This research extends understanding of the relationship between chief marketing officer (CMO) presence and firm performance by investigating how it is affected by the presence of three other functional heads (or CXOs) under various environmental and strategic contingencies. Results based on a panel of 401 U.S. manufacturers reaffirm the positive CMO presence–firm performance relationship and establish that the linkage is (a) strengthened by chief sales officer presence when industry sales volatility is high, (b) strengthened (weakened) by chief technology officer presence when industry innovation and firm differentiation (cost leadership) are high, and (c) strengthened (weakened) by chief supply chain officer presence when firm diversification (differentiation) is high. The study: expands top management team research by investigating executive dyads formed by the pairing of heads of functions advocated in the organizationally embedded view of marketing; delineates CXOs’ roles and orientations to clarify mechanisms that aid or hamper the CMO; and, identifies industry and firm-level contexts that affect the CMO–CXO interfaces. Additionally, the findings underscore the importance of appointing CMOs and, of CMOs spanning organizational silos.
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We use the terms structural or dyadic to emphasize that the interfaces we study result from the simultaneous or dyadic presence of the CMO and each of the other CXOs in the TMT’s structural configuration. In comparison, the focus in the functional-level marketing interfaces literature (subsequently cited in this paper) is on process measures such as inter-functional cooperation where the interfacing functions are always present.
Notably, this literature precedes the rising importance of big data, which would make the CMO–CIO interface also worthy of study (Sleep and Hulland 2019; Whitler et al. 2017). Conversely, the marketing–finance interface explored in this literature cannot be studied at the structural level using data from recent history because almost all public firms have a CFO, making the issue of presence of CFOs and CMO–CFO dyads moot. As such, we acknowledge the importance of these and other possible CMO–CXO interfaces, but limit our scope to the three that we have studied given that our research represents one of the early efforts to investigate structural dyads in TMTs.
The moderation of the CMO presence–firm performance relationship by any CMO–CXO interface is essentially the interaction between the CMO’s and this CXO’s presence. The addition of environmental and strategic contingencies discussed in the body of this paper as well as the resulting hypothesized relationships shown in Figure 1 are, therefore, three-way interactions between CMO presence, CXO presence, and each of these contingencies.
We thank an anonymous reviewer for suggesting this Table.
We preclude delineating CXO orientations along the temporal dimension even though it has been used at the functional level—e.g., Homburg and Jensen (2007) find that marketing is relatively more long-term oriented than sales—since TMTs, and by extension CXOs, are generally long-term oriented in strategic decision making.
Because the main effects of CSO, CTO, and CSCO presence are not central to our conceptual model, we do not hypothesize them; however, we report and comment on them in subsequent sections of this paper.
Since we study structural CMO–CXO interfaces that are captured by the simultaneous presence of the CMO and a CXO, we do not consider process measures such as cooperation and conflict. Such facets of an interface can have opposing effects as discussed in the body of this paper. Consequently, the net effect on performance, if any, is not clear, leading to our preclusion of directional two-way hypotheses for these interfaces.
We test H7 with total, related, and unrelated diversification but expect the latter to be more relevant for the rationales proposed here because business units are more disconnected in unrelated (vs. related) diversifiers, making it harder for CMOs to effectively perform their roles. Because total diversification is the sum of these two measures, we similarly expect the arguments to be less relevant to it compared to unrelated diversification.
We sampled from the following two-digit SICs: 20 (Food & Kindred Products), 25 (Furniture & Fixtures), 26 (Paper & Allied Products), 28 (Chemicals & Allied Products), 35 (Industrial & Commercial Machinery & Computer Equipment), 36 (Electronic & Other Electrical Equipment & Components), and 37 (Transportation Equipment).
TMT operationalizations have varied in extant research. Given the increasing importance of research on TMT functional heads within and outside marketing, we clarify this issue of operationalizing the TMT separately, in an Appendix, to serve as a primer for future research in the area; we also justify our TMT operationalization in it. We thank an anonymous reviewer, the associate editor, and the editor for their inputs that led to creating this Appendix.
