In season three of Mad Men, Sterling Cooper’s rainmakers — including Don Draper and Roger Sterling — are planning to leave the ad agency and to take as many clients as possible with them. They’re in the firm’s Manhattan offices on a Sunday morning, plotting their exit, when the knowledge dawns: they don’t know where the client files are. They stare at each other, aghast. Fans everywhere screamed, “Joan! Get Joan!!” And indeed, the hyper-competent office manager, Joan Holloway, joins the men in the next scene, finds the files, and later recreates Sterling Cooper’s smooth-running routines in a new agency.
Sekou Bermiss, an assistant professor at the University of Texas, Austin, had the same response as the fan base, but from a different perspective: he was well into a research project examining which executives in ad agencies do the most damage when they leave (and add the most value when they don’t) based on data from New York City ad agencies from 1924 to 1996. A paper reporting on that research, co-authored by Johann Peter Murmann, is forthcoming in Strategic Management Journal. I spoke with him about his findings.
HBR: What’s the main takeaway of the research?
Bermiss: We separated the executives into two groups – internally facing people in charge of things like production, HR, and finance, and externally facing people like account executives and creative directors. Then we measured the effect of their departures on firm survival. Losing people from the first group – the internally facing executives – was significantly more damaging than losing people from the second group.
Why do those less-glamorous roles end up mattering more, do you think?
Those people know how the internal business operates – how the pieces fit together – and that turns out to be very valuable knowledge and, more important, fairly difficult to replace.
It’s not that creative people aren’t valuable! Of course they are. But there’s pretty good evidence that they’re more easily replaceable. It’s really hard to replace people who know the firm-specific routines and structures that make an agency competitive. It’s this specific knowledge, like how to manage the cash flow, the people, the production process … but it’s also knowing how the different functions fit together.
Did this finding surprise people?
It surprised people in the industry, yes, partly because all the media attention goes to the creative and account executives. When I discuss the findings, I get asked, “Did you control for this factor…for that factor?” But the truth is, we controlled for everything we could think of, and the data hold up.5 Pink Women’s Rosa Pinko Vitello Chiaro Shoulder Simply Tracolla Seta Love Bag twB1Bx
Were academics surprised? Not as much. I could have argued it either way, in advance. As an empiricist, I was really curious to see what the data would tell us. We know from prior research that losing executives matters, and that different functional areas have different effects, but nobody had looked at the internal-vs-external question through a mobility lens before.
You didn’t have detailed data on profitability, so the outcome you looked at was firm failure. Is that a worry?
Right, I’d love to have had a complete set of data on firm performance, and I’m looking now at industries where it’s available. But for the larger firms that we can get more specific performance data on, the main effects still hold even after we’ve tortured the data. And remember, small firms do start up and die all the time – survival is a pretty good metric.
Should I be embarrassed that I immediately thought of Don Draper and Joan Holloway when I read about your research?
Not at all! I use clips from the show when I present the research. I’m a huge Clutchbag Pompom Ashiana Geometric Waterproof Light Travel Pattern Lining Blue and Oversized with Mad Men fan.