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Universitt Zrich Institut fr Strategie und Unternehmenskonomik

Lehrstuhl Human Resource Management

Diskussionspapier Nr. 16

Effectiveness of Talent Management Strategies in Swiss Companies

Pamela Bethke-Langenegger, Philippe Mahler und Bruno Staffelbach

August 2010

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Effectiveness of Talent Management Strategies

in Swiss Companies

Pamela Bethke-Langenegger1 Philippe Mahler

Bruno Staffelbach

Universitt Zrich

August 2010

Abstract:

This paper draws on a survey of 138 organisations to investigate how talent management strategies

affect organisational performance in Swiss companies. It appears that the choice of talent management

strategy massively affects organisational performance. Analysing the sample from financial and non-

financial perspectives, we identified higher corporate profit and increased corporate attractiveness as

statistically highly significant main effects of pursuing a talent management strategy. We also highlight

the motivational character and impact on talents trust in leaders of talent management practices in

Switzerland. Moreover, talent management practices with a strong focus on business strategy have a

statistically highly significant impact on corporate profit, more than any other focus of talent manage-

ment has. Above all, some results diverge from previous studies conducted in North America. Therefore,

cultural elements may have a distinctive impact on the success of talent management activities.

Keywords: talent management; talent management strategy; talent management practices; business

strategy; organisational performance; organisational success; Switzerland

JEL Classification: C30; M12; J24

1 Pamela Bethke-Langenegger, pamela.bethke-langenegger@isu.uzh.ch, +41 44 634 29 23

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Effectiveness of Talent Management Strategies

in Swiss Companies

Pamela Bethke-Langenegger Philippe Mahler

Bruno Staffelbach

Universitt Zrich

August 2010

Abstract:

This paper draws on a survey of 138 organisations to investigate how talent management

strategies affect organisational performance in Swiss companies. It appears that the choice of

talent management strategy massively affects organisational performance. Analysing the

sample from financial and non-financial perspectives, we identified higher corporate profit

and increased corporate attractiveness as statistically highly significant main effects of pursu-

ing a talent management strategy. We also highlight the motivational character and impact on

talents trust in leaders of talent management practices in Switzerland. Moreover, talent man-

agement practices with a strong focus on business strategy have a statistically highly signifi-

cant impact on corporate profit, more than any other focus of talent management has. Above

all, some results diverge from previous studies conducted in North America. Therefore, cul-

tural elements may have a distinctive impact on the success of talent management activities.

Keywords: talent management; talent management strategy; talent management practices;

business strategy; organisational performance; organisational success; Switzerland

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1. Introduction

Since McKinseys proclamation of the War for Talent in 1998 (Chambers, Foulon, Handfield-

Jones, Hankin, & Michaels, 1998) the specific management of talent has been widely seen as

a solution for the HR challenges in todays labour market (Lewis & Heckman, 2006; Ritz &

Sinelli, 2010; Schuler, Jackson, & Tarique, 2010). 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, on the one hand, research dealing

with talent management strategies and organisational performance is quite lacking, and the

question of the right strategy for the right impact on organisational performance has not yet

been answered (Lawler, III, 2008). On the other hand, the research is mostly confined to the

USA, raising the question concerning the extent to which talent management influences or-

ganisational performance in other labour market structures or cultures (Tarique & Schuler,

2010).

In addition to the fact that there exist various definitions of the terms talent and talent man-

agement (Ashton & Morton, 2005; Collings & Mellahi, 2009; Lewis & Heckman, 2006), the

challenge is to draw causal inferences isolated from other organisational parameters. Despite

the immense toolbox of HR metrics (e.g., Fitz-Enz, 2009; Huselid, Becker, & Beatty, 2004) it

remains particularly challenging to quantify and qualify the impact of talent management

practices and improvements. As a result, most companies continue with subjective estimates

when assessing the effectiveness of their HR practices (Becker, Huselid, & Ulrich, 2001).