We also observed executives with marketing and sales titles (or responsibilities in the case of the customer and commercial titles discussed subsequently in the paper). Our focal analyses classified such executives as CMOs, but we subsequently conducted robustness checks of our results classifying them as only CSOs and as CMOs and CSOs.
Our focal results are substantively similar whether we used the raw measure of SGA or excluded R&D from it (cf. Ptok et al. 2018). We used the latter operationalization to report findings in this paper.
We consider a moderation hypothesis as being supported if its related three-way interaction is strongly significant (p < .05) in at least one of the two models that includes it, i.e., the model in which it is entered separately or the full model, and at least weakly significant (p < .10) in the other model. We claim partial support when the interaction is significant in only one of these models, and weak support if this interaction is weakly significant (p < .10). Cases with both models showing weak interactions would also be weakly supported, but our focal results preclude such cases.
As mentioned in Footnote 8, we tested H7 with total, related, and unrelated diversification. While results for H7a and H7b were similarly non-significant across all these measures and Models M7a, M7b, and M8, with H7c, Model M7c’s results reported in the body of this paper hold only with unrelated diversification and not with total or related diversification (these latter measures are identical when dichotomized). Similarly, the strong support for H7c in the full Model M8 was observed only with the former measure; we found only weak support (p > .10) with the latter. Furthermore, when we used continuous measures, H7c was again supported, albeit weakly, with only unrelated diversification. Thus, the arguments we proposed for this hypothesis are more relevant to this latter measure, in line with the expectation mentioned in Footnote 8. We, therefore, only report results with unrelated diversification.
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Appendix: Operationalizing the TMT in the context of CXO research
Appendix: Operationalizing the TMT in the context of CXO research
As noted in the body of the paper while discussing our focal measures of CMO, CSO, CTO, and CSCO presence in the TMT, the operationalization of TMTs has varied in extant research. In this appendix, we elaborate on this issue, with a view to aiding future research that studies functional heads (or CXOs) and TMTs, while also justifying our measure. To that end, we include a table below that first defines three operationalizations—Executive Officers (EOs) of the Registrant; Named Executive Officers (NEOs); and Management/Leadership—in extant TMT research that has used secondary data, and then lists the pertinent issues for each of them in subsequent rows (we preclude commenting on survey-based, CEO-defined TMTs, given that such research is rare, which is not surprising given the difficulty of obtaining CEOs as respondents).
As shown in this table, EOs are the policy making executives that publicly listed US firms are required to report for the purpose of various disclosures. Notably, firms have discretion in determining what constitutes policy making, however, it is a non-trivial matter determined by the board of each firm annually, and the SEC does not question the board’s decision in this matter. NEOs are “named” in the context of compensation disclosures that are required for the CEO, the CFO, and three other most highly compensated EOs (although, firms don’t always report exactly five NEOs). Thus, to be a NEO, an executive must be an EO in the first place, making NEOs a subset of EOs, although the two lists can be identical. In addition, firms often report other significant executives in the management/leadership section (found at the beginning or end) of their glossy annual reports to shareholders, or on their websites. However, these additional executives are not EOs, and since these glossy reports are not required (firms can send the 10-K instead), they are not consistently observed; in addition, the issue with websites is that they are dynamic and not historical. Yet another approach to construe the domain of the TMT construct has been to restrict the hierarchical levels used within these lists (e.g., Senior Vice President or SVP and above); notably however, this is a judgment made by the researcher(s).
