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A Blessing in Disguise

by Bob Siegal

"My father taught me many things here. He taught me, 'Keep your friends close, but your enemies closer.'"

His brow was covered with sweat.  “This all just seems so invasive.”  His words were dripping with concern and desperation.  Like others we’d met recently, he’d never been through anything like this before.  “I don’t want everyone to be disrupted.”  He was scared.  “You need to promise me that this will be done with a minimum of pain and disruption.”  We assured him we were professional.  We already had lots of experience in this area, and told him that if all went well, they could actually end up stronger than they were now.  He leaned back in his chair and sighed, heavily.  “Oh right, I’m sure we will.”  The sarcasm was palpable.  “This Sarbanes – Oxley stuff is going to kill us.”

The above is a verbatim composite (with a little literary license) of a typical opening meeting I have attended for a SOX/404 review of a Fortune 500 marketing department.  And, I’m happy to report—in the end, the CMO’s concerns are always proved to be unfounded.  

Having performed quite a few SOX marketing reviews, I know management, especially marketing management, has great trepidation when it comes to marketing and Sarbanes – Oxley.  While each company is different in how it manages its marketing spend, here are some observations I’ve made while conducting SOX/404 reviews that may explain this concern:

  • Finance management often perceives marketing as the department with the weakest financial and operational controls
  • Marketing has often proved to be the department with the weakest financial and operational controls
  • The relationship between finance and marketing is often strained at best
  • Even many marketers believe that you really can’t “measure marketing”
  • A surprising number of marketing departments don’t have formal agreements with their agencies or other vendors
  • Likewise, many departments don’t have formal production or media procedures
  • Many companies have been remiss in regularly auditing their marketing spend
  • Finance often doesn’t understand how marketing, advertising and media operate
  • Even marketers are often unclear about how their agency manages media and production
  • Marketers are often loathe to “disrupt” their relationships by auditing their agencies, vendors and the media spend
  • Informal processes and procedures often mean that business is conducted in a manner that violates the basic SOX principles

Making lemonade from lemons

But there is a positive solution.  Instead of seeing the SOX review as a bitter pill you have to swallow, you can instead see it as a chance to make the proverbial lemonade out of the lemons you’ve been given.  Several forward-thinking CMOs (with the active support and cooperation of the CFO and the finance department) make the conscious decision to turn their department’s SOX review into an oft-needed (but too seldom performed) opportunity for a process and systems review.  The best part of this approach is that it takes little additional time and effort to accomplish this goal, as the SOX review steps are essentially the same ones you would take if performing a process review. 

Consider the very basic steps in a SOX review:

  • Document the processes and procedures for performing the various functions of the marketing department (chiefly creating, implementing and managing marketing, advertising and promotional campaigns)
  • Determine that adequate approvals (and systems) are in place for developing and managing the marketing budget
  • Ensure that invoices are accurate and have appropriate support
  • Ensure that all financial management and reporting are correct
  • Identify and correct opportunities for potential fraud  
  • Ensure that the company is “getting what it paid for”
  • Test everything, identify any deficiencies, and implement best practices

Of course, the specific steps required are far more detailed than those presented above, but at its heart, the process required by the two reviews is essentially the same.  This means that not only does marketing do its “corporate duty” by conducting the SOX review (do you really have a choice?), but it also selfishly gets to improve itself in the process.  Also, because the improvements are “required by Sarbanes – Oxley,” the CMO need not take the heat for changes that may cause some dissent or discomfort; just blame it on SOX. 

Further, as the SOX review is mandated, not discretionary, it is typically not paid for out of the marketing department budget, but rather by corporate finance. 

So, the CMO gets to improve the department and, aside from the time and effort involved (which would be required for the SOX review anyway), gets the improvement benefit for free. 

After the dust settles, the marketing department gets the chance to show finance they really are good corporate players.  The agencies and other vendors get to show that they really are operating in a responsible fashion as the marketing partner to their client.  And the CFO gets to sleep better knowing that fiscal chaos is not the norm in marketing and that any deficiencies have been corrected.  And even the shareholders win, knowing the marketing department is a responsible steward of the corporate assets.

See, that wasn’t so bad.  Isn’t it great when everybody wins? 

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Bob Siegal, working with corporate internal audit and / or external professional services / accounting firms provides brutally honest subject matter expertise in the areas of entertainment, media, marketing, advertising and public relations for internal audit, contract assurance & process improvement initiatives (yes, including and combined with SOX /404 engagements) for an assortment of clients.

Over the course of a 25-year media career, Bob has experience that encompasses journalism, program development & production, entertainment finance and administration, market research, marketing, management, screenwriting, consulting and stand-up comedy.  He is proud to call some of the leading companies in America either former employers or clients.