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524 European J. International Management, Vol. 5, No. 5, 2011
Copyright © 2011 Inderscience Enterprises Ltd.
Effectiveness of talent management strategies
Pamela Bethke-Langenegger*,
Philippe Mahler and Bruno Staffelbach
Department for Business Administration,
University of Zurich,
Plattenstrasse 14, CH-8032 Zurich, Switzerland
Email: pamela.bethke@business.uzh.ch
Email: philippe.mahler@business.uzh.ch
Email: bruno.staffelbach@business.uzh.ch
*Corresponding author
Abstract: This paper investigates the effects of different types of talent
management strategies on organisational performance. We introduce four
different strategies and show how they affect organisational performance. For
this purpose, we use a particularly detailed dataset of 138 Swiss companies.
We find that talent management focusing on retaining and developing talents
has a statistically significant positive impact on human resource outcomes such
as job satisfaction, motivation, commitment and trust in leaders. Moreover,
talent management practices with a strong focus on corporate strategy have a
statistically higher significant impact on organisational outcomes such as
company attractiveness, the achievement of business goals, customer
satisfaction and, above all, corporate profit, more so than any other areas that
talent management focuses upon.
Keywords: talent management strategy; organisational performance;
Switzerland.
Reference to this paper should be made as follows: Bethke-Langenegger, P.,
Mahler, P. and Staffelbach, B. (2011) ‘Effectiveness of talent management
strategies’, European J. International Management, Vol. 5, No. 5, pp.524–539.
Biographical notes: Pamela Bethke-Langenegger is a Lecturer at the Chair of
Human Resource Management at the University of Zurich, Switzerland. She
writes on talent management, with a focus on the financial constraints faced by
employers and social spillover effects faced by employees. Further research
interests are individual learning behaviour and organisational development. She
has held related positions as a research associate and as an educator in
institutions in Switzerland.
Philippe Mahler serves as a Senior Research Associate at the Chair of Human
Resource Management at the University of Zurich, Switzerland. His research
interests include labour-market spillover effects of volunteering, organisational
citizenship behaviour, work engagement and applied micro-econometrics. He
studied economics at the University of Bern and the University of Lund and
worked several years as a Management Consultant, and he holds a doctorate
from the University of Zurich.
Bruno Staffelbach is a full Professor of Business Administration and Head of
the Chair of Human Resource Management at the University of Zurich,
Switzerland. He has published ten books and more than 90 papers, mainly on
Effectiveness of talent management strategies 525
strategic human resource management, management ethics, personnel and
military economics as well as the history of economic thought. In addition to
his career in the academic community, he served in the Swiss Armed Forces,
where he was Brigadier General and Commander of an Infantry Brigade.
1 Introduction
Since McKinsey’s proclamation of the War for Talent in 1998 (Chambers et al., 1998),
the specific management of talents has been widely seen as a solution for the HR
challenges that arise in today’s labour market (Beechler and Woodward, 2009; Scullion
and Collings, 2011; Schuler et al., in press). Although a review of the literature shows
that talent management is a growing field, the effectiveness of talent management and its
added value have still not been accurately stated. Moreover, research dealing with talent
management strategies and organisational performance is somewhat lacking; the question
has not yet been answered as to whether deciding upon the right strategy would achieve
the desired impact on organisational performance (Lawler, 2008). As a result, there is
evidently a great need for empirical research to investigate the dynamics and impact of
talent management strategies. It also has to be acknowledged that the research that exists
is mostly confined to the USA, raising the question as to the extent to which talent
management influences organisational performance in other labour market structures or
cultures (Tarique and Schuler, 2010). The main objective of this study, therefore, is to
address these research gaps by identifying the effectiveness and impact of talent
management strategies on organisational performance. A second objective is to describe
the extent to which organisational performance is associated with talent management
strategies.
