The Psychology of Talent Management
Talent management focuses on the activities and processes that are used to identify key positions, the development of a pool of high-potential and high-performing employees to fill these roles, and the continuous management of such employees with differentiated human resource architecture to ensure their continued commitment to the organization. Rousseau (2004: 120) defined psychological contract (PC) as “the beliefs, based upon promises expressed or implied, regarding an exchange agreement between an individual and, in organisations, the employing firm and its agents.”
The past two decades have seen an increasing interest in talent management (TM) in the academic literature and as a central element of managerial discourse and organizational practice. Its growing significance is premised on the assumption that superior talent is a key source of competitive advantage in this highly dynamic and often uncertain market environment of the twenty-first century. This coupled with changes in worldwide demographics leading to talent supply issues have been key driving forces of interest in TM. Indeed, two articles in the Economist entitled “The Battle for Brainpower” (Wooldrige 2006) and “The Tussle for Talent” (Schumpeter 2011) claimed that organizations are much concerned about talents. Earlier scholarly research on TM primarily focus on defining and clarifying the conceptual boundaries of TM, but this has since given way to empirical studies in recent years. Therefore, it has been found that TM does matter as it is positively associated with employees’ attitudes and outcomes and organizational performance, and negatively associated with quit intentions and counterproductive work behaviors.
While many business leaders, practitioners, and academics attach great value to TM, there is still little known about how TM really works in practice – the mechanisms by which TM practices produce these consequences remain poorly understood. This is what is usually referred to us the “black-box” in TM (Mensah et al. 2016). The “black-box” focuses on the critical interactions inside the complex realm of organizational TM systems that account for its positive consequences. Indeed, it is stated that psychology is a missing link between the TM systems and their consequences in that, employee perceptions, attitudes, and attributions are crucial mediators of this relationship (Dries 2013). Drawing from the social exchange theory (SET), this section attempts to explain why psychological contract (PC) fulfilment may act as mediator in the TM–talented employee outcomes relationship. Whereas SET was initially developed to examine the development and maintenance of interpersonal relationships, it has since been used to explain the nature of employee–organization relationship.
PC basically has to do with beliefs based upon promises either implied or expressed regarding an exchange agreement between an employee and organization. TM practices and talent strategy of an organization can be considered as particularly instrumental in shaping PC fulfilment and employees make sense of their employment relationship. The implementation of TM practices is related to PC fulfilment thereby inducing talent pool members to illicit the desired employee outcomes. Thus, an organization’s investments in TM practices serve as a fulfilment of the PC for talent pool members which then have a strong relationship on talented employees’ outcomes. In this paper, an attempt is made to examine the mediating role of PC fulfilment in the relationship between TM and employee outcomes as this is central to examining the “black box” in TM.
The Concept of Talent Management
Academics and practitioners agree that TM continues to be one of the key challenges for organizations worldwide because it represents a source of sustained competitive advantage. However, TM research has long suffered from lack of a precise definition, theoretical support and development, and measurement frameworks for operationalization and identification. Early definitions of TM concentrate on the individuals, but the focus has since shifted to strategic positions that drive organizational performance (Collings and Mellahi 2009). This paradigm shift led to the identification of “high impact” or “pivotal” roles to be filled with talented employees. Strategic positions are defined in terms of their potential outputs or disproportionate contribution to the organizational strategic intent. Strategic positions are not only limited to top positions, but include different levels in organizational hierarchy among functional and operational units. The key to understanding strategic positions is to take into account the contribution of the position to the achievement of the strategic objectives of the firm.
Generally, there are two approaches to the study and practice of TM – exclusive and inclusive. The exclusive approach views talented employees as an elite subset of the organization’s employees as they exhibit a drive to excel, a catalytic learning capability, an enterprising spirit, and a dynamic sensor (Ready and Conger 2007). On the contrary, the inclusive approach is based on the “egalitarian” principle and that ideally, all employees in an organization have a role to play and can contribute something (Iles et al. 2010). Clearly, every individual’s role is part of the overall performance of the organization; however, some individuals have rare skills that are crucial and contribute heavily to the competitiveness of the organization. Similarly, some positions are very strategic and contribute towards the achievement of organizational goals than others. Therefore, adopting an inclusive approach results in overinvestment and waste of resources when a star performer is in a position with little potential for differentiation (Minbaeva and Collings 2013).
