Talent Management:Conceptual Approaches andPractical ChallengesPeter Cappelli and JR KellerWharton School of Business, University of Pennsylvania, Philadelphia,Pennsylvania 19104; email: cappelli@wharton.upenn.edu

Annu. Rev. Organ. Psychol. Organ. Behav. 2014.1:305–31

First published online as a Review in Advance onJanuary 2, 2014

The Annual Review of Organizational Psychologyand Organizational Behavior is online atorgpsych.annualreviews.org

This article’s doi:10.1146/annurev-orgpsych-031413-091314

Copyright © 2014 by Annual Reviews.All rights reserved

Keywords

mobility, hiring, internal labor markets, talent pools

Abstract

The challenges associated with managing talent inmodern labor mar-kets are a constant source of discussion among academics and practi-tioners, but the literature on the subject is sparse and has grownsomewhat haphazardly. We provide an overview of the literatureon talent management—a body of work that spans multiple disci-plines—as well as a clear statement as to what defines talent man-agement. The new themes in contemporary talent management focuson (a) the challenge of open labor markets, including issues of re-tention as well as the general challenge of managing uncertainty, (b)new models for moving employees across jobs within the sameorganization, and (c) strategic jobs for which investments in talentlikely show the greatest return. We review the conceptual and prac-tical literature on these topics, outline the evolution of talent man-agement over time, and present new topics for future research.

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INTRODUCTION

Talent management is a recent, practitioner-generated term covering a range of long-standingpractices that aim at getting the right person in the right job at the right time. These includeworkforce planning, succession planning, employee development, and career management. Thephrasedates froma1998McKinsey report (Chambers et al. 1998), which argued that variations inthe performance of executives explain a great deal of the variance in overall performance acrossbusinesses. It has become the dominant human capital topic of the early twenty-first century(Cascio & Aguinis 2008a). Virtually every survey of executives, not just of human resourceprofessionals, confirms this interest, and leading human resource consulting firms have eitherdeveloped new practice areas or rebranded existing practice areas to provide so-called talentmanagement solutions.

Consistent with several commentaries lamenting the gap between miniscule academic interestand widespread practitioner interest in this area (Cascio & Aguinis 2008a, Rynes et al. 2007),a review of the academic literature using the term talent management yields surprisingly fewresults. In response, we conducted what might be thought of as an old-fashioned literature reviewthatworkedbackward through the bibliographies of relevant articles.We reviewed approximately500articles, books, and chapters across the fields ofmanagement, human resources, industrial andorganizational (I/O) psychology, sociology, and economics to find studies that address at leastsubtopics within talent management. Although the scope of this article does not permit us toprovide a comprehensive review of all the research that intersects the talent management topic, wereference reviews that do related topics justice throughout.

DEFINING TALENT MANAGEMENT

The term talentmanagement has escaped a standard definition, and nearly every article written onthe topic beginswith handwringing over the conceptual boundaries of the term. For example, Lewis &Heckman (2006, p. 139) note the “disturbing lack of clarity regarding the definition, scope andoverall goals of talent management.” Similarly, Collings et al. (2009, p. 1264) conclude that “theconcept of talentmanagement is lacking in terms of definition and theoretical development and thereis a comparative lack of empirical evidence on the topic.” And as Gallardo-Gallardo et al. (2013,p. 291) assert,“It appears that talent canmeanwhatever a business leader orwriterwants it tomean,since everyone has his or her own idea of what the construct does and does not encompass.”

Perhaps the most salient criticism from researchers is that the use of the term talent manage-ment is often little more than a rebranding of a range of typical HR activities (Lewis & Heckman2006). Although this is a fair criticism of most of the practitioner literature, it is less true in theacademic literature, which has been more careful in its attempts to distinguish talent managementfrom the study of specific HR practices and strategic human resource management (SHRM)moregenerally (Cappelli 2008a, Collings &Mellahi 2009, Tarique & Schuler 2010). Dries (2013), forexample, identifies six different theoretical perspectives on what constitutes talent.1

However, a notable feature of much of the existing literature on talent management is that itcontinues to focus on practices associated with lifetime careers in corporations, despite the fact

1These include (a) a human capital perspective emphasizing an employee’s contribution to the organization, (b) an I/Opsychology perspective emphasizing the ability to predict who will be successful in more senior roles, (c) an educationalpsychology perspective emphasizing domain-specific excellence, (d) a vocational psychology perspective emphasizinga vocational self-concept/identity, (e) a positive psychology perspective emphasizing self-actualization, and (f) a socialpsychology perspective emphasizing the perception of talent.

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that the most profound shift over the past 30-plus years in how organizations manage theirworkforces has been an increase in dismissals and external hiring at all organizational levels(Cappelli 1999). As Cappelli (2008b) argues, although the central talent management concerns—anticipating human capital needs and setting out plans tomeet them—may not be new, traditionalsolutions are no longer appropriate because the certainty that was required for them no longerholds. New approaches must account for that uncertainty and the increased prominence of ex-ternal labor markets. In this view, the questions addressed by talent management are not new, butthe answers are.

A definition that is consistent with traditional approaches and captures what academicresearchers have been doing under the heading of talent management is as follows: the processthrough which organizations anticipate andmeet their needs for talent in strategic jobs. As arguedbelow, the clear focus on strategic jobs is the new idea in academic studies. This definition issufficiently suited to the academic need to stimulate theory development while reflecting theinterests of practitioners, for whom the interest in talent management is strongly focused on asmall number of roles, typically senior management and executive positions.2

A SURVEY OF THE CONCEPTUAL LITERATURE

Two debates have emerged from recent attempts to draw conceptual boundaries around the termtalent and the field of talentmanagement. The first centers on the distinction between inclusive andexclusive approaches to talent management, and the second onwhether workforce differentiationefforts should begin with individuals or jobs.

Inclusive and Exclusive Approaches to Talent Management

Inclusive approaches suggest that talent management should apply to all workers. All employeesof an organization are seen as possessing strengths that can potentially create added value for theorganization. Exclusive approaches, by contrast, see a subset of employees or jobs as creatingdisproportionate value (Gallardo-Gallardo et al. 2013, p. 295). The practical implication of thesetwo approaches concerns the investment of scarce resources: Is development for everyone, orshould the firm differentially invest in certain individuals or jobs?

Inclusive approaches seem to have developed more recently, possibly in response to the moreegalitarian concepts in the air during the 1960s and 1970s, as well as workplace regulationsrequiring equal treatment of employees in areas such as retirement policies and health benefits.Exclusive approaches have a longer history, no doubt inspired by the practices in the militarywhere hierarchical arrangements are assumed. Exclusive approaches are consistent with theoriesof resource optimization in the strategy literature (Majumdar 1998) and theMatthew effect in thesociology literature (Bothner et al. 2011) in which unequal investments are seen to generategreater aggregate returns.

Exclusive approaches have increasingly come to dominate the academic literature on talentmanagement, as reflected in the growing interest in workforce differentiation (Collings &Mellahi2009, Huselid & Becker 2011, Lepak & Shaw 2008). The notion of workforce differentiation orsegmentation, a key theoretical development in the strategic human resource management(SHRM) literature, suggests that organizations should disproportionately invest scarce resources

2A standard commonly used in corporations is that talent management programs are for the top 10% of the workforce asmeasured by their positions in the corporate hierarchy (e.g., Ulrich & Smallwood 2011).

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in the individuals or jobs from which they expect the greatest return. It differs from olderapproaches,which simply assumed that the importance of an individual or jobwas associatedwithits position in the organizational chart.

Individuals and Jobs as the Loci of Workforce Differentiation

The exclusive approach leads to a second debate around whether the locus of workforce differ-entiation should be the individual or the job. Shouldwe begin by identifying a subset of individualswho might be slotted in an array of roles or by identifying a specific population of jobs that are insome way strategic and then focus on filling those roles with talent?

The individual differentiation perspective has its roots in the resource-based view of the firm,which suggests that “the value of human capital is inherently dependent upon its potential tocontribute to the competitive advantage or core competence of the firm” (Lepak & Snell 1999,p. 35). Themost prominent conceptual model remains the architectural theory ofHRM (Lepak&Snell 1999), whichmarries insights from the resource-based view, transaction cost economics, andhuman capital theory to show how differential investments in workers possessing highly valuableand highly unique human capital can lead to competitive advantages. Several scholars haveexpanded on this work, with, for example, promising efforts to show how mobility constraintsprovide important boundary conditions on the link between firm-specific skills and competitiveadvantage (Campbell et al. 2012).

