Downsizing CMOs: don’t miss the window to transform your operating model

The last year has been a roller coaster for US marketing organizations.

How we got here

Deferred headcount adds from the pandemic coupled with an accelerated need for new-age marketing skills drove a boom in hiring. Posting new positions and reactivating recruiting agencies became a central priority on every marketing leader’s agenda. Then the labor shortage hit. Without enough qualified marketing talent in motion to meet the insatiable appetite of hiring managers, top talent became scarce to find, shifting the balance to an employee’s market where prospective hires could name their title, salary, and working model. And they did just that, driving marketing salaries to an all-time high.

As basic economics tells us, an increase in prices will drive an increase in supply. That happened as marketers of all levels, including ones happy with their role and company culture, updated their resumes and got on the interview circuit. That created the resignation wave.

Some marketing leaders used this opportunity to bring in freelancers, but quickly found that large variations in quality and inconsistent availability made this an unsustainable path—ultimately driving them back to full-time equivalent (FTE) hiring. The spike in freelancer demand and the promise of greener pastures caused many in-house marketers to leave their full-time jobs to enter the gig economy. This further reduced the available talent levels and pushed salaries higher. This led to a point where some hiring managers were compromising on the quality of talent and paying any salary demanded simply because they had to fill vacant roles.

Then, with the looming threat of recession came retrenching and layoffs. As finance and marketing leaders sought to meet budget pressure, the high cost of labor made it necessary to downsize their organizations.

That’s a lot of whiplash in 12 months.

Unfortunately, the net result is that marketing is now in a position with a higher cost base but less overall capacity. The cost of running a marketing organization has gone up due to increased labor costs from proactive market adjustment raises to retain staff, as well as salary cost increases from replacing staff that left—often at equivalent skill levels, meaning the marketing organization became more expensive but not necessarily more diversely skilled or impactful. The current condition of hiring austerity and layoffs also puts the marketing organization at a lower capacity level. And if you are like most CMOs that I talk to, you are facing an elevated pressure on marketing to perform and be the savior for delivering a revenue plan that is increasingly at risk of being missed. The solution to every business problem is more revenue, right?

The ‘do more with less mandate’ has reached a new intensity.

Many marketing leaders in high-growth organizations talk about the need to build the airplane while it’s flying, and they have gotten very good at that over the past three years. But now, the headwinds driven by these organizational issues have stalled that airplane—badly. It’s recoverable, but it requires doing something different. It requires changing the marketing organization.

Now is the time to change the operating model.

The underlying reason that set these labor issues in motion is a sub-optimized marketing organization.

1. The marketing department doesn’t often have enough of the new-age skills to operate today’s omnichannel and hyper-personalized marketing machine.
2. Marketing has a considerable amount of operational work across processes, systems, and execution tasks. Without this work, marketing can’t pull a list, atomize content, or launch an ABM campaign—the work is important, but it’s not a core competency. Some of this work is put into roles that don’t have a clear career path, driving constant turnover. Or sometimes this work is bolted onto a senior marketer who is supposed to be doing strategy work, but also has to write and set up testing for their own email campaigns and build their own landing pages, for instance. The objective of keeping the engine running becomes the primary focus for many in the marketing organization, rather than evolving, thinking bigger, or finding new ways to engage and add value to the customer. When it comes time to restructure the organization and cut costs, marketing leaders are forced to choose between doing without individuals who are executing programs or doing without those who are building the future. Those working on the future are the first to get cut, and the cycle continues.
3. Marketing tends to insource a lot, only relying on external partners for highly specialized edge-case work in marketing or for one-time projects. When it comes to day-to-day work, the marketing organization is solely accountable for providing the capacity to deliver, and the organization is almost always capacity constrained.
4. It is incredibly difficult to deliver productivity and impact improvements on a flat or constrained budget while labor costs increase at double-digit rates.

There is a better way.

A transformed operating model addresses these issues.

Gartner’s recent “Recession Playbook for Marketing Leaders” highlighted the need to change the operating model in one of their top recommendations: “Fundamentally rethink the way your company leverages humans (locations, hours, part- vs. full-time, in-house vs. outsource).”

