| 265 The Marketing Function in its Organisational Context by Douglas Tookey The positive role of the marketing function in the firm has been strongly emphasised in the literature. The advocates of marketing development have seen a clear link between the growth of this activity and increased effectiveness. The hypothesis can be summarised as follows: (1) The marketing concept provides the most useful basis for the making of overall business policy in the firm. (2) Its application requires the development of a range of marketing activities. (3) It also requires the creation of a marketing function, and the integration of these activities (and some others previously assigned to other departments) in a \"unified marketing organisation\". (4) The acceptance of the marketing concept by all members of management, and co-ordination and control by marketing of all \"customer-impinging\" activities (as in 3) will act as an integrating force in the organisation. (5) The overall effectiveness of the firm will be improved by these changes. The main difficulty with this line of argument is that its propositions are largely unsubstantiated. It seems likely that in the last two decades the pace of marketing development has accelerated in UK manufacturing firms. But the nature and effects of this development have received little attention from researchers in this field, who have concentrated on the improvement of marketing theory and practice without reference to the organisational context. This bias of interest is reflected in standard marketing texts. Philip Kotler[l] draws attention to some of the organisational issues (see, for example, his table summarising conflicts between marketing and other departments[2]. But he devotes less than a twentieth of his text to the subject of marketing organisation. Studies of the organisational impact of marketing such as those carried out by David Carson and by Roy Hayhurst and Gordon Wills have been exceptional during this period. Professor Carson[3] examined the extent to which the adoption of the marketing concept in 54 British manufacturing firms had resulted in organisational changes (i.e., the development of a \"unified marketing organisation\integration just below top management of those activities orientated primarily to customers\") in 1966/7. He categorised these firms as A (outstandingly successful in marketing) and B (mediocre or poor in these respects). \"For the large and medium sized firms combined, 68 % of the category A firms had unified marketing organisa-tions as against only 25% of those in category B\". 266 | European Journal of Marketing 8, 3 A larger-scale study by Roy Hayhurst and Gordon Wilis[4] of over 500 major firms in 1968 recorded what they have described as \"the British marketing organisational status quo\". They found a wide acceptance of the marketing concept among senior managers. Manufacturers of consumer goods were somewhat more strongly orientated towards the implications of the marketing concept than their counterparts in the industrial producing situation. On the other hand this adoption of marketing had not led to logical changes in policy and organisation—\"in leading firms in British industry, we have advanced in only a half-hearted fashion to the full operational implementation of the marketing concept\". These two studies were extensive in character, designed to collect basic information and summarise the situation in a large number of firms. It appeared that, to see whether a more detailed investigation would confirm these conclusions, it would be useful to make an intensive study in a smaller number of firms of the precise way in which marketing had developed. This was the purpose of the project described in this article. We had, at Ashridge, made some studies during the period 1968-71 of marketing organisations in manufacturing and service industries. These led us to a number of provisional conclusions which formed a basis for the later study. The earlier studies suggested that the effectiveness of marketing appeared to depend on the finding of the right role in the organisational structure of the firm. This was particularly important as marketing developed and became increasingly accepted in these firms and assumed responsibility for a greater range of activities. Some marketing failures appeared to be organisational failures. It was decided to make a study of the development of marketing in four firms in a single industry. This would concentrate on a number of measurable aspects of market-ing organisation and relate them to effectiveness in two key activities—product development and customer relationships—which were thought to require a high level of co-operation between marketing and other departments in the firm. The project was designed to answer a number of questions: (a) What had been the overall development of marketing in these firms and how did it relate to organisational performance? (b) Was effectiveness in the two selected activities—product development and customer relationships—influenced by the relationship between the marketing function and the rest of the firm? (c) If this relationship was a significant factor was it determined in the way in which marketing writers have suggested—by the extent to which the marketing concept was adopted by management in all functions, and the progress of the firm towards a \"unified marketing organisation\"? (d) or was it determined by other factors, as P. W. Lawrence and J. W. Lorsch had suggested in Organisation and Environment[5]. In their view differences in attitudes, behaviour and orientation between managers in different functions within the firm were necessary and desirable, provided that integration between function was sufficient to achieve collaboration. Marketing Function in the Organisation | 267 They found, in a study of ten American firms in three industries, a relationship between differentiation among managers in three functions within the firm (in goal, time and interpersonal orientation and in a degree of formality and structure) and differences