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Chapter 6 – Talent Management

Learning Objectives

Develop an understanding of various definitions of talent and what these potentially mean for employee perceptions of self and others, engagement and motivation.

• Identify the main approaches to talent management and conceptualize potential implications for HR practice and organizational strategy.

• Learn to identify challenges faced by organizations in identifying, putting into operation and retaining talent.

• Develop a critical understanding of talent management as a strategic tool in developing human resources.

• Identify and critically assess challenges arising from applying talent management approaches to the development of employees in intercultural contexts.

Introduction

Talent management has received increasing attention from academics and practitioners alike in HRM, global HRM and OB commentary. Talent management has been associated with core HRM processes such as recruitment and selection, performance management, retention, career development and succession management. The assumption here is that managing talent effectively would generate value to an organization’s performance and development. Although the notion of talent management has been around for over a decade, there seems to be an air of ambiguity about it. It has been criticized for being merely a fad with nothing truly novel to offer to people management practice. However, we suggest here, as Scullion and Collings (2011) imply, that part of the difficulty in situating talent management in the broader management discourse, and the reason why it is left open to critique, is that talent management not only lacks consensus in definition and theoretical development, but is also often equated with HRM. One can argue, as we will later in this chapter, that the two are inherently distinct despite their numerous similarities. However, in building the case to demonstrate that talent management warrants attention from academics, practitioners and corporate leaders alike, this chapter will argue that talent management must be seen as part of the wider HRM agenda, rather than somehow separate or in competition with it. The purpose of human resources is to add value to organizations, but for some reason HR as a function seems to be continually trying to prove that it is worth the investment and position as a business partner rather than merely an administrative function (Lawler, 2005). It is the HR function’s job to create policies and practices that enable the recruitment, development, deployment and retention of the kind of human capital that will improve organizational effectiveness and create value for the company (Lawler, 2005). In this chapter we argue that one of the ways in which HR can contribute to organizational effectiveness is by enabling the recruitment, development and retention of key talent through talent management processes. Furthermore, it is HR’s responsibility, together with middle and senior management, to identify key roles for which talented individuals are needed. Most importantly, we propose that although the development of processes and practices from a traditional HRM perspective can contribute to the management of talent, successful talent management requires a more holistic approach that recognizes the influence of and consequences for individual perceptions, behavior and motivation to work. Talent management as strategy, practice and method can be applicable to all areas that are traditionally grouped under the OB cannon, but in this chapter the discussion focuses on just a few: perception, motivation and employee engagement. Successful management of talent requires multiple perspectives in that it is relevant as much at organizational level (structural and functional) as it is at individual and group level.

Simply put, organizations have the opportunity to build sustainable competitive advantage by selecting, developing and retaining the right people. There is an entire body of literature dedicated to demonstrating the link between HRM, human resources development (HRD) and competitive advantage (for example Ulrich, 2001). If we follow the logic of ‘an organization is only as good as the people in it’, then we can assume that organizations would endeavor to select the most capable and talented individuals. However, this raises several questions. How can and do organizational leaders and HR professionals determine who is talented and who is not? Three practical management problems can be identified:

The first is definitional and relates to identification of talent. Even if the parameters of talent are somehow narrowed and agreed upon, how can organizational leaders then develop strategies that put these ‘talented’ human resources into operation in a way that is conducive to organizational success?

• The second problem is therefore concerned with developing strategic approaches to talent management.

• The third problem is then concerned with implementation of practices and policies defined by strategy that will be effective in creating and sustaining talent pools as well as recruiting, developing and retaining the individuals organizations have invested in.

In starting to address the practical management issues highlighted here, we feel that exploring some basic concepts from OB, such as perception and motivation, is helpful in understanding what are some of the consequences of how talent is managed and, as a result, they will also enable us better to understand why talent management approaches are useful for organizations and people management practitioners. Furthermore, it will help us understand why talent management warrants a place in the people management rubric.

In the course of exploring the three management problems that we have identified, we will discuss what perspective the OB lens can offer to the talent management debate, particularly in relation to experiences of being talent managed, what we mean by ‘talent ideology’, definitions of talent, the concept of talent management and what it means for organizational strategy as well as for people management practice. Let’s begin by setting the scene for you and briefly introducing the ongoing debate on talent management versus HRM, which will enable you to understand where our discussion sits in the wider management rubric. We will identify and explore some of the emerging issues from the OB perspective in terms of the consequent experiences of being talent managed for individuals, such as employee self-perceptions, motivation and potentially on performance. We will then critically explore how talent may be defined and how its definition consequently influences the kind of talent management strategies available to organizations. Finally we will conclude by discussing how talent can be managed.