There is evidence that top performers contribute disproportionately to firm performance.Research on the productivity of knowledge workers has demonstrated that top performers aremany timesmore valuable than average performers (see Felin &Hesterly 2007, pp. 211–12). Thishas led many practitioners to advocate for an ABC notion of talent management, popularized byJack Welch’s vitality curve, in which some workers are really good performers (the A players),others are really poor performers (the C players), andmost are stuck in an average category (the Bplayers). Implicit in this notion is the idea that performance is dispositional, so that the goal is tohire A players and get rid of the C players (Axelrod et al. 2002, Smart 2005).

However, there is also substantial research showing that exceptional performance is not entirelydispositional. Studies of investment bankers (Groysberg et al. 2008) and doctors (Huckman& Pisano2006) have highlighted the importance of intrafirm social networks to performance, withGroysberg et al. (2008) finding that star investment analysts were often unable to replicate theirprevious levels of performance owing to the loss of social capital associated with a move to a newfirm. Groysberg et al. (2011) cast doubt on a more-is-better approach to talent management,finding a curvilinear relationship between group performance and the percentage of star analystsin investment-bank research groups. More generally, the field of HRM is based on the notion thatmanagement practices, and not just individual differences, drive performance.

Moreover, the value of a superior individual performance is often moderated by the job oc-cupied. Hunter et al. (1990) found significant differences in output when comparing top per-formers with poor performers across a variety of jobs, but the gap varied significantly dependingon the complexity of the job. Even further back, Jacobs (1981) used contingency theory to modelthe relationship between individual performance, jobs, and organizational performance, showinghow exemplary individual performance adds a significant increment to an organization’s totalperformance in some jobs but not others.

This has led to recent arguments advocating for the job as the more appropriate locus of dif-ferentiation. From this perspective, some jobs are more critical to organizational performancethanothers, and firms should devotemore resources to those jobs inwhich individual performancehas the greatest potential to impact firm performance (Boudreau & Ramstad 2007, Delery &

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Shaw 2001, Huselid et al. 2005). Focusing on the job as the locus of differentiation does notdismiss individual differences, of course. It simply gives primacy to the job, as the relative value ofindividual differences depends on the nature of the job (Gallardo-Gallardo et al. 2013,Humphreyet al. 2009). As described by Becker & Huselid (2006, p. 904), “The value of employee skillswithin a firm is not just a supply side phenomenon. It is a function of how those skills are used andwhere they are used.”

Humphrey et al.’s (2009) role composition model of team performance provides support forthe idea that the job should be the locus of differentiation. They found that certain roles are moreimportant to team performance than others, the implication being that staffing decisions shouldtake into account the strategic importance of different roles prior to considering individualattributes. A job differentiation perspective is also consistent with the historical view of talentmanagement, in which the key jobs were executive positions, assessing which individuals hadthe potential to succeed in those jobs was a central task, and development to make themsuccessful in those jobs was the most significant expenditure. And it reflects the perspective ofmost practitioners, for whom the focus is on filling a small number of key roles, typically seniormanagement and executive positions, as well as key technical positions (e.g., Charan 2005,Fernández-Aráoz 2005).

Given the apparent dominance of the job differentiation perspective, we can more clearlydefine “talent management” as the process through which organizations meet their needs fortalent in strategic jobs, “talent” as those individuals who currently or have the potential todifferentially contribute to firm performance by occupying strategic jobs,3 and a “talent pool” asthe high-performing incumbents in strategic jobs and those individuals identified as having thepotential to occupy strategic jobs in the future (Cappelli 2008b; Cascio & Boudreau 2008;Collings & Mellahi 2009, p. 307).

Strategic Jobs

Identifying what constitutes a strategic job requires some discussion as well. Traditionally, talentmanagement efforts were focused on filling executive-level jobs that were assumed to have themost important effect on firmperformance. The attention on executive positions ismirrored in theacademic literature, which has focused on the antecedents and consequences of CEO and topmanagement team (TMT) successions.4 However, a key insight from the recent workforce dif-ferentiation literature is that although executive jobs are almost by definition strategic, strategicjobs can potentially be located anywhere in the organization, depending on the strategic com-petencies of the organization. For example, amarketing and sales–focused companymay find thatits sales positions are strategic jobs. That strategic jobs exist outside of the executive suite hasbeen trumpeted as one of themost insightful aspects of this approach, as “there is greater potentialfor distinctively competing for and with talent in areas that are less recognized” (Boudreau &

3One of the shortcomings in this literature is the lack of a consistent term used to identify those jobs with the greatest potentialto improve firm performance. They have been variously described as “strategic jobs” (Becker & Huselid 2006), “keypositions” (Collings&Mellahi 2009), “linchpin positions” (Conger&Fulmer 2003), “Apositions” (Huselid et al. 2005), and“pivotal roles” (Boudreau & Ramstad 2007, Collings & Mellahi 2009).4Though of interest to scholars interested in talent management, a review of the executive succession literature is beyond thescope of this review. The dominant research topic in the field has been the antecedents and consequences of internal versusexternal CEO succession (see Karaevli 2007). For a review of the literature of succession planning in general, see Cappelli(2011). Excellent reviews of the literatures related to CEO turnover and succession include Giambatista et al. (2005) andFinkelstein et al. (2009, pp. 164–225).

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Ramstad 2007, p. 69) and because it makes for broader and stronger conceptual links betweenHR and business strategy.

Huselid et al. (2005) argue that strategic jobs must meet the dual criteria of having a directstrategic impact and high variability in the performance of incumbents, representing upsidepotential. Hence, strategic jobs are those jobs in which investments in selection, evaluation, anddevelopment have the greatest potential to generate a significant return through increasing revenueor decreasing costs. Jacobs (1981) similarly argues that individual performance is most likely toaffect firm performance in jobs located in a part of the organization with a direct impact on firmperformance and in jobs in which success is comparatively infrequent. Boudreau & Ramstad(2007) focus on identifying jobs for which increases in worker quality or availability most affectorganizational success. Thus, strategic jobs can include such diverse roles as cashiers at Costco(Huselid et al. 2005), street sweepers at Disneyland (Boudreau & Ramstad 2007), and recordproducers at music studios (Jacobs 1981).

Emerging from these various efforts to define strategic jobs is general agreement that strategicjobs encompass those jobs in which exemplary individual performance contributes to a firm’scompetitive advantage. It is less clear whether jobs in which the occasional poor performancecarries significant downside risk should be considered strategic jobs or fall under another category.Our interpretation is that these jobs are not strategic jobs because simply filling themwith averageperformers can reduce the downside risk, whereas filling them with talent may not necessarilyresult in a marginal contribution to firm performance (Huselid et al. 2005, Jacobs 1981). Outsideof a few illustrative examples, however, few attempts have been made to identify strategic jobsmore broadly (Huselid & Becker 2011), and the idea remains largely conceptual.

Incorporating the strategic job concept into the general idea of talent management could bestraightforward. Rather than simply assuming that only top management jobs are strategic,employers could add other jobs to that list and then decide how best to meet the demand for thosejobs: Should they be filled by outside hiring or fromwithin,5 and if fromwithin, what practices areassociated with developing and identifying the appropriate candidates? Talent managementobviously involves identifying the requirements of those strategic jobs as well as assessing anddeveloping the abilities of individuals; where the focus of attention should be between jobs andindividuals is an issue we return to below.

THE PAST AND PRESENT OF TALENT MANAGEMENT

In order to get a sense of where the practice of talent management is headed, it may be helpful toexplore briefly where it has come from. The notion of talent management as defined above isassociatedwith the rise of large corporations in the 1950s. The firms that dominated the early daysof industrial production had no talent management issues. The owners were the managers, butthere was often little to manage, as much of the work, from sales and distribution to actual pro-duction tasks, was outsourced (Zunz 1990).