between the three environmental sectors with which these functions have to deal (R&D with the scientific sector, production with the techno-economic sector, marketing with the market sector). \"As organisations deal with their external environments, they become segmented into units, each of which has as its major task the problem of dealing with a part of the conditions outside the firm. This is a result of the fact that any one group of managers has a limited span of surveillance. Each one has the capacity to deal with only a portion of the total environment. If we take as an example either a division of a large, diversified corporation or a medium sized firm, we really observe sales, pro-duction and design units, each of which is coping with a portion of the organisation's external environment ... This division of labour among departments and the need for unified effort lead to a state of differentiation and integration within any organisation [6].\" Here differentiation is regarded as an unavoidable concomitant of specialisation of function within a firm, but needing to be balanced by integration, which could be defined as: \"the quality of the stage of collaboration that exists among departments that are required to achieve unity of effort by the demands of the environment[7]\". Our project was carried out between February 1972 and July 1973 in the electronics industry. Four firms of small to medium size were studied. One of these had less than 1,000 employees, two had between 1,000 and 2,000 and one between 2,000 and 3,000. We selected firms from this industry because we thought that their complex products resulted in a high degree of interdependence between marketing and other departments in the firm. We sought and found two firms at an earlier stage of marketing develop-ment and two at a later stage. The field work in the companies consisted of interviews with management and other staff. We interviewed in each firm an average of twenty-seven staff, half in marketing and half in other departments. We also spent a certain amount of time observing the work of sales engineers visiting customers, and we interviewed customers independently and obtained their evaluation of the customer services of the firms studied. The work concluded with the completion of a question-naire which enabled us to measure attitudes and relationships in the firms and the views of managers on effectiveness in marketing and in other activities. One hundred and eighteen questionnaires were sent out to those who were interviewed and some other members of staff. Ninety were returned. We found that marketing development in these firms had progressed unevenly. Marketing had become widely accepted as a concept, but was less advanced as an activity or as a function within these firms. In our interviews with managers there was some confusion when we began talking about marketing. The sales function had fully developed over the years in these firms but marketing was, in most cases, in its early stages of development (subordinate to sales management in two of the firms). People 268 | European Journal of Marketing 8, 3 Table I. Marketing Development in the Four Firms (Rank Order) Attitudes 2. 1. marketing to the Marketing 3. Development 4. Total 5. Firm concept performance and sales of marketing Organ-6. organisation development marketing ranking performance isational C 1 2 1 1 1 A 2 1 3 2 2 D 3 3 2 3 4 B 4 4 4 4 3 said, \"Do you mean sales or marketing?\" They saw these as two separate activities. Sales was seen as something which had been in existence for a long time and with which people were relatively familiar. Marketing was newer and although reactions to it were positive, managers in general were less clear about how it worked and its role in the firm. Attitudes to the marketing concept were tested (as in the Hayhurst and Wills study) by inviting respondents to agree or disagree with statements about marketing. The response here was generally favourable to marketing though less emphatically favourable than in the previous study. We also asked managers to consider the performance of marketing and sales as departments. Sales activities were considered to be more effective than marketing. A total ranking for each firm for marketing development, based on a number of factors, was made and is shown in column 5 of Table I. This was compared with organisational performance for the four firms (the method used to measure this is shown in Table II, p. 271). The two rankings are broadly similiar, tending to agree with Professor Carson's finding of an association between marketing development and better performance[8]. Product Development The main requirements for success in product development in these firms were: (1) Effective inputs of the results of scientific research and of market information Most of these firms had difficulty in obtaining these types of input. In the sectors of the electronics industry wh these firms were located (components and scientific instruments and controls) innovation was a major factor in commerical success. The rate at which new products were being introduced to these markets was speeding up, and product life cycles were shortening. But all these firms were too small to finance effective basic research, and even applied research was proving difficult to support. The firms derived their scientific and technological inputs from three sources: Marketing Function in the Organisation | 269 (i) licensing, mainly, from U.S. companies, (ii) joint development with customers, leading to products which could be sold more widely, (iii) using components or assemblies provided by other firms. This meant that they were dependent, to a lesser or greater extent, on other companies which were more advanced in science and technology and carried out basic and applied research. The strength of these four firms lay in the middle and later stages of the product development process, in making new products and bringing them to the market. These firms were not much better served with market information. The main sources