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HBR July-August 2017: The trouble with CMOs

Harvard Business Review - July/August 2017 issue
Annotated table of contents

1. Adi Ignatius, The truth about globalization

Adi Ignatius, the editor in chief of HBR, notes the ebbs and flows of globalization, its critics and supporters, and highlights the contribution to the topic made in the article by Pankaj Ghemawat in this issue.

Idea watch

2. HBR Team, How to predict turnover on your sales team

What are the sources of the high 27 per cent turnover of personnel in the sales function, twice the overall rate? Principally, research shows that in teams where there is no variability in performance between members, there is a greater chance that morale will be low and some team members will leave. A negative cycle can become entrenched once sales people start to leave. Their decision suggests a negative assessment of the company and they expand the volume of new opportunities once they join other organizations. Accordingly, managers might be interested to investigate more closely the settings where there is little variability in performance and devise appropriate interventions to increase morale and performance.

3. Alison Beard, Crowded places make people think more about the future

Beard interviews Oliver Sng, of the University of Michigan, who, with colleagues, has analysed the relationship between population density and life-history scores based on average marriage rate, fertility, higher-education and preschool rates, and retirement plan participation. He has found that in US states with high population density, planning for the future, investing in one’s education and career, having children later are more common behaviours. The suggestion is that in such settings there is greater awareness of competition and the need to invest in long-term strategies for success. In contrast, in US States with lower population density people tend to focus more on fast and immediate satisfaction.

4. Melanie Whelan, SoulCycle’s CEO on sustaining growth in a faddish industry

Whelan joined SoulCyle in 2012 and became CEO in 2015, overseeing the expansion of the chain of fitness studios and ranges of merchandise. She sees SoulCycle as part of the ‘broader experiential economy’, not just a fitness company. Its appeal is based on a combination of elements: the pay-per-class model, which encourages commitment; the careful selection of riders, favouring personality and self-expression; the careful choice of locations, as the studios become destinations in themselves; deep knowledge of life-style preferences among different categories of users and customised offerings.

Spotlight: The trouble with CMOs

5. Kimberley A. Whitler and Neil Morgan, Why CMOs never last

Whitler and Morgan point out that CMOs have the highest turnover rate among C-suite executives and link this finding to the poor definition of the role. There are at least three ways to understand the role of the CMO – in terms of commercialisation, strategy and enterprise-wide P&L. Paying attention to the distinctions between these dimensions could help align the expectations of CEOs and potential CMOs for better performance and business success. The article breaks down the process into four steps – from definition of the role, to job description, to alignment of metrics with expectations and recruitment of candidates with the right fit.

6. Kimberley A. Whitler, D. Eric Boyd, and Neil Morgan, The power partnership

This article elaborates on current business conditions which make it necessary for the CMO to have a good working relationship, a partnership, with the CIO in order to deliver superior results.

7. Daniel McGinn, Reflections of a six-time CMO

McGinn interviews Joe Tripodi, a six-time CMO, whose first appointment at the top of the marketing function was in 1989 at Mastercard and who has served in this capacity at Seagram’s, Bank of New York, Allstate, Coca-Cola and Subway. The interview explores the challenges and sources of success in marketing in different industries, at different times.

8. Greg Welch, Reducing CMO turnover

Welch is an executive recruiter, specialising in placing CMOs, and here he shares his observations about the type of enquiries he receives from CEOs and the common issues that arise in ensuring a good fit between candidates and the CMO job.

9. Caren Fleit, The evolution of a CMO

This is a brief historical survey of the development of the marketing function since the 1950s to today, including the emergence of the CMO job (and title), in the 1990s.

Features

10. Leslie A. Perlow, Constance Noonan Hadley, and Eunice Eun, Stop the meeting madness

There is a general consensus that in current practice, in most companies, meetings fail to achieve their objectives ending up wasting both individual time, by including people who don’t need to be present, and group time, when meetings are poorly run. Moreover, meetings have proliferated and they are encroaching into productivity as well as job satisfaction and other wider measures of organisational wellbeing. In this article, the authors suggest that actively taking stock and assessing a firm’s approach to meetings can help reduce their number, increase time for deep, solo work and improve performance across the board. They define a five step process for actively working to redefine the role of meetings: collect data from each person on how meetings work for them; interpret data together to surface insight and develop a collective understanding of the current state of play; develop common goals and align the scheduling and organizations of meetings accordingly; set milestones and monitor progress; and regularly debrief as a group through regular pulse checks.

11. Erin Meyer, Being the boss in Brussels, Boston, and Beijing

National culture shapes work practices in complex ways, but here Meyer focuses on two central dimensions of leadership culture: attitudes towards authority (from hierarchical to egalitarian) and attitudes towards decision making (from top-down to consensus). The authority and decision-making styles can combine in surprising ways. For instance the Japanese culture, which is clearly hierarchical, with great respect and deference paid to elders and senior people, is also consensual when it comes to decision-making. In contrast, while US work culture has an egalitarian cast, decision-making is seen as broadly the prerogative of the boss, even as decisions may be seen as temporary and consultation does take place to a certain extent. Meyer defines and illustrates four cultures of leadership – consensual and egalitarian, consensual and hierarchical, top-down and hierarchical and top-down and egalitarian. She explores as well how nineteen national cultures are placed in the field defined by these two axes, including some of the largest developing economies, such as Indonesia, China, Saudi Arabia, India and Russia.

12. Robert C. Pozen and S.P. Kothari, Decoding CEO pay

Most CEOs of large companies receive a compensation package with multiple elements, including base salary, but also long-term awards of stock and stock options, annual incentive plans, increases in pensions, deferred compensation plans and others. While certain elements of the pay are determined in advance, others are linked to various indicators of company performance and can be calculated with some discretion by compensation committees. In this article, Pozen and Kothari illustrate how indicators such as earnings per share, total shareholder return and adjusted operating cash flow are sometimes determined following ad-hoc, non-Generally Accepted Accounting Principles so as to favour overly generous pay awards to CEOs. At the same time, effective oversight by investors is made difficult by complex, often incomplete or disjointed, technical presentations, and by lack of time. However, Pozen and Kothari argue that it would be possible to introduce tighter rules and definitions for acceptable assumptions in calculations to ensure more effective, collective oversight of compensation determinations and suggest a few remedies.

13. Melissa Schilling, What’s your best innovation bet?

Schilling argues that technological development is predictable to a certain extent and the best way to determine areas of likely breakthrough is to study systematically the history of a particular technology. This entails, first, identifying key dimensions of the technology. Second, to locate your current position, enquire whether there are any patterns in how different dimensions of the technology emerged and played a role in generating value over time. In the case of audio, the ability to make a good recording was crucial in the early stages, but the fidelity reached a plateau over time and music selection and portability became more important differentiators. Finally, having a list of dimensions and a sense of how evolved they are can help companies understand where there is room for improvement. Companies then need to assess the match between those and their own strengths and weaknesses and those of their competitors.

14. Andrei Hagiu and Elizabeth J. Altman, Finding the platform in your product

In principle, many companies may have the potential to develop their products and services by adding a platform dimension. Hagiu and Altman define four scenarios for developing platforms based on existing offerings, providing examples and a brief analysis of advantages and drawbacks. These are: opening the door to third parties; connecting different customer segments; connecting products to connect customers and, the as yet untried, supplying to your customer’s customers via a multisided platform.

15. Forest L. Reinhardt and Michael W. Toffel, Managing climate change: Lessons from the U.S. Navy

Reinhardt and Toffel present in detail the thinking behind the US Navy’s approach to climate change, arguing that their experience is relevant for business organisations as well. In general, it is understood that adverse weather events and patterns might both increase the demand for the services of the Navy and undermine their capacity to deliver. To prepare for such eventualities, like other organisations, the Navy have been planning and implementing both mitigation measures (for instance increasing energy consumption from renewable sources and increasing energy efficiency) and adaptation (taking preventive measures to ensure continuity of energy supply and the integrity of physical assets). To a certain extent, these measures are ‘no regrets actions’ that would make sense irrespective of further developments in climate patterns. At the same time, the Navy is willing to take ‘bets’, to implement measures that assume and prepare for a certain level of climate change that may not occur, for instance the three feet increase in sea levels which would threaten 55 naval installations in the US, valued at $100 bn.

16. Pankaj Ghemawat, Globalisation in the age of Trump

Ghemawat argues that while globalization has been hyped in the last few decades, the actual level of flows – information, people, capital, trade – is more modest than generally assumed. For instance, countries vary widely in the size of their tradeable sectors and the ratio of international trade to GDP. Moreover, the marked shift in rhetoric against globalisation since Brexit and the election of Donald Trump, has yet to manifest in actual reversals in levels of exchange patterns, although some have indeed slowed down. Given these conditions, Ghemawat recommends that business decisions about where to compete should respond to economic rationale, rather than the assumption that ‘a truly global company must compete in all major markets’. Equally, in terms of how to compete, the criticism of globalisation refers mostly to the arbitrage strategies employed by multinationals, as they exploit differences in labour costs and tax regimes between countries. Two other strategies are available – adaptation to local markets and regional aggregation – and some multinationals, such as GE, have already indicated that they will give renewed attention to these.

17. Adi Ignatius interviews Ginni Rometty, IBM CEO “Don’t try to protect the past”

Ginni Rometty, who became IBM CEO in 2012, initially followed the strategy set by her predecessor, aiming to double per-share earnings within 5 years. Since October 2014 she has set a new course, leading a process of transformation to position IBM as a leader in the $2 trillion market for better decision-making, by developing Watson, its AI capability. In this interview Rometty defines and defends this strategy, providing insight on IBM’s take on the role of AI, as enabler of human workers, and a capability that will bring ‘world-class health care to every corner of the globe.’ She argues for continued engagement on the issues with the US administration (IBM doesn’t make political contributions) and appreciates the importance of providing positive role models for women.

Experience

18. Daniel McGinn, The science of pep talks

A successful pep talk normally contains three elements: it gives directions, expresses empathy and formulates meaning. McGinn presents here both the science and the practice of pep talks, with examples from academic research and business and sports practice.

19. Sandra Sucher and Matthew Preble, Case study: Follow dubious orders or speak up?

This case study explores the ethical implications for an intern of being asked by her manager to misrepresent herself in order to elicit potentially sensitive information from competitors. There is good advice on how the task can be redefined to avoid the conflict and enable appropriate, successful delivery at the same time.

20. J. M. Olejarz, Liberal arts in the data age

Olejarz reviews three books that consider the continued importance of humanities and liberal education. The books agree that the uses and significance of the arts and humanities are as apparent as ever: understanding the broader picture, asking penetrating questions, sense making, moderating and shaping sensibilities.

21. Alison Beard, Life’s work interview with Alan Alda

Alan Alda, actor, writer, director, communications consultant, shares insight on making the moment count in everyday interactions, whether in performance, business or family life. His new book, If I understood you, would I have this look on my face? My adventures in the art and science of relating and communicating is out now from Random House.

Table of Contents

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