That context first changedwith the creation of executive jobs prior toWorldWar I. Once firmsgrew large enough to have specialist functions, they needed someone tomanage those functions atheadquarters. These newly created jobs had enough discretion to qualify as executive jobs. But, as

5To the extent this has been studied, the literature has focused almost entirely on the CEO position, a context that is notrepresentative of the vast majority of jobs (Hambrick & Mason 1984) or labor markets (Khurana 2002). A recentexception is Bidwell & Keller (2013), in which the authors found that performance variability and the supply ofpotential internal candidates shape the decision to fill a job through promotion, internal transfer, or external hiring.

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business historian Thomas Cochran noted, although many of the administrative problems ofrunning large corporations had been solved by World War I, one important issue had not: “how[menwere] to be trained, selected, and inspired to undertake the task of coordinating and directingthe enterprise as awhole” (Cochran 1960, p. 70). Therewas noway to assess the capabilities of themanagers and predict who could handle an executive job, a problem with a remarkable con-temporary feel. Nor was there an understanding of how to develop candidates who might meetsome but not all of the requirements for these executive jobs.

Most companies looked externally, importing candidates to fill executive jobs. Typically thishappened by acquiring smaller companies and their founders. This was an excellent approachgiven that nothing in the science of prediction and selection beats observing actual performance inan equivalent job (Cascio & Aguinis 2008b). One consequence of this approach, however, wasthat corporations were effectively prisoners to the supply of talent available in the outside market.

Internally, most employers promoted top performers to supervisory positions, a practice thathad some limited success because the supervisory jobs were not so different from the worker jobs.But the leap from frontline supervisor tomiddlemanagerwas a big one in that success in the formerrole did not predict success in the latter. Although a few companies, GE foremost among them,began experimentingwith approaches to developing talent internally in the 1920s, the diffusion ofthesemodels was set back considerably by the lack of hiring and development from theDepressionthroughWorldWar II. Organizations during the post–World War II boom responded just as theyhad at the beginning of the century, by raiding competitors for talent. But the demand for seniormanagers and executives exceeded the supply, creating a talent bottleneck so severe as todwarf anytalent shortage before or since (Cappelli 2010).

Recognizing the need to develop an internal supply of talent, employers turned to the military.In the short period of time leading up toWorldWar II, theNavy beganwhat was arguably the firsttruly systematic effort at large-scale management development and succession planning. Its effortbecame a blueprint used bymany companies as the basis for building their own talent developmentprograms, and a common model of internal talent management soon emerged.

This model was designed to provide a steady supply of internal candidates capable of fillingmanagerial and executive jobs. It began with careful recruitment and substantial investments inidentifying individuals with the potential to become executives, including the use of psychological,vocational, and intelligence testing. Careers and career planning unfolded within all these largecorporations, with internal advancement supported by early investments in training and regularmovements within the firm to provide development opportunities. External hiring at the executivelevel was virtually nonexistent; one study found that by 1950, 80%of current executives had beendeveloped fromwithin (Newcomer 1955), and another shortly after found that few contemporaryexecutives in any company had begun their careers elsewhere (Steel 1957).

This model was predicated on the stability necessary to generate long-term forecasts of humancapital demand through workforce planning (see Cappelli 2011, p. 676). Succession plans werebut a subset of these broader workforce/manpower planning models covering entire organi-zations, described by Vetter (1967) as “manpower planning for high talent personnel.” Theseforecasts, which in some cases extended out a decade, werematched against estimates of the futuresupply of internal candidates. The assumptionwas that the supply of talent for executive positionswas entirely internal, with career advancement and development centrally managed by the firm.The most sophisticated efforts attempted to model the movement of individuals within a careersystem by including individual behavior and psychological variables, supervisory practices, groupnorms, and labor market outcomes.

These practices were developed to support talent management within closed employmentsystems (Althauser & Kalleberg 1981). Workers were shielded from external competition, and

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mobility was governed by bureaucratic rules. Expectations of lifetime employment and steadyadvancement opportunities provided a sense of stability toworkers, who granted firms substantialcontrol over their careers within the organization. Because jobs above entry level were not freelyavailable to outsiders, there were limited opportunities for external advancement, and retentionwas rarely a concern. Decisions related to investments in employee development and advancementwere largely handled by centralized personnel offices. Advancement occurred along narrowlydefined jobs located along clearly defined job ladders, structural features that emerged from theneed to maintain the overall efficiency and social stability of the closed employment system(Althauser 1989).

By the 1950s, the tools and practices commonly associated with internal talent managementwere in place: workforce plans to set direction; sophisticated recruitment and selection techniquesfor hiring entry-level candidates; assessments of potential (including assessment centers, abilityand personality tests, etc.); developmental assignments like job rotations, shadowing, and actionlearning with coaches; assessments of performance such as 360 feedback and forced rankings;career ladders; and succession planning to fill the important jobs. Virtually every contemporarypractice in talentmanagement was developed and in place during this period. The academic worldinvestigated some of these topics, developing huge literatures on employee selection and assess-ment, reflecting the interests of the I/O psychologists. Institutional economists and sociologistscreated large literatures on career advancement and arrangements such as internal labor markets.Topics such as workforce planning, succession planning, and employee development saw sub-stantially less interest from academics.

Decline of the Traditional Model

Dramatic changes in the competitive environment from the 1980s on (Cappelli 1995, Jacoby2005) resulted in an opening of the closed employment systems of traditional internal labormarkets. The new competitive environment is characterized by uncertainty in both the demandfor and supply of talent (Cappelli 2008b), leading to a gradual disintegration of the structuresand processes supporting the traditional, internally focused approach to talent management andwith it, a sharp decline in many of the talent management practices associated with the traditionalmodel. Piore (2002, p. 275) summarizes the cumulative effect of these changes quite succinctly,noting that “in the new environment, the mix of labor requirements was no longer stable; and theorganizational structures began to shift in a direction which was no longer compatible with thebureaucratic rules of the internal labor market.”

Flattening organizational hierarchies combined with broader job definitions led to the gradualdisappearance of well-defined job ladders. Personnel decisions have been largely decentralized,with decisions on promotions, transfers, and new hires being delegated to individual managers.No longer willing or able to provide any assurance of continued employment, employers have en-couraged workers to take control of their careers.

Perhaps the most fundamental change has been the expansion of external hiring.With ports ofentry no longer restricted to lower-level jobs, employers nowhire into almost all kinds of jobs at alllevels of the organization. Jacoby (2005) surveyed senior HR executives in 145 US firms in 2001and found that none of them considered only internal candidates for managerial vacancies anda mere 1% considered only internal candidates for nonsupervisory vacancies; these figures wouldhave been viewed asmisprints only a fewdecades earlier. Cappelli&Hamori (2005) examined thetop 10 executives of the largest companies with the most sophisticated internal labor markets, theFortune 100 companies, in 2001 and compared their careers to their peers in 1980, finding thatexecutives now spend significantly less time with a single employer and are much more likely to

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build careers across firms. Royal&Althauser (2003) and Bidwell (2011) found extensive externalhiring to be common in mid- and upper-level jobs. These findings are consistent with extensivework documenting the steady decline in job tenure (particularly in the United Sates) over the past30-plus years (Hollister 2011).Whereas large employers in theUnited States filled only about 10%of their vacancies from outside in the period from World War II to the 1980s, current estimatessuggest that they now fill over 60% of vacancies from outside (Crispin & Mehler 2013).

Toward a New Model: Talent Management Under Uncertainty

Uncertainty in demand has arisen from difficulties in forecasting consumer demand, creatingdifficulties in forecasting human capital needs. As a result, workforce planning has all but dis-appeared. In the mid-1960s, a study of personnel departments found that 96% did planningthorough enough to maintain a dedicated manpower planning function (NICB & Janger 1966),but by the mid-1990s, only 19% of companies responding to a Conference Board survey reportedengaging in any sort of structured workforce planning. The decline in overall workforce planningwas accompanied by a similar decline in succession planning. A 2005 survey found that only 29%of employers have succession planning programs (Fegley 2006), and of those that do, only abouta quarter appear to do any such planningmore than two levels below the CEO (Cohn et al. 2005).

