Embeddedness and Management Control
in Creative Industries: An Exploratory
Case Study in the Advertising Industry
Master Thesis: MScBA specialization OMC
Author: Nicolien Wempe
Amsterdam, November 2011
Embeddedness and Management Control
in Creative Industries: An Exploratory
Case Study in the Advertising Industry
(www.positivethoughtsfortoday.blogspot.com
Master Thesis: MScBA specialization OMC
Author: Nicolien Wempe
Amsterdam, November 2011
Embeddedness and Management Control
in Creative Industries: An Exploratory
Case Study in the Advertising Industry
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Embeddedness and Management Control in
Creative Industries: An Exploratory Case Study in
the Advertising Industry
Author: Nicolien Wempe Student number: 1632582 Address: Jan Hanzenstraat 47
1053SL Amsterdam
Email: nicolien.wempe@hotmail.com Phone: 06-38533928
University of Groningen Faculty of Economics & Business
MSc Business Administration
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Acknowledgement
Every research project consists of several phases; it begins with the selection of a topic to study and ends with the dissemination of the research findings. Now that I am writing the acknowledgement of this study I reflect on these phases, or steps.
I consider my master thesis as a complex puzzle in which every phase of the research represents a piece which nears the completion of the puzzle. Every phase offered a new challenge in which I needed to reconsider whether it added relevant value to my research.
Mostly, I overcame these challenges independently by carefully reconsidering my ideas and ordering my thoughts. However there were several moments during which I needed a different point of view to put me on the right track again. Therefore this seems the appropriate place to thank my supervisor Dr. Pieter Jansen for his valuable insights and comments. At times I was aware of the fact that parts of this study were not satisfying; however I was experiencing difficulties with verbalizing these. During such moments Dr. Jansen came up with the right words which caused me to move on again. Besides this, I experienced our cooperation as very pleasant. For the execution of this research I conducted a case study at Company X, an advertising agency. The voluntary and pleasant cooperation resulted in valuable findings and caused me to enjoy doing my research. Therefore I would like to thank all employees who contributed to the completion of this study.
Since this thesis is considered the last step in finishing my university education in which I was always supported by my parents, I would like to thank them at this time as well. Their faith and support gave me the confidence to always believe in myself and pursue my aspirations.
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Abstract
The capacity of an organization to stand out in innovation and creativity is now a significant asset, which indicates a shift from material products and transactions towards a ‘creative economy’ in which ideas and knowledge are the new capital (Bilton, 2007; Chapman et al., 2010).
Organizations for which creativity is their main source of value creation have to deal with particular organizational and employee characteristics which ask for ask for a unique control approach. This research is aimed at providing understanding and advice about the management control tools applied in creative organizations in order to strive towards organizational
objectives.
In order to provide a theoretical basis for the subject under study the ideas of Powell (1990) are followed, whose analysis suggests that management of economic exchanges can find place either trough a market system; arm’s-length ties, or trough networks of exchange
partners; embedded ties. Until now, classic MC-theories did not offer satisfying conclusions about control in creative organizations. Therefore the theory of embeddedness is included; this theory seems to possess characteristics that are able to deal with the specific demands of creative organizations and creative people.
Since the subject of this study can be considered as exploratory, case study research is chosen as the preferred research method. A creative advertising agency is chosen as the research setting, in which interviews and observations are used as means for data collection.
Findings of this study indicate that both embedded ties and arms-length ties are applied as management control tools in order to strive towards organizational objectives. Embedded ties are crucial for creative organizations in order to deal with the specific demands of creative organizations and employees and thus to promote creativity. In order to focus on results and outcomes and to promote creativity, arm’s-length ties are implemented. This study shows that the current thought that creativity and control are two incompatible phenomena is wrong; rather, control system design needs to be adapted to the specific demands of creative
organizations and creative employees with the inclusion of both components of embedded ties as well as components of arm’s-length ties.
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Table of contents
Acknowledgement Abstract
1. Introduction……….. 6
1.1 Research Objectives & Research Question.……….. 8
1.2 Outline………... 10
2. Theoretical Background………. 11
2.1 Creative Industries: Advertising………. 12
2.1.1 Creative Employees……….. 14
2.2 Embeddedness……….. 16
2.2.1 Relational Embeddedness……… 18
2.2.2 Applicability of Embedded Ties in Creative Organizations……… 19
2.3 Arm´s-Length Ties……….……….. 20
2.3.1 Applicability of Arm’s-Length Ties in Creative Organizations……….. 22
2.4 Conclusion………23
3. Research Design & Methodology………. 26
3.1 The Case Company……… 26
3.2 Methodology……… 27 3.2.1 Data Collection……… 29 3.2.2 Data Analysis……… 31 4. Results ……… 32 4.1 Current situation………. 32 4.1.1 Organizational Objectives………. 32 4.1.2 Organizational Characteristics……… 33 4.2 Embedded Ties……… 34 4.2.1 Culture………. 34 4.2.2 Communication………. 37 4.2.3 Trust……….. 38 4.3 Arm’s-Length Ties……….. 40 4.3.1 Delegation of Authority……….. 40 4.3.2 Results control……….. 42 4.4 Specific projects……….... 43
5. Conclusion & Recommendations……… 46
5.1 Conclusion……….. 46
5.2 Recommendations………. 48
6. Limitations & Suggestions for Further Research……… 50 References
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1.
Introduction
“There is no doubt that creativity is the most important human resource of all. Without creativity, there would be no progress, and we would be forever repeating the same patterns.” — Edward
de Bono – Expert and management guru on creative thinking
Creativity is more significant than ever before. The creative industries are now one of the most important drivers of the economy, with the cultural and creative sector developing at a faster rate than other parts of the economy (European Commission, 2001; OECD, 2006, UNCTAD & UNDP, 2010).
In existing hypercompetitive settings, where the comparative advantage is easily battered by technological evolution and by imitative or innovative activities of competitors, organizations can only deal with this by means of creative processes aimed at renewing market strategies and product lines. To be able to offer innovative products, an organization needs creative employees who are motivated to unfold their creative potential and generate creative ideas which are the source of innovation and thus the source of an organization's competitive advantage. The capacity of an organization to stand out in innovation and creativity is now a significant asset, which indicates a shift from material products and transactions towards a ‘creative economy’ in which ideas and knowledge are the new capital (Bilton, 2007; Chapman et al., 2010).