Talent management versus human resources management

The talent management rubric is often accused of merely trying to rebrand what is essentially HRM. Although talent management and HRM are both concerned with how people are recruited, managed, developed and retained in order to achieve organizational as well as individual objectives (Cascio, 1998; Chuai, Preece and Iles, 2008) it could be argued that talent management is a more detailed and focused approach to managing individuals (human resources) that have been identified as having the potential to contribute to an organization’s core competencies (Chuai, Preece and Iles, 2008). HRM may be argued to adopt a more egalitarian approach to the management and development of people in organizations (Chuai, Preece and Iles, 2008). The focus of talent management on the other hand is to differentiate the skills and capabilities of individuals and develop their talents strategically in line with the company’s corporate strategic objectives. However, talent management is also about identifying key positions that have the potential to contribute to organizational effectiveness and ensuring that such positions are fulfilled with the right people. Talent management is often also equated with strategic HRM; however, talent management offers a more ‘segmented approach to managing people in strategic roles’ and therefore the emphasis is on integrated approaches to ‘attracting, developing and retaining key employees and potential organizational leaders’ (Kock and Burke, 2008). That being said, we argue here that talent management, although distinct, is a component of the broader HRM agenda in one way or another.

Iles, Chuai and Preece (2010) identify a set of policies and practices to attract, retain and engage key talent, as opposed to a focus on HR in general that can help us make sense of differences between the two:

Talent management involves getting the right people in the right job at the right time and managing the development of people, which does not necessarily make it different from HRD or HRM.

• However, talent management may use the same tools as HRD but focus on a relatively small group of employees – the talent pool.

• Finally, talent management involves organizationally focused competence development through managing and developing talent. The focus here is on talent continuity that is linked to succession planning and HRM planning, which we discuss later in the chapter.

For some organizations systematic approaches to talent management are limited to individuals in leadership roles (Barlow, 2006), in which case it is hard to tell the difference (if any) between talent management and leadership or management development. To distinguish talent management from HRM or management development, we should consider talent management to be based on some form of exclusivity, but one that is not merely defined by leadership or managerial positions. Furthermore, an organization may have more than one ‘pool’ of talent that are each defined differently. For example, according to a Chartered Institute of Personnel and Development (CIPD) report on talent management, Cargill, an international provider of food, agricultural and risk management services, has divided its talent into three different ‘pools’: ‘Next generation leaders’, ‘Emerging leaders’ and ‘High impact performers’ and therefore make varying decisions about how each of these ‘pools’ are resourced, developed, deployed and retained (Tansley et al, 2006). Identifying and accordingly recruiting, developing and retaining individuals who have been somehow deemed to be higher potential or specifically capable from the rest of the work population seems to be key in differentiating talent management approaches from other HR activities, even if the terms by which talent is defined is somewhat ambiguous and contextual.

The OB perspective

We would encourage you to look back at Chapter 2 on perception and decision making and Chapter 3 on motivation. Although these chapters do not discuss talent management explicitly, it is easy to see how the notion of perception and motivation are inherently linked to the way talent is identified, managed and developed as well as the resultant consequences as you work your way through this chapter. The underlying assumption here is that the way in which we perceive the world around us influences the decisions we take and the options we see as available to us. It should not, therefore, be difficult to see that the way in which we define ourselves and the way we think others in the organizational context, particularly managers, perceive us and our efforts would influence our motivation to work and our efforts in the workplace. If we feel valued and our efforts are noticed and recognized through intrinsic or extrinsic rewards (see Chapter 3), we are inclined perhaps to work harder and perform better. Therefore, if individuals have been identified as ‘talented’ by management and are aware of such classification, one might argue that their self-confidence may be enhanced, they may feel that their capabilities and efforts are being recognized and, as a result, they may feel more motivated to produce results. What are the consequences then if one is aware of not being identified as ‘talented’ in organizations that clearly have a formal or at least a semi-formal approach to managing and developing ‘talented’ individuals? In the realization that one’s efforts and skills are not recognized or that managerial expectations of an employee do not match the employee’s self-perception, considerable room exists for dissatisfaction and potentially loss of motivation and effectiveness. If we take an intercultural approach, for example, in some cultural contexts that are considered hierarchical, status and position can be very important in determining where one sits in not only the organizational hierarchy, but in wider society (see Hofstede, 1980; Trompenaars and Hampden-Turner, 1997). Being perceived and categorized as somehow talented potentially means better development and promotion opportunities, or at least one may perceive these to be better. Therefore one could assume that the lack of the ‘talent status’ implies limited opportunities to develop and progress professionally.

The talent management discourse seems to further perpetuate a managerial perspective rather than an employee perspective. What we mean by this is that very little research seems to be focused on how individuals feel about being identified and, consequently, managed as talented. It has been argued that in order for talent management to succeed, organizational objectives must coincide with the employee’s personal objectives (Kock and Burke, 2008). There is little point in planning out an employee’s careers: no matter how great a plan, if it does not fit in with the future that those employees had envisioned for themselves; any investment by the company may be a wasted one. So in addition to encouraging discussion on why organizations should pay due attention to strategically recruiting, developing and retaining talented individuals, we also want to explore what it means to the individual to be talent managed.