Uncertainty on the supply side arises from difficulties in predicting (a) skills and competenciesneeded in the future and (b) turnover. If the competencies needed in the future change dramatically,a talent pool that looks robust now may look deficient in the future. And although organizationscan use historic turnover rates to predict future exit rates, voluntary turnover is often unavoidable(Allen et al. 2010) and introduces substantial error into these predictions. Increased hiring ofexperienced candidates from competitors has created retention concerns, further complicatingestimates of internal supply. Moreover, firms have limited control over the future availability ofskills and competencies available on the labor market (Cappelli 2008a).

Popular management books on talent management often put forward historical practices atolder companies such as GE as the model to emulate (e.g., Charan et al. 2011). However, suchmodels require extensive up-front investments that canbedifficult to recoup if human capital needschange or if employees unexpectedly leave, both common occurrences. A recent survey of high-potential (HiPo) programs illustrates this problem: Although 75% of firms report that HiPoemployees are more than 50%more valuable than an average employee, less than a third reportedrealizing a significant return on their HiPo investments (Martin & Schmidt 2010).

The reality of talent management under uncertainty is quite different from what existed underthe old model. External hiring has not only increased; it has become a de facto talent managementstrategy for many firms, with just-in-time hiring emerging as a substitute for workforce andsuccession planning, internal development, and even assessment (Cappelli 2010). Relying onexternal hiring to fill strategic jobs leaves employers at the mercy of the labor market, resulting intalent shortfalls and other costs whenever labor markets tighten. Just as it can be difficult for firmsto recoup their investments in internal development, recent research has identified informational,social, and sociocognitive impediments limiting firms’ ability to recoup the costs associated withidentifying, attracting, selecting, compensating, and onboarding external candidates.

The traditional model of growing talent from within and the more recent just-in-time modelbased on external hiring represent polar-opposite perspectives. Fortunately, these are not either/orchoices inpractice.Cappelli (2008b) suggests an approach, based on supply chainmanagement forwhich addressing uncertainty in supply is the key concept, in which organizations recognize theinevitable problems created by uncertainty and combine internal and external approaches to talentmanagement in ways that minimize the cost associated with those problems. A simple example of

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the approach is to use internal development to address themost predictable aspects of demand andexternal hiring to meet needs that are less predictable. Statistical tests and simple assumptionsallow reasonably precise estimates of the amount of talent that should be “made” versus “bought”(Cappelli 2009). In nonstrategic jobs, the rise of alternativework arrangements (Cappelli&Keller2013a,b), including the use of workers provided by staffing agencies, reflects one approach toaddressing this issue.

Strategic jobs can be filled internally or externally, and there has been substantially more workon identifying and retaining internal talent than there has on identifying and selecting externaltalent. Recent work on interorganizational mobility, however, has begun to shed light on chal-lenges and institutions associated with external hiring, addressing Collings & Mellahi’s (2009,p. 308) concern that“solely relyingon internal development and sourcing,with a general disregardfor the external sourcing of talent, is at odds with an increasing realization that careers are moreregularly characterized by inter-firm mobility in the current environment.”

NEW ISSUES WITH INTERNAL TALENT

Despite the growing practice of outside hiring, most organizations still think of talent manage-ment as being about current employees. Indeed, the traditional practices that form the core oftalent management practices are aimed at existing employees. And despite the attention in theliterature to strategic jobs, many of the major concerns in the practice of talent management haveto do with identifying individuals for development and future advancement. We consider what isknown and new about these practices below.

Identifying the Internal Talent Pool

An evergreen question in talent management is which employees should be the focus of scarcedevelopment resources. That group is often known as an organization’s talent pool, and it istypically seen as consisting of high performers currently in strategic jobs andHiPo candidates whomight fill those strategic jobs in the future. Performance and potential are quite different attributes,of course. The challenges involved in identifying each are well documented in organizationalbehavior (Cascio 2006, Pichler 2012, Roberson et al. 2007) and personnel economics (e.g., Grund& Przemeck 2012), especially around the topics of performance appraisals and performancemanagement systems. The literature on these topics is vast, but we provide a guide to some of themost important issues and newest research below.

Assessing performance. Few jobs lend themselves to purely objective measures of performance(Baker 1992). As a result, subjective measures of performance, which involve judgment withrespect to both the aspects of performance and the level within each aspect, are common in mostjobs and are executed through performance appraisals. Concerns related to inequality aversion inthe form of leniency and centrality biases can combine to suppress variation in the performanceevaluations, thereby making it difficult to identify top performers. If the variation in appraisalscores is compressed, then it also becomes more difficult to identify those strategic jobs in whichexemplary individual performance will have an impact on firm performance.

Organizations have attempted to overcome the challenge of identifying top performers thatresults from the biases associated with performance appraisals through competency modeling,which has replaced job analysis in many organizations. In contrast to job tasks, which areattributes of jobs, competencies can be used in amore straightforwardmanner to assess individualjob performance, as they refer to “behaviors or behavioral themes that are instrumental in the

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delivery of strategic results” (Sanchez & Levine 2012, p. 408). They may also make it easier todifferentiate between average and top performers (Campion et al. 2011) by being more specificabout the attributes in question. In fact, competencies have been broadly defined as “any in-dividual characteristic that can be measured or counted reliably and that can be shown to dif-ferentiate significantly between superior and average performers” (Spencer et al. 1994, p. 4).Whether or not competency modeling fulfills this promise, however, appears to be an openquestion (Sanchez & Levine 2009, 2012).

Assessing potential. Finding those individuals who are capable of filling strategic jobs in thefuture—that is, those who have the potential to succeed at a job they have yet to do—is morechallenging than assessing performance. HiPo programs are designed to meet the challenge. Theyare used to identify individuals who are the best bets for success in strategically important roles,leveraging limited developmental budgets by focusing them on HiPo candidates.

The challenges surrounding the identification of HiPo candidates, like the challenges sur-rounding job performance, are not new. Indeed, the central challenge in identifying HiPo candi-dates is the same as in any staffing decision: It is incredibly difficult to predict future performance ina new role (see Cascio & Aguinis 2008b).

The conceptual ideabehindassessingpotential hasbeen to identify abilities, given that knowledgeand skills presumably can be learned through the development process (e.g., Fernández-Aráozet al. 2011). For this reason, traditional assessments of potential have relied on personality and IQ.More recently, however, employers appear to have fallen back on the basic approach of simplyasking supervisors to make an assessment of potential, an approach built in to performanceappraisals through the nine-box grid, again made famous by GE. It is a matrix in which per-formance is assessed on one axis and potential on the other. However, the lack of a definition forwhat constitutes potential, bothwithin firms andwithin the academic literature (Fernández-Aráozet al. 2011, Silzer&Church 2009), gives us little reason to believe that this process should producevalid information, despite its widespread use.

The lack of established criteria and tools for assessing potential has been cited as the primaryreason that roughly40%ofHiPoassignments end in failure (Martin& Schmidt 2010). In practice,high performance in the current role is often the main criterion used to identify HiPo employees(Martin & Schmidt 2010), despite our knowledge that past performance is unlikely to predictfuture success in significantly different situations (Cascio & Aguinis 2008b, Silzer & Church2009). As noted above, a move toward formal competency modeling may improve predictivesuccess, to the extent that the competency models consider future job requirements either directlyor indirectly (Campion et al. 2011). How competencies are linked across jobs within an orga-nization and how those links affect future performance and mobility remain open empiricalquestions.

Communicating potential. A tactical challenge with HiPo programs is whether and/or howwidely employers should communicateHiPo status.Research drawing onorganizational behaviorconcepts has explored this question in an effort to better understand the effects of workforcedifferentiation on individuals. Gelens et al. (2013) developed a theory suggesting multiple rela-tionships between communicating HiPo status and perceptions of organizational justice. Dries(2011) surveyedworkers in organizations that disclosed their list of HiPo candidates and in othersthat did not, finding that communicating HiPo status to HiPo workers increased their job per-formance, career success, and commitment. Another study revealed that individual managers’support of HiPo programs increased with their level of involvement in the identification process(Slan-Jerusalim&Hausdorf 2007). A Center for Creative Leadership study revealed that 77% of

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respondents placed a high degree of importance on being formally identified as a HiPo employee.Only 14%of formally identifiedHiPo employees were actively searching for other jobs, comparedwith 33%ofworkers informally labeled asHiPo employees (Campbell& Smith 2010). Data fromthe Corporate Leadership Council showed that although only 12% of formally identified HiPoemployeeswere actively seekingnew jobs, 25%expected to leave their organizationswithin a year,and nearly a third reported being disengaged (Martin & Schmidt 2010), demonstrating thatformally communicatingHiPo status alone is not sufficient to retainmembers of the organization’stalent pool (also see Fernández-Aráoz et al. 2011).