for this were sales engineers' contacts with customers and market research. In practice, they relied heavily on the first source and there was little systematic investigation. This meant that the firms were better informed about short-term developments than long-term trends in the market, and that the information from their customers, being derived from contact at a low level, was incomplete. (2) Parallel development of services related to products The products were of little use without technical information and advice, well-informed discussions on the products and their application, data books, up-to-date estimates of production and deliveries, etc. The customers of these firms made it clear to us in interviews that although these services were provided they were less well-planned than the product range. And there was no systematic development of services comparable to the development of products. Another problem was that there was no direct costing of these services, and they were, in many cases, not directly charged to the customer. Where the provision of services was on a large scale (three-quarters of firm D's staff were employed in administration and services and one-quarter in manufacturing), this led to anomalies. It was significant that this firm had the lowest profitability. (3) Well devised procedures and controls These included clear assignment of responsibilities for the various stages in development, evaluation of new ideas at an early stage, budgeting for accepted new products and modifications, and agreed procedures and programmes. (4) Positive contributions by the development and marketing/sales departments. Performance in product development was related to these contributions. (5) Adequate financial resources In firm A financial restrictions on applied research led to product obsolescence and falling sales (see Figure 1), culminating in a takeover by a foreign-based company with more advanced technology. Requirements 1, 2 and 4 were linked to the development of marketing and, to a lesser extent, to the state of inter-departmental relationships in these firms. Column 2 in Table II shows the relative performance in product development of the four firms, as assessed by the managers and staff who completed questionnaires. 270 | European Journal of Marketing 8, 3 Marketing Functions in the Organisation | 271 Table II. Organisational Performance—Ranking of Four Firms Performance 2. Performance in customer relationships Performance of firms development in product 6. 7. Rank from 3. subjective Rank from 4. 5. Rank based Rank based on profits/ on 8. Total 9. Overall 10. Firm 1. Rank from subjective appraisal appraisal customer's appraisal Sub-total rank net capital employed subjective appraisal Sub-total rank rankings all order rank C 1 3 2 2·5 2 1 1·5 5 1 A 4 1 1 1 1 2 1·5 6·5 2 B 3 2 4 3 3 2 2·5 8·5 3 D 2 4 3 3·5 4 3 3·5 9·0 4 272 | European Journal of Marketing 8, 3 Customer Relationships We found marked differences between the way in which a satisfactory relationship was defined by the four supplier firms on the one hand and their sixteen customer firms on the other. Taking this into account, we concluded that there were three main requirements for success in customer relationships: (i) an understanding by the supplier of the relative importance attached by the customer to supplier performance in various areas, (ii) the ability of the supplier to provide a required range of services and products, (iii) the extent and nature of supplier/customer contacts. There was an association between the ranking of these firms for \"ease of customer contact\" and for overall customer appraisal. Customers' preferences for wide-ranging unrestricted contacts in the supplier organisation suggested that channelling of contact through the marketing function, as suggested by advocates of the \"unified marketing organisation\Philip Kotler demonstrates what in his view are the advantages of co-ordination of company actions impinging on buyers. This would reduce multiple contacts by buyers to a single contact with the marketing department which would channel information from the various departments in the firm. However, the customers of the firms we studied had a strong preference for contacts at all levels and with all departments inside the firm. This system, to the extent that it existed in these companies, appeared to work well, and, by a process of osmosis, to clarify customer requirements and the ability of the firm to meet these. Performance in customer relationships, based on subjective appraisal within the Marketing Function in the Organisation | 273 firm and the appraisal of customers (the two only coincided in the case of firm A), is shown in Table II, column 5. The development of marketing and the level of its co-operation with other depart-ments in the firm played a significant part in customer relationships. Inter-departmental Relationships We were particularly concerned, in measuring the state of these relationships, with those between marketing/sales and the two other major departments in these firms, development and production. We also wanted to try to establish the influence of these relationships on effectiveness in product development and customer relationships. The account given above of the factors influencing effectiveness in these activities has suggested that marketing relationships within the firm may influence performance. The hypothesis is tested in Table III, which shows some correlation of ranking for the marketing/sales—rest of firm relationship with the performance of the firm as a whole, and with performance in customer relationships, but not with effectiveness in product development. An explanation for these results can be found in the \"requirements for success\" in the two last-mentioned activities. Although we found three of the five requirements for successful product development were linked to the development of marketing and, to a lesser extent, to the state of inter-departmental relationships, there were two other important factors and one of these—\"adequate