For these reasons, this paper presents how Heads of HR, executives and supervisors in Swiss

companies perceive the effectiveness of their talent management practices and what changes

they have observed in their company since their implementation of talent management. For

three reasons, we limit the scope of our examination to Switzerland. First, Switzerland has a

particular market structure. It contains 300,000 companies, where 99.7 percent of these are

small and medium-sized enterprises (SMEs), which provide work for less than 250 workers

(BFS, 2009a). In comparison, in the USA, small enterprises with fewer than 500 employees

represent 99.7 percent of the countrys 28 million businesses (SBA, 2009). Consequently,

results from seminal studies mainly conducted for the USA (e.g., Ringo, Schweyer, DeMarco,

Jones, & Lesser, 2008; DiRomualdo, Joyce, & Bression, 2009) can hardly be used for Swiss

companies, regarding the company sizes and thus the culture of talent management. Second,

Switzerland's economy relies on the service sector and is marked by increasing international

interdependence due to cross-border alliances, especially those with immediately neighbour-

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ing countries. Its remaining separate from the EU, despite being in the middle of Europe,

makes Switzerland a unique labour market in the European area. Third, although there are

some international studies regarding talent management practises and organisational perform-

ance, there is little research focused on the Swiss labour market. As a result, there is evidently

a great need for empirical research to investigate the dynamics and impact of talent manage-

ment strategies.

The main objective of this study, therefore, is to address this research gap by identifying the

perceived effectiveness and impact of talent management on organisational performance. A

second objective is to describe the extent to which organisational success is associated with

talent management strategies. For this reason, the next section reviews the theoretical back-

ground on talent management and organisational performance and highlights studies done in

this field before we proceed to the analysis of Swiss talent management.

2. Literature Review

Talent Management

One of the key challenges that scholars have experienced over the past decade has been the

unanswered questions regarding the definition and goals of talent management. As (Lewis

& Heckman, 2006), p. 139) conclude, there is a disturbing lack of clarity regarding the defi-

nition, scope and overall goals of talent management. This might be one reason why practi-

tioners find its realisation quite challenging but nonetheless extremely important for the com-

panys future (BCG, 2008; DGFP, 2009).

To date, the field of characterisations and explanations of the essence of talent management is

immense. Nevertheless, three streams come into sight as several authors observed (e.g.,

Collings & Mellahi, 2009; Lewis & Heckman, 2006; Silzer & Dowell, 2010). A first stream

emphasises the human capital and therefore the definition of talent, a second stream sees Tal-

ent Management as a process through which employers anticipate and meet their needs for

human capital (Cappelli, 2008, p. 1), and a third stream perceives talent management as an

instrument to reach economic outcomes.

To tie in with this result, we focus for this study on the issues of Ringo et al. (2008), who

identified eight possible talent management strategic aspects, crossing hereby the three talent

management streams:

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(1) Support the corporate strategy: In this case, talent management is understood as a sum of

activities to explicitly support the corporate strategy (e.g., to successfully expand busi-

ness activities, to achieve cost leadership).

(2) Handle succession planning: Talent management try to diminish the time spent hiring

replacements for leaders and specialists. In focus is the covering of the demand for the

right people with the right competencies at the point at time when they are needed, either

with internal successors or workers from outside the company.

(3) Bear change management: HR challenges and the constantly changing environment,

mergers & acquisitions and cross-border alliances make relentless adjustments and neces-

sitate organisational development. Talent management drives and accomplishes these ad-

justments on all corporate levels to react to these changes.

(4) Maintain knowledge management: Talent management enhances collaboration and the

share of knowledge with others in a way that supplies organisational success. Therefore,

it tries to guarantee continuity in workflow and active knowledge transfer.

(5) Increase employers attractiveness: Talent management is seen as an instrument to reach

a distinctive corporate image and strengthen employers position in the ranking of most

preferred employers in Switzerland by creating a distinctive employee value proposition.

(6) 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. More-

over, talented workers are identified and valued, and different programs and incentives

exist to retain them.

(7) Develop and motivate talent: Talents development needs are identified and met in an

effective way while career options and paths are offered. Therefore, talent intend to de-

velop company-specific relevant skills.

(8) Deploy and manage talent: Talent are actively managed and assigned to positions across

business units and departments. Their competencies and engagement levels are known to

decision-makers to put them in the right place, where their capabilities have the strongest

impact to organisational success.

As a result, we identified two dimensions in which talent management practices can be cate-

gorised. The first five talent management strategies have a more institutional-level focus, as-

sociated with a superior corporate system level. The last three talent management strategies

primarily focus on the individual level, aiming at a specific talent pool.

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For this study, we disregard whether talent management replaces Human Resource Manage-

ment, focusing on typical human resource management practices (Heinen & ONeill, 2004), if

it is seen as Global talent management, emphasising international HR challenges (Scullion &

Collings, 2010, Schuler et al., 2010) or as Strategic talent management, which emphasises its

strategic importance and connection to business strategy (Becker, Huselid, & Beatty, 2009).