The recognition of the creative industries as an important economic driver has lead to increased interest of economic and political policy makers and as well caught the attention of academic writers (Gil & Spiller, 2007; Fesel & Söndermann, 2007; UNCTAD & UNDP, 2010). Researchers in the field of management accounting and control as well turned their attention towards creativity and creative industries. However, the limited research that has been done does not provide convincing results as to what are appropriate management control
mechanisms in creative organizations.
The conclusions of the studies that have been conducted until now indicate that
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type of research, formal MCSs are seen as a restriction for creativity as they appear incompatible with creative employees’ preferences for autonomy and freedom (Amabile, 1998).
Not only do the characteristics of creative employees ask for a unique control approach, the specific demands of creative processes do also ask for a particular control system. Gil & Spiller (2007) argue that the ultimate outcome of successful creative process is the formation of a final product whose nature is fundamentally different from all formerly produced products. Thus, the outcome of each creative process is unique, and the potential solution to a given problem is impossible to identify ex ante and to evaluate ex post (Caves, 2000; Gil & Spiller, 2007). This entails that the task itself cannot be programmed ex ante and that managers can neither identify the required resources nor the input of employees necessary for the completion of tasks. Due to this uncertainty about outcomes and the complexity of the process, companies operating in creative industries should stress other combinations of control mechanisms compared to organizations that do not rely on creativity as their immediate source of value creation (Cunningham & Hearn, 2003).
Think for example about the creative task of designing and producing a fashion collection. A unique collection, involving a certain “style” or “feeling” which attracts a specific type of customer is supposed to be developed. Aspects such as “style” and “feeling”, which are the combination of components from different fashions, materials, and production techniques are difficult to communicate trough codified, formal control mechanisms, without the loss of essential information. Therefore such a process asks for other tools of communication and information sharing between superiors, employees and customers, rather than the classic, more formal forms of management control, which are implemented to strive towards positive
organizational outcomes (Uzzi, 1997).
The recognition of the uniqueness of creative processes and employees, and the need for a specific management control approach has however not caused substantial shifts in
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and communication; 1) measures of the organizations goals (e.g. targets, revenues) 2) measures of the organizations performance (evaluation and monitoring tools) 3) measures of intervention in the management control system. This stream of literature recognizes that there is a need to align these three specific control practices with organizations task characteristics (e.g. Chenhall, 2003; Abernethy and Brownell, 1997). This indicates that the applicability and effectiveness of control mechanisms is contingent on the task characteristics of the employees to be controlled (Eisenhardt, 1985; Ouchi, 1979). Following this approach it can be assumed that the nature of creative work influences the design of control systems in creativity-dependent settings.
However, in management control research an unexplored dimension of control system design is so far the dependency on creativity. There seems to be a tension between the idea that there is need for formal MCS in every organization and the distinctive properties and demands of creative organizations and employees. This creates a unique control dilemma for which current management control research does not seem to offer clear conclusions.
1.1 Research Objectives & Research Question
The current conflicting views about the implementation of control in creative settings, and the limited research that has been done without providing clear conclusions make more research into this area valuable and contributive. The purpose of this research is to develop an understanding about how creativity dependent organizations manage their creative tasks and creative employees in order to strive towards positive organizational outcomes. Knowledge is supposed to be developed about how managers in creative organizations make decisions about the management control system and which properties of creative organizations drive these choices.
The research question to be answered in this thesis is:
- Which control mechanisms and systems are applied within creative organizations in order to strive towards organizational objectives?
By mechanisms and systems is meant all management control practices that are applied to arrange activities within the organization to reach organizational objectives.
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Until now, the neoclassical approach of arm’s-length ties has often been used to explain control practices in different situations and organizations (Abernethy & Brownell, 1997; Speklé, 2002; Williamson, 1975, 1985). Within this type of control system price data convey all
information needed to make efficient decisions and personal relationships are formal and cool (Uzzi, 1997).
Although the classic MC theories offer valuable insights and explanations in control dilemmas, these have failed to offer satisfying explanations in the creativity-control dilemma. The specificity of the type of setting asks for a unique approach of organizational control, which the existing management control literature does not seem to offer. Therefore it goes further than preceding studies, which have built on classic MCS theories only, by including theories of embeddedness, social relations, and networks (Polanyi, 1957; Granovetter, 1985; Uzzi, 1997). The theory of embeddedness explains the facilitation of economic exchanges trough stable networks and close social relationships. The basic assumption of embeddedness literature is that it creates economic opportunities that are difficult to replicate via the formal market ties trough which classic management control functions (Uzzi, 1997). This approach is seen as the opposite of the classic MC approach, in which impersonal and constantly changing ties, a “market system”, facilitate economic actions (Powell, 1990; Uzzi, 1997).
The concept of ‘embeddedness’ (Granovetter, 1985) is introduced to come up with an alternative view of control in creative processes, and how this affects outcomes of these processes. Because of the high degree of trust and flexibility that characterized embedded ties, these might be an appropriate control mechanism for the specific demands and characteristics of creative organizations and employees; such as the high need for autonomy and the resistance against control (Amabile, 1983, 1998; Gil & Spiller 2007).
Regardless of the common thought that informal socialization processes and
relationships contribute to goal alignment between management and employees and positive organizational outcomes (e.g. Merchant & Van der Stede, 2007; Ouchi, 1979; Uzzi, 1996, 1997), these processes have been largely ignored in academic studies so far, and therefore will form an important contribution to existing management control research. Besides this, the current study might be a valuable addition to the existing management control literature by looking at
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1.2 Outline
The remainder of this research paper is organized as follows: In the proceeding section the theoretical background will be presented. Initially the specific setting of this research will be introduced. To address the research questions proposed, a look needs to be taken at the specific setting of the proposed research; creative industries and creative employees. As important as it is to analyze and define what specifies creative industries, it is to identify what characterizes creative employees. In order to find out which mechanisms and systems are implemented in creative organizations, knowledge of the specific setting is essential.
Once the research setting is introduced the underlying theory of the proposed research is presented. Both the theory of embedded ties as well as the theory of arm’s-length ties is
presented. The analysis of the research setting as well as the discussion of the theoretical concepts leads to the construction of a theoretical framework and a conceptual model, which will form the foundation for the interpretation of the results of this study.
In the following part the research methodology will be presented, in which the selection of specific methods are supported with arguments and thoroughly explained.
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2.
Theoretical Background
This section creates the theoretical background for the subject under study. It introduces the specific research setting and its characteristics; creative industries and creative employees. In order to build a theoretical background for this study the literature of embeddedness and arms-length control is consulted. Both arm’s-length ties and embedded ties are management control mechanisms which are supposed to arrange activities within an organization and strive towards positive organizational outcomes. Although both types of mechanisms serve as a management control tool, they have strongly contrasting characteristics (Powell, 1990).