financial resources\"—proved to be critical in two of the firms. In firm A the lack of financial support for applied scientific research negated the firm's advantages in marketing development and relationships, and the firm was taken over by a competitor who could provide new products, and particularly valued firm A's ability to market these. In firm B weaknesses in marketing development and relationships were compensated for by resource allocation to product development, and this explains the firm's high ranking for this activity, although it was ranked lowest in the other two areas. Table III. Marketing as an influence on performance in product development and customer relationships (Ranking of four firms) Performance in product development 1 4 3 2 Marketing/Sales —rest of firm Performance relationship (the in higher the rank, customer Organisational the better the relationships performance relationship) 2 1 3 4 1 2 3 4 2 1 3 4 Firm C A B D 274 | European Journal of Marketing 8, 3 In contrast, in customer relationships there were three main requirements for success (supplier understanding of the relative importance attached by the customer to supplier performance in various areas, the ability of the supplier to provide a required range of services and products, and the extent and nature of supplier/customer contacts), which were closely linked to the level of marketing co-operation with other departments, and with the development of marketing. This close linkage explains the exact coincidence of rankings for \"customer relationships\" with those for the market-ing/sales—rest of firm relationship. Our second concern was with the way in which the relationship between the marketing/sales department and the rest of the firm was determined. Was it deter-mined by the extent of acceptance of marketing ideas and the strength of marketing influence in the organisation, or was a state of differentiation balanced by integration desirable? In the questionnaire, managers and other staff were asked to select statements (ranging from \"Sound—full unity of effort is achieved\" to \"Poor, serious problems exist which are not being solved\"), which described the relationship between the three departments with which this study was concerned. The results were as shown in Table IV. A previous study which we had made of a large electronics firm had shown that inter-departmental conflict had increased and the relationships deteriorated as marketing developed. But this was not the case in these four firms, as Table V shows. We thought there were a number of reasons for this. Planned integrative pro-cedures had, to a varying extent, balanced the differentiation arising from marketing development. Also, inter-departmental relationships were more satisfactory in the two firms where marketing had developed furthest. In these firms relationships were seen as determined by the extent to which departments had acquired their appropriate levels of influence and competence, and the higher levels of influence and competence of marketing were seen as necessary and desirable. We also thought that the better marketing/sales relationships with other depart-ments in these firms were influenced by the fact that the firms were of small to medium size, with less specialisation and more informal contacts, and that the absence of basic applied research in three of the firms reduced the level of differentiation. Attitudes to marketing were different in these firms from those we recorded in the Table IV. The state of inter-departmental relationships (The higher the figure, the better the relationship as perceived) The relationship between: Development/Production Development/Marketing and Sales Production/Marketing and Sales Appraisal of state of relationship Firm Firm Firm Firm All firms A B C D 63 72 74 60 60 55 46 74 47 42 57 51 52 65 56 Marketing Function in the Organisation | 275 Table V. Marketing development and influence compared with inter-departmental relationships (Ranking of four firms) Influence of Marketing Marketing Department Marketing/Sales Development on Company —rest of firm (Table I) Policy relationship 1 2 3 4 1 2 3 4 2 1 3 4 Firm C A D B larger company, where marketing theory was regarded as unscientific and marketing was suspected of empire-building at the expense of more traditional departments. But in these smaller firms the growth of marketing was accepted if it proved capable of undertaking the tasks it claimed to perform, and the marketing function was given an appropriate influence on company policy. This acceptance of the concept was not associated with the development of a \"unified marketing organisation\" (which none of the firms had established). (In fact it appeared that one form of this—integrated marketing—might have led to a deterioration in customer relationships—see page 272). We found some obstacles to repeating the Lawrence and Lorsch measurements of environment factors and inter-departmental relationships. The scale of our study was smaller so that we were not able to make all the measurements used in the original study, and some of the questions were thought inappropriate or likely to be un-acceptable to British managers. Most of the measurements were repeated, but although they tended to confirm and extend other findings of the study, they did not corroborate Lawrence and Lorsch's main hypothesis, i.e. that states of differentiation and integration within the organisa-tional system, to the extent that they were related to relative uncertainty in environ-mental sectors, determined effectiveness. Within the limits of this paper it is not possible to discuss this issue in any detail. An example will illustrate the difficulties we encountered. Lawrence and Lorsch investigated six firms in three U.S. industries, and a funda-mental measurement was that of relative environmental uncertainty for the three sectors shown in Table VI, which shows the results of our replication of their measure-ments for the two sub-environments of the firms in our study—\"components\" and \"scientific instruments