Six simple steps to more effectiveness, with 30 to 40% less marketing overhead
The surge of consumer spending over the past two decades
ushered in an era of rapid growth for consumer-products companies in North America. As the industry flourished, so did the marketing organizations that helped drive this growth. With brands and
products proliferating, companies hired more people — and organization structures became more complex, inflexible and costly. As a result, when the financial downturn put the brakes on growth,
many companies were saddled with cumbersome structures that hindered strategic focus, decision-making and responsiveness, undermining their ability to compete effectively in a changing marketplace.
The digital economy and rapid growth of emerging markets are transforming the consumer-products industry. What’s needed is a leaner, more agile structure that can adapt to an increasingly dynamic, fast-paced world.
The Traditional Marketer
In our work with leading consumer-products companies, we’ve found that most marketing organizations have a similar structure: the chief marketing officer (CMO) sits at the top of the org chart, responsible for the company’s marketing strategy and product portfolio. This portfolio is divided into separate lines of business on the basis of product type or consumer need. For instance, a large food and beverage manufacturer might have separate business units for beverages, desserts, snack foods, health foods and frozen dinners. These business units are typically divided again into categories that are led by directors who report to the business-unit heads. The snack food business, for example, might include categories such as chips, pretzels, pork rinds and beef jerky. Each brand within these categories has a brand manager, and — moving down the org chart — one or two assistant brand managers (ABMs), who provide dedicated support.
Then there are the specialists — people who are experts in specific areas of marketing, such as digital, social media and multicultural outreach. These special resources often consult, make decisions, and execute in their area of expertise and are either embedded within brand teams or sit together within a marketing services team.
All told, these different brands, roles, and responsibilities tend to result in an org structure that is five or more layers deep, with small spans of control — most managers have only two or three people reporting to them. This can lead to micromanagement and can limit the development and exposure of junior people. Since most teams work in independent brand silos, cross-pollination of ideas is limited, and teams often reinvent the wheel instead of drawing on existing knowledge or reusing previous work.
This cumbersome hierarchy is a major obstacle to decision-making speed, agility and overall effectiveness. Final decision rights are often far removed from the people on the frontlines running the day-to-day business, and approvals may require multiple sign-offs.
Lack of Strategic Focus
But what really hinders the effectiveness of many marketing organizations is the complexity and lack of strategic focus that these structures create. Marketers within each brand team are expected to develop brand-specific projects and initiatives, which are often not aligned with the top strategic agenda. Few mechanisms are in place to ensure that projects are prioritized across brand teams in a way that drives forward the overall portfolio strategy.
One of the most visible problems that comes from this lack of strategic prioritization is the creation of hundreds of unrelated projects that do little to drive business results or competitive advantage in the marketplace. And each project affects virtually every area of the company. When a team wants to extend a snack brand with a new flavor, for instance, r&d creates the new ingredients and taste, procurement buys the needed inputs, sales reps sell the new flavor to retailers and get it shelf space, operations figures out how to add it to the trucks and get it to the distribution centers, and an outside ad agency develops a campaign. These activities are replicated over and over, for each new initiative, and most projects are treated with equal importance. As a result, many low-growth, low-margin brands end up consuming enormous resources and diverting attention away from projects with potentially higher impact that could push forward the strategic priorities of the business. For instance, of 400 projects at one consumer-products company, 100 were driving 99.5 percent of the value. The remaining 300 projects were just absorbing time and resources.
In addition to diluting focus, this traditional marketing model is costly — especially now that industry growth has slowed. To fund higher-value investments in advertising and innovation, teams must reduce costs by shedding management layers and unnecessary complexity.
Building a New Organization Model
Despite the clear drawbacks of the traditional marketing organization, creating a new model is an effort that can’t be taken lightly. But a number of forward-looking companies are beginning to move boldly in order to define a new paradigm. Drawing on their insights and our work in the industry, we offer the following guidelines:
• Set and communicate strategic priorities. The ceo and cmo must clearly communicate the marketing strategy and priorities to all levels of the organization. As part of the planning process, work priorities and allocation of resources — including advertising dollars, r&d and people — must be set and rigorously adhered to according to these strategic guidelines. The planning process always involves difficult tradeoffs. But strategic focus is diluted when all projects are funded equally. Defining and communicating a clear set of priorities is the first step toward ensuring that valuable resources aren’t squandered on low-value activities.
• De-layer the organization. The traditional marketing structure has too many management layers between the brand and portfolio levels — and these added layers tend to increase cost and complexity rather than value. Before combining projects or teams under a more senior leader, be clear on the value gained by doing so. If the value proposition isn’t clear, don’t do it. Aim instead for fewer layers of management and greater spans of control. With this leaner structure, decision-makers are closer to the business and the cmo, resulting in greater responsiveness and overall effectiveness.
