1. Talent management: What. Why. How. Dr
Talent management: What? Why? How? Dr. Nicky Dries Keynote “HRM in de overheid” October 21st, 2010
Introduction:
Brief introduction of myself & my research.

2. Talent management: What?
Four distinct strains of thought regarding TM:
(1), doing what HR has always done, only faster and better;
(2), ensuring an adequate flow of employees through jobs;
(3), managing talent regardless of organizational/job boundaries;
(Lewis & Heckman, 2006)
and (4), identifying key positions, rather than key people per se.
(Collings & Mellahi, 2009)
>> HR practitioners tend to agree most with (3), but are often limited to (2) (Dries, 2009).
(1) In other words, ‘talent management’ is just a new term for ‘human resource management’. Some practitioners are convinced that this is true; they see talent management as ‘old wine in new bottles’, as another management hype or fad, if you will. Within this perspective there are those who believe that TM equals the broad spectrum of HR practices (only faster/better/more efficient/across the entire enterprise rather than within one division or department) versus those who believe that TM refers to very specific HR practices (i.e. only for the best employees, in terms of development, reward systems or succession planning);
(2) ...Based on projections of staffing needs. This perspective is quite close to the concepts of succession planning and human resource planning;
(3) According to this perspective, organizations need to focus on the optimalization of their human resources (talent, operationalized mostly as performance level), either from a humanistic point of view (i.e. it is the responsibility of HR to manage all employees to high performance), or because demographic and economic trends demand it (e.g. some organizations only want to have ‘A performers’);
(4) ... i.e. “the starting point for any talent management system should be the systematic identification of the key positions which differentially contribute to an organization's sustainable competitive advantage”. This is linked to the development of a differential HR architecture, which implies filling these positions with people that, consequently, might contribute to the organization in different degrees. Strategic talent management, according to this perspective, focuses on those incumbents who are included in the organization's pivotal talent pool and who occupy, or are being developed to occupy, pivotal positions in the organization.
Bottom-up versus top-down view of talent:
Bottom-up: Employees can contribute to the firm's strategic objective simply because of their value and uniqueness.
Top-down: Human capital is of little economic value unless it is deployed in the implementation of the organization's strategic intent; the locus of differentiation, in terms of fit, should be the job, not the individual employee.
I would argue that the literature has evolved from job-based to competency-based employment models; hence, a bottom-up approach to TM appeals more to me.

3. Talent management: What?
… the differential management of employees based on their relative potential to contribute to the competitive advantage of their organizations
(adapted from Lepak & Snell, 1999)
Given economic pressures for more efficiency, flexibility, and innovation, organizations worldwide are exploring the use of workforce segmentation to enhance the return on investment (ROI) of their human resource practices (Benschop, 2001). Workforce segmentation, the main principle underlying efficient talent management procedures (Chuai, Preece & Iles, 2008; Dries & Pepermans, 2008), involves the differential management of employees based on their relative potential to contribute to the competitive advantage of their employing organizations (Lepak & Snell, 1999). In other words, it implies that as not all employees generate the same outcomes, it makes no sense (economically speaking) to invest in them indiscriminately (Lin, 2006).
However, different organizations tend to use different definitions of talent management. Some use more ‘elitist’ definitions and others use more ‘egalitarian’ definitions. There has been no research to date about the possible advantages and disadvantages of investing selectively in talent, versus investing in talent in general (Lewis & Heckman, 2006). At one extreme, talent management can be seen as encompassing all employees in the organization (Ingham, 2006). The ‘diversity’ perspective on talent management advocates that all employees have some form of talent and that, consequently, talent management should be aimed at developing all employees to the best of their abilities (Bossuyt & Dries, 2008). No matter how appealing the diversity perspective on talent management sounds, more arguments are found in the talent management literature in favor of a more ‘elitist’ perspective.
For instance, Boudreau and Ramstad (2005) argue that identifying pivotal talent pools – those groups for which small improvements in quality or quantity generate large returns on measures of strategic interest – should be a central feature of any talent management program. Similarly, Collings and Mellahi (2009) assert that focusing mainly on high potentials facilitates a more deliberate exploitation of organizational resources. Chuai, Preece and Iles (2008) describe employee segmentation as exactly that feature of talent management that distinguishes it from general HRM, which is more egalitarian by nature. In contrast, talent management perceives the needs of core and periphery employees as noticeably different (Ledford & Kochanski, 2004). Finally, Lin (2006) views employee segmentation as a logical application of labor economics. If not for segmentation, the author reasons, all employees would be treated as equally valuable, regardless of their performance, competence, potential or other characteristics that might distinguish them from each other. Such an approach might then create unnecessarily high costs in terms of recruitment, selection, training and development, and reward management.