Organisational Performance

Two challenges arise in the evaluation of the effect of talent management practices on organ-

isational performance. On the one hand, there exists a range of definitions of what organisa-

tional performance is about. This is, for example, because performance is connected to vari-

ous measures and goals depending on corporate strategy and size. Conversely, like in many

other areas of HR practices, it remains exceptionally difficult to measure the real impact of

talent management practices. In this regard, Lewis & Heckman (2006) identified three key

streams of analysing the effectiveness of talent management practices. A first stream refers to

an analytical technique to tie talent management to financial performance (e.g., Fitz-Enz,

2009), a second stream emphasises the process of analysing and optimising the talent man-

agement system (e.g., Boudreau & Ramstad, 2004), and authors aligned with the third stream

appear to see analytics as a set of metrics and measures for use by different users (e.g., DGFP,

2007).

Although the subject of talent management is frequently discussed, there are only a few em-

pirical studies to date analysing the impact of talent management on organisational perform-

ance. Nonetheless, a number of studies linking talent management and organisational per-

formance have been published. These studies are mostly cross-sectional (e.g., Huselid &

Becker, 1998; Ringo et al., 2008), but some others concentrate on particular sectors (ASTD &

SHRM, 1999; Yapp, 2009) or specific sample groups (DiRomualdo et al., 2009; Joyce, Her-

reman, & Kelly, 2007; Gandossy & Kao, 2004). As a result, previous research has consis-

tently found a positive relationship between talent management and organisational perform-

ance. Moreover, an international study of (Half, 2007) show that 83 percent of Germanys

managers and 95 percent of Netherlands managers observe a direct leverage effect between

talent management practices and organisational success. In addition, a recent study conducted

by McKinsey confirms the strong correlation between talent management practices and finan-

cial performance (Guthridge & Komm, 2008). To reveal researches done in the field of ana-

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lysing the effectiveness of talent management we take a financial and non-financial perspec-

tive.

Impact on financial outcomes

Considering 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. Organisations that apply talent management prac-

tices demonstrate significantly higher financial performance compared to their industrys

peers, for example regarding sales revenue and productivity (Axelrod, Handfield-Jones, &

Welsh, 2001; Barber, Catchings, & Morieux, 2005; DiRomualdo et al., 2009; Gandossy

& Kao, 2004; Kontoghiorghes & Frangou, 2009; Steinweg, 2009; Tansley, Turner, Foster,

Harris, Stewart, Sempik et al., 2007), Net Profit Margin and Earnings Before Interest, Depre-

ciation, and Amortisation (EBITDA) (DiRomualdo et al., 2009; Joyce et al., 2007), Return on

Assets and Return on Equity (Joyce et al., 2007), or Return on Shareholders Value and Mar-

ket Value (Axelrod et al., 2001; Huselid, 1995; Huselid & Becker, 1998). Moreover, different

studies induce talent management cost savings through long-term proactive internal succes-

sion planning and higher retention rates (Sebald, Enneking, & Wltje, 2005; Steinweg, 2009;

Tansley et al., 2007).

Furthermore, studies have disclosed a big difference in the reported change in operating profit

(Axelrod et al., 2001; Guthridge & Komm, 2008; Ringo et al., 2008); this also could lead back

to qualified people themselves (Axelrod et al., 2001; Gandossy & Kao, 2004). Although it is a

fact that the qualification of knowledge workers is a critical success factor and ensures com-

petitive advantage (Drucker, 2003; Lawler, III, 2009; Pfeffer, 1994), it is not reported whether

this is the result of specific talent management activities. Therefore, it still remains open

whether talent management practices lead to organisational success or if organisational suc-

cess provides the resources to invest in talent management practices (Lewis & Heckman,

2006), or, to start with: if talents arise from successful companies or if talents make compa-

nies successful - still subject of current learning studies (MacBeath, 2006; Byham, 2001).

However, studies show that companies excelling in sophisticated talent management out-

scored companies with a lower effort level in terms of talent management practices.

Impact on non-financial outcomes

From a non-financial perspective, studies point out the positive impact on employee engage-

ment (DiRomualdo et al., 2009; Gandossy & Kao, 2004). Additionally, on the employee-level

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side, companies with established talent management capabilities achieve improved quality,

speed and skills (Gandossy & Kao, 2004; Tansley et al., 2007), higher innovative ability

(Kontoghiorghes & Frangou, 2009; Sullivan & John, 2009; Tansley et al., 2007), a higher job

satisfaction among employees if they are given carrier and development perspectives (Mac-

Beath, 2006; Steinweg, 2009) and above all, a higher retention rate of employees overall and

of talent in particular (DiRomualdo et al., 2009; Sebald et al., 2005; Tansley et al., 2007;

Yapp, 2009).

