Why Entrepreneurs Fail Lesson #2; No Skin in the Game

I originally wrote this blog about the CMO (a C-Level role that I love to pick on due to my belief that its only reserved for those with strong business & FINANCIAL Acumen) when I was running Chief Outsiders. For the start-up, this message applies to all of you. It matters.

I likes to swim in a 1/8 mile long natural spring-fed pool with a year-round average temperature of 68 degrees. Goggles, Speedo (square, not triangle), that’s it. One thing that bothers the me is the massive amount of wetsuit wearing triathletes that dominate the pool in the mornings paying little to no attention to etiquette. Not only do they remove the element of freezing to death, they also believe that their wetsuits give them the right of way. It is not uncommon to be kicked in the face just after being cut off or have to completely stop and swim horizontally to avoid being punched in the face.

The Wetsuit Warriors show No Skin (& No BLOOD)

While trying to go stride for stride with one of these ironmen this week, it (he) hit me. This is one of the reasons why CMO’s (and entrepreneurs) fail. There is no skin in the game. Let me explain.

When I started my first company, the first question every potential investor asked me was “How much are you investing in the idea?” There is only one correct answer. Everything I have. After getting an enterprise off of the ground, entrepreneurs pour everything they have back into their company. That is just the way it is. Why would an investor or stakeholder invest in an idea, company, vision and/or branding campaign if the person asking is putting in nothing themselves?

As I posted in The Art of the Business Plan, Part I, one of the first reasons CMO’s fail is that they are unqualified. A CMO must be able to blend the art of the vision and the science of the business case. If your CMO cannot write a business plan (or has never written one), you may have a serious problem. These CMO’s have little to no financial acumen and are unable to understand how their strategies and expenditures impact both the income statement and the balance sheet.

Here is the 2nd reason, the CMO has no skin in the game. According to AdAge, the average CMO-level executive last year took home $1.5 million. At the same time, according to the January 2009 McKinsey Global Survey of 587 C-level executives, CMO’s are not using available tools or best practices to assess their marketing campaigns, make their budgets, and plan new campaigns. “Many companies, the survey shows, don’t use basic best practices such as clearly allocating—or even defining—marketing spending across the whole company or regularly reviewing the results. Further, companies typically allocate their marketing budgets based on historical allocation levels and product-level priorities, rather than campaign effectiveness or the goals of the company as a whole.”

Is there a correlation between the average tenure of a CMO and the large compensation packages that lack alignment and comparable risk?

I met with a senior Dell marketing executive to discuss the recent Mark Jarvis fiasco. What did not make sense to me (besides Enfatico) was that while Dell was laying off people, cutting bonuses and halting raises, they bring in the $6M man. According to Dell’s SEC filings, Jarvis had total compensation of $6.85 million and had commuting expenses of $315,387. “As part the employment arrangement with Mr. Jarvis, we pay Mr. Jarvis’ commuting expenses for travel on chartered aircraft between our headquarters and his principal place of residence in Northern California,” the company said. A Company Jet for commuting!

Not only did Jarvis have nothing to lose by going to work at Dell, if he completely created a mess at the company, he had a severance agreement that paid him $1.2M.

If you want a CMO (or any CXO) that will succeed in your organization, make sure they bring skin in the game. You must align their performance with measurable results. For the role that is responsible for ultimatley driving warm leads and increasing the value of our organization, you must create alignment with their success to your bottom line both short-term and long-term. How and what does this look like? How to do measure long-term brand value? Will bark soon on this exact topic.

Barking from the pool.