How many times have we come across or heard a situation where the CFO (Chief Financial Officer) and CMO (Chief Marketing Officer) are busy engaging in a tug of war over what is prudent and imprudent spending? It is difficult for a CFO to digest the ambitious ventures of his marketing counterpart which may be termed “exorbitant”. He is understandably justified because at the end of the day, he is justifying his role as a “CFO”. This is similar to a chicken and egg situation which continues to confound theoreticians and practitioners of management alike.

The game of Functional One-upmanship

Functional experts continue to play the game of one-upmanship unabated. Avid supporters of Marketing, (who are presumably die-hard marketers themselves) would undoubtedly believe that it is Marketing which forms the crux of all business activities in an organization. This is evident as even Pundits of Management like Professor Philip Kotler (regarded as the father of marketing management) tend to think on similar lines. On the other side of the coin, there are those who may be perennially accustomed to sheer number-crunching exercises and tend to believe that it is the Finance function which captures the very breath of an organization. It is becoming increasingly difficult to gauge as to which function should be considered as the most important of all or called the “Father of all functions of Management”. With the ever expanding horizons of the functions of management and the onset of the concept of specialization and even super-specialization, the picture gets only blurred. It is therefore essential to probably devise such mechanisms or tools and techniques (may be even models) which can contribute to the existing management literature, capable of recognizing and capturing all the core functions of management with equal magnitude.

The Coco-Cola case

A CEO is possibly one such person who by force (so to say) at-least, has to be sensitive and subservient to the various functionalities of management, even though he may have served the same organization in his previous Avatar as a CFO or CMO or even COO (Chief Operating Officer). We all remember the infamous case of Douglas Ivester (the then legendary CEO of Coca-Cola, who was dubbed by the Fortune as the “prototype boss for the 21st Century”) who had to step down from his job in very difficult circumstances. In Douglas’s case, it was his unnerving proclivity to detail and micro-management that lead to his undoing. What could be the lesson we may probably learn from his mistake? Well, before assuming the role of CEO, he was a very successful as CFO and COO of Coca-Cola. As a CFO, he became the blue eyed boy of the company’s shareholders and earned accolades for his innovativeness and shrewd financial prowess which earned him recognition almost instantaneously. Among the successful decisions that he took were orchestrating successful Mergers and Acquisitions which created substantial value for its shareholders. It was a turning point in his career when he was asked to head the same organization, but now as the company’s CEO. Amidst all the hype and hysteria that surrounded his elevation, he couldn’t resist but replicating his “old bad habit” which was his sheer indulgence in micro-management, an art that he perfected during his previous stint as CFO/COO. As a result of this, somewhere down the line, he couldn’t give himself enough room and probably time to look at the big picture, namely developing a broad vision and strategy for the organization which was singularly important as the CEO of the organization. We know this because he headed a Fortune 500 company called “Coca-Cola”. Wonder how many CEOs may be there right now going through a similar fate like Douglas Ivester. It is a question which, at best, can be left unanswered. We don’t even know to what extent did the organization suffer economically as a result of self-aggrandizing measures that were adopted by Ivester. Remember, there is an opportunity cost involved in the case Coca-Cola. It becomes critically important for the managers of the neo-economy to be sensitive and subservient to all the functions of management, and resist the temptation to concentrate on areas which they know best and are known to have super-specialization..

The new mantra called Cross Functional Sensitization

The ramifications of ignorance can be even more pronounced in the present scenario where competitors are studying every move in a world dominated by the mantra “Vasudeva-Kutumbakam” or the principle of Globalization which has come to dictate the terms of business in the 21st Century. As the businesses get more and more complex with the ever disappearing geographical boundaries, it is very essential that managers inculcate the philosophy of “cross-functional sensitization” for staying ahead in competition. The time is ripe when we start contemplating on revolutionary ideas and concepts which can facilitate the process of cross-functional sensitization. It is time that Marketers and Financial Wizards start breaking their self-contained vacuum called Functional Specialization. It is time, we start looking at Green field concepts like ROMI ( Return On Marketing Investment) which seek to open new vistas of opportunities towards bridging the gap between different functionalities of management. Such concepts seek to widen the scope of existing management literature. Application of concepts like ROMI, (which merits measuring return on every dollar (or rupee) spent on marketing as an investment) seek to provide fillip for the much desired integration of different functions of management. As a consequence, then, even though our friends Mr. CFO and Mr. CMO may have radically divergent views, but they would be at-least looking at the problem from a common angle. Guy R Powell, the much touted leader and the pioneer in the area of ROMI, has successfully demonstrated the benefits of the applicability of the concept in driving business profitability. There is a wide scope for fostering such innovations which can result in consolidation in this industry called “Management”. Take for instance, another simple area in Marketing called Pricing, which calls for involved interaction between the Marketing and the Finance professional (more typically the Costing Head). Now, every Finance freak will be familiar with jargons like ABC (not the English alphabets but the more serious Activity Based Costing), while Marketing geeks would we be more comfortable with snazzy terminologies in pricing like “Cream Skimming”, “Market Penetration”. While it is not contemptuous to stay loyal with one’s functional area, yet it becomes critically important in not losing the Big Picture while simultaneously concentrating on evolving methodologies which seek to maximize organizational value. Thus, it is not as much important as to maximize functional value as much it is to maximize organizational value. Also, it is common for any management student to know that compensation plays a very vital role in framing HR policies. Though the ambit of compensation falls well within the jurisdiction of Human Resources function, yet given its wider implications and conundrums like TDS, ESOPS (Employee Stock Options) etc., finance professional would inevitably step into the picture. An HR manager may well appreciate this fact, but it is very important that both the functional heads are sensitive to their respective perspectives which would go a long way in benefiting the organization as a whole.

Concluding Thoughts

Cross-functional sensitization would obviate the peril of value destruction for the organization. So, while the finance expert clamors for the maximization of shareholder’s wealth and thus maximization of corporate value, his marketing counterpart may play the tune “Customer is the King”. The fact, though remains that be it shareholders or customers, as the stakeholders of the business organization, both are equally important and relevant for the success and survival of the organization. Shareholders wealth at best will be destroyed if the customer’s interests are at best minimized. May be the time is ripe to have another Peter Drucker who could add one more dimension to the Management, which blends all the functions in itself and cultivates the much desired cross-functional sensitization.

CREDITS :Ullas Rao is a Research Associate in SDM Institute for Management Development, Mysore. 

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Comments (1)

	1. 20-08-2008 18:03
	really a deeper look into the ocean of finance... Registered Report

ashish trivedi

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