In addition to the fact that there exist various definitions of the terms talent and talent
management (Ashton and Morton, 2005; Lewis and Heckman, 2006; Collings and
Mellahi, 2009), the challenge is also to quantify and qualify the impact of talent
management practices. As a result, most companies continue with subjective estimates
when assessing the effectiveness of their HR practices (Becker et al., 2001; Anderson,
2008). Consequently, this paper details how the heads of HR, executives and supervisors
perceive the effectiveness of talent management and what changes they have observed in
their companies since the implementation of talent management strategies.
The remainder of the paper is organised as follows: the next section reviews the
literature on organisational performance; we then move to the theoretical background of
talent management and our related propositions before we present the methodology and
results; and we end with the discussion and conclusions.
2 Literature review on organisational performance
Although the subject of talent management is frequently discussed, there are to date only
a few empirical studies which analyse the impact of talent management on organisational
performance. Nonetheless, a number of studies linking talent management to
organisational performance have been published. These studies are mostly cross-
industrial (e.g. Huselid and Becker, 1998; Ringo et al., 2008), but others concentrate on
526 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
particular sectors or specific sample groups (e.g. Gandossy and Kao, 2004; Joyce et al.,
2007; DiRomualdo et al., 2009) or focus on case studies (e.g. Tansley et al., 2007; Yapp,
2009). Notably, most studies are predicated on web-based surveys (e.g. Axelrod et al.,
2001; Guthridge and Komm, 2008; Ringo et al., 2008). As a result, previous research has
consistently found a positive relationship between talent management and organisational
performance.
Nevertheless, challenges arise in the evaluation of the effect of talent management
strategies on organisational performance because organisational performance is defined
in a range of ways. This is, for example, because performance is connected to various
measures and goals depending on corporate strategy and size (Richard et al., 2009) or
due to stakeholders’ different concepts of “‘good’ performance” (Lusthaus et al., 2002,
p.109). In our analysis, we understand organisational performance as a multidimensional
construct referring to three types of measurement for organisational performance as
suggested by Dyer and Reeves (1994). As such, organisational performance is a
conglomerate of (a) financial outcomes (e.g. company profit or market value), (b)
organisational outcomes (e.g. productivity or customer satisfaction) and (c) human
resource outcomes (e.g. job satisfaction or commitment).
2.1 Impact on financial outcomes
Looking at the situation from a financial perspective, researchers assess the relationship
between competence in talent management and financial organisational performance and
demonstrate why talent management is a worthwhile investment (e.g. Joyce et al., 2007).
Organisations with a deliberate talent management strategy demonstrate significantly
higher financial performance compared with their industry peers, for example, regarding
operating profit (Axelrod et al., 2001; Guthridge and Komm, 2008; Ringo et al., 2008),
sales revenue and productivity (Axelrod et al., 2001; Gandossy and Kao, 2004; Barber et
al., 2005; DiRomualdo et al., 2009; Yapp, 2009), net profit margin, return on assets and
return on equity (Joyce et al., 2007; DiRomualdo et al., 2009) or return on shareholders’
value and market value (Huselid, 1995; Huselid and Becker, 1998; Axelrod et al., 2001).
2.2 Impact on organisational outcomes
On the corporate level, a sustainable and strong corporate culture (DiRomualdo et al.,
2009; Steinweg, 2009), a significant increase in operational excellence (Ashton and
Morton, 2005; DiRomualdo et al., 2009) and better market access (Gandossy and Kao,
2004; Kontoghiorghes and Frangou, 2009) are the reported results of strong talent
management competences. Moreover, a study by Towers Perrin (2005) suggests that
talent management improves an employer’s image and attractiveness, but only if that
strategy is transparent and clearly communicated both within and outside the company
(Sebald et al., 2005).
2.3 Impact on human resource outcomes
Studies point out the positive impact on employee engagement (Gandossy and Kao,
2004; DiRomualdo et al., 2009). Additionally, companies with established talent
management capabilities achieve improved quality and skills (Gandossy and Kao, 2004),
higher innovative ability (Tansley et al., 2007; Kontoghiorghes and Frangou, 2009;
Effectiveness of talent management strategies 527
Sullivan, 2009), higher job satisfaction amongst employees if they are given career and
development opportunities (MacBeath, 2006; Steinweg, 2009) and, above all, a higher
retention rate overall and of talent in particular (Sebald et al., 2005; Tansley et al., 2007;
DiRomualdo et al., 2009; Yapp, 2009).
