What Happens When You Shift Your Focus from Financial to Performance Management?

As the CEO, CFO, COO, or president of your company, you may often wonder how to best determine the value of your Marketing investment. To answer this question, the Marketing team in many organizations tends to focus on financial management. They might even use a financial management tool to support the planning, directing, monitoring, organizing, and controlling of the Marketing budget.

Despite the increase attention on trying to answer this question, many Marketing budgets are declining. A recent Gartner study suggests the decline is due to budgeting immaturity and a lack of financial planning muscle. Marketers understand how to budget and manage a budget. We would posit that it’s not a financial management question –  it’s a question about how to determine value. From our perspective, determining value is more about performance management and measurement than financial management.

To determine the value of your Marketing investment you need both performance measurement and performance management. Performance measurement is what enables you to track the progress of performance to the strategy. Performance management addresses how well you’re managing the strategy you’ve implemented – it is what links strategy to plans and execution. Performance management includes the entire process: from establishing performance targets, to developing and implementing the plan, to reporting performance to the plan and the financial targets. It enables you to act on the performance measurement information.

Performance management improves planning and decision-making, including financial accountability. In contrast, financial management is about being managing to a budget. It facilitates efficiencies; it helps with exploring where costs can be reduced.

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For Marketing to be successful at performance management, it must strengthen its alignment to the business and truly “run the business” of Marketing’s day-to-day operations. A primary part of alignment includes establishing an agreed-upon set of key performance indicators (KPIs) that define the success of the organization and all of its functions, including Marketing.

The KPIs you select need to be relevant. It’s not possible to measure everything, nor should you want to. The key is to focus on the metrics and KPIs essential for achieving your company’s business strategy. Once you have defined these metrics, accountability to performance beyond the budget can really occur.

As the leadership team, you need to identify the KPIs and metrics. This step serves to highlight the data most critical to your business. These metrics and KPIs become the foundation for the Marketing dashboard that reports on Marketing’s value, contribution, impact, and progress against performance targets and reflects potential opportunities and risks.

A performance management dashboard, compared to a dashboard primarily about money and productivity, encourages a richer business conversation about what the data mean, the implications of performance to the business, and what if anything can be done to change or improve the trendline. This level of performance management supports effective decision-making on all fronts, not just financially.

Your Marketing organization must be able to collect, analyze, and derive insights from customer, market, and business data to succeed with performance management. It takes deriving actionable insights from data for all of this to work. It is this aspect of performance management that sets the stage for a more forward-looking organization. Performance management leads to scenario planning, which helps identify opportunities for innovation and growth, as well as potential risks.

Successful Implementation Takes Time, and It’s Worth the Effort

Performance management is what will move your Marketing organization from focusing on budget and productivity to focusing on results and accountability. Establishing a performance management initiative for your Marketing takes time. We have found that it takes about six months to implement the basic building blocks: alignment, accountability, the data inventory, and first iterations of the dashboard.

As a leader in your organization, you need to serve as the champion and initiate the process. Start the process with these three steps:

  1. Establish a Marketing performance management leader (perhaps someone from the Marketing Operations or Marketing Analytics functions) and a cross-functional team (Marketing, Finance, Sales, Business Unit leaders, etc.).
  2. Explain why you want this initiative and your expected outcomes.
  3. Schedule your first meeting to create a plan and begin the alignment process. Alignment is the starting point because it sets the stage for the metrics, KPIs, and data conversation.

If we’ve convinced you to move to performance management, but you have implementation questions, let’s schedule a call.