Monday, May 18, 2009

Welch, Drucker, CFOs, CMOs, and the Yin and Yang of Corporate Culture

You don't need to meditate to recognize that the Yin and Yang of American business are out of balance. Layoffs, bailouts, bankruptcies--every day's headlines make it apparent the corporate world is out of equilibrium. Theories and opinions as to the cause are many, but I'd suggest that marketers have failed to hold their ground and acquiesced to those who've demanded ever more immediate results at the expense of long-term brand value.

In our daily lives, we innately understand the value of balance: Mind and body; work and family; self and others. Balance is equally important to business, but over the past three decades the equilibrium that existed between the marketing and finance functions has been disrupted. It is time for marketers to take a stand, return marketing to its crucial place, and restore the balance so vital for long-term corporate health.

Jack Welch, the former Chairman and CEO of GE and "father of the shareholder value movement," set the tone for our aggressively short-term-oriented management culture in a 1981 speech entitled, "Growing fast in a slow-growth economy." "Shareholder value" became the alter at which corporate boards and leaders worshipped, expanding the influence and authority of Chief Financial Officers (CFOs). Once the equal and peer of the Chief Marketing Officer (CMO), the CFO's role as protector of quarterly results and stock prices upset the balance between the long- and short-term and the qualitative and quantitative.

Of course, many have come to believe that business culture is overly fixated on the immediate creation of returns. You don't have to take my word on it; Jack Welch recently offered a reconsideration of "Shareholder Value" when he said:
“On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products... The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees.”

Before Welch, there was a time when marketers steered the ship and financiers kept the engines stoked. Marketing students used to be taught that virtually all vital corporate functions were the purview of the marketer. Future marketers weren't advised to focus on just one "P"--Promotion--but "Four P's": Product, Place, Price and Promotion.

So important was the place of Marketing to the enterprise that Peter F. Drucker, the father of modern management, once said:
"Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."

Of course, Drucker knew why business enterprises exist. He understood the importance of results and measurement, but he also recognized that financials and the short-term wants of owners were subordinate to something else:
"A company's primary responsibility is to serve its customers, to provide the goods or services which the company exists to produce. Profit is not the primary goal but rather an essential condition for the company's continued existence."

Marketing as the distinguishing function of business? Profit a mere condition and not a primary (much less the only) goal of the enterprise? Doesn't sound much like today's corporate culture, does it? What happened, and how has marketing's decline led to the business issues of today? Perhaps the answer lies in ancient Chinese Philosophy, which teaches us that Yin and Yang must be in balance. When one disappears, the other must disappear as well, leaving emptiness.

In philosophy, Yin speaks to the intuitive, the emotional, and relatedness while Yang is logic, reason, and individuality. It is easy to see the corollaries to business culture and roles--the world of finance, ROI, quantity, and CFOs is the Yang of corporate America, while the world of marketing, brand building, quality, and CMOs is the Yin.

Corporate Yin has been diminishing for years, while Yang has risen. It appears the ancient philosophers were right, because to correct the imbalance, Yang has now fallen precipitously. Of course, financial news sources don't refer to it as lost Yang; they call it "our worst recession since the 1930s."

To be clear, I am not suggesting Marketing take a paramount place and Finance a lesser. But it seems evident to me that organizations work best when Yin and Yang--Marketing and Finance; long- and short-term; and qualitative and quantitative--are in balance.

How might CMOs return the Marketing function to its former glory, forge new partnerships with CFOs, and guide corporate culture back to a healthy balance? We'll explore this in my next blog post, "Marketing and Finance in Balance."

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