Finally, it remains open for debate as to which specific talent management practices
distinguish outperformers from other companies. Joyce et al. (2007) reveal critical
practices within the talent management process as a whole. Some researchers emphasise
the significance and relevance of a transparent, clearly communicated, corporate specific
skill set for identifying talent at the beginning of staffing procedures (e.g. ASTD and
SHRM, 1999; Sebald et al., 2005; Joyce et al., 2007). Other studies highlight practices
such as a company being understanding towards their employees and acting upon their
attitudes; they emphasise the positive effect on organisational performance when they
focus strongly on employees’ needs (Lockwood, 2006; Ringo et al., 2008). Overall, there
is a tendency for studies not to report fully enough the degree to which other parameters
influence the results or which variables were taken into account and how these were
omitted.
3 Theoretical background on talent management
One of the key challenges scholars have experienced over the past decade has been
unanswered questions regarding both the definition and the goals of talent management.
As Lewis and Heckman conclude, there is “a disturbing lack of clarity regarding the
definition, scope and overall goals of talent management” (2006, p.139). This might be
one reason why practitioners find its realisation quite challenging, but nonetheless
extremely important, for the company’s future (BCG, 2008).
To date, the field of characterisations and explanations as to what constitutes the
essence of talent management is immense. Nevertheless, certain commonly held views
are in evidence, as several authors have observed (e.g. Lewis and Heckman, 2006;
Collings and Mellahi, 2009; Silzer and Dowell, 2010). An initial view emphasises the
human capital aspect and therefore the definition of talent (e.g. Byham, 2001; Peters,
2006; Ready et al., 2008); a second view sees talent management as “a process through
which employers anticipate and meet their needs for human capital” (Cappelli, 2008,
p.1); and a third view perceives talent management as an instrument to reach economic
outcomes (e.g. Gandossy and Kao, 2004; Lockwood, 2006). We go along with the
second view: We understand talent management to be a distinctive process that focuses
explicitly on those persons who have the potential to provide competitive advantage for a
company by managing those people in an effective and efficient way and therefore
ensuring the long-term competitiveness of a company. In light of this, an integrated talent
management process could subsume HR practices, such as attracting and staffing,
training and development, assessment and compensation, and focus on those workers
who have – from their company’s perspective – the right qualifications, potential and
performance level to deliver the desired results (Davis et al., 2007; Berke et al., 2008;
Galagan, 2008; Schuler et al., in press).
Our analysis looks at the underlying talent management strategy and not individual
practices in isolation. We argue that the strategic level more accurately reflects the
multiple paths through which talent management procedures can influence performance
528 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
(Huselid and Becker, 1998). To tie in with our understanding, we focus on four possible
aspects of talent management strategy. Notably, each of these strategies contains many
distinct practices that form an integrated talent management process.
3.1 Talent management to support the corporate strategy
In this case, talent management is understood as a sum of activities to support the
corporate strategy explicitly (e.g. to successfully expand business activities) (Becker
et al., 2009; Silzer and Dowell, 2010; Boxall and Purcell, 2011; Schuler et al., in press).
There is some support for the concept that those organisations with a strong link
between talent management practices and corporate strategy report higher (financial)
performance outcomes (Huselid, 1995; Joyce et al., 2007; Tansley et al., 2007).
Additionally, if companies emphasise one strategic goal over other goals, priorities can
be settled on a corporate level and are no longer decided by workers on the front line
(Lipsky, 2010). Therefore, the sum of activities is purposively focused on one superior
corporate goal, and the impact on financial and organisational outcomes is higher.
Furthermore, if talent management is recognised and realised as part of a corporate
strategy, a companywide talent mindset can be implemented (Cohn et al., 2005); also,
talents feel appreciated and have higher motivation and stronger commitment (Gandossy
and Kao, 2004).