On the corporate level, a sustainable strong corporate culture (DiRomualdo et al., 2009;

Steinweg, 2009), a significant increase in operational excellence (Ashton & Morton, 2005;

DiRomualdo et al., 2009) and a better market access (Gandossy & Kao, 2004; Kontoghior-

ghes & Frangou, 2009) are reported results of strong talent management capabilities. More-

over, a study of Towers Perrin suggested that a strong talent management strategy improves

an employers image and attractiveness, but only if the strategy is transparent and clearly

communicated inside as well as outside the company (Sebald et al., 2005).

The example of the British electricity and gas supplier npower demonstrated why talent

management is a meaningful investment. After business reorganisation and implementation of

a talent management process in 2008, npower registered an increase in sales revenue by 54

percent and in productivity by almost 5 percent, and customer service-related complaints de-

clined by more than 14 percent. In addition, the number of employees who would recommend

working at npower was up by 11 percent points, and employees confidence in leadership

grew by 7 points (Yapp, 2009).

Basically, there is a tendency to be short of reporting the degree to which other parameters

influence the results or which and how omitted variables were taken into account. For exam-

ple, in the case of npower, the question arises whether the reorganisation of the strategic seg-

ments and business units or the contemporaneous implementation of a talent management

process had a stronger effect on corporate culture and productivity.

Practices of Outperformers

Furthermore, it remains open which specific talent management practices or strategies distin-

guish outperformers from other organisations: (Joyce et al., 2007) reveal critical practices

within the talent management process as a whole. Nevertheless, they support the first stream

going along with a resource-based view of talent management, emphasising the significant

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relevance of a transparent, clearly communicated, corporate specific skill set for identifying

talent at the beginning of staffing procedures (ASTD & SHRM, 1999). Other studies disclose

practices such as understanding and acting upon employee attitudes, and emphasise the effect

of strongly focusing on employees needs on organisational performance (Lockwood, 2006;

Ringo et al., 2008). There is also some support for the theory that those organisations with a

strong link from talent management practices to business strategy report higher (financial)

performance outcomes (DiRomualdo et al., 2009; Huselid, 1995; Joyce et al., 2007; Ringo et

al., 2008; Tansley et al., 2007).

3. Propositions

Focus of research

Based on the previous literature, we can say that the implementation of and improvements in

a talent management system have a positive effect on organisational performance in various

ways. Therefore, we expect this effect to occur for companies in Switzerland as well:

Proposition 1: The specific strategic focus of talent management systems leads to higher

scores in measures of financial outcomes such as profit, organisational and individual pro-

ductivity and market value.

Proposition 2: Talent management increases non-financial outcomes at the organisational

level such as attractiveness, time savings for successions, achieving business goals, opera-

tional excellence and customer satisfaction.

Proposition 3: Non-financial outcomes on employee level such as job satisfaction, perform-

ance motivation, commitment, work quality, qualification, trust in leaders, fluctuation rate

and inventive ability are improved through distinctive talent management strategies.

Methodology

The conceptual framework of this study is based on theoretical and design principles driving

talent management systems, as well as research in the area of organisational performance. The

majority of the cross-sectional survey is based on different questionnaires used in interna-

tional studies and adapted to companies in Switzerland. The web-based survey was conducted

between June and July 2010. Participators were members of the Association of the HR-

professionals in Zurich, Basel and Bern, covering the main part of German-speaking Switzer-

land.

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The survey contained three parts: (1) individual and organisational information, (2) informa-

tion about companies talents and talent management strategies and (3) information about the

HR control and instruments used to measure the impact of talent management. The survey

draws on mixed questions to apply qualitative and quantitative methods in the analysis.

The first part of the results section presents the descriptive analysis, whereas the second part

shows the results of the regression analysis. To evaluate the effect of different talent manage-

ment strategies on the binary outcome variables company profits, company productivity, pro-

ductivity of talent and market value, a standard logit model is applied. The effect of talent

management strategies on the ordered non-financial outcome variables is analysed with a

standard ordered logit model (Wooldridge, 2002).

In order to test the propositions on the financial outcomes we run a standard logit regression

of the following form

where is the dependent variable of the latent regression model for the financial outcomes.

is a vector containing a set of dummies for all eight talent management strategies and is

the respective coefficient vector. is a vector containing a set of control variables such as

industry sector, company size, company revenue span and company geographical structure

dummy variables, and how long companies have conducted a formal talent management sys-

tem, is the respective coefficient vector and is the error term. is an indicator function

that returns 1 if the latent variable is bigger than zero and 0 otherwise.

