UNSW UNSW Business School UNSW Business School

Just who are the crucial Mad Men?

December 10, 2014
Management

​​​​​​​​​​​​​​​​​​​In real firms, it's better to lose the stars out front than the back-room execs   

​For most of the popular TV series Mad Men, lead character Don Draper, the creative director and founding partner of advertising firm Sterling Cooper Draper Price, appears to be the reason his business wins clients.

Draper's talent and unmatched reputation within the industry mean he is constantly being head-hunted. But at the same time he rarely works closely with those around him, and when he finally falls from grace the business carries on quite successfully without him.

In the real world, would the loss of such an influential figure be of greater concern for the business itself? Or is it the less visible and often lower-paid executives working in roles that involve internal relationships that keep the business healthy?

New research from Johann Peter Murmann, an associate professor of strategic management at UNSW Business School, and Y. Sekou Bermiss from McCombs School of Business at the University of Texas, reveals that the external-facing industry heroes are actually less important to the success of an organisation.

While the loss of any executive is damaging, it is far more difficult for a business to recover from the loss of an internal-facing executive than one whose functional role mainly involves the management of external relationships.

 

Causing the most damage

​The research methodology for Murmann's project involved the analysis of data from New York City advertising firms from 1924 to 1996 – Mad Men, indeed. The academics tracked the rise and fall, merging and splitting of the city's firms, observing when specific staff members jumped ship or simply left, and how this affected each business's future performance.

"I was keen to do the research using this data because this is an industry in which people would say that, of course, the outwards-facing stars are more important," Murmann says.

"The creative people are seen as the innovators. So we chose a setting where these individuals should be seen as the most potent in terms of influencing the success of the business. And it turned out the people who hold the fort together, the inwards-facing executives, are more important."

So why is such a finding of great value?

"While the accumulated knowledge of top executives can provide a firm with a competitive advantage, the potential for loss of these executives, and the accompanying loss of critically important human capital embedded within them, is a continual threat to firm viability," Bermiss and Murmann write in their paper, Who Matters More? The Impact of Functional Background and Top Executive Mobility on Firm Survival.

In other words, it is important to identify who might cause the most damage to the business should they decide to leave or to take a position with a competitor company, and ensure they are fully engaged.

"With this research we were simply showing that you can systematically demonstrate that the departure of an internal-facing person increases the likelihood of organisational failure," Murmann says.

"Actually, it makes sense. If you think about Apple or Samsung, they release new devices every six months. Being on time is vital to retaining and building market share and buzz [and so on].

"In terms of the people who are managing the processes of new product development – those who are managing things internally – it shouldn't be surprising that they could be more important than someone who is actually doing the design and innovation and as a result becoming very well known outside the organisation."

 ​

'The external facing person, who is not interacting with all of the other people, does not know much about what their colleagues do' ​

– JOHANN PETER MURMANN

Network leadership​

Samantha Hickey is head of professional services/solutions for CEB, a business that develops the science and practice of management then implements its findings within client companies. CEB's member businesses number more than 10,000 and include 89% of Fortune 500 companies. Hickey says Murmann's findings correlate with work CEB has done recently around what it refers to as network leadership.

"I started looking into whether the external-versus-internal factor ties in around what we're seeing around that topic," Hickey says. "Peter's work does connect up with some of the concepts around the importance of having good connectivity in an organisation."

Network leadership is about the establishment of strong performance in a business by creating internal networks to leverage the knowledge of, and work being done by, various individuals and departments.

"We know that organisations with strong leadership bench strength – companies that have these kinds of capabilities – tend to have about 1.9 times the revenue growth and two times the profit growth of companies that do not," Hickey says.

Successful network leadership entails building communications networks, encouraging and rewarding networking behaviour, supporting organisational learning through sharing  knowledge between departments, and facilitating clear and open avenues for new ideas to be introduced by any staff member.

"These are behaviours that are valuable within an organisation but may not be visible from the exterior, or from a position that faces the exterior," Hickey says.

 

Keeping the show on the road​

Of course, those whose positions are not facing internally are less likely to establish or become a part of these networks. But the HR people, the IT people, the finance staff and other internal-facing specialists are more likely to demonstrate strong cross-company networks, especially a senior executive who has been with the firm for a significant amount of time.

"If externally focused people leave but back-office people stay, because the back-office people have interacted with everybody they have a higher chance of knowing enough about the other person's job that they can at least keep the organisation running," Murmann says.

"They have interacted with all of those people so when a new person is being hired they can at least give them instructions on how things are done. But the external facing person who is not interacting with all of the other people does not know much about what their colleagues do."

Murmann refers to the example of Mad Men to illustrate his point.

"Look at Mad Men, or at any successful TV series," he says. "No single person can produce enough writing to create a full season in the required time period, so there are teams of writers. Then there is a manager of those writers, somebody who oversees and divides up that writing job, someone that is not a well-known name but who knows and manages those that are.

"Perhaps this person also has control over the plot lines. Who is most important here – the famous writers whose names are high on the credits list or the lesser known person who manages them? Who is more easily replaceable?"

"Our study has taken a first step in capturing the nature of knowledge that different individuals have within the firm and examining how this affects a firm's competitive viability. Many external-facing people are considered more important, which is evidenced by their pay. Our data shows what is really happening. At least this knowledge might force people to re-evaluate how much attention they need to pay to the internal folk," Murmann says.



comments powered by Disqus

Subscribe now

BusinessThink is a free online publication. By subscribing, the latest edition will be delivered to your inbox once a month.

​ ​
Print PDF