Proposition 1a: Talent management practices aligned with corporate strategy lead to
higher financial outcomes such as company profit and market value.
Proposition 1b: Talent management practices aligned with corporate strategy lead to a
higher impact on organisational outcomes such as company attractiveness, the
achievement of business goals and customer satisfaction.
Proposition 1c: Talent management practices aligned with corporate strategy lead to
higher human resource outcomes such as performance motivation and commitment.
3.2 Talent management to enable succession planning
The use of talent management diminishes the time spent hiring replacements for leaders
and specialists. In focus is meeting the demand for the right people with the right
competencies at that exact point in time when they are needed, either with internal
successors or with candidates from outside the company (Cappelli, 2008; Hills, 2009).
According to previous studies, a proactive internal succession planning reduces
transaction costs and, subsequently, raises corporate profit (Sebald et al., 2005; Steinweg,
2009). Furthermore, a seamless succession may reduce the loss of knowledge and
enhance work quality, for example, because information and practices can be transferred
personally (Conway, 2007). Also, since customer satisfaction is driven, amongst other
things, by work quality (Evans and Jack, 2003), this strategy leads to an increase in
customer satisfaction. Furthermore, if leaders inform talents about their future and the
promising pathways open to them, talents trust in leaders as long as they fulfil their
promises when talents satisfy their requirements; this integrity is a distinct factor in
establishing trustworthiness (Mayer et al., 1995). Subsequently, according to the
expectancy theory of Vroom (1964), this strategy convinces the talent to show far greater
levels of performance motivation of talent, provided that the promised succession is a
Effectiveness of talent management strategies 529
result of individual desires (valences), that the talent is confident in what he is capable of
doing (expectancy) and that he considers that he will get what has been promised
(instrumentality).
Proposition 2a: A talent management strategy effectively influencing corporate
succession planning will raise financial outcomes such as corporate profit.
Proposition 2b: A talent management strategy effectively influencing corporate
succession planning will raise organisational outcomes such as customer satisfaction.
Proposition 2c: A talent management strategy effectively influencing corporate
succession planning leads to higher human resource outcomes such as performance
motivation, work quality and trust in leaders.
3.3 Talent management to attract and retain talent
Talent management practices ensure that the right people want to join the company and
effectively bring new, talented workers into the company. Moreover, talented workers
are identified and valued, and incentives exist to retain them (Ringo et al., 2008;
Brundage and Koziel, 2010).
To attract and retain talent, the company needs to know what talents want and,
consequently, have to set the incentive system in line with their needs. Subsequently,
their esteem needs are fulfilled and, as a result, talents demonstrate higher job satisfaction
and motivation (Maslow, 1954). Furthermore, talents are valued and retained by
specialised programmes existing within the company; they get meaningful work
combined with special rewards. According to previous studies, this appreciation and
recognition leads to higher commitment (Beechler and Woodward, 2009; DeConinck and
Johnson, 2009) and job satisfaction (Herzberg et al., 2008). Furthermore, the quality of
work ought to be enhanced through the use of this strategy in view of the fact that
experience is an essential source of learning (Kolb, 1984). The longer the talents stay in a
company, the higher the level of company-specific knowledge and qualification remains.
Furthermore, customer satisfaction is driven by work quality (Evans and Jack, 2003) and
employee commitment (Reichheld, 1993), which is why this strategy causes higher levels
of customer satisfaction. Finally, since employee commitment and customer satisfaction
are essential value profit chain elements, this strategy enhances corporate profit
(Reichheld, 1993).
Proposition 3a: Talent management with a focus on talent retention will raise financial
outcomes such as corporate profit.
Proposition 3b: Talent management with a focus on talent retention leads to higher
organisational outcomes such as increased customer satisfaction.
Proposition 3c: Talent management with a focus on talent retention leads to higher
human resource outcomes, such as job satisfaction, motivation and commitment, and
enhances work quality and qualification.
3.4 Talent management to develop talent
The development needs of talents are identified and met in an effective way while career
options and paths are offered. Therefore, talents have the intention of developing their
company-specific relevant skills (Ready and Conger, 2007; Ringo et al., 2008).
