When and How Does Board-Level Marketing Experience Impact Firm Performance?
Kimberly A. Whitler, Ryan Krause, and Donald R. Lehmann, 2015, 15-109
Their focus on top-line growth performance, ability to understand consumer preferences, and acumen in generating market insights suggest that marketers would be valuable members of boards of directors. Yet marketing’s presence at the top of firms is nominal. Only 2.6% of board members have marketing experience, suggesting that directors don’t see a connection between marketing experience and the ability to address firm-level marketing challenges.
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How board-level marketing experience improves firm value
To date, there is no research investigating marketing experience at the board level; previous research on marketing’s role in firm-level strategy development has primarily focused on CMOs. In this report, Kimberly Whitler, Ryan Krause, and Donald Lehmann investigate when and how marketing experience on the board contributes to overall firm performance by driving firm revenue growth.
They develop a conceptual model to explain how marketing impacts the firm and the conditions under which marketing experience on the board of directors impacts firm financial performance. They test their model using 64,086 board member biographies and publicly available data from S&P 1500 firms.
Their findings indicate that marketing experience at the board level is considerably more valuable than the number of marketers on boards today would suggest:
- Marketing-experienced board members positively impact total shareholder return in general. A board with one marketing-experienced director is associated with a 3-percentage point increase in total shareholder return over a board with no marketing-experienced directors.
- This effect is even stronger when the firm is facing declining market share. When firm market share is declining by 1.5 percentage points (1 standard deviation above the mean), the presence of a marketing-experienced director is associated with an increase of more than 6 percentage points in total shareholder return.
- The interaction effect of board-level marketing experience and declining market share on firm revenue growth is stronger: (1) at firms with large boards, (2) at firms where the CEO also serves as chairman of the board, and (3) when the number of designated finance experts on the board is lower.
Overall, the study suggests that boards of directors could generate better performance with the inclusion of marketers. These findings may help executive recruiters better understand the conditions under which they should recommend marketers for board positions, and provide insight to board members and CEOs who may influence and/or approve board member choice.
Kimberly A. Whitler is Assistant Professor of Business Administration, Department of Marketing, Darden School of Business, University of Virginia. Ryan Krause is Professor of Management, Department of Management, Entrepreneurship, and Leadership, Neeley School of Business, Texas Christian University. Donald R. Lehmann is George E. Warren Professor of Business and Chair of Marketing Department, Columbia Business School, Columbia University.
We would like to thank the following people who commented and offered helpful suggestions on earlier versions of this manuscript: Mark Houston, Joel Huber, Neil Morgan, Chris Puto, and the seminar participants in the marketing department at the Darden School of Business. This research was made possible by a grant from the Randall L. Tobias Center for Leadership Effectiveness at the Kelley School of Business.
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