The notion of being identified as talented is interesting and relevant not only for its implications for corporate success, but also because of what it potentially means for individuals and their perceptions of themselves and others. Are individuals aware that they have been identified as high potential and placed in some kind of a ‘talent pool’? Is the talent identification process somehow explicit and evident, for example by individuals being placed in particular development programs? This may be the case in organizations that have adopted a more formal and strategic approach to the way their key human resources are managed. However, our suspicion is that in many companies that lack a formal approach to talent management, some individuals are implicitly assumed to be high flyers based on the kinds of attitudes and personality traits they display coupled with the ‘right’ professional experiences and educational background. In such organizations, development opportunities are likely to be presented on a more ad hoc and haphazard basis and the relationship between employees and managers becomes an increasingly important factor in talent management decisions.

Chapter 2 looked at perception and explored the notion of self-fulfilling prophecies. Following this logic, it could be argued that if individuals feel that they have been identified as high achievers, they are more inclined to behave and take action in ways that are conducive to professional success. On the flipside, the reverse may also be true. If the skills and abilities of talented individuals remain explicitly unacknowledged, this may have a negative effect on their level of motivation and even self-confidence. As McLean (2009) points out, the basic idea of a ‘talent pool’ is that ideally the ‘pool’ should be greater than the demand and therefore inevitably there would be high flyers who are passed over for promotion. Attention therefore also needs to be paid to the reaction of key human resources that are not utilized in what they themselves may see as key positions and significant to their professional career development. Employees in such positions may have low morale, feel less committed to their jobs and underperform (McLean, 2009). Although the impact on employees’ morale of being passed over for a position is a concern, there is some evidence to suggest that it is not as ‘detrimental’ as often assumed (CIPD, 2010b; McCartney, 2010). A recently published CIPD report on talent management experiences suggests that participation in talent management programs is associated with high engagement levels and that ‘structured selection processes serve to increase talent programs perceived value and the motivation of participants to perform’ (McCartney, 2010). However, over and above formal talent management activities, the CIPD research findings suggest that among the senior level participants, mentoring, coaching and networking were particularly valued methods in talent management programs (McCartney, 2010).

Ensuring that employees feel engaged is an essential part of long-term talent management as employee engagement has been linked with commitment, job satisfaction, performance and retention. There seems to be little question that people who feel engaged with their work and organization are more productive than those that feel disengaged (Bhatnagar, 2007). It is also recognized that, in addition to financial reward, development opportunities are a increasingly significant factor in engaging and retaining talent (Bhatnagar, 2007; Orr and McVerry, 2007).

However, as the discussion to follow will show, there is no one set definition of talent and even when we think we have arrived at one, particularly in international contexts we should question to what extent our definitions are applicable or perhaps shaped by Western ideology. Moreover, each organization and industry differs and requires different approaches to the way in which it selects, manages, develops and retains individuals or groups of individuals (ie talent pools) that corporate leaders think possess the kind of skills needed to enhance their company’s business success. In the next section we will introduce the concept of talent ideology and how it shapes the way in which talent is defined and what are some of the implications for individuals and organizations.

Talent identification

The talent ideology

How has the talent ideology developed in the corporate world? Generally talent implies rarity. After Penrose (1959) ascribed importance to managerial and technical talent for firms’ growth and sustainable returns, the talent ideology was formally set out in an article ‘The war for talent’ by McKinsey consultants. The term ‘war for talent’ was originally coined by McKinsey & Company in 1997 as a result of its research on talent management practices and beliefs (McKinsey & Company, 2001). The term has been widely used by practitioners and academics to describe a phenomenon that most organizations had been experiencing, but one that remained unnamed and in need of further clarity. Three major points emerged from the article:

• Talented employees have a highly disproportionate impact on a company’s performance.

• Talented leaders are required by the increasingly complex global economy.

• The search for extremely effective employees has become even more challenging due to demographic changes.

Following the above, companies would contest an ever intensifying ‘war for talent’ with their competitors. The authors’ very definition seemed to provide us an ultimate foundation that a more complex economy demands more sophisticated talent with global acumen, multicultural fluency, entrepreneurial skills and the excellent ability to manage organizations.

McKinsey & Company’s talent ideology perhaps not only provided a sharp insight of the importance for having talented individuals, but also promoted people’s interests of those who have highly paid knowledge jobs. Therefore, ever since McKinsey & Company coined the phrase ‘war for talent’, managing talent has received remarkable attention by both academics and practitioners in the United States, Europe and Asia (Aston and Morton, 2005; Bennett and Bell, 2004; Berry, 2007; Buckingham and Vosburgh, 2001; Pianmsoongnern and Anurit, 2010). In the UK, the CIPD recently claimed that ‘most organizations believe talent management is more not less important in periods of economic uncertainty and it is even more important to have a well-developed talent strategy’ (CIPD, 2010a). Indeed, it has been suggested that during times of economic uncertainty individuals may be reluctant to change employers: ‘employers should consider “growing their own talent” ’ (CIPD, 2011b). Therefore, attracting new talent and developing and retaining existing talent has become increasingly important.

Following on from this, let’s examine what we mean by talent and how organizational leaders might go about identifying talent.