530 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
According to the agency theory (Pratt et al., 1991), talent management is a process
which can be used to direct employees’ behaviour in a direction that fits business needs.
Furthermore, the development of talents is an incentive to meet individual needs, and,
subsequently, talents (agents) follow the company’s (principal’s) direction. This
systematic investment in human capital not only causes employees to be more highly
qualified and, subsequently, produce work of a higher quality, but also enhances
intellectual capital. Since this is part of a company’s capital, the market value of a
company also increases (Friederichs and Labes, 2006; Scholz et al., 2006). Furthermore,
given that more qualified employees are more productive, this strategy leads to higher
company profit (Pfeffer, 1994; Axelrod et al., 2001; Lawler, 2009). According to
previous studies, career options and progress are crucial for the motivation of talent
(Gandossy and Kao, 2004; McGrath, 2008), job satisfaction (Ellickson and Logsdon,
2001) and commitment (Bartlett, 2001). This arises because talents prefer non-material
compensations, such as career perspectives, challenging job content and scope of action,
over monetary compensation (Bulter and Waldroop, 2000; Gandossy and Kao, 2004;
Ready et al., 2008) and are apparently looking out for developmental perspectives
(Ready and Conger, 2007; Lawler, 2008). Therefore, companies who have this focus
enhance their attractiveness as a preferred employer very easily by communicating this
talent management strategy.
Proposition 4a: Talent management with a focus on developing talent enhances financial
outcomes such as corporate profit and market value.
Proposition 4b: Talent management with a focus on developing talent enhances
organisational outcomes such as an employer’s attractiveness.
Proposition 4c: Talent management with a focus on developing talent achieves higher
human resource outcomes, such as increased work quality and level of qualification, and
talents demonstrate higher job satisfaction, performance motivation, commitment and
trust.
4 Analysis
The conceptual framework of this study is based on the four talent management strategies
as well as on the three measurements of organisational performance, namely financial
outcomes, organisational outcomes and human resource outcomes. The web-based
survey was conducted between June and July 2010. Participators were members of the
Association of HR professionals in Zurich, Basel and Bern, covering the main part of
German-speaking Switzerland.
The survey was made up of three parts:
1 individual and organisational information
2 information about companies’ talents and talent management strategies
3 information about talent management controlling instruments.
To identify the main strategic goals of talent management strategies of Swiss companies,
we asked the participants to rate different strategic goals which applied in their company.
In the following analysis, we focus on the above-mentioned four strategies and analyse
Effectiveness of talent management strategies 531
the effect of each particular talent management strategy on three sets of outcomes. We
measured the financial outcomes with two indicators, company profit and market value.
The respondents had to declare whether the respective talent management strategy had an
influence or not. To measure organisational outcomes, we used the ordinal-scaled
indicators: company attractiveness, achieving business goals and customer satisfaction.
The respondents had to evaluate the observed effectiveness of talent management since
its implementation on these indicators, using a five-point Likert scale, from ‘very low’ to
‘no influence’ to ‘very high’. For human resource outcomes, we used six performance
indicators: job satisfaction, performance motivation, commitment, work quality,
qualification and trust. Here again the respondents had to evaluate the effect using a
five-point Likert scale, from ‘very low’ to ‘no influence’ to ‘very high’.
To evaluate the effect of different talent management strategies on the binary
dependent variables, company profit and market value, we used a logit model because we
were interested in how a particular talent management strategy influences the probability
of a positive evaluation of performance outcomes.
In order to test the propositions on the financial outcomes, we ran a logit regression
of the following form:
*
ij i
yt x
α
βε
=++
*
(0)
ii
yIy=>
where *
i
y is the dependent variable of the latent regression model for the financial
outcomes, namely company profit and market value, and ()I is an indicator function
that returns 1 if the latent variable is bigger than zero and 0 otherwise.
