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Talent management collides with corporate social responsibility: creation of inadvertent hypocrisy DOI (Permanent URL): 10.1108/JMD0620120073 Article citation: Miriam Y. Lacey, Kevin Groves, (2014) "Talent management collides with corporate social responsibility: creation of inadvertent hypocrisy", Journal of Management Development, Vol. 33 Iss: 4, pp.399 409
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Miriam Y. Lacey, Graziadio School of Business and Management, Pepperdine University, Los Angeles, California, USA Kevin Groves, Graziadio School of Business and Management, Pepperdine University, Los Angeles, California, USA
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Purpose – The purpose of this paper is to reveal the unintended effects of talent management (TM) practices on employees excluded from high potential (HiPo) programs. Excluding the majority of employees from the numerous developmental benefits and privileges of HiPo programs runs contrary to the ideals of corporate social responsibility (CSR), an increasingly common espoused value of organizations. This paper discusses the inadvertent hypocrisy of organizations seeking to demonstrate CSR actions for their employees while simultaneously barring the vast majority of employees access to targeted development opportunities. While many organizations are proud of developing exemplary TM systems and executing effective CSR initiatives, further analysis suggests an inherent incompatibility between these approaches as commonly practiced. This paper concludes with a discussion of possible solutions to ameliorate the disconnect between exclusionary TM practices and CSR outcomes. Design/methodology/approach – Through the theoretical lens of organizational justice, the paper critically reviews relevant research on the impact of TM policies and practices on CSR initiatives. To spur further interest from scholars and practitioners, the paper offers responses to the following questions: What is the usual array of TM practices? What is the organization's social responsibility to its workforce at large and to individual employees? With resources devoted to developing HiPo talent, what is the organization's social responsibility to those in the ranks who have not been identified as HiPo? Findings – The critical review revealed that organizations seeking to simultaneously pursue TM best practices and CSR initiatives must tackle several fundamental issues, including expanding employee access to HiPo programs, enhancing the HiPo selection processes via greater emphasis on lead indicators of HiPo, and improving rater reliability across assessment tools. The paper concludes with practical suggestions to ameliorate the unintended consequences of disparate treatment of employees by creating a permeable boundary for broader employee inclusion in HiPo programs. Originality/value – The literature is remarkably deficient in research addressing the effects of TM practices on employees who are excluded from leadership development opportunities, and the resulting implications for CSR outcomes. Given the rapidly growing importance of CSR initiatives for many organizations, research on the impact of TM policies and practices is sorely needed. This paper addresses an important gap in the research literature on the unintended consequences of disparate treatment of employees and offers practical suggestions for more inclusive leadership development systems. Article Type: Viewpoint Keyword(s): Leadership development; Corporate social responsibility; Talent management; Organizational justice; High potential. Journal: Journal of Management Development Volume: 33 Number: 4 Year: 2014 pp: 399409 Copyright © Emerald Group Publishing Limited ISSN: 02621711 Introduction
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Today's organizations operate in an increasingly complex and uncertain business environment that demands both responsiveness to environmental changes and careful concern for the needs and values of multiple stakeholders. Overwhelmingly, organizations have adopted corporate social responsibility (CSR) as a core value and executed corresponding initiatives to demonstrate their commitment to customers, employees, shareholders, communities, and other primary stakeholders (Waldman and Galvin, 2008; Maak and Pless, 2006). In the interests of demonstrating responsible corporate behavior directed toward employees, many organizations implement organization justice practices – distributive, procedural, and interactional – to ensure fair treatment of employees. In addition to heightened expectations with respect to delivering value to employees via CSR initiatives, several additional environmental forces compel organizations to invest in talent management (TM) practices. The primary reason is the expected retirement rate of the baby boomer generation. Since the boomers hold the senior offices and make the important decisions regarding the operation their loss could be catastrophic, as they will be taking the business knowledge with them. Since the beginning of the new millennium, forecasters have been predicting mass attrition. With the onset of the economic downturn of 2008, precious time has been purchased for organizations to bolster their TM programs. Due to the extreme shrinkage in 401(k) and pensions, the rate