Talent Management: An Instrument of Strategic Human Resources Management?

Abstract

This study provides an investigation on Talent Management in German mid-sized enterprises. The purpose of this research is to explore whether Talent Management is an instrument usable to overcome external challenges, such as demographic changes as well as a shortage in skilled labour, to enhance organisational performance and to remain competitive. The research determines that, Talent Management can be seen as a part of strategic Human Resources Management and in this context, as a high performance working system in order to develop, motivate and empower talented employees.

Since empirical data in the national context of Germany are restricted on the one hand and, on the other hand, research efforts regarding Talent Management in small and medium-sized enterprises are of less significance, qualitative research methods were used in order to gather deeper insights. Three in-depth expert interviews were conducted, providing valuable information regarding the conceptualisation and operationalisation of Talent Management in the context of German mid-sized enterprises.

The findings reveal that, what is of strong importance within small and medium sized enterprises in general is the expansion of the term talent to all employees and their skills and abilities instead of seeking for high potentials and so-called A-players. Furthermore, three significant characteristics of German companies; being long-term and developmentally orientated, as well as providing dual vocational training to potential future employees, have been identified. These qualities underlie the highly specialised industries in which German medium sized enterprises operate, skilled labour and development of these is of high importance.

Overall, the dissertation concludes that Talent Management is recognised and implemented as an instrument of strategic human resources management within German medium sized enterprises. Special focus is put on investment in the Human Capital as the development and retention of potential is of strong importance. However, due to limited financial budgets and less recognition of line managers, Talent Management stands in its infancy.

The research recommends further studies in order to investigate the findings and limitations of this dissertation, such as the empirically undetected field of Talent Management as a high performing system in national context or within small-and medium sized enterprises.

Table of contents

Dedication... 2
Acknowledgments... 3
Abstract... 4

I List of tables... 8
II List of figures... 8
III List of abbreviations... 8

Chapter 1: Introduction to the dissertation... 9
1.0 Introduction... 9
1.1 Motivation... 9
1.2 Research rationale... 10
1.3 Research aim and objectives... 11
1.4 Structure of the dissertation... 12

Chapter 2: Literature Review... 14
2.0 Introduction... 14
2.1 Talent Management... 14
2.1.1 What is a 'talent'?... 14
2.1.2 Definition of Talent Management... 15
2.1.2.1 Definition of TM for the Purpose of this Dissertation... 20
2.1.2.2 Approaches of TM... 22
2.1.2.3 TM in Practice... 23
2.2 Strategic Human Resources Management... 25
2.2.1 SHRM and Organisational Performance... 25
2.2.2. HPWS and TM... 27
2.3 Medium-Sized Enterprises... 28
2.3.1 Definition of MSE in Germany... 28
2.3.2 Considerations of the German Business System... 30
2.3.3 Impact on SHRM... 31
2.4 Gaps in Literature... 31

Chapter 3: Conceptual Framework... 33
3.0 Introduction... 33
3.1 The HCT and TM... 33
3.2 TM as a HPWS... 34
3.3 Summary... 34

Chapter 4: Methodology... 35
4.0 Introduction... 35
4.1 Research Philosophy... 35
4.2 Research Methods... 36
4.2.1 Literature Review... 37
4.2.2 Interviews... 38
4.2.2.1 The Questionnaires... 39
4.2.2.2 Analysis of the Interviews... 40
4.2.3 Reliability and Validity... 41
4.2.4 Potential Problems / Limitations... 42
4.2.5 Ethical Considerations'... 42
4.3 Summary... 43

Chapter 5: Findings... 44
5.0 Introduction... 44
5.1 Definition and Understanding of talent and TM... 44
5.2 Implementation of TM and important Considerations... 46
5.3 The process of TM within MSE... 48
5.4 The contribution of TM... 50
5.5 Summary... 52

Chapter 6: Analysis and Discussion... 53
6.0 Introduction... 53
6.1 Talent, TM and the Implementation of the process.. 53
6.2 Factors affecting the Operationalisation of TM... 55
6.3 Summary... 60

Chapter 7: Conclusion and Recommendations... 62
7.0 Introduction... 62
7.1 Review of the Research Objectives... 62
7.2 Evaluation of Methods... 63
7.3 Recommendations... 64

Chapter 8: Reflection... 65

IV List of References... 66

Chapter 1: Introduction to the dissertation

1.0 Introduction

This chapter introduces the emerging issue of Talent Management (TM) utilised as an instrument of strategic human resources management (SHRM) by German mid-sized enterprises (MSE) to improve organisational performance. In a first step, the dissertation provides a critical literature review, representing the theoretical background. To underpin the literal findings, three in-depth interviews with specialists were held to give the research professional insight into German MSE.

First of all, the researcher’s personal motivation for choosing this topic will be presented. The rationale for the research will be demonstrated in chapter 1.2. Thereafter, the research aim and objectives are outlined. Section 1.4 elucidates an overview of the research structure.

1.1 Motivation

There have been three dominating reasons that let me choose this topic for my research.

Firstly, I dealt with the term of talent and TM for the first time during my professional work in a German HR consultancy. I was mainly responsible for identifying and recruiting employees for my clients of various executive search projects. In 2012, the company introduced a talent pool for those candidates who did not fit to current vacancies but seem to be highly skilled and talented due to interesting experiences or their education. It was assumed that those candidates could have been of interest for future projects. Hence, the talent system creation simplified the research process and generated a pool of more qualified and ‘valuable’ employees.

Secondly, I have a strong interest in economic and political issues in general. Consequently, my interest in German MSE (Mittelstand) grew by reading several national as well as international journals and papers, dealing with the analysis and exploration of the economic power of Germany even in challenging economic and financial times.