What has not been examined carefully are the effects of communicating HiPo status on thosenot chosen,who are sometimes referred to as LoPo employees. It is difficult to imagine any positiveeffects for that group. No doubt the negative effects depend on how the assessment of potential ismade. If it is based on performance, it could motivate LoPo employees to perform better; if itis based on attributes they cannot control, such as personality and IQ, it will quite likely havea demotivating effect. It is also unclear how communicating HiPo status and then removing thatdesignation at a later date, a likely occurrence when performance influences the assessment ofpotential and when human capital needs change, affects workers (Silzer & Church 2009).

Talent-Pool Retention

Although employers are fond of attributing retention concerns to the changes in the attitudes ofworkers, recent research has shown that retention problems are largely self-inflicted. The increasein external mobility has been driven more by changing employer preferences than by changingworker preferences (see Bidwell et al. 2013, p. 76). No longer willing or able to provide anyassurance of continued employment, employers have encouraged workers to take control of theircareers, and as a result, employees around the world report being open to external opportunitieseven when not seeking them directly (Towers Perrin 2006).

Talent-pool retention is a particularly pressing concern. A 2012–2013 Towers Watson surveyof global employers found 50% experiencing problems retaining top-performing employees; thatnumber rose to 55% for HiPo employees and 56% for employees with skills linked to theorganization’s strategic competencies (TowersWatson 2013). Cappelli &Hamori (2005, 2013)found, in two studies using two separate executive populations, that executives changeemployers every three to four years and that almost 50% of executives were willing to considersearching for a new job at another company when asked by a search firm. It is difficult to sustaincostly investments in employee training and development when the employees receiving that in-vestment leave so quickly.

The extensive research on voluntary turnover is too large to review here (see Allen et al. 2010,Holtom et al. 2008,Hom et al. 2012), but a subset of that literature argues that firms should targetretention efforts differentially toward the organization’s talent pool, whose turnover ismore likelyto be dysfunctional (Allen et al. 2010, Cappelli 2000). Hausknecht & Holwerda (2013) identifyfive characteristics of turnover that are useful for assessing the impact of talent-pool turnover:leaver proficiencies, time dispersion, positional distribution, remaining-member proficiencies, andnewcomer proficiencies. Kwon & Rupp (2013) provide empirical support for the differentialimpact of talent-pool turnover, finding a significant negative effect of high-performer turnoveron firm performance, but no effect for turnover of the remaining workforce.

However, aside from a very specific literature exploring the retention of TMTmembers in thecontext of mergers and acquisitions (see Krug et al. 2013), we have little understanding of howexecutives, HiPo candidates, and top performers come to leave organizations. Research on theunfolding model of voluntary turnover suggests that many turnover decisions commence with an

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environmental shock that leads to a violation of the worker’s self-image (Holtom et al. 2008,pp. 247–48). It seems reasonable to expect that members of an organization’s talent pool, es-pecially those who are aware of their status, are likely to carry different self-images from and beexposed todifferent shocks (e.g., calls fromsearch firms, as exploredbelow) thanothermembers ofthe organization.Understanding how these individuals come to leavemay provide valuable insightinto effective talent-pool-retention strategies.

The idea of thinking about a pool of talent as consisting of many candidates deployed acrossa range of jobs is not new, but it does represent a contrast to the succession planning–based ideathat each strategic job will have a successor who is expected to step into that job when it becomesvacant. The notion of a pool applies the idea of a portfolio. If individual jobs disappear or in-dividual candidates are no longer viable (or indeed still employed), then a pool of candidatesdeveloped more broadly becomes an attractive alternative to the succession model.

Employment contracts. A popular approach for addressing retention concerns, and one that isrelatively new, is the use of explicit employment contracts that try to restrict the ability ofemployees to leave. It is not legal—indeed, it is unconstitutional—to compel employees to stay ona job. It is, however, legal to require that they pay back training and education investments ifthey leave before a certain date. It is also legal to require noncompete agreements that preventemployees who leave from working for competitors for a fixed period of time.

Using both surveys and in-depth interviews of technical professionals, Marx (2011, p. 696)found that firms strike back against the mobility of high-tech workers via the strategic use ofnoncompete agreements. Noncompete agreements require employees to agree in writing that thatthey will not use confidential information gained from their employment or for a limited time willnot compete against their former employers; such agreements trigger liquidated damages andinjunctive relief if broken (Bishara 2006, p. 289). They are often signed reluctantly and are stra-tegically presented to workers only after an initial oral agreement of employment has been reached,when the candidate has the least bargaining power (Marx 2011). Garmaise (2011) reports that over70% of firms require their executives to sign noncompete agreements, and their use has steadilyexpanded to cover jobs located a lower levels of organizations (Garrison & Wendt 2008).

The evidence on the effectiveness of noncompete agreements is mixed. As intended, they doreduce exits (see Garmaise 2011 for evidence on executives and Marx et al. 2009 for evidence oninventors). However, using archival data, Garmaise (2011) found that although self-directedinvestments in human capital among top managers are more likely to improve performance thanfirm investments are, the use of noncompete agreements encourages firm investments whilediscouraging self-directed investments. Using an experiment design, Amir & Lobel (2013) foundthat individuals in the noncompete conditionwere generally lessmotivated and thusmore likely toleave a task uncompleted, although the results on overall job performance are mixed. Otherresearch has focused on the effect of noncompete agreements within geographic regions, showingthat the lack of mobility reduces the information spillovers so critical to innovation and growth(Marx 2011, Samila & Sorenson 2011). The enforcement of noncompete agreements varies bystate, and courts are increasingly reluctant to enforce these agreements if they are restrictiveenough that they impair the ability to work.

Proactive job design. A very different approach to dealing with talent-pool retention involvesproviding employees with the opportunity to proactively modify their own jobs, roles, tasks, andterms of employment in ways that make these itemsmore desirable to employees (Grant & Parker2009, pp. 347–51). Proactive approaches to job design include job crafting, role adjustment, andidiosyncratic deals (i-deals). Although we were unable to find empirical evidence linking

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proactive job modification to turnover, it seems reasonable that allowing workers to shape theirjobs around their role identity, past experience, motivation, and personal and professional goals(Sanchez & Levine 2012, p. 403) should positively affect what we know to be many of theantecedents to voluntary turnover, such as job satisfaction, job stress, and organizational com-mitment (Holtom et al. 2008). To the extent thatworkers engage in proactive job design to expandtheir competencies as opposed to simply shaping their jobs around their existing competencies, thisalso presents a unique approach to talent development. Certain jobs are more likely to provide thesituational opportunity for promoting proactive approaches to work design (Wrzesniewski &Dutton 2001). Strategic jobs should be particularly amenable to such efforts, as they are much lesslikely to be standardized, providing more discretion to incumbents.

Career Management

Career management has also undergone dramatic change. Once employees had opportunities togo elsewhere if they did not like the moves their current employer required, organizations movedaway from the command-and-control model in which each organization moved employees likechesspieces across aboard to serve its owngoals (Baruch 2006, p. 130). New conceptual models ofcareers6 place the burden of careermanagement on the individual rather than the organization (seeSullivan & Baruch 2009 for an excellent review).

Although organizations may no longer actively plan individual careers, they remain an im-portant actor in shaping careers by providing the opportunity structures through which mobilitytakes place. These opportunity structures, however, are neither stable nor straightforward,changing as businesses adapt to environmental uncertainties. Yet even during periods of stability,flatter hierarchies, broader jobs descriptions, and new ways of organizing work within the firm(Barley&Kunda 2001) hinder the ability of employees andmanagers to identify opportunities fordevelopment and advancement. The idea that careers can be planned inside organizations iseffectively gone, as the job ladders around which career advancement was based no longer exist.

