Why Handing Marketing To The CFO May Be A Mistake For Twitter (And For Shareholders)

May 6, 2015 | Forbes

by Kimberly Whitler

How often does a company turn over the finance department to a CMO? Or give marketing to the CFO? It’s so rare that when it occurs, it deserves investigation, understanding, and prognostication.

Yesterday, the Wall Street Journal reported that Twitter Inc.’s head of finance (Noto) has taken on the responsibility of managing marketing. I’ve spent years investigating why some CEOs (and companies) are better at organizing and managing marketing; this move, on its face, suggests that there are several issues at the top of the Twitter empire.


CFOs aren’t trained to understand or effectively manage marketing: CFOs are trained differently than CMOs. Academics have long talked about the difference between “throughput,” “prevention-focused,” and “value appropriating” functions, such as finance. These functions are trained to extract value from the company, largely through efficiency-oriented activities. At the more senior roles (including the board of directors), individuals coming from finance tend to play more of a risk management, monitoring, or efficiency-centered (i.e., profit-oriented) role. This contrasts with people trained in marketing who tend to focus on converting insight about the external environment (consumers, competitors, channel partners, etc.) into mechanisms for topline growth. As one start-up company founder suggested, “Finance is the Growth Prevention Department.” While this may seem to be extreme, it illuminates the stark differences between a marketing and finance paradigm. I also recognize that some CFOs become CEOs and are equipped to manage multiple functions. That isn’t what is happening here. The CFO wasn’t promoted … marketing was pushed lower in the organization and now reports to finance.

Handing marketing to finance can hamper the firm’s marketing capability: Marketers tend to be more focused on the topline and finance executives tend to be more focused on the bottom line. They counterbalance one another and are good partners. However, when one has control over the other, you end up with one paradigm dominating the other and the cost can be weakness in the subordinated function. Imagine if a CMO managed finance. How might that impact marketing investment – perhaps more spending on marketing? When finance manages marketing, investment in growth-related activities may be compromised for short-term results. In a discussion with a CMO who reported to a CIO (another anomalous situation), the CMO indicated that most of her responsibility was centered on supporting the IT group. The CIO failed to leverage marketing’s full potential at an enterprise-wide level. There is a reason that you have a checks and balance system. Twitter has just turned theirs off.

Marketing capability is positively associated with innovation, firm growth, TSR, and other desirable outcomes. If Twitter’s management of marketing jeopardizes their ability to develop a strong capability in marketing … then it’s logical that this can negatively impact important financial and consumer-based outcomes. Of course, one of the challenges in this specific context is being able to prove whether this organizational design is better or worse than an alternative. Without a control, that’s impossible. However, we know from a preponderance of evidence that this design is an outlier, for many of the reasons listed below.

This move will make it difficult for Twitter to hire top marketing talent: What strong marketer wants to report to a CFO? Competent marketers with career options won’t likely take a job reporting to a CFO. So you lose – and can’t recruit – top marketing talent. In fact, Verve predicts that the senior director of consumer marketing at Twitter (poached from Facebook) will likely leave.

Who will train marketers? The leader of a function often plays a critical role in the training, development, and skill enhancement of the employees within the department. Part of this comes from overt training and a significant part comes from observation. What questions does the functional head ask? How do they think? If finance is the head of marketing, what will marketers learn? Probably not much about marketing.

Perhaps most alarming is the fact that after several months searching for a CMO, Costolo (CEO) was unable to find one: The company is under fire for missing revenues and has been searching for a CMO for months. There are plenty of capable CMOs in the world, and the failure on the part of the CEO to hire one suggests: 1) he doesn’t know which executive recruiters to turn for help on the search (Greg Welch from Spencer Stuart, Caren Fleit from Korn Ferry, or Christine DeYoung from DHR are all very experienced former marketers with significant CMO recruiting experience), or 2) he doesn’t really know what he wants out of a CMO and is struggling to make a decision. One of the most important roles for the CEO is to design the organization and hire the right people. Since Costolo has originally had an open position and search for a CMO, it would seem to be his preference. To move marketing under the CFO as an alternative seems like a knee-jerk response to investor discontent rather than a smart, strategic move.

And it appears that Twitter doesn’t fully understand the potential of marketing: According to both the WSJ and Verve, the former head of marketing had a “communications” title, suggesting that the role was marginalized and was only responsible for MARCOM, rather than the more strategic, growth, business development, P&L-oriented role that the best firms create. Activating the potential of marketing (i.e., the ability to drive topline growth) requires that the CMO has the responsibility to do so.

After interviewing hundreds of CMOs and conducting several surveys on the role of the CMO, this move signals that Twitter doesn’t understand marketing, doesn’t understand the different ways to design and staff it to drive better results, and has made a potentially flawed decision as a result. I could be very wrong and Noto might be terrific at managing marketing. If so, he may be primed to succeed Costolo. However, in the interim, I think it’s going to be hard for Twitter to hire the best-of-the-best into the marketing function.

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