4. Talent management: What?
Lepak and Snell (1999), in their seminal paper on differential HR architecture, argue that in general, the HRM literature has inadequately acknowledged the need for multiple HR strategies to exist parallel to each other within one and the same organization. In a response to this important gap in the literature, the authors developed a model prescribing appropriate employment modes, employment relationships, and HR strategies for four different types of human capital: high potentials, internal partners, contract workers, and external partners (see Figure 1).
In the top right-hand corner of the model (quadrant I) we find human capital that is both valuable and unique (embodied in so-called ‘high potential’ employees). The recommended employment model for employees falling into this quadrant is internal development, as highly unique skills are not easily ‘bought’ in the general labor market. The associated employment relationship, then, is organization-focused. Organization-focused exchange relationships encourage significant mutual investment both on the part of employers and employees in order to achieve long-term competitive advantage. In order to support or create such an employment relationship, organizations will likely rely on a commitment-based HR strategy that encourages employee involvement and optimizes their return on human capital investments. For example, they could sponsor career development and mentoring programs aimed specifically at developing organization-specific knowledge in their high potentials (i.e. knowledge that is much more valuable within their specific context than to competitors) (Lepak & Snell, 2002).
As talent management procedures are aimed specifically towards the identification, development, deployment and retention of high potential employees (Pepermans et al., 2003), we will not discuss the other three quadrants in equal depth here. Put briefly, internal partners (quadrant II) are employees with skills that are valuable, but widely available in the labor market; contract workers (quadrant III) are those with generic skills of limited strategic value, that can be acquired on an ad-hoc basis; finally, external partners (quadrant IV) possess skills that are unique in some way, but not directly instrumental to the organization’s competitive advantage.
(adapted from Lepak & Snell, 1999)

