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Peter Cappelli and JR Keller
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Wharton School of Business, University of Pennsylvania, Philadelphia,

Pennsylvania 19104; email: cappelli@wharton.upenn.edu
Annu. Rev. Organ. Psychol. Organ. Behav. 2014. Keywords

1:30531
mobility, hiring, internal labor markets, talent pools
First published online as a Review in Advance on
January 2, 2014
Abstract
The Annual Review of Organizational Psychology
and Organizational Behavior is online at The challenges associated with managing talent in modern labor mar-
orgpsych.annualreviews.org kets are a constant source of discussion among academics and practi-
This articles doi: tioners, but the literature on the subject is sparse and has grown
10.1146/annurev-orgpsych-031413-091314 somewhat haphazardly. We provide an overview of the literature
Copyright 2014 by Annual Reviews. on talent managementa body of work that spans multiple disci-
All rights reserved plinesas well as a clear statement as to what defines talent man-
agement. The new themes in contemporary talent management focus
on (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 same
organization, and (c) strategic jobs for which investments in talent
likely 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.
305
INTRODUCTION
Talent management is a recent, practitioner-generated term covering a range of long-standing
practices that aim at getting the right person in the right job at the right time. These include
workforce planning, succession planning, employee development, and career management. The
phrase dates from a 1998 McKinsey report (Chambers et al. 1998), which argued that variations in
the performance of executives explain a great deal of the variance in overall performance across
businesses. 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 resource
professionals, confirms this interest, and leading human resource consulting firms have either
developed new practice areas or rebranded existing practice areas to provide so-called talent
management solutions.
Consistent with several commentaries lamenting the gap between miniscule academic interest
and 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 few
results. In response, we conducted what might be thought of as an old-fashioned literature review
that worked backward through the bibliographies of relevant articles. We reviewed approximately
500 articles, books, and chapters across the fields of management, human resources, industrial and
organizational (I/O) psychology, sociology, and economics to find studies that address at least
subtopics within talent management. Although the scope of this article does not permit us to
provide a comprehensive review of all the research that intersects the talent management topic, we
reference reviews that do related topics justice throughout.
DEFINING TALENT MANAGEMENT

The term talent management has escaped a standard definition, and nearly every article written on
the topic begins with 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 and
overall goals of talent management. Similarly, Collings et al. (2009, p. 1264) conclude that the
concept of talent management is lacking in terms of definition and theoretical development and there
is a comparative lack of empirical evidence on the topic. And as Gallardo-Gallardo et al. (2013,
p. 291) assert, It appears that talent can mean whatever a business leader or writer wants it to mean,
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 & Heckman
2006). Although this is a fair criticism of most of the practitioner literature, it is less true in the
academic literature, which has been more careful in its attempts to distinguish talent management
from the study of specific HR practices and strategic human resource management (SHRM) more
generally (Cappelli 2008a, Collings & Mellahi 2009, Tarique & Schuler 2010). Dries (2013), for
example, 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 it
continues to focus on practices associated with lifetime careers in corporations, despite the fact
1
These include (a) a human capital perspective emphasizing an employees contribution to the organization, (b) an I/O
psychology perspective emphasizing the ability to predict who will be successful in more senior roles, (c) an educational
psychology perspective emphasizing domain-specific excellence, (d) a vocational psychology perspective emphasizing
a vocational self-concept/identity, (e) a positive psychology perspective emphasizing self-actualization, and (f) a social
psychology perspective emphasizing the perception of talent.
306 Cappelli Keller