Part of the reason for different TMT operationalizations is the absence of a formal conceptual definition (Carpenter et al. 2004). As such, TMTs are part of firms’ strategic leadership, i.e., “the executives who have overall responsibility for an organization [with] substantive decision-making responsibilities” (Finkelstein and Hambrick 1996, p. 2). The common thread of research in this area is that a dominant coalition of senior executives in the firm’s upper echelons has greater influence compared to those at lower levels (as an aside therefore, this focus also covers the board of directors). In the absence of formal criteria for determining the boundary of this dominant coalition, one assumption that has resulted, is that pay equates with influence, making the highest paid executives, i.e., the NEOs for whom pay is disclosed, the most influential and equivalent to the TMT. However, we know of no conceptual basis for the SEC’s specification of five NEOs and as mentioned previously, NEOs exclude EOs who may be paid relatively less but are still policy-making executives, a problem that is likely exacerbated in the context of CXOs who may get paid less than divisional heads. Another assumption is that titles (e.g., SVP and above), which indicate hierarchy and therefore influence, confer the status of strategic leadership. However, such an assumption ignores that equating titles across firms and industries in particular, may not be accurate (Finkelstein and Hambrick 1996).
In light of the preceding discussion, we operationalize the TMT as the list of EOs since it is consistently reported, inclusive (of CXOs), and objectively measured, and recommend that future CXO-focused research follow a similar approach. Notably, such an effort needs far more manual data collection than using NEOs, who are more readily determined with the Execucomp database. However, this latter operationalization, which results in selecting a relatively smaller number of CXOs is likely to bias estimates of CXO presence or other CXO characteristics. To the extent that CXO presence is a mere control, the TMT operationalization of NEOs may be reasonable; it would of course need to be what is used for compensation-focused research as this data is available only for NEOs (see Bansal et al. 2017 who account for sample selection since NEOs are a subset of EOs). For event-type studies using CXO appointment announcements, we recommend that researchers check if the CXOs are part of the TMT, operationalized as EOs in that year’s annual filings. In these studies, if sample size is an issue and all CXOs need to be included, presence in TMT should be used as a control, an approach that can also be used if the scope of the TMT is broadened to include the additional executives reported in the glossy annual reports or websites (see last column of the table). Lastly, we note that our recommendations are limited to public firms, which are required to disclose information on their key senior executives.
Top management team (TMT) operationalizations using secondary data
|Characteristics of TMT Operationalizations||Executive Officers (EOs) of the Registranta,b||Named Executive Officers (NEOs)b||Management/Leadershipb|
|Definition under Exchange Act||CEO and vice presidents in charge of a principal business unit, division or function and any other officer who performs a policy making function||CEO, the CFO, and (typically) three other most highly compensated EOs, i.e., a subset of EOs but can be same as the EO list||No formal definition but is either the same as the list of EOs or has additional executives or senior officersc who are not EOs|
|Source for collecting data||Firms can choose to report EOs in 10-K or definitive proxy (DEF 14A); 10-Ks are usually filed earlier than proxies; needs manual data collection||Typically in proxy; available as downloadable data in the Execucomp database||Glossy annual reports sent to shareholders, or websites, but the latter source is not historical; needs manual data collection|
|Legally required to be reported and consistently available for firm-years||Yes||Yes||No for executives who are not EOs; glossy reports are also not required (firms can send 10-Ks instead)|
|Inclusion determination||Annually, by board of directors||Based on total pay of (typically) five highest paid EOs||Unknown for executives who are not EOs|
|Purpose||Disclosure (to SEC and shareholders) of EOs’ (a) beneficial holdings, purchases, and sales of employing firm’s equity securities to shareholders, (b) biographical information such as age, tenure as EO, current and previous titles in firm, and prior business experience, and (c) appointment, termination, resignation or retirement filed in 8-Ks||Disclosure (to SEC and shareholders), of NEO’s compensation details; recent say-on-pay ruling also requires advisory vote by shareholders on compensation at least once every three years||None formally indicated but likely purpose is to communicate leadership information on EOs (and other significant executives) to broader investor community, general public, and other stakeholders|
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Nath, P., Bharadwaj, N. Chief marketing officer presence and firm performance: assessing conditions under which the presence of other C-level functional executives matters. J. of the Acad. Mark. Sci. 48, 670–694 (2020). https://doi.org/10.1007/s11747-019-00714-1
- Chief marketing officer
- Executive dyad
- Inter-functional interfaces
- Organizationally embedded view of marketing
- TMT functional dyads
- Financial performance