The effect of talent management strategies on the ordinal-scaled organisational and
human resource outcome variables is analysed with an ordered logit model. Again we
were interested in how a particular talent management strategy affects the probability of
reaching a higher evaluation in the respective outcome variable. We ran an ordered logit
regression of the following form:
*
ij i
yt x
α
βε
=++
*
1
if and only if 1, ,
ijij
y
jkykjJ
−
=<≤=…
where *
i
y is the dependent variable of the latent regression model for the human resource
outcomes, such as job satisfaction, performance motivation, commitment, work quality,
qualification and trust, and also the organisational outcomes such as company attractiveness,
achieving business goals and customer satisfaction. A threshold mechanism divides the
real line represented by the latent variable *
i
y into J intervals, using J + 1 threshold
parameters 0,,
J
kk….
In both regression models we included a dummy variable tj for each of the four talent
management strategies. α is the respective coefficient. x is a vector containing a set of
control variables such as industry sector, company size, company revenue span and
532 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
company geographical structure dummy variables, including how long companies have
conducted a formal talent management system,
β
is the respective coefficient vector and
ε
i is an independent and standard logistic distributed error term.
5 Results
The raw data consisted of 580 companies. To evaluate the impact of the strategic focus of
the implemented talent management system, we excluded all companies without a
formalised talent management system, and this consisted of 317 companies or 55%. After
data cleansing, the working sample consists of 138 companies practising formal talent
management, 17% of which are made up of small- and mid-sized companies, 21% with
250 up to 1000 employees, 33% with 1000 to 5000, 11% with 5000 to 10,000 and 18%
of companies with more than 10,000 workers. The four biggest industries represented are
the manufacturing sector with 37%, finance and assurance services with 25% and public
agencies and retailers, each represented by 9%. A total of 8% of the companies were
regional, 21% national and 71% international/multinational-oriented. In our sample,
talent management is a relatively young phenomenon; in more than two-thirds of the
companies, talent management practices have been implemented for less than six years.
The results of the regression analysis are shown in Table 1. For each talent
management strategy, we ran either the above-mentioned logit or ordered logit regression
according to the outcome variable analysed.
The third row of Table 1 shows the results of the effects of talent management,
focusing on corporate strategy. This talent management strategy has a statistically higher
and more significantly positive impact on company profit but no effect on market value,
which is why our proposition 1a is only partly supported. The focus of talent
management practices on corporate strategy has a positive effect on organisational
outcomes, which corroborates proposition 1b. The statistically positive impact on
performance motivation partly supports proposition 1c.
The seventh row of Table 1 shows results as to what happens if talent management is
focused on succession planning. This strategy has a statistically significant and positive
effect on company profit. Subsequently, this supports our proposition 2a. No statistically
significant effect can be found on customer satisfaction, which is why we have to reject
proposition 2b. Regarding human resource outcomes, there is a statistically positive
effect on performance motivation, work quality and trust in leaders. This supports
proposition 2c.
The results of a talent management strategy focusing on talent retention are presented
in the 11th row of Table 1. We find no effect on company profit, which leads us to reject
proposition 3a. A focus on talent retention has, as expected, a positive effect on customer
satisfaction and on all human resource outcome indicators such as job satisfaction,
motivation, commitment, work quality, qualification and trust in leaders. This supports
propositions 3b and 3c.
The antepenultimate row of Table 1 presents the results of the effect of a talent
management strategy, which focuses on developing talents. This strategy has a
statistically positive effect on all the performance indicators we reviewed. These results
corroborate propositions 4a, 4b and 4c.