This section of the study makes an effort to illustrate that even though the theories of embedded ties and arm’s-length ties are considered to be totally opposite of each other, these both offer characteristics that seem to be compatible with the specific circumstances in creative organizations, and can even be applied simultaneously. Depending on the characteristics, demands and environment of the specific organization a combination of both control
mechanisms can serve as an effective management control system in which components of both mechanisms complement each other. Uzzi (1996) seems to confirm this idea by stating: “Optimal networks are not composed of either all embedded ties or all arm's-length ties, but integrate the two.” Uzzi (1996) makes an effort to illustrate this theoretical implication by performing a study in the New York apparel industry. He finds that firms which integrate embedded ties and arm’s-length ties experience a significantly lower failure rate than organizations that do not follow this idea.
Although he is a great proponent of embedded ties within organizations and organizational networks, Uzzi acknowledges that the positive effects of embeddedness on organizational performance reach a maximum level: Results of Uzzi’s research (1997) reveal that embeddedness is an exchange system with unique opportunities relative to markets and that firms organized in networks have higher survival chances than do firms which maintain arm's-length market relationships. The positive effect of embeddedness reaches a threshold, however, after which point the positive effect reverses itself, and arm’s–length ties seem to offer
attractive control mechanisms
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Proposition 1: Creative organizations that integrate arm’s-length ties and embedded ties optimize the management control system in order to strive towards positive organizational outcomes; organizations that only implement embedded ties or arm’s-length ties decrease the potential for positive organizational outcomes.
This proposition serves as a directive for the theoretical framework that is constructed in this chapter. This chapter takes a stepwise approach in describing the theoretical concepts of this study, which are integrated at the end of this section in a theoretical framework and conceptual model, which in their turn give direction to the empirical study that is to be conducted.
The theoretical background which is provided in this part of the research serves as an explicit basis for the interpretation of the subjects which are under study; it does not serve as a fixed framework, this study is also open to other explanations and perspectives.
2.1 Creative Industries: Advertising
Defining ‘creative industries’ is a matter of substantial variation and disagreement in academic literature and policy making. Additionally it is a relatively “young” concept, in the sense that definitions firstly emerged in the beginning of the 90ties. The term ‘creative industries’ became widely recognized in 1997 when the United Kingdom’s Department of Culture, Media and Sport (DCMS) set up the Creative Industries Task Force (UNCTAD & UNDP, 2010). The definition of DCMS is described as follows:
“those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property.” (DCMS, 2001)
This definition has been influential, and many nations adopted it as their official
definition of creative industries. Other definitions have been formulated, but in general there is agreement about what specifies creative industries: it involves the “cycle of creation, production and distribution of goods and services that use creativity as the direct source of value creation” (UNCTAD & UNDP, 2010).These industries can be distinguished from other types of businesses because creativity is their principal source of value creation (Cunningham & Hearn, 2003).
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and press (See, for example, DCMS, 2001; Hesmondhalgh &Pratt, 2005). On the other hand the more market-oriented creative sector which includes for example advertising, design and software development (Cunningham, 2002; Cunningham & Hearn, 2003; Fesel & Söndermann, 2007).
In 2004, the UNCTAD XI Ministerial Conference launched the concept of creative
industries officially. The topic was introduced into the international economic and development agenda, based upon suggestions made by a High-level Panel on Creative Industries and
Development. Creative industries are distinguished by the UNCTAD as activities having a strong artistic element to “any economic activity producing symbolic products with a heavy reliance on intellectual property and for as wide a market as possible” (UNCTAD, 2004). As in the academic literature, the UNCTAD distinguishes two sectors in the creative industries “upstream activities” (traditional cultural activities such as performing arts or visual arts) and “downstream activities” (much closer to the market, such as advertising, publishing or media-related activities).
(UNTCAD, 2010)
This current research will focus on the second category of the creative industries, which are more market-oriented. Businesses in this division are involved in trading creative products; employees in these companies have to take on creative activities to generate marketable products. Amabile (1988) states that a product or concept will be considered as being creative if it is a new and suitable, useful, accurate, or valuable response to the job that is assigned. Creative jobs therefore demand intangible creative contributions which add more monetary value to a product than is added by manufacturing activities only (Amabile, 1997; Cunningham & Hearn, 2003).
The focal point of this research will be on the advertising industry, which is mentioned in almost all definitions of creative industries as one of the “core” creative industries (e.g.
Cunningham & Hearn, 2003; DCMS, 2001; Fesel & Söndermann, 2007; UNCTAD, 2004, 2008, 2010). The advertising business is based on creativity; key assets are the creative minds of the individual employees, who act on behalf of the client. At the same time, it is a multi-billion dollar industry, in which high interests of companies are at stake (Bilton, 2007). Both the reliance on creativity and the economic interests of the advertising industry seem to offer an appealing setting for the proposed research.
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nonspecific problems where performance requires the generation of novel, valuable solutions (Mumford et al., 2002). The production of creative goods regularly involves the execution of versatile tasks which require various types of expertise. The variety of tasks makes creative jobs complex as people need to focus simultaneously on numerous dimensions of their task (Oldham and Cummings, 1996). Furthermore, creative processes are defined as being heuristic rather than algorithmic (Amabile, 1983). Heuristic tasks have no straightforward, obvious solution, some exploration is necessary (McGraw, 1978). Heuristic jobs necessitate undefined,
multifaceted solutions were some search is required and immediate solutions are not at hand (McGraw, 1978). Specifically, the production of creative goods demands complex practices and procedures (Chenhall, 2003). Mostly, the outputs of creative processes are highly specialized, non-standard, and customized products designed to fulfill individual customer desires.
Also there is agreement in academic literature about the task uncertainty of creative work (Gil and Spiller, 2007; Caves, 2000). Since creative problems are non-specific, multiple solutions to a given problem are possible (Mumford et al., 2002) and as a result the outcome of each creative process is unique and thus, naturally uncertain (Caves, 2000). Because of this uncertainty managers delegating creative tasks to subordinates are not able to specify the desired output.