TM has been described as important to the success of organizations, being able to give a competitive edge through the identification, development, and redeployment of talented employees. Contemporary TM research has focus on the individual level and found that TM contributes to employee outcomes such as satisfaction, commitment, OCB, task performance, and reduced turnover intentions (Mensah et al. 2016). However, TM especially the exclusive approach is likely to have some negative consequences. It may discourage, demotivate, frustrate, and cause dissatisfaction and jealousy of those employees who are not in the talent pool, resulting in lower productivity or increased turnover. Similarly, talent label may lead to arrogance and complacency, promote inequality, and exclusion from the TM pool could be interpreted as somehow inferior, which might lead to lower self-efficacy. Indeed, the overemphasis on individual performance diminishes teamwork and creates a destructive internal competition that hinders learning and the spread of best practice across the organization.
Psychology: A Psychological Contract Fulfilment Perspective
PC has gained increased attention because it is an important concept in understanding the exchange relationship between organizations and their employees. The origin of PC theory can be traced to the work of Argyris (1960), Levinson et al. (1962), and Schein (1965). However, recent use of the concept stems from Rousseau’s (1989) seminal work. PC comprises of the beliefs employees hold concerning the terms and conditions of the exchange agreement between themselves and their organizations. PC is unwritten and hence not necessarily shared by the other party to the exchange, what is termed perceptual (Rousseau 1989). Explicitly, PCs are comprised of the obligations that employees believe their organization owes them and the obligations the employees believe they owe their organization in return. Accordingly, different views are held by employees and employers on the content of the PC and the extent to which each party has fulfilled the mutual obligations of the exchange.
A central premise of the PC is the notion of reciprocity whereby employees reciprocate their employer subject to how well they have been treated – PC fulfilment, breach, or even violation. A composite measure of PC uses content-specific items which can be categorized as transactional and relational (Rousseau 1990). Transactional content refers to specific, monetizable exchanges over a limited period, while relational content refers to long-term exchanges that maintain the employee–employer relationship (Robinson and Rousseau 1994). PC fulfilment reveals an employee’s perception that the organization has fulfilled its side of the contract (Henderson et al. 2008). Empirical research has established a relationship between PC fulfilment and individual performance variables such as neglect, intention to quit, satisfaction, organizational citizenship behavior, turnover, intention to remain, loyalty, and voice (Robinson and Rousseau 1994).
Generally, PC develops at key moments in the employment relationship, such as recruitment, performance appraisal, training, and compensation discussions and outcomes or during events where organizations express plans for the future. Human Resource departments of organizations, through their policies, practices, and actions aimed at managing and shaping the employment relationship, are therefore considered to be particularly instrumental in the shaping of PC. Indeed, HRM has the task to create and maintain PC between organizations and their employees, where each HRM practice represents a choice by the organization about what it expects from its employees and what the employees can expect in return (Sonnenberg et al. 2011). Therefore, as part of efforts to open up the black box of TM, the concept of PC fulfilment could be used to examine how TM practices send signals that are relevant to talented employees which in turn generate talented employee outcomes.
Talent Management: What Has Psychology Got to Do with It
A large body of research has documented that academics and practitioners agree that TM continues to be one of the priorities for organizations worldwide. While the importance of TM practices is now well accepted, there is insufficient understanding of how they work in practice (Thunnissen 2016). In order to advance the field, Dries (2013) challenged scholars to bring in literature from the field of psychology. In response, this section argued that PC fulfilment may act as mediating variable in the relationship between TM practices and talented employees’ outcomes. The state of PC in terms of fulfilment or breach is of interest to the extent that if the theoretical predictions hold true, organizationally desired outcomes will result from contract fulfilment by the employer whereas contract breach by the employer is likely to lead to negative responses. Findings from the PC literature showed that fulfilment of employer obligations will be reciprocated and this reciprocation may take the form of performance, commitment, satisfaction, OCB, reduced turnover, and reduced counterproductive work behaviors.