Defining talent

What is talent? How do we define it and once we have defined it how can we be sure that what we mean by it is interpreted in the same way by others? What are the benchmarks? The rubric at times implies there are some universal truths, but anyone thinking logically can see that talent depends on a multitude of factors whether industry, company or discipline related, so why do we talk about it in general terms? Is the talent pool bound – when individuals once enter, are they in it for the duration of their careers, or can they dip in and out, and who decides that? Or is being defined as talented really just about having the qualifications and meeting the right person at the right time, who for whatever reason thinks you have what it takes?

The original concept of talent by McKinsey & Company is not clear, and how the word has been used has become more complex. In ancient Greek, a talent described the amount of silver required to pay the monthly wage bill of a crew of a large warship known as trireme. Thus, the original meaning of the word ‘talent’ can be interpreted as something that donates value. The concept of talent has been defined in various ways (Buckingham and Clifton, 2001; Rath and Conchie, 2008; Robertson and Abbey, 2003). The CIPD defines talent as consisting of ‘individuals who can make a difference to organizational performance either through their immediate contribution or, in the longer-term by demonstrating the highest levels of potential’ (CIPD, 2011b). Buckingham and Clifton (2001) identify that talent refers to a natural recurring pattern of thought, feeling or behaviour that can be productively applied. When talent is augmented with knowledge and skills, the results become individual strengths. In other words, individuals could never possess strengths without requisite talent. Morton (2004) and Goffee and Jones (2005) define talent as a handful of employees’ skills, knowledge and cognitive ability and potential. Ingham (2006) considers that talent is a critical ability set that is difficult to obtain in the labour market. So talent is regarded as a scarcity of skills.

Some other researchers define talent as a core group of leaders, experts and other key employees who are the best performers in the organization. For example, Huselid, Beatty and Becker (2005) describe high performance employees who hold strategic positions as talent. They further note that organizations need to adopt a portfolio approach to management, placing such talent in support positions and dismissing non-performing employees and jobs that do not add value.

Based on a comprehensive literature review of the term ‘talent’, Pianmsoongnern and Anurit (2010) identify two categories. The first is individual potentials – talent is a quality possessed by people that drives outstanding performance. The second is potential people – talent is a generic term for people who hold key positions, such as organizational leaders, high performers who make unique contributions to an organization and those who possess excellent knowledge and skills. Thus, on the one hand, maximizing people’s inherent talent may drive them to perform well. On the other hand, a group of employees having above average educational qualifications, skills and performance, and defined as talent should be well managed and developed in the organization.

In the context of management of internationally mobile talent, D’Costa (2008) defines talent in terms of technical competency and in accordance with a definition from the Organization of Economic Co-operation and Development (OECD), as professionals with a minimum of four years’ tertiary education beyond primary and secondary education in fields such as physical and life sciences, social sciences, engineering, health, education and business. Although to some this may seem a little limited, it reflects the notion that talent is often associated with educational attainment and implies that the skills, capabilities and knowledge that can differentiate one individual from another as talented are consequent of higher education. However, we are then faced with another dilemma. If talent is defined by the skills and capabilities that organizational leaders seek in their employees, then we must ask on what basis are the ‘desirable’ skills that they seek defined? The argument here is that in multinational and multicultural contexts the criteria used to define the ‘ideal’ candidate for recruitment or employee for development may be based on a set of cultural values and assumptions that may be inherent to the manager or recruiter but not the candidate or employee (see the case study example of African candidates and US recruiters in Chapter 2, page 72).

In a recent article in the online magazine HR Review, a writer suggested that the skills that organizations should be developing in their high potential employees, in their talent pools, should not be bound purely by formal talent programs (HR Review, 2011). The author contends: ‘Instead we must look for those individuals with the universal skills that will enable them to take advantage of the uncertainties of the future’. In essence, in order to be defined as talent now as well as in the future, an individual has to be three things, according to the article’s author:

• An information seeker. It is impossible in today’s world, where we are bombarded with information, to remember everything. One must understand how and where to look for information and importantly distinguish what is reliable and what is not.

• A multidimensional learner. One has to be someone who is open to new experiences and is capable of reflecting on them.

• An enquiring mind. One must be capable of both problem solving as well as asking the difficult questions (HR Review, 2011).

We realize the assessment of such qualities is an impossible task, as is the measurement of talent. However, we argue that the qualities highlighted by the article’s author offer a useful qualitative perspective to anyone attempting to decipher the notion of talent.

Having explored what talent is, how it may be defined and what are some of the implications for employees’ perceptions and motivation, in the next section we will address the second management dilemma we highlighted at the beginning of this chapter that relates to how organizations use these high potential individuals to enhance organizational performance by adopting a strategic approach to their management and development. We will begin by highlighting some of the challenges organizations are faced with that necessitate some kind of systematic approach to the management and development of talent if organizations want to develop a competitive edge.

Strategic talent management

Defining talent management

Like the notion of talent, the term ‘talent management’ has been criticized as a management fad and as ambiguous because there appears to be no single concise definition of the concept (Aston and Morton, 2005; Lewis and Heckman, 2006; Reilly, 2008). Often the terms ‘talent management strategy’, ‘succession planning’ and ‘human resource planning’ are used interchangeably (Aston and Morton, 2005). In the substantial academic and practitioner literature, Lewis and Heckman (2006) and Pianmsoongnern and Anurit (2010) identify three main talent management approaches that have also been highlighted by Scullion and Collings (2011) to which they have added a fourth approach as identified by Collings and Mellahi (2009). The four approaches are:

• Traditional HR practices are used.

