Human Resource Management in the Service Sector

1. 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 – 100-500, giants (Omnicom, WPP, Interpublic)

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

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 Creatives Account managers 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 Client delivery Post job debrief Work and Reviews Organise project New business Agree contract

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

15. Client Marketing manager Building network capital 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 Network Capital Client Capital Structural capital • Organizational • Capital The HR Wheel Strategy Resourcing Structure Job and Work Design Involvement Intellectual Capital Training and Development Performance Management Pay and Reward Kinnie et al 2006 Delivery

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

19. 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 Multiple Identity perspective Value capture Ownership of value

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. 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 Client aims and consequences for employee development

22. 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 Firm aims and consequences for employee development

23. 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 Employee aims and consequences for the firm and clients

24. Competing identities in marketing agencies Organisation Professional PSF employee Team Client

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

26. Stonehenge

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

28. Kaleidoscope

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

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

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

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