What has emerged is a system inwhich employees and employers actively seek opportunities tomake good short-termmatches inside the firm and to assemble them inways thatmeet talent needsand lead to meaningful careers (Cappelli 2008b, pp. 206–7). Two structures supporting this newsystem are the career-lattice model and internal job boards.

Career lattice. A popular concept in the practitioner literature on career management is thecorporate lattice model (e.g., Benko & Anderson 2010). In contrast to the traditional job-laddermodel, the job-lattice model provides multiple paths for advancement and development resultingfrom vertical and horizontal links among the jobs within an organization. The lattice modelembraces the theoretical concept of multidirectional careers (Baruch 2004), in which careerdevelopment and advancement result from a combination of lateral, upward, and even downwardmoves. The lattice model offers an alternative to traditional succession planning. Rather thandeveloping employees to fit narrow jobs at a specific time in the future, this model develops broadcompetencies in employees as lateral moves increasingly replace vertical moves as a form ofdevelopment (Van der Heijde & Van der Heijden 2006). Having developed a broader set ofcompetencies, the internal talent pool is more likely to meet the changing demands of futurestrategic jobs.

6These new conceptual models include protean and boundaryless careers (see Briscoe & Hall 2006), postcorporate careers(Peiperl & Baruch 1997), and intelligent careers (Arthur et al. 1995).

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Although the lattice model has not been the subject of academic study, extant research suggeststhat providing multiple career paths may also be beneficial to organizations in other ways. Re-search on career plateaus and the repatriation of executives has shown that a lack of advancementopportunities often has negative consequence for the firms, both in terms of turnover intentionsand job performance (e.g., Blackl 1992, Near 1984, Stahl et al. 2009), which are problems thatmay be especially acute among HiPo and high-performing employees (e.g., Slocum et al. 1985).Unmet expectations and perceptions of plateauing may be reduced if employees are able to findalternative options for advancement within firms. Multiple career paths also allow for the de-velopment of atypical careers (Kleinbaum 2012), which create the internal brokerage opportu-nities shown to benefit firms by, among othermeans, facilitating internal knowledge transfer (VanWijk et al. 2008).

Whether the lattice model actually exists in practice is not clear, however, and what employerscould do to implement it is not obvious. Specifically, whether careers can truly be said to advanceby lateral moves may simply be a semantic point, redefining what career advancement means.Given that it is proving impossible for employers to sustain a predictable path for career ad-vancement, the idea that employers could provide multiple paths is even more difficult. The ideamay turn out to be an after-the-fact rationalization of how careers play out, which makes it lessuseful as a management concept.

Internal job boards. Multiple career paths are further supported by the use of internal job boards,through which current employees apply for new jobs within the organization. Unlike the con-ceptual notion of a career lattice, internal job boards are real and now define how careers advancein most large organizations. Recent data indicate internal job boards are used by over 95% oforganizations (Taleo Res. 2005). They are designed to facilitate the exchange of informationnecessary for employees and employers to make the short-term matches that constitute careers.In providing a common platform for such an exchange, posting creates a market for talent withinthe firm.

Internal job boards are not new, having been introduced in collective bargaining agreementsfollowing World War II. Their application beyond production jobs and their use as a marketmechanism are new, however. Early versions covered only a limited set of jobs and imposedonerous eligibility requirements on potential applicants (typically seniority), and most com-panies discouraged or severely restricted lateral moves, limiting their reach. By contrast, fewrestrictions are now placed on the types of jobs that are posted and who is eligible to apply,which is consistent with the perspective that employees are now responsible for managing theirown development.

Although job boards have received limited academic attention, several theories suggest theiruse should have a significant impact on how careers unfold within firms. As a formal process forallocating workers to jobs, internal job boards may be beneficial to the advancement of womenand minorities (Strum 2001), but, as with many organizational practices, their actual effect onworkplace inequality is unknown (Bielby 2000). The dissemination of information may helpovercome talent management failures attributed to agency problems and bounded rationality(Mellahi & Collings 2010). Agency theory suggests that subunits may not want to share theirtalent or help to develop talent located in other parts of the organization. Bounded rationality andinformation asymmetries may result in the marginalization of talent located in more distant partsof the organization, including international subsidiaries, as managers begin by searching locallyand have difficulty evaluating geographically and socially distant talent. Broadcasting oppor-tunities internallymay also facilitate the development of atypical career paths (Kleinbaum2012) asemployees become aware of a wider variety of opportunities.

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Staffing International Subsidiaries

The rising interest in global operations, driven by growing markets in Asia, has called specialattention to talent management in multinational enterprises (MNEs). TMT positions in in-ternational subsidiaries are widely seen as strategic jobs (Collings et al. 2009). The staffing ofthese jobs has been identified as “the critical issue” faced by MNEs (Collings et al. 2009,p. 1253), with human resource departments in MNEs focused primarily on creating a supplyof international managers (Scullion & Starkey 2000).

Recent work has expanded on early typologies ofMNE strategic orientation (Perlmutter 1969)in exploring the choice between staffing subsidiary TMTs with parent-country nationals, host-country nationals, and third-party nationals when filling strategic subsidiary positions.7 Tariqueet al. (2006) draw on person–environment fit to identify strategic, national, and organizationalcontingencies affecting MNE staffing decisions. Gong (2003) uses both agency theory and theresource-based view to identify cultural distance and time as antecedents to the use of parent-country nationals. Other work has borrowed from institutional theory (Gaur et al. 2007, Gong2006) and organizational demography (Gong 2006) to explain the national diversity of thesubsidiary TMTs and subsequent performance. Collings et al. (2008) use a case study approach toprovide an important perspective on subsidiary TMT staffing decisions as a means of control andon the relationship between control and organizational culture.

Developing Global Leaders

The growing importance of international business operations has increased the long-standingtalent management challenge of staffing leadership roles with executives who can operate ina global environment. Although there are many factors that shape the performance of globalleaders, recent work has emphasized the importance of cross-cultural competencies in man-aging MNEs (Tarique & Schuler 2010). Culturally competent leaders are those who are ef-fective “in drawing upon a set of knowledge, skills, and personal attributes in order to worksuccessfully with people from different national cultural backgrounds at home or abroad”(Johnson et al. 2006, p. 530).

Culture-general knowledge and culture-specific knowledge have been identified in a number ofconceptual papers as dynamic competencies that predictMNEmanagerial effectiveness (Caligiuri2006, Johnson et al. 2006). Culture-general knowledge refers to knowledge of how cultures differand awareness of values, norms, and other common dimensions on which most cultures vary,whereas culture-specific knowledge refers to the extent of knowledge of a specific culture. Culturalflexibility, the ability of an individual to substitute his or her preferred way of doing things withactivities and behaviors appropriate to the local culture, is another dynamic competency shown tobe positively related to job performance among multiple samples of global leaders (Caligiuri &Tarique 2012, Shaffer et al. 2006). Ethnocentrism appears to be negatively correlated withperformance (Shaffer et al. 2006), whereas tolerance for ambiguity is positively correlated withperformance (Caligiuri & Tarique 2012).

Dynamic cross-cultural competencies are particularly important in the talent managementcontext, as they represent the knowledge, skills, and attitudes that can be acquired through

7Parent-country nationals are nationals of the country where theMNE is headquartered; host-country nationals are nationalsof the countrywhere the international subsidiary is located; and third-party nationals are nationals of one country, working ina second country and employed by a MNE headquartered in a third country.

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traininganddevelopment (Shaffer et al. 2006). An important theoretical development has been theuse of social learning and contact theories as a framework for understanding how differentdevelopmental experiences affect performance by shaping dynamic competencies (Caligiuri &Tarique 2012). High-contact developmental experiences, those involving behavioral modelingand interpersonal contact (Caligiuri&Tarique 2009), aremore likely to foster the development ofcultural flexibility and tolerance for ambiguity, as are nonwork cross-cultural experiences, whichalso decrease ethnocentricity. Scholars have called attention to the need for additional researchtaking into account the interrelationships among dynamic competencies and stable competencies(aspects of personality and ability that are relatively fixed), developmental experiences, andmanagerial performance.