TM practices can be seen as an investment in a long-term and stable relationship with an employee. Therefore, an organization’s investment in TM practices generates a higher emotional involvement and more mutual interdependence between the talent and the employer. Thus, whereas TM may lead to talented employee outcomes, it is the perception of PC fulfilment that would generate an obligation on the part of talented employees to reciprocate their employer. In other words, the more talented employees perceive the organization as fulfilling their promises and obligations, the more likely they will display positive outcomes. This accounts for the importance of PC fulfilment in the TM and employee outcomes relationship. Indeed, the TM process is of significance to the talented employee in two ways. First, the inclusion in a talent pool is an indication of the employer’s attempt to fulfil the PC. Second, the favored individual recognizes differential treatment and an investment in the development of their talent and career as an indication that their contribution is valued and the fulfilment of the PC (Sonnenberg et al. 2011). Thus, TM practices such as identification, selecting, developing, appraising, motivating, and retaining signal a fulfilment of the organizations’ obligations in the contract.
Theoretically, SET provides a useful lens through which to understand the mechanisms involved in how talented employees interpret and react to TM practices. From the perspective of SET, talented employees may see organizations’ investment in TM practices as an indication of their employer’s commitment towards them, signaling future opportunities in the organization. Thus, when organizations invest in TM practices, talented employees interpret this as organizational support and will reciprocate with positive employee attitudes and outcomes. Scholars have offered explanations of SET that defines TM as signals of organization’s willingness to invest in talented employees (Mensah et al. 2016), which subsequently impact the PC fulfilment (Sonnenberg et al. 2014). From the above explanation it is argued that PC fulfilment may be valuable in explaining the TM–employee outcome relationship.
Implications and Recommendations
The above discussion has implications for human resource managers. First, managers must institute communication mechanisms that inform talented employees about the availability, content, and focus of TM practices to ensure that the desired results are achieved from talented employees. This is perhaps because TM practices when communicated to talented employees help develop better understanding of organizational signals while at the same time implying the fulfilment of the PC on the part of the employer (Sonnenberg et al. 2014). Indeed, given the strategic intent to manage talent as a competitive resource, top management are expected to be highly involved in governing and communicating intentionally regarding this highly visible competitive activity.
Second, managers need to be careful about what promises and expectations they create with talented employees. Care must be taken by managers at the beginning of the employment relationship or at the time of admitting high potentials into the talent pool to firstly establish and agree to a fair PC that would benefit both parties in the employment relationship. Indeed, an entry-level survey can be used to identify their initial expectations and align them, thus creating a fair PC that would benefit both parties in the employment relationship. Since expectations may change over time, monitoring and aligning expectations should be done on a regular basis, perhaps half-yearly. This also includes the need to create environments that are supportive of employees’ PC needs as far as possible. Third, organizations and their agents such as managers and supervisors should be transparent and communicate effectively with their high-potential employees about the promises, business situations, and other factors that may influence or limit their ability to fulfil their promises to their talented employees. This also implies that in situations where there has to be changes in the employment relationship, employers should seek to renegotiate the contract and thereby create new terms that are reflective of the new employment conditions.
TM practices do not only have a direct positive effect but also an indirect effect on talented employee outcomes via PC fulfilment. Management should therefore endeavor to understand and fulfil the expectations of talented employees so that they can reciprocate with positive outcomes. It is also imperative for management to communicate the availability and content of TM practices, and provide information on how the organization seeks to fulfil their part of the PC. This paper contributes to the TM literature by bringing an important mechanism from the field of psychology, PC fulfilment. Therefore, this paper links the two streams of fields together to show that PC fulfilment is a psychological mechanism through which TM practices illicit positive talented employee outcomes.
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