of baby boomer retirements has slowed drastically. This gap is expected to continue for the immediate future. The baby boomer managers will still definitely retire, but it looks like their expected wholesale departure from organizations will not happen just yet, and will mostly be delayed for three to five years. The intended outcomes of CSR initiatives and TM practices appear complementary, as many organizations with strong CSR performance outcomes are also known for adopting exemplary TM strategies, policies, and programs. However, careful analysis of the intent of CSR initiatives and the impact of TM policies and programs suggests that such practices are at odds with the interests of employees, a principal stakeholder group in virtually any organization's CSR framework. To date, there is an absolute dearth of research on the unintended effects of TM practices on organization's stated CSR goals with respect to responsible actions toward employees. Given the seemingly opposing values and outcomes of CSR initiatives and TM practices, as well these powerful demographic trends and the resulting workforce development implications for organizations, this paper identifies the unintended effects of exclusionary TM policies and practices on a firm's ability to demonstrate socially responsible behavior. We address the following fundamental yet heretofore unexplored question: what is the organization's social responsibility to its workforce in the context of TM policies and practices? The paper is organized into four major sections. First, we establish the role of TM in organizations seeking to build employee capability in the current business environment. Second, we provide an assessment of the nature of TM programs as focussing on individuals compared to the broader workforce. Next, we propose a definition and conceptual discussion of CSR and supporting theories of organizational justice as they relate to TM policies and practices. We center on the differential treatment of employees designated as “high potential” (HiPo) and how such disparate treatment creates a secondclass citizenry that erodes CSR outcomes. Finally, we discuss a series of practical issues and concerns that organizations should address to better assess TM practices and track progress toward greater CSR. TM Given the daunting demographic challenges posed by the changing nature of the workforce, organizations in the USA are scrambling to find management replacements. Indeed, almost a third of all Americans (76 million) will reach retirement age over the next ten years, an incredible challenge commonly cited as the “5/50” crisis – organizations potentially losing 50 percent of all management talent over the next five years (Ready and Conger, 2007). Needing to create bench strength from which to draw future leaders, organizations are spending time and resources on the development of leadership capabilities. TM usually encompasses a variety of programs that address a range of organizational and individual needs. Formally defined, Silzer and Dowell (2010) describe TM as the integrated system of strategies, policies, and programs designed to identify, develop, deploy, and retain talent to achieve strategic objectives and meet future business needs. Common components such as coaching and mentoring have gained hugely in popularity in the hopes of capturing and preserving the knowledge and intellectual capital before the impending boomer departure. Overtime, organizations have developed various development programs and human resource systems to improve leadership talent for increased performance and profit. Such programs have also evolved to offer learning and development programs focussed on the individual. It can easily be argued that any activity that improves individual performance ultimately combines into the workforce at large and improves the overall performance of the organization. Table I deliberately separates the two for ease of this discussion. As organizational understanding of TM has increased, new programs have been adopted to address organization and individual needs for development and better performance. These practices differ widely across organizations. While not all organizations have TM programs, those programs that are sponsored by a given organization are most often not offered to all of its employees. CSR We begin our critical analysis of TM policies and practices with a definition and conceptual discussion of CSR and supporting theories of organizational justice. For the purpose of this paper, we adopt Daft's (2010) broad definition of CSR as “management's obligation to make choices and take actions that will contribute to the welfare and interests of society as well as the organization” (p. 138). An organization's ability to demonstrate CSR, or what is often described as corporate social performance (Hillman and Keim, 2001; Waddock and Graves, 1997), is dependent upon the proper management of internal and external stakeholders, including shareholders, suppliers, employees, customers, community residents, and the natural environment, to “[…] create and distribute wealth or value sufficient to ensure that each primary stakeholder group continues as part of the corporation's stakeholder system” (Clarkson, 1995, p. 107). Practically, organizations measure corporate social performance across numerous dimensions, including