Effectiveness of talent management strategies 533
Table 1 Regression results
Financial outcomes Organisational outcomes Human resource outcomes
Indicators
TM strategy
Company
profit Market value
Company
attractiveness
Achieving
business goals
Customer
satisfaction
Job
satisfaction
Performance
motivation Commitment
Work
quality Qualification
Trust in
leaders
Corporate strategy 1.76***
(0.52)
0.63
(0.43)
1.62***
(0.48)
0.68*
(0.40)
0.93**
(0.42)
– 1.14 ***
(0.42)
–0.66
(0.41)
– – –
Log likelihood –66.57 –83.09 –96.28 –111.00 –88.65 – –113.40 –113.38 – – –
Chi
2
(23) 39.64 24.87 41.21 19.94 43.93 – 22.13 24.36 – – –
Succession
planning
1.19**
(0.51)
– – – 0.55
(0.43)
– 0.80*
(0.42)
– 0.97**
(0.43)
– 0.85**
(0.41)
Log likelihood –70.27 – – – –90.31 – –115.34 – –110.58 – –122.75
Chi
2
(23) 32.24 – – – 40.61 – 18.24 – 44.87 – 26.96
Retaining talents 0.65
(0.44)
– – – 0.91**
(0.41)
0.78*
(0.42)
1.12***
(0.40)
0.85**
(0.40)
1.24***
(0.41)
1.27 ***
(0.38)
–
Log likelihood –72.04 – – – –88.63 –106.77 –113.18 –112.35 –108.30 –131.10 –
Chi
2
(23) 28.69 – 43.97 25.40 22.57 26.42 49.43 33.46 –
Developing talents 0.90**
(0.46)
0.98**
(0.41)
1.18***
(0.43)
– – 1.12**
(0.44)
1.06***
(0.40)
0.93**
(0.39)
0.89**
(0.40)
0.69*
(0.37)
0.61*
(0.38)
Log likelihood –71.14 –81.10 –98.66 – – –105.05 –113.60 –111.76 –110.62 –135.24 –123.62
Chi
2
(23) 30.50 28.84 36.45 – – 28.84 21.73 27.59 44.78 25.19 25.22
Notes: Standard errors in parenthesis.
Control variables: industry sector, company size, company revenue, company geographical structure and duration of formal talent management system.
Significance level: * 10%, ** 5% and *** 1%,
N
= 138.
534 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
6 Discussion
In this section, we examine the results from the four strategic perspectives considering
the propositions mentioned above.
6.1 Focus on corporate strategy
Talent management practices with a strong focus on corporate strategy and its alignment
with overall corporate goals have a statistically higher significant impact on corporate
profit; one that is greater than that of any other focus on talent management practices.
This might be, for example, because companies aligning their HR activities along a given
strategic direction have lower coordination costs and achieve synergy advantages (Boxall
and Purcell, 2011). Furthermore, to the extent that changes in the corporate environment
evoke a particular talent management response, talent management is finally all about
making business strategy work. Therefore, Boxall and Purcell (2011) argue in favour of
an accord harmony between corporate strategy and talent management. The strong
impact on organisational outcomes that companies which excel in talent management
strategy show underlines the relevance of this match. Subsequently, the strong strategic
focus on one superior goal pursued consecutively with this talent management strategy
also explains the higher level of success in achieving business goals. Furthermore, it
seems that having clear goals (Locke and Latham, 1990) and being appreciated by the
highest corporate level (Herzberg et al., 2008) considerably raise talents’ performance
motivation.
6.2 Focus on succession planning
Talent management, understood as a strategy to meet a company’s demand for the right
people at the right time and place, has a strong impact on corporate profit. On the one
hand, it links back to lower transaction costs, since internal successors can be discovered
and introduced to new work places more easily than external successors. On the other
hand, it seems that this strategy successfully accomplishes information flow and reduces
the loss of knowledge because established and proven practices can be more easily
adopted personally from predecessors, which may also explain the positive impact on
talents’ work quality. The non-existent effect on customer satisfaction might be because
work quality is only one criterion for customer satisfaction and maybe not appreciated as
much in this sample as a continuing customer–employee relationship (Reichheld, 1993).
The statistically highly significant increase in trust and in performance motivation could
be a result of the perceived calculability of the future as well as of the integrity of the
leaders. Talents know which pathways are promising and thus know about their possible
future positions. According to the expectancy theory (Vroom, 1964), this is why talents
show higher motivation. Furthermore, this belief held by talents that the promises of their
leaders can be relied upon seems to play a crucial role in building up trust in those leaders.