• There is a new term for succession planning with an emphasis on developing talent pools and tracking the progress of employees through positions.

• People’s natural capability or learned skills that benefit an organization are managed (HR development). A distinction is made between top and poor performers and people are managed accordingly.

• Key positions that have the potential to make a difference to business success are identified.

A further definition of talent management provided by the CIPD has been widely adopted by academics, HRD managers and consultancies: ‘the systematic attraction, identification, development, engagement/retention and deployment of those individuals with high potential who are of particular value to an organization’ (2009b). Therefore, many of the existing studies on talent management tend to be from an HR planning, selection and HRD perspective (for example Garrow, 2008). While focusing on definition and delivery of talent management, Reilly (2008) and Chuai, Preece and Iles (2008) suggest that talent management should not stand alone from other people management practices. The challenge for organizations is how to design the focus of their approach to talent management and how their approach fits in the organizational context. It is important for managers to recognize that the organization’s definition of talent determines their talent management programme, and how talent management is emphasized may have an impact on the organizational management system and procedures. For instance, if the organization defines talent as employees who are in senior management positions or the potential employees to be in such positions, then the organization has to decide what criteria should be used and which level of managers should be included, as well as the criteria on which to identify high potential.

Seemingly the adoption and implementation of formal talent management strategies remains piecemeal for many organizations. That being said, according to a 2010 survey report by the CIPD, nearly 60 per cent of organizations do engage in some kind of talent management activities, but only approximately half of these consider such activities effective (CIPD, 2010b). This could suggest that organizations are not necessarily consistent in their approaches. Although much debate surrounds how talent or talent management is defined, there seems to be some consensus that organizational success in today’s changing and financially challenging times requires some kind of systematic approach to the way key human resources are managed.

Challenges and changing contexts in talent management

In addition to the recent global recession, what are some of the other changes that suggest that talent management approaches are needed to maintain a competitive edge in today’s market? Why do we need talent management? In summary, from an extensive review of literature on talent management the following challenges have been identified and we will explore them in more detail next:

• Labor shortages;

• Changing demographics;

• Greater demand for work–life balance;

• Skills gap;

• Experience gap;

• Increased professional mobility;

• Lagging educational attainment.

Research has indicated that the competition for talent has been created as a consequence of labour shortages (Boudreau and Ramstad, 2005; Brewster, Sparrow and Harris, 2005). In addition, competition for talent arises from the changing demographics of the labour market as well as a greater demand for work–life balance (Tansley et al, 2006).

Galagan suggests that an increasing skills gap, that is a gap between ‘organization’s current capabilities and the skills it needs to achieve its goals’, a consequence of the recent financial down turn, challenges organizations to think more strategically about how they manage their key human resources who hold the knowledge and skills needed to create and sustain competitive advantage for their organization (2010). Bridging the increasing skills gap is not only a challenge for organizations, but industries, communities and entire nations, as Galagan (2010) points out. Moreover, this skills gap seems to be a persistent problem worldwide. As the generation of people born since the Second World War (often referred to as the baby boomers), who possess knowledge and experience and hold a significant portion of senior leadership positions begin to retire, the existing skills gap is likely to be further exacerbated (Galagan, 2010; McKinsey & Company, 2001; Orr and McVerry, 2007). In developing countries lacking resources, inadequate educational infrastructures and a large gap between the rich and poor do little to enable the development of home grown talent to meet the needs of companies working to meet the demands of an increasingly consumerist society (see Glossary) worldwide.

Organizations are also facing an experience gap and struggle to find and retain qualified people with the adequate experience and capabilities (for example, in the oil and gas sector; Orr and McVerry, 2007). The retirement of ‘baby boomers’ is not only likely to leave a gap in technical knowledge and experience, but the retirement of such a significant segment of the working population in a relatively short number of years may also mean a loss of supplier and customer relationships as well as a loss of understanding of the complex informal networks that often keep organizations functioning (McQuade et al, 2007). Somewhat contrastingly and perhaps on a more optimistic note, the changing demographics of the workforce also means that the labour market increasingly consists of individuals of the ‘net generation’, a term coined by Don Tapscott to describe individuals born between 1977 and 1997 who have grown up with computers and digital media and now make up the largest group in the US workforce (Galagan, 2010). This generation of people is said to demonstrate higher IQ and different learning styles, work habits and a new notion of collaboration, thus changing the nature of the way a large portion of today’s working population work. However, we would like to point out here that this notion of a ‘net generation’, a generation of people that somehow have internalized the use of computers and take for granted the availability of technology, currently remains one that should not be universally assumed to apply to all parts of the developing world where such infrastructure simply remains unattainable for the majority. It raises an interesting question in that if the notion of talent in Western MNCs is somehow explicitly or implicitly shaped by the expectation that all graduates entering the job market have internalized the notion of technology and access to it long before reaching university, then would that not mean that individuals who have not would inevitably be to some extent excluded from ‘talent pools’, whether implicitly or explicitly?