community, diversity, employee relations, environment, and product (Waddock and Graves, 1997; Hillman and Keim, 2001). Indeed, many corporations voluntarily report CSR outcomes via the Global Reporting Initiative's (GRI) reporting framework while several independent investment rating services, such as Kinder, Lydenberg, Domini (KLD), assess the corporate social performance outcomes of large firms. Our critical analysis of TM policies and practices centers on the diversity and employee relations dimensions of corporate social performance, which address the equitable treatment of employees, the degree and depth of employee involvement, ownership, and decision making, progress relative to the promotion of women and minorities, and employee development and benefit programs (Waddock and Graves, 1997; Hillman and Keim, 2001). As discussed below, TM policies and programs that segment selected employees for special treatment often risk violating fundamental assumptions of equity, fairness, and impartiality. Longestablished theories of organizational justice (Colquitt et al., 2001), defined as employees’ overall perception of fairness in the workplace and inclusive of distributive, procedural, and interactional dimensions, suggest that TM practices impact employees’ equity perceptions and resulting attitudes and performance outcomes. These dimensions of organizations justice are defined below: distributive justice: employees’ perceived fairness of the amount and allocation of rewards resulting from TM programs; procedural justice: employees’ perceived fairness of the process employed to determine participation in TM programs; and interactive justice: employees’ perceived degree to which they are treated with dignity and respect. Collectively, these three primary dimensions of organizational justice impact the social performance outcomes of TM practices. Next, we discuss several of the defining characteristics of TM programs, notably the designation of “HiPo” employees as exclusive participants in TM programs and recipients of organizational rewards, and the resulting impact on other employees’ perceptions of organizational justice. HiPo employees identified for special treatment In a study on organization development best practices (Lacey and Tompkins, 2007), it was clearly shown that managers and employees are treated differently by the organizations when it comes to developmental experiences. Yet, both groups have needs for growth and learning. Organizations further split the workforce by culling out a small group of upandcoming performers for special treatment and designating them as HiPos. This group is composed of mostly junior managers and individual contributors who are slated for leadership positions. Clearly, organizations devote time and resources to the development of “HiPo” talent. What is the organization's responsibility to those it has identified as “HiPo?” Do organizations have a social responsibility to those in the ranks who have not been identified as “HiPo?” If so, what would it be? And how can it be accomplished? What
measures have organizations found useful as yardsticks to judge success or failure in the management of their employee talent? How can organizations include such measures as part of the reporting of their corporate social performance outcomes? Efforts to compete for talent in the marketplace, complemented with efforts to maintain and develop talent, have resulted in a considerable rise of HiPo development programs. These specialized programs cater to the developmental needs of the workforce elite. People selected for these programs, or HiPos, are viewed as tomorrow's stewards of the future organization. They are catered to and nurtured by organizations with specialized, often secret programs and processes offered exclusively to them. HiPo managers are commonly considered as an elite class (Gratton et al., 1999). This elite class is treated in special ways by the organization. An important study recently conducted in Australia (Hudson Report, 2007) assessed almost 7,500 employers nationally and found that of the 52 percent of organizations with formal HiPo programs in place, almost 100 percent said they delivered benefits to their business. The benefits were cited as retaining and motivating key talent (31 percent), development of future leaders (27 percent), and planning for the future/mitigating risk (24 percent). The following are the ways that HiPo participants receive special treatment: They are labeled as HiPo, which boosts selfesteem and confidence. They are invited to key meeting and events, which clues them in to the latest happenings in the organization and makes them more in the know than others. Their preferences are catered to – whether it be job type, job location, or people with whom they wish to work. They are included in informal gatherings where contacts and relationships can be nurtured. They receive leveraged opportunities for the most powerful form of mentoring – that which is freely entered into by a senior manager personally selecting a junior manager to share insight and wisdom about career choices, problem solving approaches, project success, access to information networks, referrals to people and resources, etc. They are picked out for specialized training and development, attending classes with other HiPos, where they form bonds and create relationships that will serve