that the most profound shift over the past 30-plus years in how organizations manage their
workforces 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 to meet themmay not be new, traditional
solutions are no longer appropriate because the certainty that was required for them no longer
holds. 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, but
the answers are.
A definition that is consistent with traditional approaches and captures what academic
researchers have been doing under the heading of talent management is as follows: the process
through which organizations anticipate and meet their needs for talent in strategic jobs. As argued
below, the clear focus on strategic jobs is the new idea in academic studies. This definition is
sufficiently suited to the academic need to stimulate theory development while reflecting the
interests of practitioners, for whom the interest in talent management is strongly focused on a
small 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 term
talent and the field of talent management. The first centers on the distinction between inclusive and
exclusive approaches to talent management, and the second on whether workforce differentiation
efforts 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 employees
of an organization are seen as possessing strengths that can potentially create added value for the
organization. Exclusive approaches, by contrast, see a subset of employees or jobs as creating
disproportionate value (Gallardo-Gallardo et al. 2013, p. 295). The practical implication of these
two approaches concerns the investment of scarce resources: Is development for everyone, or
should the firm differentially invest in certain individuals or jobs?
Inclusive approaches seem to have developed more recently, possibly in response to the more
egalitarian concepts in the air during the 1960s and 1970s, as well as workplace regulations
requiring 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 military
where hierarchical arrangements are assumed. Exclusive approaches are consistent with theories
of resource optimization in the strategy literature (Majumdar 1998) and the Matthew effect in the
sociology literature (Bothner et al. 2011) in which unequal investments are seen to generate
greater aggregate returns.
Exclusive approaches have increasingly come to dominate the academic literature on talent
management, as reflected in the growing interest in workforce differentiation (Collings & Mellahi
2009, Huselid & Becker 2011, Lepak & Shaw 2008). The notion of workforce differentiation or
segmentation, a key theoretical development in the strategic human resource management
(SHRM) literature, suggests that organizations should disproportionately invest scarce resources
2
A standard commonly used in corporations is that talent management programs are for the top 10% of the workforce as
measured by their positions in the corporate hierarchy (e.g., Ulrich & Smallwood 2011).
www.annualreviews.org Talent Management 307

in the individuals or jobs from which they expect the greatest return. It differs from older
approaches, which simply assumed that the importance of an individual or job was associated with
its 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. Should we begin by identifying a subset of individuals
who might be slotted in an array of roles or by identifying a specific population of jobs that are in
some 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 to
contribute to the competitive advantage or core competence of the firm (Lepak & Snell 1999,
p. 35). The most prominent conceptual model remains the architectural theory of HRM (Lepak &
Snell 1999), which marries insights from the resource-based view, transaction cost economics, and
human capital theory to show how differential investments in workers possessing highly valuable
and highly unique human capital can lead to competitive advantages. Several scholars have
expanded on this work, with, for example, promising efforts to show how mobility constraints
provide important boundary conditions on the link between firm-specific skills and competitive
advantage (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 are
many times more valuable than average performers (see Felin & Hesterly 2007, pp. 21112). This
has led many practitioners to advocate for an ABC notion of talent management, popularized by
Jack Welchs vitality curve, in which some workers are really good performers (the A players),
others are really poor performers (the C players), and most are stuck in an average category (the B
players). Implicit in this notion is the idea that performance is dispositional, so that the goal is to
hire 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 entirely
dispositional. Studies of investment bankers (Groysberg et al. 2008) and doctors (Huckman & Pisano
2006) have highlighted the importance of intrafirm social networks to performance, with
Groysberg et al. (2008) finding that star investment analysts were often unable to replicate their
previous levels of performance owing to the loss of social capital associated with a move to a new
firm. 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 analysts
in investment-bank research groups. More generally, the field of HRM is based on the notion that
management 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 depending
on the complexity of the job. Even further back, Jacobs (1981) used contingency theory to model
the relationship between individual performance, jobs, and organizational performance, showing
how exemplary individual performance adds a significant increment to an organizations total
performance 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 performance
than others, and firms should devote more resources to those jobs in which individual performance
has the greatest potential to impact firm performance (Boudreau & Ramstad 2007, Delery &
308 Cappelli Keller