• Dynamically deploy resources. To ensure that resources are allocated to the highest-priority work, they must be deployed and redeployed on a dynamic basis wherever they can add the greatest value across the portfolio. Although larger, more strategic brands benefit from the specialized knowledge and continuity of dedicated resources and brand managers, smaller brands are often better suited to dynamic deployment. abms, for instance, might work on portfolio-level projects, specific brand initiatives, or ongoing work that’s critical to the business, such as forecasting or market research. Rather than being permanently attached to a particular brand and brand manager, they explore a much richer set of experiences, work on top-priority projects, and can move from brand to brand and manager to manager, as determined by the strategic needs of the business and their own career-development objectives.
A critical benefit: Companies that can offer employees a variety of experiences and greater management visibility have an edge when it comes to attracting and retaining top talent. In this new structure, specialists are internal consultants rather than decision-makers or executors and should reside in centers of excellence that report to the cmo. This approach results in a flatter organization that can be more responsive to evolving priorities. And it also helps to break down silos, resulting in more sharing of knowledge and ideas.
• Streamline processes. Convoluted work flows and unnecessary tasks can be a costly drain on resources and productivity. One marketing organization spent enormous amounts of time gathering data for the sales- and operations-planning process to improve forecast accuracy. Besides having minimal impact on accuracy, these efforts were a duplication of the work being done by the finance and supply chain organizations — mainly because none of the groups trusted the others to get it right. By eliminating this redundant shadow work and distilling the process down to its essential inputs, the company was able to free up significant time and resources without sacrificing forecast accuracy. Analyze core processes and do away with any work-arounds, handoffs, time wasters and unnecessary steps.
• Ruthlessly prioritize work. As noted earlier, marketing projects have a tendency to proliferate, and most add little value. Challenge teams to cut out 20 percent of their projects, and revisit this housecleaning exercise on an annual basis. The key is to identify and eliminate any projects that don’t support the strategic priorities of the business.
• Define clear responsibilities. Given the layers of management, multiple decision rights, and the sometimes overlapping roles of specialists and brand managers in traditional organization structures, it is important to clarify the roles of brand managers, ABMs and marketing specialists. The brand manager should be the brand owner, with full decision rights over marketing and end-to-end accountability for outcomes. Any decision-making or execution by specialists or others outside the brand team should be very limited.
Consumer-products companies that follow these six guidelines are often surprised by the number of people working on low-value activities — and the sheer magnitude of the benefits that accrue when changes are made. Overhead reductions of 30 to 40 percent are not unusual. These resources can be allocated to strategic, growth-generating activities with far greater impact.
Making It Work
As with any major transformation, managing employees and their expectations is perhaps the biggest challenge in restructuring the marketing organization. For people who no longer have employees, these changes can feel like a step backward. Being told that your project is no longer a priority is hard to take. Success in this new environment requires a shift from being a specialized, niche player in a stable, predictable role to someone with the willingness to learn a much broader set of marketing skills, develop a wider range of organizational relationships, and stay flexible to the changing needs of the business. During the transition period, many people will be unhappy with the increased visibility, revised priorities and changing project assignments. At the same time, companies will likely rethink whom they want to recruit into their marketing organizations.
To move past these obstacles, it is critical to clearly communicate the rationale for the changes and the benefits of the new model. But companies also must manage their people differently. This means defining clear career paths for every employee, setting up robust development programs, and making functional rotation a core element of professional growth. One consumer-products company has made “people planning” an integral part of its ongoing brand-planning process. Newly hired abms take on a two-year training curriculum that encompasses all the skills needed to become a world-class marketer. When the marketing organization sets portfolio priorities and brand roles according to strategic guidelines, abms are mapped to different assignments based on their skills and development objectives. This approach results in greater professional growth and ensures that the “rock stars” don’t get all the great projects.
Moreover, management experiences must focus on high-impact project or process roles, where success is highly visible and measurable. Finally, new performance metrics and incentives can underscore what is important and encourage new behaviors, while making it clear that underperformance will no longer be tolerated. With time, an influx of new people will join the organization — and be energized and inspired by this type of environment.
The traditional marketing organization is too unwieldy and slow-moving to keep up with the demands of today’s global business environment. To adapt to the new realities of slower growth and ongoing cost pressures, consumer-products companies must fundamentally rethink the structure of their marketing organizations. By dynamically deploying resources, streamlining processes and focusing on high-value work, they can do far more with fewer resources — and gain a lasting competitive advantage.
Gabrielle Novacek, Lucy Brady and Alexander Purdy are based in BCG’s Chicago office. Stephen Moeller is based in New York. Adapted from Rethinking the Marketing Organization, © The Boston Consulting Group, Inc., 2012