them and boost their careers inside (and outside) of the organization. Such elitism challenges widely held beliefs of fair treatment and access to opportunities, which are so popular across Europe and the USA. The disparate treatment of individuals not designated as HiPo also undermines employees’ perception of fairness and equity concerning rewards, process, and treatment by supervisors, dimensions of organizational justice that are strongly supported by empirical research (CohenCharash and Spector, 2001; Colquitt et al., 2005; Colquitt et al., 2001). By definition, when an elite class of employee is created, those not included are left on the outside looking in. Creation of secondclass citizens The usual scenario unfolds as follows. Those not identified as having HiPo are excluded from the range of development opportunities readily supplied to the elite. Doors of access are closed. Elite, specialized training is not only not offered, but the unidentified are not permitted to attend. When they directly request enrollment, they are told that they are not eligible to enroll. When asked how they can become eligible, they are told that they must be nominated by their manager. They cannot self nominate. All this comes with a cost and impacts the unidentified in the following manner: Marginality is experienced because they are not included in the mainstream of important meetings and events. Isolation engenders feelings of being ignored and lack of significance (Schutz, 1994). Cognitive and emotional distress ensues whereby workers may wonder why they are working so hard when they are not apparently valued. Discouraged by being excluded from specialized formal training and coaching for improvement, the unidentified take a blow to selfesteem, confidence is diluted, and productivity declines. Lessened zeal and weakened commitment to the success of the organization can be expected; seeking job opportunities elsewhere can be predicted. Enthusiasm for performing a job well wanes. Should they exit the organization, there are concomitant costs of their knowledge disappearing from the operation, and the price of new hires up the ante for the company. CSR to employees When access to entry is barred to some and not others, a twotiered system is created within the organization – a type of organizational “have and have nots.” The group of “haves” lives a life of privilege and receives careful stewarding. The “have nots,” on the other hand, are left out to sea on their own to navigate through inhospitable waters. Companies run into difficulty with employees when some are singled out for special treatment and others are not. Employees’ sense of fair treatment and perceptions of justice are violated and organizations are viewed as socially irresponsible. Fraught with danger, a twotiered class system is commonly being instigated in organizations by way of their HiPo programs. This violates social norms and values found in many European countries and the USA. Social values of fair treatment and democratic ideals are popular throughout many places in the world and are prized dearly among workers at all organization levels (CohenCharash and Spector, 2001). These values press organizations to examine how their TM practices may violate these values, and to devise policies that uphold social norms that support them instead. Do organizations have a social responsibility to those in the ranks who have not been identified as “HiPo?” If so, what would it be? And how can it be accomplished? As previously discussed, social justice and organization justice concepts help generate ideas critical to an analysis of the role TM plays in CSR. Simplistically, social justice theory states that ideally the needs of the community and the needs of the individual should be simultaneously addressed and balanced. Individuals deserve the opportunity to discover their capabilities and interests. Communities provide support and resources for their fulfillment. As they grow and develop, the communities in which people live also grow and develop, creating a symbiotic relationship of mutual gain. Similar concepts are at play in organizations (Greenberg, 1993; Leventhal, 1980). European and USA labor law and human rights legislation go right to the heart of the matter to reinforce these notions within organizations. When ascertaining organizational justice (Folger and Cropanzano, 1998), employees examine the distributive, procedural, and interactional (relationship) dimensions for guidance (Bies, 2005; Colquitt et al., 2005). Table II shows the relationship among these concepts and TM. Issues and concerns for organizations Selection of HiPo employees The Hudson survey also showed that when assessing someone's suitability for a HiPo program, employers use manager's performance rating (37 percent) and performance data (35 percent) over other assessment options like 360 degree surveys (12 percent), psychometric assessment (7 percent), or assessment centers (5 percent). In virtually all HiPo programs, managers use lag measures that rate past performance to put forward the names of those they consider as HiPo. a. Use of lag and lead measures When determining eligibility to participant in the HiPo program, most organizations only look at individual performance. However, performance by definition is focussed on events of the past. Only focussing on past performance creates