5. Talent management: Why?
demographic drivers
psychological contract drivers
The war for talent seems to be grounded in two main assumptions. First, that the importance of human capital (especially in terms of leadership) for organizations’ competitive advantage is increasing. Traditional sources of competitive advantage are losing their edge as organizations today are operating within the context of a knowledge economy. Leadership, on the other hand, is a potentially renewable resource that cannot easily be copied or stolen by competitors. Furthermore, it is said that only through effective leadership a firm can identify and take advantage of other sources of potential competitive advantage, by doing so staying ahead of competitors in a rapidly changing economic context (McCall, 1992). The second assumption is, that attracting and retaining talented human capital is becoming harder due demographic and psychological contract evolutions (Tucker, Kao & Verma, 2005).
Demographic drivers: The majority of employers worldwide (both in emerging economies such as China and India and in developed economies such as the United States and Western Europe) are reporting difficulties in findings and retaining talented employees (Tarique & Schuler, 2009). However, demographic trends differ across different parts of the world. Whereas in a US or European setting, the problem lies with the impending retirement of large groups of older employees and the fact that fewer and fewer young people are entering the workforce, in other parts of the world, there appears to be an oversupply of young workers (Guthridge et al., 2008). Although, in the European Union, younger workers are on average achieving higher levels of education, demand for educated workers is still not being met (Tucker et al., 2005). As for Belgium, demographic trends predict that the working-age population will stop increasing from the year 2015 onwards. After 2020, it will start shrinking, causing a decrease in potential labor market participation (Sels et al., 2008).
Psychological contract drivers: In the recent careers literature, there has been renewed interest in the psychological contract (Hess & Jepsen, 2009). In general, it is assumed that as organizations are increasingly less able to promise stable, long-term careers, career actors are distancing themselves from their organizations in turn (Hiltrop, 1999; Tulgan, 2001). Since ‘employment’ is no longer an acquired right for employees, they must now pursue ‘employability’ and acquire transferable skills that make them more attractive to the labor market as a whole. As a consequence, employee loyalty towards their employing organizations is said to have decreased dramatically (Sullivan, 1999).This means that, on top of the demographic shifts that are causing a decrease in labor market participation in its entirety, psychological contract dynamics are making it harder to retain talented employees. However, instead of concluding from all of this that talent management is no longer workable (e.g. Baruch & Peiperl, 1997), the opposite conclusion is equally valid. Rather than stating that organizations with stable, established career structures have missed out on important developments, one could argue that they are in a better position to face the war for talent. After all, research has indicated that many ambitious young managers still think in traditional career terms (Guest & Mackenzie Davey, 1996). Organizations that rely primarily on external hiring to ‘buy’ the knowledge they lost by way of turnover and retirements will find that strategy to be decreasingly effective. Before the demographic shift, when the talent supply exceeded demand, external hiring may have made sense as a primary strategy. However, the talent pool is now shrinking, and the demand for talent is escalating. Even if leadership talent could be bought, the competitive costs will continue to increase (Calo, 2008).

6. Talent management: Why?
Effectiveness =
“doing the right thing”
Show this slide and the next before discussing them (= logical argumentation): read general statements out loud.
Then discuss efficiency first, effectiveness second!
2. Effectiveness is very similar to efficiency, but the measure is related to some enterprise objective rather than the technical quality of output. For example, one common indicator of effectiveness is related to customer satisfaction rather than output. Therefore the effectiveness measure of a business process can be indicated by the resource inputs needed to produce a level of an enterprise objective.
A measure of effectiveness is given by:
Effectiveness = Enterprise objectives/Input Quantity"

7. Talent management: Why?
Efficiency=
“doing the thing right”
1. A more efficient process either requires fewer inputs or produces more outputs compared to a similar process, to achieve the objectives of the process.
Simplified formulas for calculating efficiency:
Technical efficiency = Output quality / Input quantity
AND
Allocative efficiency = Value of outputs / Cost of inputs

8. Talent management: Why?
Ask yourself: which ROI indicators are relevant for evaluating the quality of your talent management processes?
Examples
Employee outcomes: job satisfaction, career satisfaction, organizational commitment, organizational citizenship behavior, productivity, absenteeism, intention to quit, ...
Organizational outcomes: profitability, sales, market share, growth, returns, quality, …

9. Talent management: How?
CM = career management
CSM = career self-management (employee also has a responsibility in talent management)
OCM = organizational career management
This table might provide input for a psychological contract between employee and employer:
What will we do versus what can (or: should) you do?
(adapted from Dries & Pepermans, 2008)

10. Talent management: How?
Strategic consideration 1:
Degree of egalitarism
Probably depends on organizational culture as well as on strategic objectives:
- Do you WANT to create (large) differences between employees?
- CAN you create (large) differences between employees?
- Would it be INSTRUMENTAL to create (large) differences between employees?
Matthew effect:
“Give to those who have”, i.e. invest mostly in those where you expect a higher ROI. This means that you should focus your investments on high potentials as these investments are most likely to generate high returns. Other employees might be motivated to enter the ‘in-group’ looking at the benefits the happy few receive. (= very specific type of culture, achievement-oriented). For instance, as a scientist: when you are famous, you are most likely to get funding, get cited and get recognized for your ideas (even when a junior person in your department has better ideas, or has developed ‘your’ ideas!) This inspires young scientists to also want to get published, deliver many speeches and seminars in the public eye, and appear in the media.
Mark effect:
“Give to those who need it the most”, i.e. invest there where help is most needed, for instance in the weaker performers in the organization. In this strategy, we assume that the high potentials can take care of themselves (they are really good at their jobs, so just let them do their thing), but that the weaker groups in the organization need most remediation.
This is a strategic choice, there is no objective truth that holds across all possible organizations!