and controls\". There are two problems here. From the evidence obtained from the remainder of our study, we would have expected the \"uncertainty\" in the second environment to be greater than in the first. In the instruments and controls industry the requirements of the market were less clear, the production processes were complex, and the scientific and technological aspects somewhat more advanced. This is confirmed in the higher 276 | European Journal of Marketing 8, 3 Table VI. Relative uncertainty of environmental factors (Higher scores indicate greater uncertainty) Clarity of information 1. Electronic Components (Firms A and B) Scientific Market Techno-economic 2. Scientific Instruments and Controls (Firms C and D) Scientific Market Techno-economic Uncertainty of causal relationships Time span of definitive feedback Total uncertainty score 3·37 2·77 2·37 5·29 3·39 4·75 4·32 3·65 2·56 12·98 9·81 9·68 2·68 2·22 3·01 4·45 4·26 4·72 4·72 4·03 2·82 11·85 10·51 10·55 scores for two of the \"instrument\" sectors compared with the corresponding \"com-ponents\" sectors (market and techno-economic), but the lower \"scientific\" score was unexpected. This could be partly explained by the difficulties which the components firms were experiencing in obtaining the necessary scientific inputs compared with the other two firms. To managers in the component firms, the scientific sector of this environment, although objectively less uncertain, appeared less certain. The other problem presented by these results is that although Lawrence and Lorsch's hypothesis about varying levels of uncertainty in sub-environments (in the three industries they studied) could be applied to our findings in the \"components\" firms, it appeared to be inapplicable to the \"scientific instruments and controls\" firms, where high levels of uncertainty arc shown in all three sectors. Similar difficulties were encountered in analysing the results of the other measure-ments (i.e. of required differentiation, integration and performance). We concluded that apart from differences of culture and type of industry which made it difficult to replicate Lawrence and Lorsch's study, the smaller size of firm in our investigation resulted in lower levels of specialisation and differentiation, and less need for the integrating units which they identified. To sum up the answers which our study of these four firms produced to the questions asked at the beginning of the project (see p. 266), we found, firstly, that a high level of marketing development was associated with a high level of organisational performance (supporting the conclusions reached by Professor Carson). The nature of the marketing/rest of firm relationship played a significant part in success in customer relationships, but was less important than some other factors in influencing effectiveness in product development. There was an association between good marketing/rest of firm relationships and a higher level of marketing development. We expected to find that where a firm had adopted the marketing concept and implemented this by modifying its organisational Marketing Function in the Organisation | 277 structure, differentiation would, by definition, be higher than in a firm which had not developed in this way. However, we found that in these firms planned integrative procedures had balanced the differentiation arising from marketing development. And inter-departmental relationships were more satisfactory in the two firms where marketing had developed furthest. In these firms these relationships were evaluated mainly in the light of the influence and competence of departments, and the higher levels of influence and competence of marketing were seen as appropriate. But these firms had moved only part of the way towards a \"unified marketing organisation\marketing\" organisation appeared to conflict with the requirements of the customers of these firms. We saw marketing development in these firms as handicapped by the lack of an industrial marketing theory and by the difficulty of developing marketing from the previous stage of sales orientation. Dissatisfaction with marketing performance in these firms was mainly with the inability of marketing functions in their embryonic state to measure up to expectations and provide the necessary services to other departments. The study showed the importance of lateral integration between departments in an organisation. This was seen as particularly important between the marketing/sales and development departments, and to a degree between other functions. In practical terms, this means that as much attention needs to be given in organisational design to the integrating process as to the operational process. The management of boundary relationships may be as important as the management of task performance. ACKNOWLEDGMENT This project was made possible by the help given by a number of organisations and individuals, and mention should especially be made of the Social Science Research Council, who supported the project with a grant, and Ashridge Management College, who provided the balance of support. Also Professor R. J. Lawrence who acted as tutor when the report on the project was submitted as a thesis for the degree of M.Sc. in the University of Lancaster; colleagues at Ashridge, particularly May Tha Hla, who interviewed and analysed the research material; and the managers in the four firms studied, who gave freely of their time and knowledge. References 1. Kotler, P., Marketing Management: analysis, planning and control, Prentice Hall, 1967. 2. Kotler, P., op. cit., p. 139. 3. Carson, D., \"Marketing Organisation in British Manufacturing Firms\ Journal of Marketing, April 1968. 4. Hayhurst, R., and Wills, G., Organisational Design for Marketing Futures, George Allen and Unwin, 1972. 5. Lawrence, P. R., and Lorsch, J. W., Organisation and Environment, Harvard, 1967. 6. Lawrence, P. R., and Lorsch, J. W., op. cit., p. 8. 7. Lawrence, P. R., and Lorsch, J. W., op. cit., p. 11. 8. Carson, D., op. cit., p. 38. 9. Kotler, P., op. cit., p. 9.