In order to test the propositions on the non-financial outcomes we run a standard ordered logit

regression of the following form

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where is the dependent variable of the latent regression model for the non-financial out-

comes. is a vector containing a set of dummies for all eight talent management strategies

and is the respective coefficient vector. is a vector containing a set of control variables

such as industry sector, company size, company revenue span and company geographical

structure dummy variables, and how long companies have conducted a formal talent man-

agement system, is the respective coefficient vector and is the error term. A threshold

mechanism divides the real line represented by the latent variable into J intervals, using J +

1 threshold parameters

Sample

The raw data consist 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, where these comprised 55% or 317 companies. After data clean-

sing, the working sample comprises 138 companies utilising formal talent management, in-

cluding 17% small and mid-sized companies, 21% with 250 up to 1000 employees, 33% with

1000 up to 5000 employees, 11% with 5000 to 10000 employees and 18% companies with

more than 10000 workers. A total of 37% of these organisations are in the industrial sector,

25% provide finance and assurance services and 9% are public agencies and retailers. A total

of 8% of the companies are regional, 21% are national, and 71% are interna-

tional/multinationals.

Considering survey results

Descriptive Results

In Switzerland, talent management is a relatively young discipline. In more than two thirds of

the companies, talent management practices have been implemented for less than six years.

To identify the strategic directions, we ask the participants to rate eight different strategies

(mentioned above) according to their talent management practices. As a result, talent man-

agement is primarily seen as a strategy to handle the succession planning (57% of the compa-

nies) but also to retain (54%) and develop talent (48%) and rated in fourth place as a strategy

to support business strategy (43%). In 24% of the companies, talent management practices are

seen to increase an employers attractiveness or deploy and manage talent. Surprisingly, 34%

of all these talent management practices are not explicitly aligned with overall business goals.

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In Switzerland, talent management does not go along with Knowledge Management (13%) or

Change Management (9%). In the following analysis, we focus only on the first four strate-

gies: first on talent management as a strategy to support corporate strategy, second as a strat-

egy to handle succession planning, third to retain talent and fourth to develop talent. The other

four strategies are of lesser interest for talent management systems in Switzerland.

Regression Results

The results of the regression analysis are shown in Table 1. This is a summary table of the

relevant results and does not show all regression parameters. In all regression models, we in-

cluded a set of control variables. We included nine industry sector, five company size, seven

company revenue span and four company geographical structure dummy variables, and we

included how long companies have conducted a formal talent management system.

In the upper panel of Table 1, the results of the effects of different talent management strate-

gies on financial outcomes such as company profit, market value, company productivity and

the productivity of talents are shown. A focus of the talent management on supporting corpo-

rate strategy has a statistically highly significant positive impact on company profit and the

productivity of talent. There is no effect on company value or on company productivity. The

second row shows that a focus on succession planning has a statistically significant positive

effect on profit and market value. No effect is found on productivity at either the corporate or

individual level. The focus on talent retention has no effect on financial outcomes at the com-

pany level. As expected, the focus on talent development has a positive effect on profit, mar-

ket value and the overall productivity of talent. This partly supports the first proposition.

In the middle panel of Table 1, the regression results of the strategic focus on non-financial

outcomes on company level are presented. The focus of talent management practices on busi-

ness strategy has a positive effect on company attractiveness, reaching company goals and

increasing customer satisfaction. Noteworthy here is the positive effect of an appropriate tal-

ent management strategy on reaching company goals. Regarding succession planning, there is

no effect on non-financial company outcomes. A focus on talent retention has, as expected, a

positive effect on customer satisfaction, and the focus on talent development positively affects

company attractiveness and succession time. Curiously, the implementation of a talent man-

agement strategy focusing on succession planning has no appreciable effect on the time for

succession, while focusing on the development of talents affects the time for replacement.

Overall, these results lead to weak support for the second proposition.

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In the lowermost panel of Table 1, we show the results of the effect of the focus on talent

management on non-financial outcomes at the talent level. The positive impact of individually

focused talent management strategies such as talent retention and development on satisfac-

tion, motivation, commitment, work quality, qualification and trust in leaders shows that tal-

ent management plays a crucial role in Human Resource Management. Both talent manage-

ment strategies with a more institutional-level focus show a more cautious impact on non-

financial outcomes on talent level, but nonetheless have a statistically highly significant im-

pact on the motivation of talent. The results at the individual level very strongly support the

third proposition.