Lastly, I was convinced to investigate my research efforts in TM by the module PGBS 0154 Human Resources Management during my studies at Plymouth University. I was involved in a research for an individual essay concerning TM and the drawbacks and benefits the approach contains. My knowledge and horizon regarding strategic HRM issues grew rapidly and awake my interest to find out more about the approach of TM with particular respect to MSE.

1.2 Research rationale

The first time TM was mentioned in a business context was in 1998, when a group of McKinsey consultants figured out the issue of war for talents. Growing interest by HR practitioners (HR leaders and consultants) as well as profound research efforts in the field of TM have been registered, pointing out the meaning of TM and its advantages for global operating companies (Chuai et al., 2008, 2010; Scullion and Collings, 2010; Tarique and Schuler, 2012). In this context, four factors are advanced for a study focusing on TM in German MSE.

Firstly, an approach of TM is needed since companies which are acting internationally face external challenges like changing demographics, shortage in skilled labour as well as cultural and gender diversity (The Economist, 2006; Schuler and Jackson, 2009) being challenged by a reshape of the workforce (Hayutin, 2010). Hence, organisations require a complex set of skills which leads to a high demand for talented employees or so called high potentials (CIPD, 2007; Festing et al., 2013). In order to stay competitive and enhance the performance, organisations should follow the theory and implement a talent pool within their company to bind potentials to their core business (Guthridge et al., 2008). Thus, as long as these striking challenges exist, it can be supposed that the identification, development and retaining of talented employees is still a striking issue which should be explored as long as the war for talents holds on[1].

Secondly, referring to Thunnissen et al. (2013), there are still debates regarding the understanding of TM as well as its conceptual boundaries in a national, as well as an international context. Several studies observed that, depending on the type of company, TM may affect even smaller organisations which are experiencing international operations, thus seeking for talented employees to compete effectively (Festing, 2007; Iles et. al, 2010) and to overcome rapid demographic changes (Deloitte, 2008; Festing et al.,2013). Therefore, TM can be conducted in different types of organisations irrespective of their size (Collings and Mellahi, 2010; Colquitt et al., 2010). As a consequence, it can be assumed that since empirical findings in the field of small and medium-sized enterprises (SME) are limited, a research in this particular field is of special interest.

Thirdly, the German market circumstances create a further reason for research in the field of TM in MSE in Germany. According to Festing et al. (2013) Germany’s economic future growth is determined by a rapid demographic change as well as by issues of gender and cultural diversity, reshaping the market structure and the recruiting, retaining and developing process of a firms HRM policy. It was stated by the Federal Statistical Office that ‘Germany’s population will decline to 65-70 million by 2060. That would be as much as 17 million fewer residents, or a decline of 15% to 21% within 50 years’ (Demography Report, 2011, p.2), leading to a soaring shortage in the labour market. Moreover, with regard to the global economic power, the country overcame the global financial crisis successfully, having the lowest unemployment rate since the reunion in 1990 (Bundesagentur für Arbeit, 2014). Furthermore, Germany is worldwide ranked at 3rd in exporting manufacturing goods (Statista, 2014). Compared to nations which are bigger from size and inhabitants, this positioning is an outstanding result. Hence, these conditions form an attractive starting point as the market conditions seem to be interesting and rich in information, thus excellent to work with in terms of identifying how far an approach of TM will be suitable.

Lastly, German MSE operate predominantly in extremely specialised industries such as engineering, automobile, tooling and plant manufacturing (IfM, 2014). Therefore, skilled labour and specialists are requested. In this context, from an HR perspective, TM is an interesting starting point to overcome the demand for highly skilled employees, as the right set of skilled employees is needed to maintain the country’s and company’s current market position and to challenge successfully the major issues in future: aging population, declining birth rates and the war for talents (Michaels et al., 2001; Ward, 2011).

1.3 Research aim and objectives

The aim of this research is to explore whether TM can be used as a strategic people management practice by German MSE to improve organisational performance. Therefore, to achieve this aim, four interrelated objectives are:

1. To establish how TM can be defined with respect to MSE.

2. To identify important considerations in SHRM with German MSE.

3. To establish whether TM is one of the practices in the bundle of SHRM in MSE in Germany.

4. To identify ways in which TM can contribute to the performance of MSE.

1.4 Structure of the dissertation

This dissertation contains 6 chapters. In the second chapter, a critical literature review is demonstrated by defining and analysing the key terms of this research, namely talent, TM and MSE in Germany as well as presenting a categorisation of TM in the bundle of SHRM practices.

Chapter 3 briefly oversees the conceptual framework of the human capital theory (HCT) on the one hand and the theory of high-performing working systems (HPWS) in order to invest in the HC adequately. This approach is chosen as a solid basis on which TM is built.

Chapter 4 introduces the methodology adopted for this research and elucidates which philosophy and design was chosen.

Chapter 5 describes the findings of the interviews which were conducted to enhance the to get deeper insights into the literal research findings and to enhance the quality in general.

Chapter 6 demonstrates an analysis and discussion of the findings by critically reviewing the results of the literature review (chapter 2) and comparing these to the findings of the expert interviews (chapter 4).

Chapter 7 reviews the aim and objectives and represents recommendations for the further research.

The last one is a reflective chapter summarising my personal learnings and developments during this project.

Figure 1 below illustrates the entire structure.

[Figures and tables are omitted from this preview.]

[…]

[1] With regard to external challenges like the shortage in skilled labour and generally changing demographics due to the baby boomer generation (The Economist, 2006).