Furthermore, relative to 50 or even 20 years ago, professional mobility nationally and internationally is becoming increasingly the norm as individuals search for new opportunities to better their own development, despite suggestions that professional mobility is likely to slow down in times of economic distress (HR Review, 2011). There is no longer a stigma attached to changing organizations (McKinsey & Company, 2001) and as recent findings of the Inspiring Talent 2011 Survey indicate approximately one-third of the people interviewed intend to leave their current jobs in the next five years (Churchard, 2011). Hence, retaining individuals in whose training the organization has invested becomes an increasingly significant challenge. In a global context, a shift has also occurred in the direction of internationally mobile talent. The flow of talent is no longer limited to movement from the West to East, but rather multidirectional (D’Costa, 2008; Solimano, 2008). This shift in direction poses talent management strategists and HR practitioners with further challenges in attracting, developing and retaining individuals with key skills, know-how and experience in a way that is culturally appropriate. So, regardless of national, cultural or industry context, organizations need to adapt, in terms of their internal culture as well as strategically to the needs, values and habits of their changing workforce.

Coupled with this notion of a demographically changing workforce, another reason attributed to the lack of available talent is reported to be lagging educational attainment, in that during times of financial difficulty, it is anticipated that organizations are more likely to reduce the amount of low skilled, low paid jobs and these are likely to be replaced by more knowledge-intensive positions that require more highly qualified people (Galagan, 2010). Indeed, there appears to have been a shift in the nature of work where more emphasis is placed on knowledge workers and innovative thinking, which is creating a higher demand for qualified and experienced individuals with high degrees of expertise. A study conducted in the South African public service, for instance, indicates a severe skills gap across middle and top management with vacancy rates at deputy director-general level reaching 59 per cent (Kock and Burke, 2008). The demand for top managerial talent is a global phenomenon.

Key components of strategic talent management

As you can see from our discussion so far, organizations are increasingly in competition with each other to attract, develop, deploy and retain individuals with key skills needed to maintain a competitive edge. As such, organizational leaders need to develop strategies and practices that not only address their current business needs for specific talent, but also their future business needs. However, it appears that the degrees to which talent management initiatives and practices are actively used in organizations varies from informal and incidental approaches to approaches that incorporate strategic talent management with wider corporate strategy (Tansley et al, 2006).

Oakes and Galagan (2011) argue that talent management comprises several key areas of HR: recruiting, compensation and rewards, performance management, succession management, engagement and retention, and leadership development. The authors further propose that the talent management framework in its entirety is underpinned by a notion of learning and development. However, the degree to which organizations choose to emphasize each of the key components is determined by the organization’s individual business needs (Oakes and Galagan, 2011). Therefore, talent management is also about succession planning for the future as it is about recruiting and deploying the ‘right’ people with the ‘right’ capabilities in the present. In other words, talent management can be used at different stages of career development, such as when graduates who enter an organization for the first time are earmarked for fast track development opportunities or middle managers are developed for future leadership positions as part of a longer-term organization-wide succession plan. Indeed, the boundaries between talent management and succession management, of which succession planning is a component, are somewhat blurred. Succession planning refers to the process of identifying successors for key positions in the organization and developing and deploying such individuals accordingly. Succession management as a process (see Glossary) seems to be most often relevant at executive level positions and not something that is necessarily applied throughout the organization except perhaps for positions that are considered hard to fill or otherwise vital (Tansley et al, 2006). Successful adoption of a much needed integrated approach to talent management requires addressing the various key components of talent management (Oakes and Galagan, 2011), which is precisely the view that we wish to promote here.

We would like to add to the list of challenges a further concern for MNCs operating in some developing country contexts: nationalization. By this we mean the pressure from governments to nationalize workforces, particularly at management level. The implication for MNCs is that in countries where they have previously been able to fill the experience or skills gap with expatriates, this is becoming increasingly difficult due to restrictions on expatriate quotas placed by the host country government. This phenomenon is particularly evident in the energy sector and oil and gas companies operating in the Middle East (for example ‘Omanization’, Al-Lamki, 1998) and African countries such as Angola are all too familiar with it (for example ‘Angolanization’, Bjerke et al, 2004). That being said, the problems brought about by nationalization differ from country to country, which we do not have space here to delve into any further.

Emerging issues in managing talent

Danger of narrowly defining talent

Based on McKinsey & Company’s talent ideology, talent employees must have a high level of mental ability and a high level of proven performance. However, can we really say that today’s high level of mental ability will be tomorrow’s source of competitive advantage? Many companies tend to believe so, recruiting young graduates with high marks in top universities and business schools, and paying them a premium. Organizations may put themselves in danger when highly associating their talent pool with younger people and demotivate those who are older and more experienced. Moreover, sometimes a high level intellectual ability can have a negative impact on people’s behavior. For example, a high powered job may require employees to have a high tolerance of humdrum and the constant repetition of similar tasks. A highly active mind might be more likely to become dissatisfied with such a job.