Table 1: Regression Results

Financial outcomes

TM strategy

Company profit

Market value Company productivity

Talents productivity

Corporate strategy 1.76*** (0.51)

0.63 (0.43)

-0.30 (0.41)

0.92** (0.45)

Succession planning 1.19** (0.51)

0.75* (0.44)

0.05 (0.42)

0.30 (0.45)

Retaining Talents 0.65 (0.44)

0.10 (0.40)

0.13 (0.39)

0.37 (0.43)

Developing Talents 0.90** (0.46)

0.98** (0.41)

0.53 (0.39)

0.73* (0.42)

Non-financial out-comes on company

level TM strategy

Company attractiveness

Time for replacement

Achieving business goals

Operational excellence

Customer satisfaction

Corporate strategy 1.62*** (0.48)

0.31 (0.36)

0.68* (0.40)

0.25 (0.39)

0.93** (0.42)

Succession planning 0.58 (0.43)

0.21 (0.38)

0.10 (0.40)

0.42 (0.40)

0.55 (0.43)

Retaining Talents 0.57 (0.40)

0.18 (0.33)

0.30 (0.37)

0.33 (0.37)

0.91** (0.41)

Developing Talents 1.18*** (0.43)

0.58* (0.34)

0.56 (0.38)

0.45 (0.38)

0.49 (0.40)

Non-financial out-comes on

talent level TM strategy

Job satisfac-tion

Performance motivation

Commitment Work quality Qualification Trust in leaders

Fluctuation rate

Inventive ability

Corporate strategy 0.17 (0.42)

1.14*** (0.42)

-0.66 (0.41)

0.14 (0.41)

0.87** (0.38)

0.56 (0.39)

0.22 (0.38)

0.42 (0.40)

Succession planning 0.17 (0.43)

0.80* (0.42)

0.29 (0.41)

0.97** (0.43)

0.40 (0.38)

0.85** (0.41)

-0.17 (0.38)

-0.44 (0.41)

Retaining Talents 0.78* (0.42)

1.12*** (0.40)

0.85** (0.40)

1.24*** (0.41)

1.27*** (0.38)

0.62* (0.37)

0.22 (0.35)

0.48 (0.39)

Developing Talents 1.12** (0.44)

1.06*** (0.40)

0.93** (0.39)

0.89** (0.40)

0.69* (0.37)

0.61* (0.38)

-0.04 (0.36)

0.11 (0.38)

Note: Standard errors in parenthesis, Control Variables: industry sector, company size, company revenue, company geographical structure and duration of formal talent management system. Significance level: *** = 1%, ** = 5%, * = 10%, N = 138

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4. Discussion

In this section, we examine the previous presented results out of the four strategic perspec-

tives considering the proposition 1-3 mentioned above.

Focus on corporate strategy

Talent management practices with a strong focus on business strategy and its alignment with

overall business goals have a statistically highly significant impact on corporate profit; one

that is greater than that of any other focus of talent management practices. Therefore, our re-

sults are in line with previous studies for other countries (e.g., DiRomualdo et al., 2009;

Ringo et al., 2008).

It is interesting that a higher productivity of talent cannot be transferred to an entire company,

where the same pattern is apparent with a talent management strategy focusing on develop-

ment. The question arises why progress in individual productivity cannot be transferred to the

company level. We assume that non-talent are not excessively affected by these talent man-

agement practices or that talent management might not have the necessary support at the or-

ganisational level. Additionally, corporate productivity is a combination of different parame-

ters influencing the overall level of corporate performance. Moreover, as operational excel-

lence is not affected through this talent management strategy, there may be organisational

barriers impeding vast organisational productivity growth through these talent management

practices.

Regarding the non-financial impact, the focus on corporate strategy statistically highly sig-

nificantly enhances employers attractiveness. This strengthens long-term competitiveness

due to more applications, which lead to a larger candidate pool.

The statistically highly significant positive impact on performance motivation raises the ques-

tion of which people belong to the talent pool. If the talent pool comprises mostly (future)

executives who are involved in strategy development and planning decisions, then a talent

management with a primarily focus on corporate strategy raises their performance motivation.

Focus on succession planning

Talent management, understood as a strategy to meet a companys demand for the right peo-

ple at the right time and place, has a strong impact on corporate profit. This can result from a

successfully organised workflow, as successors follow seamlessly and knowledge and prac-

tices can be transferred personally. Therefore, the loss of knowledge can be diminished be-

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cause established and proven practices can be more easily adopted. This would also explain

the positive impact on talents work quality.