The before mentioned characteristics of creative tasks symbolize extreme dimensions of the concept of task uncertainty (Chenhall, 2003) as mentioned in the management control literature. Task uncertainty includes two dimensions, namely task programmability and output measurability (Eisenhardt, 1985; Ouchi, 1979). The first dimension, task programmability, refers to the degree of specificity concerning the actions undertaken by employees and how those actions influence organizational outcomes (Spekle, 2001; Eisenhardt; 1985; Ouchi, 1979). Creative processes are subject to low task programmability since desired behaviors cannot be explicitly defined and measured ex ante. Output measurability refers to the ability to clearly define performance standards and accordingly assess outputs (Eisenhardt; 1985; Ouchi, 1979). Creative processes are low in output measurability since desired outcomes cannot be specified in advance.
2.1.1 Creative Employees
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characteristics of the product they are to generate. They are assumed to pay attention to their salary, working conditions, and the effort they have to make, but they do not seem to be
concerned with the output’s characteristics like color, style and other distinctive features (Caves, 2000). Conversely, creative employees seem to have other ideas about the involvement in the production process; they highly value the involvement in the creation of products (Caves, 2000). In a study done by Rostan (1998), it is argued that creative employees identify themselves with the task being done and with their work accomplishments rather than with the organization they work for. This is as well supported by empirical research which shows the high need for
achievement of creative workers rather than the need for influence and power (Harrel & Stahl, 1981).
Intrinsic task motivation is also identified as one of the distinguishing characteristics of creative employees. As mentioned, creative work can be typified by highly complex,
nonprogrammable tasks for which performance targets cannot be easily determined. This indicates that creative tasks, compared to non-creative activities, are relatively personally challenging to employees (Oldham and Cummings, 1996). The task complexity and uncertainty demand increased skill variety and an elevated degree of autonomy because employees need to make a lot of task related choices by themselves (Cummings and Oldham, 1997). Jobs that offer employees personal challenges are assumed to encourage higher levels of intrinsic task
motivation since employees are expected to be eager about their work as they experience the tasks as interesting, challenging, and satisfying (Deci et al., 1989). As a result it can be expected, that employees who perform creative work demonstrate a higher degree of intrinsic motivation than employees with relatively straightforward, routine tasks (Hackman and Oldham, 1980).
Another widely recognized phenomenon amongst creative people, which is in line with the before mentioned intrinsic motivation, is the high need for autonomy and independence. Creative people are said to perform better under circumstances where at least a certain degree of freedom is offered (Fiest, 1999; Amabile, 1997).
These characteristics; a lack of interest power, high intrinsic motivation, and the
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Given that control cannot be avoided in formal organizations (Cardinal, 2001) this is also relevant in creativity-dependent settings. Fundamentally, there is a need to obtain cooperation among a collection of individuals or units who often do not share congruent objectives (Ouchi, 1979). The primary function of organizational control is to secure this cooperation. Therefore a manager should not only take the specificity of the creative employee in mind when designing the management control system, but also the general characteristics and tendencies of employees (Govindarajan and Fischer, 1990).
Hence, for the production of creative goods and services, creativity is the primary source of value creation (Cunningham et al., 2003). Creative industries, the production processes of creative products, and the characteristics of creative employees differ in extensive and systematic way from industries and their characteristics in the rest of the economy where creativity is less important. In sum, the production of creative goods is characterized by high complexity, high uncertainty, specific characteristics of creative employees, and the general tendency of employees to behave opportunistically. Therefore managers in creative industries are bound to the specificity of the creative organization and employee, characterized by both the high uniqueness of the task and the specific characteristics creative employees share.
These circumstances ask for a unique management control approach. In order to further establish a theoretical framework, a look is taken at different theories about different
approaches for controlling organizations and employees, both the classic MCS literature is consulted with the focus on arm’s-length control, as well as the socio-economic theory of embeddedness.
2.2 Embeddedness
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that all economic exchanges are necessarily embedded in social networks (Granovetter 1985). Uzzi (1997) captured these shaping views on the development of the embeddedness idea by stating: ‘‘Polanyi (1944) used the concept of embeddedness to describe the social structure of modern markets, while Schumpeter (1950) andGranovetter (1985) revealed its robust effect on economic action, particularly in the context of networks.’’
From then on, the notion of embeddedness has been mentioned by several academic writers from a variety of (sociological) fields, and has been used to explain a diversity of issues. Several examples of research into the relationship of embeddedness with other (social) phenomena are about; gender (Brinton 1988), entrepreneurship (Larson, 1992), immigration (Raijman & Tienda, 2003), crime and deviance (McCarthy & Hagan 1998, 2001; Uggen & Thompson, 2003), stratification and inequality (Royster 2003), and development (Henderson et al. 2002; Tsai 1999). Other disciplines, such as management (Baum & Dutton 1996, Dacin et al. 1999, Rowley et al. 2000), organizational adaptation (Baum & Oliver, 1992; Uzzi; 1996) and, to a more limited extent, economics (Dequech 2003; Piore 1993) and political science (Locke & Jacoby 1997) are also represented research on embeddedness.
The variety of studies and fields has led to multiple and mudded specifications and definitions of embeddedness. Theoretical vagueness is a widespread criticism that opponents throw against the embeddedness concept; Granovetter himself has declared the term “embeddedness” meaningless and has distanced himself from the expression (however he remains rather committed to the intellectual program that he used the concept to define and legitimate) (Krippner et al. 2004).
In this study an effort is made to narrow it down to a single understanding of the concept “embeddedness”. While Granovetter has abandoned the word embeddedness, this study will build on his explanations about the role of embeddedness in economic life and organizations (Granovetter, 1985; Uzzi, 1996, 1997).
In Granovetters’ ideas the concept of embeddedness refers to the contextualization of economic action in continuing patterns of social relations and confines the contingent character of the activities of an economic actor by the virtue of being embedded in bigger social
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2.2.1 Relational Embeddedness
Relational embeddedness refers to the "role of direct cohesive ties as a mechanism for gaining fine-grained information" (Gulati, 1998). When it comes to embedded ties in economic life, relational embeddedness is the predominant type of embeddedness that is distinguished (Gulati 1998; Uzzi, 1996).
The concept of relational embeddedness is often translated into weak and strong ties. Strong ties are associated with trust, trustworthiness, and fine-grained information sharing (Larson, 1992; Uzzi, 1997), and weak ties lead to innovation and new information trough sharing (Granovetter, 1973). Within these weak and strong ties, actors are expected to develop
collective understanding and act together as a result of discussing options in well-built, socialized relations. Solid tied members within this context of relational embeddedness are able to monitor each others’ actions and share ideas , (tacit) information and knowledge (Krackhardt, 1992).