A high level of proven performance as a criterion for talent could also be problematic, since companies first have to identify precisely types of high level individual performance. If we cannot identify high level individual performance we cannot reward it and the talent ideology becomes meaningless. Second, companies have to provide appropriate measurements for the defined performance. Once again, if we cannot measure it, we cannot reward it.

Nowadays, more organizations have adopted a competency-based method to recruit employees with certain skills and knowledge to be the future talent in the organization. The advantage of this is that the organization may provide more opportunities to develop employees’ skills and competences. However, the danger of this is obvious too. Cappelli (2008) points out that the competence-based assessment process does not sufficiently acknowledge people’s strengths and weaknesses. For instance, leadership is situational and such approaches may not value charismatic leadership.

Goals and resources in managing talent

One of the key questions for organizations managing talent is: where do we want to be and what are our resources to get there? As we have shown, there is a need to ensure that any talent management strategy is in line with broader and longer-term business needs. Therefore, as part of this process in the first stage it is essential to identify the organization’s goals and the capabilities (ie human resources) needed to achieve them. The second stage involves evaluation of current available human resources internally in the organization as well as from external talent pools. The third stage involves bringing the two together to identify areas where skills gaps appear or indeed where there might be so-called surplus of talent. Depending on the outcome of this analysis organizational leaders would then need to decide how to structure and organize their human capital, whether it be on a local, national, regional or global basis.

There seems to be a consensus among researchers and commentators that a top-down approach is needed for successful management of talent. Although HR plays a critical role in driving the talent management agenda forward, it is essential that it is driven from the top down and supported by leadership. Talent management, after all, is a component of HRM, but should not be the sole responsibility of this people management function. Rather, it should be a shared priority to line managers and top leadership (Chuai, Preece and Iles, 2008; Kock and Burke, 2008).

The need for an integrated approach to talent management mentioned earlier in the chapter is also emphasized in Kock and Burke’s (2008) approach to managing talent, based on research conducted in the South African public sector. Kock and Burke’s (2008) ‘talent wheel’ model (see Figure 6.1) depicts a cyclical process consisting of:

• Talent planning – identifying the gap between demand and supply of talent;

• Talent identification – assessment of employees’ performance, potential and readiness to advance;

• Talent categorization – classifying individuals as ‘high performers, solid performers or poor performers’ based on the talent identification process;

• Career management – a process that involves matching employees’ visions and career plans with organizational needs reflecting their talent classification;

• Talent balance sheet – a consolidation of data collected about the employee.

All these elements are underpinned by continuous employee engagement. Although we are not prescriptively promoting this model, it offers useful insight into the practical aspects of the talent management process.

Sustaining quality talent

Boudreau and Ramstad (2005) argue that two paradigm shifts have occurred that carry implications for how organizations define their people management strategies. The authors refer to the first paradigm shift as talentship, which entails identifying key talent pools in areas where strategic success is influenced by the availability or quality of human capital (Boudreau and Ramstad, 2005). As you will have noticed, we have discussed aspects of talentship, albeit using slightly different vocabulary. The second paradigm shift is referred to as sustainability.

It is no longer sufficient to define HR’s contribution and organizational effectiveness in financial terms, but rather in broader terms that enable ‘success today without compromising the needs of the future’ (Boudreau and Ramstad, 2005). In other words, although financial success is required to achieve sustainability in an organization, it should be defined in broader terms that include notions of transparency, ethics, diversity, support for employee and human rights, corporate social responsibility and contribution to the community, according to the authors. We therefore suggest that succession planning, an integral part of talent management, is not possible without achieving sustainability in an organization and it is specifically these notions that go beyond financial definitions of success that contribute to employees’ sense of organizational commitment and motivation to work, which in return are key factors in managing talent to meet future business needs. Moreover, as it is suggested in an online article, when organizations look at developing their talent or indeed recruiting new talent, the kind of individuals they need are not merely defined by their technical or practical knowledge, albeit they too are important, but by their potential ability to adapt to changing conditions successfully (HR Review, 2011).

This is as far as we intend to provide any kind of step-by-step guide to talent management as we strongly believe that the talent management process is not a ‘one size fits all’ kind of process. Indeed as Scullion and Collings (2011) contend in their edited volume on global talent management, we too argue that understanding the significance of contextual factors is key to successful talent management. What we do aim to provide you with is the ability to ask the right questions when looking at possible approaches to managing people with key skills and expertise that have the potential to enhance organizational performance. We also want to emphasize the holistic approach that is needed – it is not simply enough to address one component of HR when managing talent.

Key learning points and conclusions

• Despite criticism and skepticism, talent management does have a place on the strategic HRM agenda. There seems to be little doubt that developing the right human resources, intellectual capital, skills and competencies are more important now than ever for organizations to achieve competitive advantage.

• Any successful talent management strategy must be holistic and due consideration should be given to these key components: recruitment, selection, learning and development, performance management, retention, pay and reward as well as employee engagement.