Interestingly, companies focusing on this talent management strategy report no statistically

significant impact on the succession time; in particular, the implementation of this talent man-

agement strategy has not diminished the time needed for replacements for leaders or special-

ists. Therefore, effective and efficient recruiting methods might already be established, and

there is no need to improve the time of succession, as it is already sufficient for ensuring a

seamless replacement.

The statistically highly significant increase in trust and in performance motivation is a result

of the calculability of the future that goes along with this strategy. Talent know which path-

ways are promising and thus know about their possible future positions. This finds support in

the expectancy theory (Vroom, 1964) which applies an expected-value model to an organiza-

tional setting and deals with motivation and management. The idea behind this theory is that a

person's behavior is a result of individual wants (valences), the level of confidence what he is

capable doing (expectancy) and considerations whether he will get what have been promised

(instrumentality). Vroom proposes that a persons belief about these three factors interact psy-

chologically to create a motivational force. This implicates that as long as the management

ensures that promises of carrier steps are fulfilled and that employees are aware of that, talent

show higher motivation.

Focus on attracting and retaining talents

Talent management strategy with a focus on retaining talent leads to higher customer satisfac-

tion, what supports the result of earlier studies (e.g., Kontoghiorghes & Frangou, 2009). This

can be explained with a subsequent long-term customer relationship. Obviously, a mass of

continuity and consistency in interaction partners is very highly appreciated in this sample. As

the service sector is very strongly embedded in Switzerland, with even the Swiss industrial

sector holding crucial service elements, this outcome is evidently very important for Swiss

companies.

The statistically highly significant impact on the level of talent shows that not only attracting

and recruiting desired people but identifying the right people and having special programs to

keep them in the company raises their work quality and qualification. This effect can also be

due to a successfully managed organisational learning process pursued in tandem with this

strategy (Senge, 2006). However, the perceived tremendous increase in work quality and

qualification of talent show that talent can be well directed and that Swiss companies are do-

14

ing this very successfully (BFS, 2008). Moreover, they are part of a privileged group of em-

ployees and are valued. Subsequently, their esteem needs are fulfilled (Maslow, 1954). There-

fore, tailored programs, specific incentives and distinctive pathways increase talents job sat-

isfaction, performance motivation and trust in their leaders. Leaders belief in talent and invest

in their human capital. Therefore, we find a reciprocal relationship between the persons: Tal-

ent trust in leaders and make their investments paid (Hitt, Bierman, Shimizu, & Kochhar,

2001). This finds also support in the psychological contract (Dabos & Rousseau, 2004). Ac-

cording to previous studies (e.g., Boekaerts, 2007) motivation has a significant impact on

learning and performance, which this study confirms by looking at the relationship between

the motivation and qualification of talent.

Surprisingly, with the implementation of this talent management strategy, the fluctuation rate

was not reduced, which is not consistent with earlier results (e.g., DiRomualdo et al., 2009;

Sebald et al., 2005; Tansley et al., 2007; Yapp, 2009). On the one hand, this is a consequence

of the loyalty of Swiss workers: a recent international study disclosed that Swiss loyalty is far

greater than the European average (Kelly Services, 2010), which is also a consequence of the

higher social involvement in smaller companies (Fueglistaller, Halter, & Mller, 2004).

Focus on developing and motivating talents

Focusing on the development of talent is equal to systematic investments in human capital. As

a result, the intellectual capital rises and influences not only current but also future market

value (Friederichs & Labes, 2006; Scholz, Stein, & Bechtel, 2006). This significant increase

in market value is also found in earlier studies (e.g., Axelrod et al., 2001; Huselid, 1995;

Huselid & Becker, 1998).

Surprisingly, the specific development of talents has only a weak impact on the productivity

of talent. One reason might be that the difference between talent and non-talent is less pro-

nounced, maybe due to spillover effects, which would explain why companies excelling in

talent management strategy do not report tremendous increases in the productivity of talent if

this enhancement in productivity is seen relatively to non-talents. Henderson (2010) reveal,

although in another context, that workers are more productive when they are positioned

around other workers with a high level of human capital. This finds support in the spillover

theory. There might be also differences in the goal setting of this talent management strategy

(e.g., developing soft skills vs. enhancing engagement level and productivity) and therefore in

the development practices. Subsequently, having scope of development, allowing an error

15

culture, learning by trial and error etc. do not lead necessarily to higher productivity although

talent learn and develop competencies.