In academic research writers have mentioned several positive effects of relational embeddedness on organizational and economic outcomes (Uzzi, 1997). According to Gulati (1998) the cohesive ties can turn into a source of information about members’ capabilities and reliability. The development of strong relationships is considered as fundamental to promote the progression of shared norms and values and specific knowledge and information sharing
practices (Krackhardt, 1992). Uzzi (1997) mentions that the extensive connections within
networks promote collaboration, reciprocity and the sharing of information within organizations. He adds to this that these ties can also foster fine-grained information sharing and joint problem solving. This ‘fine-grained Information’ can be seen as more tacit, detailed, of a holistic
character, and is more difficult to transfer only trough market ties. Within this form of information exchange the characteristics of the individuals and the quality of their social connections are as important as the information that is transferred (Uzzi, 1996; 1997). Hansen (1999) also agrees that more complex and implicit knowledge is more probable to be passed through strong ties. Well-built relationships provide a better means for the actual exchange of complex issues and ideas. So-called ‘joint problem solving’ also originates in the social
arrangements in the organizational network. The embedded ties facilitate problem-solving mechanisms based on mutual understanding and trust, which have developed over time (Larson, 1992; Uzzi, 1996).
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governance instrument for embedded relationships (Uzzi, 1996). Trust is an attribute that comes in to existence as the relationship develops over time (Barney & Hansen, 1994). It can facilitate the exchange of resources and information that are critical for high performance but are too complex to evaluate and transfer via market ties. Since trust can encourage joint efforts, a trustworthy actor (someone that is trusted by other actors) is expected to get the support for achieving goals to an extent that would not be reached if there was not a relationship based on trust (Tsai & Ghosal, 1998).
An insight that is given by Ouchi (1980) is that trust enhances economic efficiency; the transaction costs related to an economic exchange will be reduced if the parties involved trust each other. Consequently a high-trust culture may be more efficient in economic conditions. This point is strongly related to an argument made by Durkheim (1964), that economic activity is only possible when it is embedded in a social and normative context that restricts opportunistic behavior. The restriction against opportunistic behavior seems to come from the extensive ties that provide ground for the emergence of collective sanctions against the unwanted actions that might be executed by one or more members of the network (Walker et al., 1997).
2.2.2 Applicability of embedded ties in creative organizations
Embedded ties seem to offer control characteristics and mechanisms that are appropriate to the specific demands of creative organizations and employees. Uzzi (1996) mentions that the level of embeddedness in an organization produces opportunities that result in outcomes not predicted by standard economic explanations, such as arm’s-length ties.
The unique characteristics of creative employees; the need for involvement, independence and achievement, and intrinsic task motivation ask for a high degree of autonomy. In order for managers to offer a high degree of autonomy, trust needs to be established. Trust is said to be a primary and explicit feature of embedded ties; it is the distinguishing characteristic of a personal relationship. It is said that within embedded ties the actor would not act in one’s own interest at another’s expense, but would take in consideration the personal relationships one’s colleagues, and thus deal with the often mentioned problem of opportunism (Uzzi, 1997).
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from the advertising industry is “a feeling” the client wants to transfer trough a commercial. This feeling needs to be translated into practice. This type of information transfer is referred to as fine-grained information. The success of fine-grained information sharing depends on the relationship between the partners within an organization; whether they understand each other when sharing this type of information. This type of understanding is closely related to the quality of the relationships within an organization (Uzzi, 1997).
Another important characteristic of embedded relationships are the ability of joint-problem solving (Uzzi, 1997). The complex and uncertain setting of creative organizations asks for innovative solutions and ideas (Bilton, 2007). Joint-problem solving involves discussion and interaction between managers and employees. The inclusion of diverse individuals provides more creative and interesting solutions. Besides this, when a decision is taken with the inclusion of many parties, it is often more binding, as they involve buy-in, and a sense of involvement in the process. The need for involvement in the production process is an important characteristic of creative employees (ILO, 2010).
2.3 Arm’s-Length Ties
“He who cannot obey himself will be commanded. That is the nature of living creatures.” – Friedrich Wilhelm Nietzsche – German philosopher
A totally opposite view of that of embeddedness is the arrangement of economic
activities in a market-like system. This market-like system operates trough so called arm’s-length ties, in which transactions are limited to the exchange of information on price and quality because it contains all the information desired to make efficient choices.
Whereas theories about embeddedness still are in a developing phase, theories about arm’s-length ties have dominated management control literature so far (Uzzi, 1996). The basic assumptions of arm’s-length theories come from the classic MC literature, in which the need for Management Control Systems in every organization is recognized, in order to strive towards organizational objectives: Anthony and Govindarajan (2001) mention management control as a tool that managers use to assure that the objectives of the organization are efficiently followed and to acquire the necessary resources in order to achieve these goals. According to Anderson and Oliver (1987) a control system is "an organization's set of procedures for monitoring, directing, evaluating, and compensating its employees”.
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interest. This idea can be labeled as ‘agency theory’ (Eisenhardt, 1989), in which a principal (manager) wants to control the agent’s (employee) behavior in order to act in the best interest of the organization. In order to create a situation in which ‘the optimal contract’ between a principal and agent is determined (Eisenhardt, 1989) Management Control Systems (MCS) are implemented. When MCS are designed and implemented appropriately it will influence
employees’ behaviors in desirable ways, and as a consequence, this will increase the chance that the organization will realize its objectives (Merchant & Van der Stede, 2003).
These ideas can be directly linked to arm’s-length theories, in which selfish, profit-seeking behavior shapes actions taken by individuals. In this type of control system impersonal relations and loose structural coupling are considered to optimize the efficiency of economic action. Speklé (2001) describes several characteristics assigned to this type of control solutions in his study. These are of the quasi-independent character; the subordinate that is responsible for a certain task retains considerable autonomy, while at the same time there is outcome based control coming from supervisors. This outcome based control is mostly executed by market-derived standards, or predefined contractual provisions, however the degree to which these results based provision are included depends on the context. Additionally compensation is mostly linked to performance in this type of control structure, which also indicates outcome based control. Arm’s-length control will take on a more hierarchical and results based character, with more detailed and complete contracts, depending on the context.
The before mentioned characteristics do seem to show strong similarities with one of the four control archetypes developed by Merchant & Van der Stede (2003); results control.
Results control is based upon the provision of incentives to create goal congruence between management and subordinates when direct authority is not in place (Merchant & Van der Stede, 2003; Ouchi, 1980). This type of control permits employees a certain degree of authority in the tasks they perform to achieve organizational outcomes (Cardinal, 2001; Merchant & Van der Stede, 2003). Results control literature argues that the choice for the two critical organizational design choices; incentives and decentralization are context specific, depending on, for example, the market structure, strategy, and the production or service processes (Merchant & Van der Stede, 2003).
