Human Resource Management in the Service Sector Lectures 10 and 11: Creative Firms

2 Objectives Understand the basic characteristics of the sector and establish our focus on advertising/marketing agencies Identify the key forms of capital present in these firms Identify the challenges this presents for HRM especially the development and retention of staff Draw contrasts between two practical cases on the way they manage these HR challenges

3 Overview Introduction to the sector Human and structural capital Organisational capital: Business process model: their way of working Client and network capital Implications for HR – balancing conflicting needs

4 Introduction to the sector Creativity is widely present – all organisations include some element of creativity – focus on organisations for whom this is their principal output Importance of individual creativity, skill and talent (human capital) to create and exploit ideas, experiences and images (intellectual capital) Typical examples: music, writing, performing arts, TV and radio Our focus is on advertising and marketing agencies

5 Advertising and marketing agencies Firms whose work includes creative output – advertising – ‘above the line’ (branding/generic/high margin) and marketing – ‘below the line’ (directly aimed at consumers/dedicated/lower margin) Independent of clients for whom they work – compared with in-house marketing departments Huge variation in size – tiny (one-two people) medium sized – , giants (Omnicom, WPP, Interpublic)

6 Intellectual Capital Human capital Social capital Structural capital Network Capital Client Capital Organizational Capital Forms of Capital Knowledge skills and experience of staff Knowledge embedded in values, culture and relationships Ways of structuring work Procedures, policies and processes Knowledge of and relationships with clients Knowledge of and relationships with network members

7 Human and structural capital Account managers – (the ‘suits’) interface between the client and the agency – project management skills – the business logic Creatives – (the ‘T shirts’) – copywriters and art directors responsible for creative output – ‘freshness’ of ideas – the artistic logic Account planners - (the ‘voice of the consumer’) – authenticity in representing customers – testing and validating ideas – the scientific logic (Grabher (2002))

8 Client project teams: structural and human capital Account managers Creatives Account planners

9 Accounts and projects Client accounts – may be a contract for 2-3 years or a one off piece of work Campaigns – tend to be within an account – series of activities – complex or simple Project teams based around clients and campaigns – membership may fluctuate – involve in-house and external staff Work with client representatives – typically marketing managers Work allocation managed by ‘traffic’

10 Human, structural and organisational capital ‘Traffic’

11 Organisational capital: Business process model Formal procedures for handling campaigns Process for taking a client brief and converting that into a desired output Series of stages tend to be managed by the account managers Different forms and interactions of capital needed at different stages

12 Organisational capital: Business process model Post job debrief Client delivery New business Agree contract Organise project Work and Reviews

13 Client and network capital Importance of time – need to respond quickly to client requests Internal human capital supplemented by external human/network capital Personal external networks – often in the local area – interaction of human social and network capital

14 Client contact and client capital Client Marketing manager Agency (Grabher (2002)

15 Building network capital Client Marketing manager Agency

16 HR challenges presented by these characteristics Tensions between needs of clients, employees and firms The interaction between the need to develop employees, serve the needs of clients and achieve financial success Two contrasting examples: ‘Stonehenge’ and ‘Kaleidoscope’ Virtuous and vicious cycles

17 Human capital Social capital Structural capital Network Capital Client Capital Organizational Capital Intellectual Capital Resourcing Job and Work Design Training and Development Pay and Reward Performance Management Involvement Delivery Strategy Structure The HR Wheel Kinnie et al 2006

18 Pressures on HR in marketing agencies Product market - Customers and clients Financial success – short and long term Employment market – needs of employees Agency (Maister, 2003)

19 Managerial challenges How can organisations retain and develop their professionals? Presents three dilemmas that sit between the employee and the organisation RetentionEmployability Organisation specific Transferable Value capture Ownership of value Multiple Identity perspective

20 Key challenges and tensions facing HRM in marketing agencies External Resourcing –Attraction and retention of staff valuable to the firm and to existing and potential clients –Recruiting for internal development – recruiting experienced staff Internal Resourcing –Promotion and career building – efficient allocation of staff –Rotation of staff - building and maintaining client and network relationships Training and Development –Developing human capital - developing client capital –Importance of coaching, feedback and development – importance of serving client needs Reward –Intrinsic rewards linked to development – extrinsic rewards linked to client success –Longer term rewards through promotion – shorter term linked to targets Our focus: the interaction between the need to develop employees, serve the needs of clients and achieve financial success

21 Client aims and consequences for employee development Clients Want best people of their account Build up good relations with them People who understand their customers Employee development Work on the account for a long time Exploiting existing knowledge – low creativity Become bored – retention problems

22 Firm aims and consequences for employee development Firm Serve needs of clients Retain clients and gain new business Repeat business, long term and profitable/efficiency Develop high value work Employee development Client led creative work Repeat business – low levels of creativity Insufficient resources devoted High value work may have low priority

23 Employee aims and consequences for the firm and clients Employee development Interesting and challenging work Develop their employability and CV Chance to learn and develop their skills Firm Opportunities to work on creative/high profile projects Variety of projects Opportunity to learn new techniques and work with good people

24 Competing identities in marketing agencies ProfessionalOrganisation TeamClient PSF employee

25 Managing competing identities and HRM ProfessionalOrganisation TeamClient PSF employee Aim: Commitment, shared values to improve retention and knowledge flow Aim: Develop knowledge and skills, improve versatility and external networking Aim: Address client needs, manage relationship, grow business Aim: Good team working improve performance and knowledge flow HR: Strategy, staffing, values, participation HR: Team design and allocation decisions, team working skills HR: Type of work and client interactions, support for client management HR: Recruit potential, development opportunities and job design

26 Stonehenge

27 Managing competing identities and HRM in ‘Stonehenge’ ProfessionalOrganisation Client PSF employee Team Values unimportant in recruitment low participation Low social capital shared values and language Development needs met in limited way by firm and clients Narrow jobs, limited new skill opportunities and development Strong team boundaries – difficult to contact others Learning from clients and mostly economic relationships Movement to and from clients Team pay is important

28 Kaleidoscope

29 Managing competing identities and HRM in ‘Kaleidoscope’ ProfessionalOrganisation TeamClient PSF employee Good ability to serve client needs, good explore and exploit Values important in recruitment, strong participation Training intervention to improve client creative processes Recruit potential, broad jobs, good new skill and development opps. Strong social capital, shared values and trust Strong team permeability – easy to contact others Development needs addressed by firm and client work Team pay has some role

30 Pressures on HR in marketing agencies: virtuous cycle Product market - Customers and clients Financial success – short and long term Employment market – needs of employees Agency (Maister, 2003) Good clients = interesting work = attract & retain employees Interesting work = attract and retain good employees = High margin Financial success = attract and retain good employees and clients

31 Pressures on HR in marketing agencies: vicious cycle Product market - Customers and clients Financial success – short and long term Employment market – needs of employees Agency (Maister, 2003) Lose good clients and interesting work = difficult to attract & retain employees Less interesting work = difficult to attract and retain good employees = low margin Low margin = difficult to attract and retain good employees and clients

32 Conclusions Advertising/marketing agencies exist in fast moving environments where there is a complex interaction between different forms of capital This throws up a series of HR challenges which can be managed in different ways Demonstrates need for HR practitioners to understand how these forms of capital interact throughout the firm