Advanced marketing leaders understand the importance of best-practice execution and the value in buying that capability from the outside vs. building it. The most forward-thinking marketers deeply understand the P&L implications of labor, managing labor costs with the same scrutiny as they do their program spend and advertising budgets. These marketers fulfill execution work offshore from a marketing-as-a-service (MaaS) provider like 2X. This new model gets the marketing leader out of the business of dealing with a large swath of employee turnover, management capacity, process compliance, and workflow optimization. This shift also drives down the run-rate cost of labor.

The modern marketing operating model splits run from grow, separates strategy from execution, balances core competency and commoditized work, and has an ongoing evaluation of where marketing should hire vs. buy talent. It is built on the foundation of outsourced execution work—contracting for FTEs and dedicated run teams from a third party (ideally offshore) that provides delivery of execution and process work as a managed service.

Marketing leaders who outsource execution work realize numerous benefits.

1. Talent recruitment and retention
   One of the best ways to reduce turnover is to improve employee satisfaction by removing basic work from your senior staff that is far below their capability and expertise level. There is a large amount of that work in most established marketing teams. Giving this work to an outsourced provider allows your marketers to focus on being marketers again. For employees with high potential, it also provides a pathway to management by allowing them to manage a vendor and learn other new skills required to advance in the organization.

   Further, outsourcing a material part of execution will minimize the distraction of retention and recruitment across execution roles that are important, but not core competencies for your organization. Let the outsourced provider manage this, and instead shift that time to address retention and recruitment with more attention on the critical roles of your insourced, senior, and strategic staff.

2. MarTech/RevTech management and value realization
   Open an access lane to skilled and certified marketing technologists that are incredibly hard to hire and retain internally, but readily available via an outsourced provider. This allows you to make an outsourced provider accountable for stability of operations, responsible for best-practice process implementation, and on the hook to extract every ounce of potential value from your tech stack into your marketing engine. Outsourcing also gives flexibility for technology change. Shifting from Pardot to Marketo becomes much less difficult with an outsourced team to navigate the organizational and skill changes of new technology. The vendor manages that for you.
3. Focus and impact
   Tasking a single marketer with both strategy and execution work sub-optimizes both sides. Dual-focused marketers often build campaign plans and strategy only as big as they can individually execute. That’s bad for strategy and drives a survival instinct of cutting corners in best-practice execution. Are your marketers really testing every ad, all the time? Are they really going to propose personalizing five different journeys within one campaign?

   Splitting the work allows the strategic thinking to be unbounded, bigger, and more transformational—the critical element to winning in a highly competitive market.

4. Best-practice process and standards
   Standardization drives efficiency and scale. Having a dedicated vendor team contracted to support a process, from a provider who is in the business of providing service around a process, will bring exponential levels of efficiency and quality to that process. Knowing productivity metrics, unit-cost economics, and utilization and capacity levels provides the foundation for predictable scale.
5. Cost-effective “run” operations
   By working with an offshore MaaS provider like 2X, you will see a 50-75% reduction in labor costs for run work. This re-profiles your run-rate labor costs and provides a budget shift that is often large enough to both satisfy budget givebacks and fuel new investments in technology, programs, or functions that you would not otherwise be able to fund. This fosters a very different relationship with your CFO.
6. Protect your employer brand
   The dynamic market where we operate requires the ability to scale up and down, and it’s hard to do that with large teams of internal FTEs. A reputation for downsizing and layoffs will significantly impact your ability to scale up talent when it’s inevitably needed. Plus, moving from a hiring to downsizing mode will be mentally taxing on both your mid-level managers and retained employees. Outsourcing with contract labor allows greater flexibility to move resourcing up and down through a simple change to a vendor’s statement of work.

Recommendation

Leading change, especially organizational change, is among the most challenging jobs of a marketing leader. The current market conditions have opened the change acceptance window since you are already adjusting how the organizational model operates and runs with less staff in the short term.

Seize the opportunity to implement a sustainable operating model while the willingness to change exists. 2X is ready to help!