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limited. This means that when more uncertainty is faced the employee is more prone to take wrong actions, therefore the more significant the employee’s choices are to organizational outcomes (Lambert & Larcker, 1995; and Locke & Latham, 1990).
To sum up; results controls are an indirect form of control, since they do not focus directly on employees actions. Therefore these types of control can be effective when it is not clear what behaviors are most desirable. Additionally these results controls allow employees high autonomy, something which is often highly appreciated by employees, and is also said to promote innovation (Merchant & Van der Stede, 2003).
2.3.1 Applicability of arm’s-length ties in creative organizations
Arm’s length ties seem to offer a solution to the high task uncertainty and the need for involvement and authority of employees in creative organizations. The high task uncertainty of creative jobs pushes managers to put higher importance on aligning employees’ actions by holding them responsible for their results.It is said that the outcomes of actions are very much determined by the decisions and actions of the creative employee, therefore the compensation of creative employees is often determined by the outcomes of their actions. This often results in the adoption of a performance-based rewards contract, in which the performance of the employee is measured against the results demands of the supervisor (Lambert & Larcker, 1995). Besides this, creative employees’ personality characteristics encourage the use of performance-based rewards since creative people display considerable need for achievement and intrinsic task motivation (Harrel & Stahl, 1981).As a consequence, personal achievement and the recognition that comes with it are great motivators for creative people (Mumford et al., 2002). Likewise, Wolff (1979) mentions that creative employees wish to be acknowledged for their individual achievements; if not they might become frustrated and be tempted leave the company, also because there seems to be a lack of organizational commitment by creative employees.
To conclude, in situations where task uncertainty is high, which allows employees a great deal of room for opportunistic behavior on the one hand, and where results are highly
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2.4 Conclusion
Both the theories of embedded ties and arm’s-length ties seem offer control mechanisms for specific organizational characteristics and circumstances: the applicability of these control mechanisms depends on the context in which they are applied. The creative industries offer a context in which specific characteristics ask for a unique management approach.
The control problems and solutions offered by both theories are schematically drawn in
Table 1. As can be observed, both theories include control mechanism which deal with the same problems in a dissimilar way.
Exchange-Related Problems in Creative Organizations Key Components of Socially Embedded ties Key Components Arm’s-Length Ties Opportunism/Characteristics of creative employees
Trust Results Based Contracts - Rewards Task Uncertainty Transfer of
fine-grained information
Results Based Contracts -Rewards Task Complexity Joint-Problem
Solving
Delegation of Authority
Table 1. Components of embedded ties and arms’-length ties that deal with problems in economic exchanges
The proposed conceptual model, Figure 1, summarizes the theoretical implications mentioned in this section, as well as proposition 1. Both embedded ties and arm’s-length ties serve as management control mechanisms that include the key components mentioned in Table 1. These control tools deal with the specific exchange-related problems in creative organizations; opportunism, characteristics of creative employees, task uncertainty and task complexity.
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Figure 1. Conceptual Model
Now that the theoretical concepts of this study are formulated, the focus can shift to the actual empirical study. The question arises whether creative organizations do follow the idea that integrating arm’s-length and embedded ties lead to positive organizational outcomes, and for what purpose specific management control tools are applied. Or does management built on the classic management control idea that creativity and control are incompatible phenomena (Amabile, 1983, 1998, Gil & Spiller 2007)? Does management even take the specificity of the context into account when designing and implementing control systems? In which way does
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management arrange activities within the organization in order to create the desired management control system?
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3.
Research Design & Methodology
In order to conduct the proposed research, the in-depth research design and
methodology are proposed in this section. The research question to be answered in this research is:
- Which control mechanisms and systems are applied within creative organizations in order to strive towards organizational objectives?
This chapter starts with providing information about the specific context in which the research is conducted; the case company. Thereafter the descriptions of the characteristics of the proposed methods are introduced. This includes the general methodology used in this research as well as the methods for data collection and analysis.
3.1 The Case Company
PART REMOVED DUE TO CONFIDENTIALITY REASONS This structure is drawn in the figure below.
Figure 2. Organizational structure
3.2 Methodology
In order to conduct the proposed research a qualitative research method is selected. The analysis in this research is based upon a field study conducted in a single organization. Blumberg
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et al. (2005) mention that qualitative studies (e.g. focusing on words and sentences) and quantitative studies (e.g. focusing on numbers and figures) are extensively distinctive.
Investigations are often initiated by means of qualitative studies to explore novel or unidentified phenomena and form theories/hypotheses, thereafter these are frequently tested on validity (i.e. explained or tried to be proven) by quantitative studies. However, according to Blumberg et al. (2005) the quality of the research is not dependent on the type of research applied, but rather on the quality of its design and whether it is appropriately conducted.
This specific research draws on data from a single exploratory case study (Yin, 1993), which means that there is not yet a clear problem defined. Exploratory studies can, however, provide valuable new insights, conducting an exploration first is more feasible than immediately drawing conclusions.
A case study can be defined as “an intensive study of a single unit for the purpose of understanding a larger class of (similar) units.” A unit indicates a spatially restricted
phenomenon—e.g., a country, political party, organization, or person—observed at a single point in time or over some limited period of time. Case study research allows for exploring and providing detailed descriptions of specific and complex cases (Gerring, 2004). Hartley (2004) describes a case study as a detailed investigation of a certain phenomenon, often with data collected over a period of time, within their context. The aim is to provide an analysis in the context and processes which shed light on the theoretical issues being studied. The
phenomenon is not isolated from its context, as for example in a laboratory, but is of interest because the aim is to get an insight into the processes and behaviors that influence- and is influenced- by the context. Therefore the case study seems to be specifically appropriate for research questions which require detailed understanding of social or organizational processes because of the rich data collected in the context.
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interpretation to guide findings and recommendations: The researcher becomes part of the research itself and aware of the expected results, may unknowingly guide the subjects to those results thereby confirming the expected results. This is known as the self-fulfilling prophecy or Pygmalion effect (Guba & Lincoln, 2003).
By being aware of the characteristics of the case study, both positive and negative, one is able to recognize this during the study and execute the case study to its maximum potential. Both the definition and description of the case study, and the consideration of the advantages and disadvantages of case study research indicate that a case study is the appropriate research strategy for the proposed study: The complex and dynamic character of the research context, creative organizations and projects, as well as the explorative nature of this study asks for a detailed investigation within the specific context. Besides this, the understanding of social and organizational processes, like arm’s length and embedded ties, within creative organizations can possibly only be realized when observed within their own context. In-depth research might be the only way to gain knowledge of such issues.