a risk that someone who is high performing may already be operating at their optimum level. The prevalent use of performancebased measures or lag indicators, such as manager's rating or performance data to assess an employee's potential, can lead to problems. While just about all HiPo employees are high performing, not all high performing employees have HiPo. Subject matter experts acknowledge that potential is different from performance and should be measured differently (Hudson Report, 2007). In addition to limiting the perspective to past behavior, other problems with lag measures exist. A manager's lack of clearlineofsight can give short shrift to a good worker. The manager either does not have the necessary information to value the employee's contribution on the job, or does not think highly enough of the employee to
identify them for HiPo. Less than stellar performance ratings essentially guarantee an employee there will be no seat at the HiPo table. Lead indicators, on the other hand, seek to assess potential to perform. Key elements of identifying an employee's potential are learning ability, commitment, and emotional and intellectual intelligence. The addition of these indicators can provide a balanced picture by which to leverage the TM program for optimum performance. Unlike lag indicators, which are usually used by one person to assess the performance of another, lead indicators can be seen by many observers. A forward thinking organization might consider opening the nomination process so that a number of people could put forward the names of people they view as having “HiPo.” Indeed, best practice organizations utilize talent review committees comprised of multiple management team members and internal OD consultants to generate a more open and diversified nomination process for HiPos (Ready and Conger, 2007; Groves, 2011). b. Rater reliability problems The accuracy of both lag and lead indicators are suspect, as the judgment of managers can be clouded by their own biases. Sometimes there is possible hubris that their opinion somehow represents “truth.” One person's cup of tea is not necessarily another's, and managers are human too. Scholars know that a selffulfilling prophecy can emerge. Not thinking well of an individual can result in stunted development, and can eventually impact the person's motivation and productivity as s/he is passed over for plum jobs and HiPo treatment. Worker perceptions of favoritism can also exist which violates the employee's conviction that there should be relational justice in the organization. Access to HiPo programs Do organizations have a social responsibility to those in the ranks who have not been identified as “HiPo?” If so, what would it be? And how can it be accomplished? Some possible options are discussed below. Offering all HiPo programs to the entire workforce could be argued to be ideal; yet, offering everything to everyone is not practical. It would be costly, and not everyone wants to devote the extra effort required to move up in the organization. Steps should be taken, however, to capture the enthusiasm of those employees who want to commit themselves. There are always times when employees want to participate in HiPo programs, but their supervisor will not put their name forward. To uphold ideals of procedural and interactive justice, there needs to be some possibility for employees to participate in HiPo activities even when they are not identified by their supervisor. Selfnomination is a smooth avenue to ameliorate this problem and supports worker convictions that there should be distributive justice in the organization. Benefits of selfnomination to HiPo program Selfnominations save the prohibitive cost of offering expensive TM programs of a high caliber to the entire workforce. Some or even many workers may not be interested in putting in the time and effort to learn new skills and execute timeconsuming projects required of the HiPos. Simultaneously having a selfnominating process offers these opportunities to people who are motivated, and who want to commit the time and effort – even if their boss does not see their potential. This path eases access to entry for all those who are serious about their learning and development, and who have the ambition to pursue this course. Worker perceptions that the organization has in place a fair process by which they can favorably represent themselves as having HiPo supports their conviction that there should be procedural justice in their organization. Conclusion TM plays an everyday role in ascertaining the efficacy of an organization's CSR. Employee perceptions of organizational justice, centered on equal treatment and equal access to opportunities, play out in the organization's approach to TM. Whether or not the corporation embraces TM as a social responsibility, it remains heartfelt by employees when they are included, or excluded from jobs and other developmental activities. When included, they feel emotionally robust and physically energized. When excluded, they feel ignored and devalued. When employees are included in TM to the degree they individually wish to be, they perceive the corporation as acting socially responsible. Key TM measures for organizations to track their progress toward greater social responsibility include: 1. Is there equal opportunity to access TM programs? Is there ease of access and widespread availability to training and development, job rotation, classes, networking, career development, coaching, and mentoring? Automated systems can even allow employees to input into their own profiles for easier administration. 2. Can people selfnominate to HiPo programs? Has the elitist propensity of the organization to secretly identify participants opened its doors to include others who also have the enthusiasm and interest to hotly pursue their careers? Windows of opportunity need to be allowed for people to present themselves as possible up andcoming careerists even if not officially sanctioned by their boss. One person should not be the sole gatekeeper for such an important leverage point of one person's career or the organization's future. 3. Is there a supportive procedure in place for workers to challenge whether their treatment has been equitable when they have doubts? How often is it used and by what groups of people? Are there any patterns of neglect or abuse? Line managers and staff alike need to safeguard these processes to ensure a robust and successful TM program. 4. Are HiPos and selfnominated HiPos given similar access, treatment, and opportunity? The careers of both should be tracked and analyzed to ensure that the best the organization has to offer is being received by those who have the most to offer in return. Suggestions for future research Analyzing the costs of current TM practices could prove an interesting exercise. The obvious costs are direct costs: training fees and corresponding time away from the job, salaries associated with time spent on coaching and interacting among individuals, learning curve on job rotation, HR data tracking and input, establishing and then using a grievance process, etc. The less obvious costs are those beneath the surface – the costs of dysfunction – resident in the usual twotiered TM system where the first tier caters to the HiPo elite and the second tier where the unidentified are essentially ignored and are treated as secondclass citizens. It would be worthwhile to study the hidden costs associated with this common TM approach to discover its possible impact on employee motivation, productivity, and loyalty, which may emerge as sluggish performance, poor quality products or services, and/or an unwanted level of turnover. Such possible dysfunction offers rich opportunity to apply a structured analytical framework like the ISEOR's SocioEconomic Approach to Management (SEAM)[1] method (Savall, 2003), or Deming's (1986) approach to determining the cost of quality, which could provide the dollars/euros and cents rationale to spur corporations to embrace their social responsibility with greater enthusiasm.
Table I Comparison of talent management programs for workforce versus individual development
Table II Organizational justice and talent management
Note 1. Institut de SocioEconomie des Entreprises et des Organisations, Lyon, France
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About the authors Dr Miriam Y. Lacey is an Authority on Organization Behavior and Development. Dr Lacey has been at the forefront of integrating behavioral science with principles of total quality management. She served on the board of examiners for the Malcolm Baldrige National Quality Award and an inaugural judge for the California Governor's Golden State Quality Award. Dr Lacey works with Fortune 500 companies such as Exxon, Boeing, MacDonald's, Los Angeles Times, Allergan, and American Airlines, on the implementation of largescale change for greater quality, productivity, and employee commitment. She has worked in human resources management and organization development in over 20 countries and has lectured at the Japanese Productivity Center. Dr Lacey has served on the boards of several manufacturing and sales companies in Europe and Asia and is the past vice president and chair of education and research of the board of directors for the Association for Quality and Participation. Dr Kevin Groves is an Associate Professor of Organizational Theory and Management at the Pepperdine University's Graziadio School of Business and Management. Dr Groves teaches courses on leadership, organizational change, organization theory and management, and organizational behavior. He was recently awarded the Julian Virtue Professorship by the Graziadio School for his applied research on valuescentered transformational leadership. Dr Groves was also recently honored with the 2009 Ascendant Scholar Award by the Western Academy of Management. He consults with organizations in the areas of talent management, leadership assessment and development, succession planning, organizational change, and employee engagement. His current research interests include talent management systems, succession planning, managerial thinking styles, leader cultural intelligence, and transformational leadership. Dr Groves’ research has been published in numerous academic and practitioner journals, including the Leadership and Organization Development Journal, Journal of Management, Journal of Business Ethics, Academy of Management Learning & Education, Journal of Small Business Management, Group & Organization Management, and Human Resource Development Quarterly. Dr Kevin Groves is the corresponding author and can be contacted at:
[email protected]
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