Human Resource Management in the Service Sector

Lectures 10 and 11: Creative Firms

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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

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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

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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

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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 – 100-500, giants (Omnicom, WPP, Interpublic)

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IntellectualCapital

Human capital

Social capital

Structural capital

NetworkCapital

Client Capital

OrganizationalCapital

Forms of CapitalKnowledge 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

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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))

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Client project teams: structural and human capital

Account managers

Creatives

Account planners

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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’

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Human, structural and organisational capital

‘Traffic’

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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

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Organisational capital: Business process model

Post job debrief

Client delivery

New business

Agree contract

Organise

project

Work and

Reviews

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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

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Client contact and client capital

Client

Marketing manager

Agency

(Grabher (2002)

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Building network capital

Client

Marketing manager

Agency

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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

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Human capital

Social capital

Structural capital

NetworkCapital

Client Capital

OrganizationalCapital

IntellectualCapital

Resourcing

Job and

Work D

esign

Trai

ning

and

Dev

elop

men

t

Pay and Reward

Perform

ance

Managem

ent

Invo

lvem

ent

Delivery

Strategy Structure

The HR Wheel

Kinnie et al 2006

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Pressures on HR in marketing agenciesProduct market -

Customers and clients

Financial success – short and long term

Employment market – needs of employees

Agency

(Maister, 2003)

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Managerial challenges• How can organisations retain and develop their

professionals?• Presents three dilemmas that sit between the

employee and the organisation

Retention Employability

Organisation specific

Transferable

Value capture Ownership of value

Mult

iple

Identi

ty

pers

pect

ive

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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

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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

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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

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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

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Competing identities in marketing agencies

ProfessionalOrganisation

Team Client

PSF employee

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Managing competing identities and HRM

ProfessionalOrganisation

Team Client

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

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Stonehenge

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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

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Kaleidoscope

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Managing competing identities and HRM in ‘Kaleidoscope’

ProfessionalOrganisation

Team Client

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

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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

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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

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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