NEW ISSUES WITH EXTERNAL TALENT

Although most of the attention in talent management has been on internal talent, the focus inpractice and increasingly of new research has disproportionately been on outside talent. Thegrowing reliance on external hiring has led to a burgeoning literature on interorganizationalmobility in management, albeit outside of the traditional HR field. The institutions that supportexternal labor market strategies have also received attention. The actions that firms can take toinfluence the quantity and quality of external applicants have been documented in recent reviewsof the external recruiting literature (Bonet et al. 2013, Breaugh 2013, Dineen & Soltis 2011).

Promise and Perils of External Hiring

The strategy literature tends to view “mobile employees [as] repositories of skills, routines, andknowledge that they carry with them from their prior employer to their new employer . . . [and]tends to find that hiring firms gain from importing these employees” (Corredoira & Rosenkopf2010, p. 159).8 Firms gain by acquiring knowledge (Rosenkopf & Almeida 2003, Song et al.2003), implementing strategic changes (Kraatz & Moore 2002), and increasing the rate of in-novation (Rao&Drazin 2002).Hiring is also a keymechanism throughwhich firms gain access toand leverage social capital for influence (Dokko & Rosenkopf 2010); acquire new business(Somaya et al. 2008); and weaken competitors through poaching (Chacar & Coff 2000, Somayaet al. 2008).At the top of the organization, hiring is an exercise in impressionmanagement (Graffinet al. 2011) and thusmayprovide status and legitimacy benefits through its effect onhow the firm isperceived by external stakeholders (Finkelstein et al. 2009, Khurana 2002).

Fully capturing these benefits, however, may be problematic. Information asymmetries resultin external candidates being paid a significant premium compared with internal candidates at alllevels of the organization, up to and including theCEO (Agrawal et al. 2006, Bidwell 2011). Firmsrequire stronger signals of observable ability from external candidates, but these signals often failto translate into higher levels of performance. Bidwell (2011) found that externally hired workersexhibited lower performance for three years and were more likely both to quit their jobs and to beterminated. Recent research on the mobility of knowledge workers underscores the importance ofintrafirm social networks to performance (Groysberg et al. 2008, Groysberg & Lee 2009,Huckman & Pisano 2006). Groysberg et al. (2008) found that the hiring of star analysts led to

8This is not a universally held view among strategy scholars, however. For example, a foundation of the knowledge-basedview of the firm is the notion that “hiring new workers is not equivalent to changing the skills of a firm” (Kogut & Zander1992, p. 383).

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negative stock-market reactions, which suggests that filling strategic jobs through external hiringmay be perceived as a negative signal by external stakeholders. And sociocognitive barriers alsoattenuate the performance of new hires, as individuals often have trouble overcoming institutionaland cognitive rigidities developed at prior employers (Dokko et al. 2009).

Institutions Supporting External Hiring

External hiring is supported by an array of new institutions, most notably labor marketintermediaries. Studies helping us understandhow these intermediaries operate andhowemployersuse them as part of the talent management process are still nascent, although the importance ofthe topic is clear (see Bonet et al. 2013 for a survey).

Executive search firms. Most of the attention in outside hiring concerns executive labor markets,where the context is distinct from other jobs in that firms rarely post want ads, employed exec-utives interested in moving rarely circulate resumes, and search processes are typically initiated bysearch firms as opposed to candidates (Cappelli & Hamori 2013). Executive search firms playa particularly important role in staffing those strategic jobs located in the upper levels oforganizations; what little data exist suggest that the majority of external hiring into such jobs is byrecruiting from a competitor through the use of an executive search firm (Cappelli & Hamori2013), often due to political and legitimacy concerns (Khurana 2002).

Executive search firms play a matchmaker role, overseeing the entire process of pairing indi-viduals and hiring organizations. Much of the research emphasizes how they structure the supplyof external candidates by taking over the initial screening and assessment roles. Executive searchfirms are able to tap into a different pool of potential candidates than employers can access di-rectly, those passive job seekers hidden from hiring organizations (Hamori 2010). They exertfurther influence onwhich candidates are considered by clients, and thuswho gets access to certainjobs, by filtering out what they consider to be unsuitable candidates (Fernandez-Mateo & King2011, King et al. 2005; but see Khurana 2004 in the case of hiring CEOs, for which the boards ofdirectors play the key role).

One question about the search firm process is whether such firms providemore diverse slates ofcandidates, both in terms of candidate experience and demographics, because they have betterinformation on candidates than an individual employer has. The available evidence, however,suggests that the slates presented to clients exhibit little diversity (Dreher et al. 2010, Hamori2010). Hamori (2013) found that moves mediated through executive search firms typically resultin executives moving into similar functional roles in similar industries. In terms of subsequentperformance, however, there is no evidence comparing the outcomes of matches facilitated byretained search firms with those of matches conducted by firms themselves.

Online job boards and socialmedia. For strategic jobs located at lower levels of the organizationalhierarchy, online job boards and social media sites are important intermediaries. They play aninformation provider role, disseminating information about opportunities to potential candidatesand aggregating information on potential candidates for organizations (Autor 2001, Cappelli2001). They also make it easier for employers to reach a larger audience of potential candidates aswell as make comparisons among applicants, which are attributes that are attractive to organi-zations. The explosion of specialized job boards and access to individual profiles on social mediasites would appear to provide employers with the ability to target their recruiting efforts to certaingroups or individuals, although little empirical research has examined either the use of these

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different sources or the topic of targeted recruitment more generally (for reviews, see Breaugh2013, Dineen & Soltis 2011).

Research in personnel economics has shown that online job boards are used primarily by thosewho are already employed (Stevenson 2009), reducing concerns about adverse selection, but theease with which candidates can apply has created an information overload problem, as employersare routinely inundated with resumes (Autor 2001). In response, employers have adoptedcomputerized screening that substitutes for more systematic recruiting and selection practices,creating unexpected (and understudied) difficulties in hiring as well as biases in who makes itthrough the process (Cappelli 2012).

DISCUSSION

The practices associated with talent management and therefore the academic literature trackingthose practices are in considerable flux. The post–World War II internal model was based onworkforce plans to determine future needs and relied on recruiting from schools for entry-leveljobs, sophisticated selection from that applicant pool, and assessment of potential. These practicesled to substantial investments in training and development, internal career plans, and thensuccessionplanning to fill executive jobs. Thismodel seems for practical purposes tobeover.Manyof the largest and oldest corporations do retain some elements of this approach, although their usehas been substantially diluted by the rise of outside hiring. Smaller and newer companies never hadthose practices. For them, outside hiring is often the de facto solution to talent managementproblems. Research on the above practices has also declined sharply, perhaps because there arefewer opportunities for data collection.

Also associatedwith the decline of research in this area are outsourcing and the rise of vendors.Topics such as assessing potential for advancement are still relevant in many organizations, but itis now much more likely that any sophisticated assessment exercises will be done by vendors(Ulrich et al. 2008). Research results have amuch greater downside risk for a vendor than they everhad for individual employers:A study showing that an employer’s practices are ineffectivemight bea temporary embarrassment butwould lead the employer to change those practices and improve itsoutcomes. A study showing that a vendor’s practices were ineffective likely puts it out of business.Getting data to study the outcome of practices such as recruiting and selection, assessment,development, and career advancement may therefore be more difficult.

A related change has to do with research on the new and emerging practices in talent man-agement. Certainly after World War II and possibly before, talent management topics were thepreserve of personnel psychology.9 That is no longer the case. Clearly there are a great manypracticing psychologists still engaged in designing selection and assessment systems, but researchon these and related topics is in sharp decline. The new topics, associated with external hiring, aremuch more likely to be studied by researchers in strategy and organizational theory preciselybecause those conceptual models better fit the phenomenon being studied.

Even with interest from researchers from these new fields, we know remarkably little about thenew practices in talent management. We lack even simple descriptive data about how employersare handling the challenges of talent management: There are no systematic, representative data onemployment practices in theUnited States.Nor dowe have detailed descriptions of how individualcompanies handle talent management, although we see tremendous promise in academic–

9Workforce planning was an exception, at least in the 1960s and 1970s, when it was a focus of interest in operations research(e.g., Dill et al. 1966).