3.2.1 Data collection
In order to conduct this research one specific creative company in chosen in which semi-structured interviews and observation are applied as means for data collection.
The semi-structured interview method has the advantage of being a face-tot-face means for data collection; which is well suited to the exploration of thoughts, values, beliefs and motives (Smith, 1975), it offers a means for evaluating the validity of the respondent's answers by observing non-verbal indicators (Gordon, 1975), it can facilitate comparability by
guaranteeing that all questions are answered by each interviewee (Bailey, 1987), and it ensures that the interviewee is unable to receive assistance from others while answering the questions (Bailey, 1987). Besides this, face to face contact with the interviewer motivates respondents to provide answers to the interviewer (Barriball & While, 1994).
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The field study was conducted over a period of 5 months, from May to September 2011. The interviews consist of a number of questions covering several topics. General questions about the demographics of the employee, the characteristics and history of the company and its management control system are asked, as well as questions focusing on the implementation of both embedded- and arm’s-length ties. The key components of both arm’s-length and
embedded ties from Table 1 are strongly represented in the interview. Besides this, general and open questions about management control mechanism are asked in order to not limit the explorative character of the study and to stay open for alternative explanations and perspectives about the management control system.
The interview also includes questions focusing on management control systems that were applied during specific projects executed by the company; one with positive organizational outcomes, and one with less positive organizational outcomes. By including these specific situations increased understanding might be realized since both the management control systems and the organizational outcomes are known when looking back at specific situations. In other words, awareness is supposed to be developed about what is the best decision when it comes to implementing management control systems to realize positive organizational outcomes.
The interview sample consists both of employees responsible for designing the management control systems, as well as employees that are subject to the control system. A sample of 5 employees represents all parties included in the execution of a creative project.
The interviews found place in a separate room in the companies’ office. Interviews lasted for about an hour and a half and were tape recorded. Besides that, extensive notes were taken during the interviews.
Time June-August 2011 Interviewees 1 Financial Director
1 Creative Director 2 Creative Employees 1 Senior Project Manager
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Observations are done in order to better understand interactions and way of working within the company. By observing these characteristics within their natural environment findings from the interview might be confirmed and complemented, and even more importantly
observation might be the only way to gain insight into the complex characteristics of the management control system that is applied and especially of socially embedded ties, such as trust, information sharing, and joint-problem solving. Data from observation were retrieved in an unstructured and informal manner. A number of project meetings and informal discussions were attended. Outside of meetings, observation took place during lunch breaks, coffee machine conversations, small talk, and by overhearing and observing conversations and daily operations.
These methods should serve the purpose of getting an insight into the organization and the control mechanisms and systems that are applied in order to strive towards organizational objectives. These two methods to gather data collectively form the basis for methodological triangulation (Denzin, 1978).
Triangulation indicates the combining of several qualitative methods; however it can also mean combining qualitative and quantitative methods. These diverse methodological
approaches are supposed to complement each other; this should serve as the complementary compensations of the weaknesses and blind spots of each individual method. Altrichter et al. (2008) argue that triangulation "offer a more detailed and balanced picture of the situation." These different methods are used as autonomous instruments, operating side-by-side, while their common focus is the issue under study (Flick, 2006).
3.2.2 Data analysis
Once the interview and observation data are collected these need to be analyzed in order to obtain the desired information for this research. The collected data, in this case, the tape recordings, the extensive notes that are taken during interviews and observations have to be codified in order to place them in the right theoretical context. The analysis is conducted by taking a step-wise approach, since this facilitates a thorough and structured method of analysis for the extensive amount of words generated by the interview and observational data.
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sentences) as they are expressed by the person and observed in the organization. Theoretical concepts are not yet included in this phase, the focus is on being as close as possible to the text, and being facts oriented. The next step is the reformulation of the data in more theoretical concepts. The last step is the actual analysis in which the codified data are modeled in a theoretical framework in order to clarify the exact meaning of the collected data.
In order to obtain the most accurate results from the collected data the first two steps of the codification will find place on a daily basis, at the end of every day of interviewing and observing. The use of a daily interpretive analysis has several advantages over the analysis of the data at a later point in time or at the end of the data collection period. First, the collected data in hand written notes are extremely fragile as time passes; it becomes increasingly difficult to reconstruct information. This is particularly true when it comes to the insights that one might have when listening to the respondent, or with respect to important relationships or
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4.
Results
This chapter presents the results that became evident from the interviews and observations that were conducted at Company X. The in-depth interviews and observations included several topics considering the management control system at Company X, with a focus on the concepts included in the theoretical framework of this study.
In order to present the results in a structured and understandable way, a clear distinction is made between the results of the case study (e.g.; quotes, examples, observations) and the interpretation and analysis of these results by the author.
The results roughly represent embedded ties and arms-length ties, and therefore this chapter is divided in sections that reflect these mechanisms, which in their turn include a variety of control mechanism which deal with specific contextual circumstances.
While the findings partially support the theoretical framework of this study, some of the outcomes offer alternative insights. In order to support these alternative outcomes, several novel sources are introduced in this section.
4.1 Current situation
Before the characteristics of the management control system at Company X are described and analyzed, a description of the current situation at Company X is provided. A discussion of the organizational characteristics of Company X provides a frame of reference for the findings about the presently applied management control system.
4.1.1 Organizational Objectives
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Throughout the interviews and observations it became apparent that combining the promotion of maximum creative potential and the commercial objectives of Company X is one of the main obstacles currently experienced at Company X. One of the employees mentioned: “Creativity is essential for our success, but I don’t think that is always recognized, money and customer demands are often considered more important than creativity. I would like to see more focus on the creative aspect. One of the managing directors on the other hand mentioned: Although we are a creative agency, we have commercial objectives and have to deal with a customer and his wishes. That is what we have to deal with, if that is not in the line of thinking, one can better work as a liberal artist.”
Questions and observations that were focused on the role of creativity within the
organization once more confirmed the important, but complex role of creativity, and the conflict between commercial and creative objectives. Respondents view creativity as a critical factor for the functioning and survival of their company. Both creative employees, as well as non-creative employees agree on this. One interviewee stated:
“The role of creativity is the key to the existence of this organization. It is the main tool by which we can discern ourselves.”