6.3 Focus on attracting and retaining talents
The perceived non-existent effect on company profit is quite surprising. It might be that
the costs associated with retaining talents are rated higher than the benefit itself, which is
why the direct impact on profit cannot be valued. Nevertheless, this talent management
Effectiveness of talent management strategies 535
strategy leads to higher customer satisfaction, which supports the results of earlier studies
(e.g. Kontoghiorghes and Frangou, 2009). This might be the consequence of a higher
employee commitment pursued with this strategy, which causes, subsequently, long-term
customer relationship (Reichheld, 1993). Obviously, a certain degree of continuity and
consistency is very highly appreciated. The statistically highly significant impact on the
level of talent shows that identifying the right people and having special programmes to
keep them in the company raise their work quality and qualification levels. This effect
might be due to a progressive accumulation of company-specific knowledge caused by a
successfully managed (organisational) learning process pursued in tandem with the said
strategy (Senge, 2006). Moreover, as talents are part of a privileged group of employees
and are valued, they show a higher level of job satisfaction, performance motivation and
commitment.
6.4 Focus on developing talents
Focusing on the development of talent is equal to making systematic investments in
human capital. As a result, the intellectual capital rises and influences not only the
current market value, but also that in the future. Regarding the organisational outcomes,
talent management with a focus on development has a statistically higher significant
effect on an employer’s attractiveness. This arises because it is apparent that talented
workers are looking for career paths, developmental perspectives and challenging work
contents. It seems that companies in this sample communicate their talent management
strategy successfully because they reach a high position in the rankings as a preferred
employer. Changes observed at the individual level since the implementation of this
talent management strategy are a statistically significantly higher job satisfaction,
performance motivation, commitment and higher trust in leaders, as employees are given
career and development perspectives and goals according to their competencies and
engagement levels. Leaders believe in talents and invest in their human capital.
Therefore, we find a reciprocal relationship between the involved parties (Dabos and
Rousseau, 2004). Talents trust in leaders and make their investments pay off (Hitt et al.,
2001).
7 Conclusion
In this paper, we sought to characterise talent management strategies and their impact on
organisational performance by evaluating perceived effectiveness. We disclose why
talent management is a worthwhile investment, highlighting the impact of pursuing a
talent management strategy on financial, organisational and human resource outcomes.
We revealed that talent management practices with a strong focus on corporate strategy
have a statistically significant, positive impact on corporate profit; an impact that exceeds
any other focuses of talent management. Talent management strategy, which aims to
support the succession planning, has the weakest impact on organisational performance,
particularly on non-financial outcomes at both the organisational level and the human
resource level. It seems that this component is what traditional human resource
management always consisted of, managing human resources, but doing so in a more
effective way. We found the pursuit of a strategy focusing on the attracting and retaining
of talents to have the greatest effect on human resource outcomes, underlining its value
536 P. Bethke-Langenegger, P. Mahler and B. Staffelbach
for improvement in work quality and levels of qualification. The focus on developing
talents has a statistically significant, positive effect on almost all the performance
indicators reviewed. This reveals the significance of focusing on employees’ needs and
meeting their expectations.
Overall, all strategies have a direct effect on talent motivation: being part of a
privileged group and getting attention and appreciation must undoubtedly have a distinct
impact on talents’ performance motivation, either because talents want to remain in an
elected group of employees or because they want to turn to account the investment and
trust provided by the company.
This study should be interpreted by taking into consideration its limitations. The non-
random sampling design and the relatively small sample mean that the generalisability of
the results is limited. The data was collected from three associations of HR professionals
in the German-speaking part of Switzerland. Furthermore, all data was collected through
a survey from heads of HR, personal managers, executives and supervisors. A full
360-degree instrument would be useful in determining more accurately the effects of
talent management, particularly at the workforce level. Also, the different focuses in
talent management strategies are not necessarily aligned with completely different
practices, but with different core areas. Future research could take this into account.
At present, this study reports a promising association between distinctive talent
management strategies and outcomes, but we are not yet in a position to assert cause and
effect. Additionally, this data should be verified with other metrics and financial
measurements. Nevertheless, this study opens the door for further research on and
analysis of the perception of talent management at the workforce level.
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