can consider CMO presence in case they are restructuring TMT. The study also reaches to conclusion that CMO’s presence neither improves nor negates firm’s performance. However, further studies need to undertaken to fully measure marketer’s impact on firm performance not just based on financial control variables but also brand awareness, brand equity and marketing research & planning. Short term matrix cannot be used to measure performance of marketers who are supposed to make long lasting impression (Kiley, 2008). In fact, the CMO Council ’ s Marketing Outlook 2008 study indicated that marketing performance measurement dashboards are at the top of the list for year since many years
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