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practitioner collaborations. Although organizations have become adept at collecting rich, detaileddata on job applicants, hiring practices, performance, mobility, and a range of other employmentpractices and outcomes, few companies possess the conceptual and empirical tools necessary to seethe links among these various data, to actually link them together, and to analyze them inways thatproduce meaningful insights. These are all skills academics bring to the table. Each of the newissues related to internal and external talent management mentioned above holds tremendoustheoretical and practical appeal, providing a win–win situation in which organizations provideresearchers access to detailed data in return for help generating insights and answers to questionsof interest to both parties. Beyond collaborations with individual organizations, we encourageresearchers to consider reaching out to organizations that collect data on multiple firms, such asconsulting firms, employment agencies, and executive search firms.

Although our review of the conceptual literature led us to define talent management as theprocess throughwhich organizationsmeet their needs for talent in strategic jobs, efforts to identifystrategic jobs are noticeably absent from the extant literature (Huselid & Becker 2011). Efforts tooperationalize the strategic jobs concept and to empirically identify such jobs within and acrossorganizations, particularly those located outside the executive suite, are sorely needed. Descriptivedata on how (and whether) organizations identify strategic jobs in practice would also be helpful.How many employers actively identify strategic jobs within their organizations? How manyidentify strategic jobs below the executive level? And what criteria are used to identify such jobs?

In addition, there are a series of evergreen topics for which research needs to be updated toinclude new realities, including career management within organizations and identification anddevelopment of HiPo employees. How organizations deal with the uncertainty involved in pre-dictingwhat future strategic jobswill look like and how the pool of talent for those jobswill evolveover time are other issues with significant theoretical and practical appeal.

Beyond these reasonably practical issues are the broader questions associated with talentmanagement. The practices associated with talent management within an organization matter tothose outside that organization because they determine access to important anddesirable jobs. Theactions taken by workers in strategic jobs (which are often powerful positions) are shaped at leastin part by the processes that identify them, shape their attributes, and advance them from one jobto the next.Who gets ahead in this new system is a central issue for social scientists interested in theindividual, organizational, and societal outcomes of the interaction of workers, firms, and otherlabor market institutions.

One conceptual issue driven by changes in the practice of talent management is whether thefocus of interest, and indeed the overall approach, has shifted from an orientation on the in-dividual candidate to a focus on the job, particularly a strategic job. In academic terms, sucha changemight lead to a shift fromapsychology-based focus on individuals to amore organizationtheory–based focus on the organization itself. In the heyday of traditional, post–World War IItalent management, the focus was clearly on the individual candidate. Large numbers of suchcandidates were being hired, developed, and moved through reasonably identical jobs in hugecorporations with massive management hierarchies. In virtually all such companies, the idea wasthat an executive couldbe an expat leader now, amarketing leader in a fewyears, anHRleader afterthat, and so forth. Rotation across jobs and functions was by design, without worrying even aboutthe fit between any specific requirement of each job and the attributes of the rotatingmanager whomight take it on. Instead, the focus was clearly on finding and developing the candidates.

Today few companies operate like that. As noted above, outside hiring is the dominant ap-proach to meeting talent needs. By definition, outside hiring and executive search put the focus onthe job and its requirements, including particular attributes of the organization. Then the processmoves to searching for a candidate who might fit those requirements. For current employees,

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internal job boards, as described above, bypass development and assessment processes whencandidates move.

The relative absence of academic research on talent management no doubt reflects thesedevelopments. The research group with the long-term interest in talent management—psychol-ogists—is not positionedorperhaps interested in analyzing the newdevelopments in the practice oftalent management. The fact that so much of the literature reviewed above that does relate tocontemporary practice comes from fields such as business strategy may reflect a long-term andfundamental change in research.

FUTURE ISSUES

1. How do employers think about talent management in practice? To what extent doestalentmanagement rely on completely adhoc responses (e.g.,wait for a vacancy and thenweigh the options available for filling it)?

2. How do employers think about the make-versus-buy choice?: Why do some decide topromote fromwithin,whereas others rely onoutside hiring?Withinorganizations,whendo they decide to use one strategy or the other?

3. How do the institutions and vendors within talent management—executive and con-tingent search companies, staffing and temp agencies, recruiting process outsourcers(which handle most all aspects of hiring), etc.—operate?

4. How do structures such as internal job boards work in practice? For example, doindividuals with certain attributes come out ahead? Do certain jobs have advantagesin securing candidates?

5. What does career progression mean in practice inside organizations now? When thereis internal advancement, what drives it, and what does it look like?

6. For those organizations that try to assess potential, how do they do so, and how welldo the arrangements work?

7. When organizations haveHiPo programs, what are they based on, and howwell do theywork?

8. How do organizations plan for the future when there is uncertainty surrounding thefuture attributes of strategic jobs and the knowledge, skills, and abilities of thoseindividuals most likely to fill those jobs?

DISCLOSURE STATEMENT

The authors are not aware of any affiliations, memberships, funding, or financial holdings thatmight be perceived as affecting the objectivity of this review.

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Annual Review of

Organizational

Psychology and

Organizational Behavior

Volume 1, 2014 Contents

What Was, What Is, and What May Be in OP/OBLyman W. Porter and Benjamin Schneider . . . . . . . . . . . . . . . . . . . . . . . . . 1

Psychological Safety: The History, Renaissance, and Future of anInterpersonal ConstructAmy C. Edmondson and Zhike Lei . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Personality and Cognitive Ability as Predictors of EffectivePerformance at WorkNeal Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Perspectives on Power in OrganizationsCameron Anderson and Sebastien Brion . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Work–Family Boundary DynamicsTammy D. Allen, Eunae Cho, and Laurenz L. Meier . . . . . . . . . . . . . . . . . 99

Coworkers Behaving Badly: The Impact of Coworker DeviantBehavior upon Individual EmployeesSandra L. Robinson, Wei Wang, and Christian Kiewitz . . . . . . . . . . . . . . 123

The Fascinating Psychological Microfoundations of Strategy andCompetitive AdvantageRobert E. Ployhart and Donald Hale, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . 145

Employee Voice and SilenceElizabeth W. Morrison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

The Story of Why We Stay: A Review of Job EmbeddednessThomas William Lee, Tyler C. Burch, and Terence R. Mitchell . . . . . . . . 199

Where Global and Virtual Meet: The Value of Examining theIntersection of These Elements in Twenty-First-Century TeamsCristina B. Gibson, Laura Huang, Bradley L. Kirkman,and Debra L. Shapiro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

viii

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Learning in the Twenty-First-Century WorkplaceRaymond A. Noe, Alena D.M. Clarke, and Howard J. Klein . . . . . . . . . . 245

Compassion at WorkJane E. Dutton, Kristina M. Workman, and Ashley E. Hardin . . . . . . . . . 277

Talent Management: Conceptual Approaches and Practical ChallengesPeter Cappelli and JR Keller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

Research on Workplace Creativity: A Review and RedirectionJing Zhou and Inga J. Hoever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

The Contemporary Career: A Work–Home PerspectiveJeffrey H. Greenhaus and Ellen Ernst Kossek . . . . . . . . . . . . . . . . . . . . . 361

Burnout and Work Engagement: The JD–R ApproachArnold B. Bakker, Evangelia Demerouti, and Ana Isabel Sanz-Vergel . . . 389

The Psychology of EntrepreneurshipMichael Frese and Michael M. Gielnik . . . . . . . . . . . . . . . . . . . . . . . . . . 413

Delineating and Reviewing the Role of Newcomer Capital inOrganizational SocializationTalya N. Bauer and Berrin Erdogan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

Emotional Intelligence in OrganizationsStéphane Côté . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459

Intercultural CompetenceKwok Leung, Soon Ang, and Mei Ling Tan . . . . . . . . . . . . . . . . . . . . . . . 489

Pay DispersionJason D. Shaw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521

Constructively Managing Conflicts in OrganizationsDean Tjosvold, Alfred S.H. Wong, and Nancy Yi Feng Chen . . . . . . . . . . 545

An Ounce of Prevention Is Worth a Pound of Cure: ImprovingResearch Quality Before Data CollectionHerman Aguinis and Robert J. Vandenberg . . . . . . . . . . . . . . . . . . . . . . . 569

Errata

An online log of corrections to Annual Review of Organizational Psychology andOrganizational Behavior articles may be found at http://www.annualreviews.org/errata/orgpsych.

Contents ix

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