• More insight is needed on employees’ experiences of being talent managed. Although we have only touched on perception and motivation in this chapter, it is evident that talent management, like HRM, cuts across all areas that are traditionally grouped together under the OB canon. If organizations are to develop effective ways of developing and retaining their key human resources, more attention needs to be paid to how individuals experience being talent managed and what are the consequences of applying talent management practices and policies in terms of behavior in the organizational context.

• Particularly as organizations increasingly operate across geographical and cultural borders, the approaches used to manage key employees in today’s economically challenging environment must be adapted to be contextually fitting. Moreover, the expectations and consequent experiences of those being talent managed are likely to differ in different national and cultural contexts.

Case study and discussion questions

Angola is one of Africa’s largest producers of crude oil, along with Nigeria and thus attracts foreign MNCs to its shores. Angolan government’s policies and practices have historically had a significant impact on the way in which MNCs operate and thus strategically manage their own human assets in the country. MNCs are under increased pressure to localize their workforces as work permit regulations are seemingly tightened, thus restricting the number of expatriates companies are able to deploy to Angola. Such barriers carry implications for the success of knowledge transfer processes in MNCs and potentially places increasing pressure on MNCs to send local employees abroad for training rather than relying primarily on expatriates to transfer skills and know-how to their local counterparts. The dynamic is further complicated and made topical by the acute shortage of local skilled professionals (Kreeft, 2009) as a result of Angola’s 27-year civil war that only ended in 2002 and the rapidly growing oil business. Talented and experienced Angolans appear to be in short supply and high demand.

A number of interlinked factors have been identified in contributing to current talent management and development practice in the Angolan oil economy. First, the nature of Angola’s struggle for independence from its Portuguese colonial rulers and subsequent declaration of independence in 1975 resulted in a mass departure of Portuguese professional and semi-professional settlers, leaving a severe lack of skills and abilities across industries (De Oliveira, 2007; Hodges, 2004). Second, the subsequent civil war between Angolan nationalist movements has resulted in the destruction of much of the country’s original subsistence industries (mainly agricultural), and had severe economic and developmental consequences for the country’s other sectors such as education, healthcare, tourism, retail and communications. Thus, the development of Angola’s infrastructure is highly reliant on oil exports, foreign direct investment in exchange for concessions and oil-backed loans creating a path dependency (eg Buckley and Casson, 2001). A shortage of educated and skilled Angolans is a consequence of the lack of access and the quality of education to name two problems and this is proving a major resourcing challenge not only for MNCs operating in Angola, but also for national companies. The lack of skills supply and restrictions on expatriate quotas could potentially slow down economic growth by making the economy difficult for foreign investors to invest in.

Furthermore, accessibility to educational and career opportunities in Angola has to an extent traditionally been determined by ethno-linguistic divisions (Oyebade, 2007). From a cultural perspective, family obligation, often perceived as nepotism in the West, is practised in Angola and thus the socio-economic position of one’s family, in many cases rooted in ethnic heritage, can be a significant determinant in accessing educational and career opportunities.

The Angolan government is driving forward a nationalization agenda, referred to as ‘Angolanization’ and thus foreign MNCs are having to put into practice strategies that will develop local talent to meet their operational needs. ‘Angolanization’ has been associated with the development of future leadership potential, not only for its practical implications of developing technical expertise, but also in increasing corporate capacity for local know-how to establish ‘constructive relationships’ with local stakeholders and the Angolan government (Ernst & Young, 2004). However, Angolanization has been criticized in the media and online forums for its limited and short-term scope (Kreeft, 2009; Paulo, 2006) and bias towards foreign-educated Angolans, implying that the agenda in itself is selective (Paulo, 2006) and perhaps perpetuates the social and economic divisions that are prevalent in Angolan society.

Nationalization in this sense is generally examined from a corporate perspective. In other words, what does nationalization mean for organizations, business performance and the nature of the labour market? The employee perspective is overlooked. Research carried out by one of the authors of this chapter in to the career development experiences of Angolan professionals working in the oil industry suggests that the Angolanization agenda carries many more personal implications for individuals who are being talent managed in this context. Participant narratives suggest that although the development of local talent is seen as a positive concept in principle, it is also accepted in practice with a degree of scepticism. MNCs’ perceived inability to treat people as individuals is contradictory to the Angolan cultural value of human relationships. Western transactional approaches to employment relationships in the Angolan context seem counterproductive. Narratives suggest that a perception exists among some Angolan professionals that their Angolan nationality has been a factor when being recruited by foreign MNC. This realization has led to feelings of cynicism and of being used, which in turn has implications for organizational loyalty and motivation. It is therefore easy to see that if individuals feel that they are merely a resource to their organization, there is a greater likelihood that they will move between companies in search of the most financially rewarding deal for themselves. The positive side of the Angolanization agenda that has been acknowledged is the increased training and development opportunities for local talent and rapid career progression. Although status and position are highly valued in Angola, rapid career progression is also met with a degree of scepticism and it is questioned whether promotions are based on skills and merit or governmental pressure on MNCs to localize at management level.

Here is the reference used for this book:

Perkins, S. J., & Arvinen-Muondo, R. (2013). Organizational behaviour. London: Kogan Page.