The weak results for inventive ability are not very surprising for Switzerland, considering that

Switzerland has one of the worlds leading education systems and a notable number of annual

patent registrations (BFS, 2009b; Hotz-Hart, Reuter, & Vock, 2001; Hotz-Hart, 2008). A fun-

damental reason why we cannot find an assessable impact on talents inventive ability might

be the problem of ascribing certain innovations to specific people. However, the higher inno-

vative ability shown in previous studies (e.g., Sullivan & John, 2009; Tansley et al., 2007)

cannot be confirmed.

Regarding the non-financial impact, talent management with a focus on development statisti-

cally highly significantly affects the attractiveness of employers. Talented workers are appar-

ently looking for carrier paths, developmental perspectives and challenging work content

(Kayser, Sebald, & Stolzenburg, 2007; Lawler, III, 2008; Ready & Conger, 2007; Steinweg,

2009). Therefore, companies with this in focus enhance their attractiveness very easily and

maintain their high position in rankings of preferred Swiss employers while communicating

their talent management strategies.

Changes observed at the individual level since the implementation of talent management with

a focus on developing talent are a statistically significantly higher job satisfaction, perform-

ance motivation, and commitment and higher trust in leaders, as they are given carrier and

development perspectives according to their competencies and engagement levels. This result

finds support in earlier studies (e.g., MacBeath, 2006; Steinweg, 2009) and finds support in

the self-efficacy theory (Bandura, 1977; Merton, 1948): Selected employees, namely the tal-

ent, are given scope for development and developmental options, because they are said to

have the potential and to be engaged. Therefore, the postulations of the management influence

the behaviour of talent, because if [talent] define situations as real, they are real in their con-

sequences (Thomas & Thomas, 1928, p. 572 in Merton, 1995). That job satisfaction, motiva-

tion and commitment are dependent variables has been shown in different studies and is a

known psychological phenomenon (Porter, Bigley, & Steers, 2003). Nevertheless, the statisti-

cally significant increase in the work quality and qualification of talent show that talent can be

successfully well directed and developed. Moreover, according to previous research (BFS,

2008) qualification has a significant impact on quality of work, which this study confirms by

looking at the relationship between the quality of work and qualification of talent.

16

5. Conclusion

In this paper, we sought to characterise talent management strategies in Switzerland and their

impact on organisational performance, evaluating perceived effectiveness. Analysing the

sample from a financial perspective, we disclosed a higher corporate profit as being a statisti-

cally highly significant main financial effect of the pursuit of a talent management strategy.

From a non-financial perspective, we identified the results of talent management practices in

Switzerland as being increased corporate attractiveness and a tremendous impact on talents

motivation.

Overall, it appears that talent management strategies focusing strictly on individual employees

and their needs have a stronger effect at the individual level, which finds support from earlier

studies (e.g., Lockwood, 2006; Ringo et al., 2008). However, talent management with a

greater focus on the corporate level seems to have a direct effect on financial outcomes.

Talent management strategy understood as succession planning has the weakest impact on

organisational performance, particularly on non-financial outcomes at both the organisational

level and the individual level. It seems that this stream is what Human Resource Management

always was, managing human resources, but doing it in a more effective way.

Talent management practices with a strong focus on business strategy have a statistically

highly significant impact on corporate profit, one that is more than any other focus of talent

management. We found the pursuit of a strategy focusing on the attracting and retaining of

talent to have the greatest effect on the level of talent, highlighting the learning process and its

value for improvement in work quality and qualification.

The higher retention rate shown as a result of talent management in previous studies (e.g.,

Sebald et al., 2005; Tansley et al., 2007), along with the increase in operational excellence

(e.g., Ashton & Morton, 2005; DiRomualdo et al., 2009), could not be confirmed with any of

the talent management strategies, and the impact on organisational productivity (e.g., Stein-

weg, 2009; Yapp, 2009) was only partly confirmed. Some discrepancies with the results of

previous studies such as the weak impact on fluctuation or on inventive ability can be ex-

plained with cultural elements unique to Switzerland. Therefore, we conclude that the appro-

priate strategy in one country is not necessarily a constructive strategy in another country.

Limitations and Directions for Future Research

This study should be interpreted taking into consideration its limitations. The non-random

sampling design and the relatively small sample represent a limitation to the generalisability

of the results. The data were collected from three personal management communities in the

17

German-speaking part of Switzerland. Furthermore, all data were collected through a survey

from heads of HR, personal managers, executives and supervisors. A full 360-degree instru-

ment would be useful to determine more accurately the effects of talent management, particu-

larly 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 this take 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. Moreover,

this study provides a snapshot of the situation at one particular point in time. Given that the

effects of talent management are thought to occur extended periods, further research should

be conducted to determine whether the influence changes over time. Additionally, these 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.

18

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