Generational challenges to talent management: A framework for talent retention based on the psychological-contract perspective

Abstract

In this conceptual paper, we adopt a social-exchange theory perspective to explain the impact of talent management (TM) on the psychological contract and its outcomes. This relationship is supposedly moderated by generational effects and associated differences in work-related values and preferences. Thus, often-neglected individual-level variables are included in the analysis. A framework and testable propositions are provided. As a result, we propose that in contexts where a war for talent prevails, the strong interest of Generations X and Y in training, development, and career advancement makes highly engaged and extensive TM activities even more crucial for retaining talented individuals than is the case for the so-called Baby Boomer generation.

Introduction

Notwithstanding its popularity and undisputed strategic importance for the corporate world (BCG & WFPMA, 2012), research on talent management (TM) is still lacking in its theoretical foundation and the clarity and uniformity of definitions with regard to what talent really constitutes, as well as with respect to how to manage it effectively (Collings and Mellahi, 2009, Dries, 2013, Lewis and Heckman, 2006, Scullion and Collings, 2011, Strack et al., 2011, Tansley, 2011). Furthermore, talented individuals are presented as subjects that need to be managed, while their preferences, needs, and expectations are under-researched (Tansley, 2011, Thunnissen et al., 2013b). This individual perspective on talent is the focus of this paper.

The basic concept of TM was introduced more than a decade ago in the late 1990s, when a group of McKinsey consultants coined the term War for Talent (Chambers et al., 1998, Michaels et al., 2001). Despite the global financial crisis, many regions still face a shortage of skilled labor (European Commission, 2011, Farndale et al., 2010McDonnell, 2011, Ward, 2011). In addition, some Western industrialized countries especially suffer from declining population growth rates although, simultaneously, employment rates remain stable or even are rising (European Commission, 2011, Ward, 2011, World Economic Forum, 2011). This development is accompanied by an increasingly aging population and dramatically higher older-worker employment rates (e.g. above 50) compared to those up to 30 years of age. This phenomenon that is sometimes referred to as the demographic scissor (Armutat, 2009, p. 25). Examples of these developments include Japan, the U.S.A., and Germany (World Economic Forum, 2011). Consequently, because talent shortages will continue to persist, attracting and retaining any kind of talent is a key challenge for organizations. This includes not only young university graduates, but also older workers, women, and ethnic minorities (Ariss, Vassilopoulou, Özbilgin, & Game, 2013).

Understanding and managing the possible resulting generational differences in TM (e.g. becoming an employer of choice for younger talent, as well as retaining the knowledge and competencies of older workers) have been cited as major challenges in recent TM research (Benson and Brown, 2011, D’Amato and Herzfeldt, 2008, Jenkins, 2008, Schuler et al., 2011, Tarique and Schuler, 2010). However, respective studies have been rather descriptive and normative when discussing differences between younger and older workers, for example. Overall, research that systematically addresses generation-specific issues in TM, including an exploratory dimension that considers the individual perspective of talent belonging to various generations, is scarce (Tarique & Schuler, 2010).

The objective of this paper is to address this research gap. We take a social-exchange perspective based on psychological-contract theory to explain the various expectations and preferences of different generations concerning the employment relationship. We analyze generational effects and associated differences in work-related values and preferences in the context of TM by explicitly including often-neglected individual-level variables and discussing implications for TM. We focus specifically on talent retention, as the effects of TM on already recruited employees are at the center of our consideration, and not the recruitment of the talent itself. To sum up, the aim of this paper is to map conceptually the TM field by suggesting a social-exchange-based framework that includes testable propositions concerning the effects of TM on the psychological contract of talented individuals and variations as a function of generations.

The major contribution of this paper is that we add to a further theoretical underpinning of TM research by including insights from psychological-contract theory, as well as research on generations and related variables. Based on these considerations, we develop a framework to guide future research and practice by creating an understanding of the drivers and challenges of talent retention among diverse generations in times of significant demographic challenges.

The remainder of the paper is structured as follows. First, we draw upon a literature review, including TM, psychological-contract theory, and a short overview of generational studies and work-related differences. Combining these research fields, in the next chapter we suggest a conceptual framework and testable propositions for future research. The conclusion summarizes the main findings of our research and addresses the limitations of the study. An agenda for future research and a discussion on possible implications for managerial relevance conclude the paper.