One of the statements of a creative employee clearly reflected the simultaneous interest in creativity and commercial objectives:
“Creativity is essential, however we keep in mind that creativity has to be combined with efficiency. It has to be in the right proportions, there are certain limitations to creativity, like budgets and deadlines, everyone is aware of these limitations.”
4.1.2 Organizational characteristics
Questions and observations that were focused on identifying organizational
characteristics of Company X strongly reflect the theoretical implications about characteristics of creative organizations and creative employees presented in chapter 2.
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brand. Knowledge of the industrial setting is essential to perform the project to its maximum potential. Gaining this knowledge and understanding is a time consuming and complex project. Although respondents experienced this complexity, it is also viewed as an interesting challenge which makes creative work attractive. A statement by an employee clearly reflects this:
“Sometimes tasks are complex; some cases are not clear and have difficult content. However these kinds of cases offer a creative challenge, which I consider as attractive. Sometimes we deal with a bank and it products, and the other day we deal with a car manufacturer, this variety makes the work interesting and attractive.”
Uncertainty is also experienced on a regular basis, since outcomes of most assignments are impossible to determine beforehand. Even when a task is clearly formulated and the customer is well-known, the outcome of the creative process is considered as uncertain.
Although opportunism is not experienced on a regular basis, all respondents agree that there is always a certain tendency of co-workers to behave opportunistically. It is mostly not considered to hurt the company, and seen as a natural tendency of ambitious people. A quote by an employee that reflects the role of opportunism:
“Of course there is a certain degree of opportunism, however not to a degree that hurts the company or the customer. Everyone wants to work to its maximum potential.”
As can be concluded from the preceding discussion Company X has to deal with the specific demands of a creative work place, in which there are conflicting interests and a high degree of complexity and uncertainty. These organizational characteristics ask for a customized management control approach. In the following section the specific management control practices at Company X are described and its theoretical implications are discussed. 4.2 Embeddedness
This section presents the results that can be regarded as being components of embedded ties as a tool for management control. It considers the social structures and interactions which influence organizational outcomes at Company X. An effort is made to analyze the underlying reasons for the use of these informal control mechanisms by concluding each section with a placement in the theory and academic literature.
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The corporate culture at Company X can be described as very informal. While
interviewees view the organizational as having a very informal culture, this became even more apparent from observations. During lunch breaks and informal discussions there were
friendship-like conversations, many jokes, and people seemed to be very comfortable with each other. A quote that clearly reflects this informal culture is:
“I consider relationships as very informal, mostly friendship-like. Because we undertake many social activities these kinds of relationships develop fast to an informal level.”
Managing directors share this opinion with their subordinates and emphasize the importance of the informal culture in this company:
“If we would have rules and procedures and a formal way of interacting with each other we would not be able to function as a creative organization. The openness and relaxed atmosphere create a culture in which people are not afraid to share their ideas and work together in a productive way.”
Because of this open and informal culture, employees do not hesitate to ask for each other’s opinion and input during projects. Interviewees mentioned this informality and the open culture that results from it as one of the most important and valuable characteristics of their work environment, they even mentioned that the organization would not function without this open and informal culture.
Although respondents do not recognize that the company’s culture is consciously formulated, it is recognized that it is aimed at being as open, transparent and informal as possible. Colleagues at all levels deal with each other in a friendship-like way and hierarchy is hardly observed at Company X. This informal culture becomes apparent in a strong feeling of “belonging” to the organization and its culture. Interviewees see the organization as a group of friends who work together towards a common goal.
The informality and friendship-like relationships within the organization are considered to make it very important that someone fits in the group. This reason for selecting the right people was mainly mentioned by creative employees and project manager. They view the selection of colleagues as an important prerequisite for good cooperation and a comfortable work environment. It was mentioned several times that new employees have to fight for their place within the group, and that if someone does not fit in the existing group they will not stay for a long time.
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right skills. Intrinsic motivation is viewed as an important attribute for employees of Company X, because of the high independence and freedom that employees get while working on projects; they need to be able to motivate themselves and independently bring projects to a good end.
The informal culture at Company X serves as a mechanism that promotes cooperation and mutual monitoring by means of informal socialization processes. Merchant & van der Stede (2007) acknowledge this function of cultural controls: “Cultural controls prompt employees to work together in a synergistic fashion and are based on methods that encourage mutual monitoring and cooperation to work towards a common goal.”
The open and informal corporate culture at Company X creates a climate in which employees are not afraid to share their ideas or ask for input from each other. Therefore the culture improves the innovative capacity and improves cooperation of the organization, which contributes to positive organizational outcomes. Since relationships are friendship-like co-workers are able to grant each other successes, and to accept advice and criticism from each other. The culture also creates a strong group, or “us-versus-them” feeling, resulting in cooperative and motivated employees.
The observations and interviews at Company X demonstrated the high importance that is put on selecting employees for this organization. This so called personnel control allows
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4.2.2 Communication
When asked about activities in which communication plays a role, such as conflicts, problem solving and information sharing, interviewees emphasized the informal way of communicating. This is in line with the before mentioned informal corporate culture.
When dealing with complexity or resolving conflicts, informal face-to-face contact is prevalent, both internally as well as externally when dealing with customers. Conflicts are resolved by open discussion with the parties involved, employees are satisfied with the current way of dealing with conflicts, but suggest some improvements; even more open discussions, and discussions in a more respectful manner. When dealing with internal complexity, employees often ask each other for advice and input. One interviewee mentioned:
“Dealing with complexity goes automatically, just by the way we work here; by sharing information with each other, asking each other for input and advice.”
When dealing with complexity that originates externally, from the customer, an informal relationship is considered very important in order to discuss ideas and difficulties openly. When this is not the case cooperation becomes very difficult, this costs a lot of extra time and money, and even can cause conflicts and project failure. This is one of the main reasons Company X is currently looking for an account executive, someone that can solely focus on the relationship with the customer. Increased mutual understanding and trust between Company X and the customer should be established, which should more efficient and successful cooperation.
The exchange and gathering of information is both done in a formal and informal manner. The way of dealing with information depends on the type of information that is dealt with. Often projects include fine-grained information, which means that this type of information is highly detailed and tacit. Employees often refer to this type of information sharing when they have to deal with a certain ‘feeling’ that a customer wants to manifest with a campaign.
Interviewees mentioned that this type of information cannot be transferred trough contracts or formal paperwork, but that only informal communication is satisfying in such cases. Therefore this type of fine-grained information is preferably dealt with trough informal face-to-face contact.