11. Talent management: How?
Strategic consideration 2:
Communication strategy
We found positive main effects of open communication about talent management procedures on almost all dependent variables, implying that adopting an open communication strategy generates overall positive effects on job performance, career success and commitment of employees. Considering these results, one could wonder whether open communication about who is on the high potential list is indicative of an open communication climate in general, or even of a specific type of organizational culture that impacts positively on worker attitudes and performance. Further research needs to be done in order to examine exactly how open communication about talent management generates these positive effects.
Cope (1998) identified three benefits of communicating openly about talent management procedures:
(1) the public nature of the talent management procedures encouraged development of a rigorous process, well able to withstand scrutiny;
(2) the increased transparency of the leadership development process caused higher appreciation and more respect for the procedures in line managers;
(3) pre- and post-transition employee surveys revealed more positive employee perceptions of the leadership development programs;
+ (4) The business ethics literature (e.g. Van Buren, 2003), alternatively, argues that information about internal employment prospects must be offered to allow employees to assess whether or not to maintain the employment relationship with the organization or to disengage.
However, the literature also identifies possible pitfalls of adopting an open communication about organizational talent management procedures:
as organizations’ high potential identification procedures are often based on annual assessments of potential, it is possible to be seen as a high potential one year, but not the next – and an open communication system would require communicating such “demotions” as well;
communication to employees about their high potential status might create false expectations about guarantees in terms of promotions or successful careers;
Eisenberg & Witten (1987), in their seminal article about strategic ambiguity as a communication strategy, described how managers who had been overly explicit in their policies paid dearly later on, when a violation by a valued employee forced them to choose between making a good decision and remaining consistent with previous pronouncements. The authors state that ambiguous communication can thus allow organizations greater freedom to respond to environmental changes.
An important factor to take into account in adopting an open or closed communication strategy about talent management is the organization’s general culture. Benefits of open communication may be more easily reaped when the company culture supports open communication (i.e. whether communication about high potential status is consistent with everyday practices).
Further research needs to be done in order to examine which types of organizational cultures facilitate implementation of an open communication climate – and conversely, in which types of organizations open communication is not feasible or desirable.

12. Take-home message
Without determining what talent management means to your organization (i.e. at which employee groups it is directed), why you want to engage in it (i.e. which type of ROI you aim to achieve), and how you plan to implement specific talent management practices (i.e. by which procedures) …
… it will never contribute to your organization’s effectiveness and efficiency!
‘Ad hoc’ nature of talent management in many organizations:
A recent UK survey by the Chartered Institute of Personnel and Development (2009) found that while 51% of the organizations surveyed engaged in some form of talent management, only 20% of them worked with a formal definition of the concept. Findings such as these raise the question of how talent management can be used to the strategic benefit of organizations when they cannot even succeed in establishing a definition for it. As a result, talent management runs the risk of being merely a management “fad” organizations run along with because all of their competitors are doing so. Furthermore, many organizations seem unwilling to explicitly delineate what talent management does and does not mean as they believe that talent management is a “mindset” rather than a bundle of HRM practices (Creelman, 2004), or because they like to use the term “talent” as a euphemism for “people” in light of employer branding (Lewis & Heckman, 2006).

13. Any questions. Feel free to contact me at: nicky. dries@econ. kuleuven
Any questions? Feel free to contact me at: