Rewarding marketers for effort rather than revenue will do more harm than good

If marketing is to be respected for creating sales and profits, marketers’ targets must be based on those numbers, not on campaign delivery.

Incentive

Everyone in the boardroom turned to me in anger.

I spent much of my former career doing two jobs: leading large brands and running major marketing transformation programmes. I loved both. And in both, when it came to success, my head was on the table. In marketing, I owned quarterly revenues and costs. In change programmes, it was customer gains or cost targets.

I didn’t always get it right. Some years ago, during a digital transformation, the software vendor screwed up. We had to manually run over 100 campaigns from an Excel spreadsheet on my laptop. We worked all night. In the end, it wasn’t enough. We didn’t hit the retention target. To be precise: I didn’t hit the target. I was the transformation leader. This was my job. There went my reputation (and my bonus). But I didn’t think for a moment that it was unfair. The project failed. I was on the hook.

Years later, I sat in a boardroom across the table from a 10-person software marketing team, breaking the bad news. The group had asked me to look at ways for them to become more influential. For years, they had been struggling to get their CEO’s attention. In a management meeting, he had even said the company’s marketing was having too little impact.

I got the team to set revenue targets for every leader. A year later, the CMO told me it was a game changer.

The team was in good company. Forbes found that 69% of CEOs believe their companies’ marketing money is wasted. You’ve heard this before.

For some weeks I looked in detail into how the team was spending their time, what type of activities they were doing, and how well they were executing. There was much to applaud. The team had high standards. Even for new things like content generation, they already worked with leading experts, did peer reviews, and had established best practices. They also had a pretty good training programme.

Game-changing revenue targets

Despite these positives the firm was in hot water. The business had slowed. They were losing market share. Yet when I looked at the team’s performance assessments, everyone scored high. Something wasn’t adding up. With some investigation, the disconnect became clear. People’s performance targets were mostly internal; things like number of campaigns, on-time launches, customer contacts, collaboration and so on. Business outcomes? Zero. Not one single team member was on the hook for things like market share, revenues or profit.

“You all have top performance ratings while revenues are falling. You have no skin in the game,” I started my summary.

I didn’t make myself many friends with that assessment. The team became defensive. One leader objected: “Marketing is mostly indirect.” The product marketing leader said: “We can’t be blamed when sales don’t have their act together.” And the head of communication asserted: “It’s all about long-term brand engagement – not next week’s sales.” I listened patiently. At the end, I summarised their comments: “So you don’t have skin in the game – and you’re OK with that.”

To me, their CEO’s criticism was merited. The team worked hard. But even if the business was tanking, they could give themselves five-star ratings. In marketing, it shouldn’t be like that.

After a long debate, I got the team to set revenue targets for every leader. A year later, the CMO told me it was a game changer. Marketing now has a weekly board meeting slot.

READ MORE: Thomas Barta – To fix marketing’s perception problem, we must overcome three issues

Real impact

Every marketing activity affects how much money a firm makes. If a campaign is awesome, customers may buy right away, or next week – or even later. On the other hand, if a campaign is terrible, or nobody sees it, it costs the company. The marketing-profit link is so obvious that I’m always flabbergasted when marketers don’t embrace their skin in the game, but it may not always be their fault.

Some days ago, in New York, I did a workshop with a group of hand-picked, highly talented marketers. In their peer group, they are best of the best. We were having a good time until I posed a simple question: “What’s your work worth – in real money?” A tense silence ensued. I’m certain many people had similar thoughts to those of my software marketing team (“marketing is mostly indirect”, etc.) But this was a room of super smart people.

We discussed marketing metrics, did some number crunching. As we talked, something else become clear: these smart young people were trained in university and by their bosses not to have skin in the game. Only some had revenue or profit targets – or even discussed them. Most were just told: do good work. Twenty-four hours later, everyone in the room had a number: a revenue number, a profit number. More importantly, everybody was convinced they do have skin in the game.

I’m always flabbergasted when marketers don’t embrace their skin in the game, but it may not always be their fault.

If companies are to succeed, marketers must be invested. But that’s not the norm. Many firms still reward marketers by their effort: how many pieces they make, how lovely the campaigns are, how great the collaboration is. To be fair, it takes many people to make the sale: production, marketing, sales. It’s a long way from the factory output to revenue.

But rewarding people’s effort – not market success – has two flaws. First, it suggests people can’t figure out how marketing drives revenue and profit. You don’t have to be a genius to see that’s nonsense. There are many ways to measure – or at least estimate – marketing’s impact, from simple tools like the funnel to fancy software with all its bells and whistles. Are these measurements perfectly accurate? No. But close-enough metrics are good enough to judge performance.

Second, rewarding marketers for effort – as opposed to revenue or profit – does tremendous harm to companies: it builds leaders without skin in the game. In the spring of 2013, BlackBerry’s marketing team went on a lavish multimillion-dollar spending spree for the new Z10 (Super Bowl ads included) to build – mostly long-term – brand engagement. In the same quarter, the firm lost over $1bn and weeks later fired 40% of its workforce. The business had run out of cash. The BlackBerry workers had skin in the game; the marketers didn’t.

Thomas Barta is a marketing leadership expert, speaker and the co-author of ‘The 12 Powers of a Marketing Leader’. He has teamed up with Marketing Week to launch the Marketing Leadership Masterclass, a new CPD-accredited online course designed to equip marketers with everything they need to become a better leader. To find out more and book your place visit leadership.marketingweek.com

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  1. Ken Jones 22 May 2019

    Exellent point being made.

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