Shaw 2001, Huselid et al. 2005). Focusing on the job as the locus of differentiation does not
dismiss individual differences, of course. It simply gives primacy to the job, as the relative value of
individual differences depends on the nature of the job (Gallardo-Gallardo et al. 2013, Humphrey
et al. 2009). As described by Becker & Huselid (2006, p. 904), The value of employee skills
within a firm is not just a supply side phenomenon. It is a function of how those skills are used and
where they are used.
Humphrey et al.s (2009) role composition model of team performance provides support for
the idea that the job should be the locus of differentiation. They found that certain roles are more
important to team performance than others, the implication being that staffing decisions should
take into account the strategic importance of different roles prior to considering individual
attributes. A job differentiation perspective is also consistent with the historical view of talent
management, in which the key jobs were executive positions, assessing which individuals had
the potential to succeed in those jobs was a central task, and development to make them
successful in those jobs was the most significant expenditure. And it reflects the perspective of
most practitioners, for whom the focus is on filling a small number of key roles, typically senior
management and executive positions, as well as key technical positions (e.g., Charan 2005,
Fernndez-Aroz 2005).
Given the apparent dominance of the job differentiation perspective, we can more clearly
define talent management as the process through which organizations meet their needs for
talent in strategic jobs, talent as those individuals who currently or have the potential to
differentially contribute to firm performance by occupying strategic jobs,3 and a talent pool as
the high-performing incumbents in strategic jobs and those individuals identified as having the
potential 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, talent
management efforts were focused on filling executive-level jobs that were assumed to have the
most important effect on firm performance. The attention on executive positions is mirrored in the
academic literature, which has focused on the antecedents and consequences of CEO and top
management 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, strategic
jobs can potentially be located anywhere in the organization, depending on the strategic com-
petencies of the organization. For example, a marketing and salesfocused company may find that
its sales positions are strategic jobs. That strategic jobs exist outside of the executive suite has
been trumpeted as one of the most insightful aspects of this approach, as there is greater potential
for distinctively competing for and with talent in areas that are less recognized (Boudreau &
3
One of the shortcomings in this literature is the lack of a consistent term used to identify those jobs with the greatest potential
to improve firm performance. They have been variously described as strategic jobs (Becker & Huselid 2006), key
positions (Collings & Mellahi 2009), linchpin positions (Conger & Fulmer 2003), A positions (Huselid et al. 2005), and
pivotal roles (Boudreau & Ramstad 2007, Collings & Mellahi 2009).
4
Though of interest to scholars interested in talent management, a review of the executive succession literature is beyond the
scope of this review. The dominant research topic in the field has been the antecedents and consequences of internal versus
external 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) and
Finkelstein et al. (2009, pp. 164225).

Ramstad 2007, p. 69) and because it makes for broader and stronger conceptual links between
HR and business strategy.
Huselid et al. (2005) argue that strategic jobs must meet the dual criteria of having a direct
strategic impact and high variability in the performance of incumbents, representing upside
potential. Hence, strategic jobs are those jobs in which investments in selection, evaluation, and
development have the greatest potential to generate a significant return through increasing revenue
or decreasing costs. Jacobs (1981) similarly argues that individual performance is most likely to
affect firm performance in jobs located in a part of the organization with a direct impact on firm
performance 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 affect
organizational 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 record
producers at music studios (Jacobs 1981).
Emerging from these various efforts to define strategic jobs is general agreement that strategic
jobs encompass those jobs in which exemplary individual performance contributes to a firms
competitive advantage. It is less clear whether jobs in which the occasional poor performance
carries 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 them with average
performers can reduce the downside risk, whereas filling them with talent may not necessarily
result in a marginal contribution to firm performance (Huselid et al. 2005, Jacobs 1981). Outside
of a few illustrative examples, however, few attempts have been made to identify strategic jobs
more broadly (Huselid & Becker 2011), and the idea remains largely conceptual.
Incorporating the strategic job concept into the general idea of talent management could be
straightforward. 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 those
jobs: Should they be filled by outside hiring or from within,5 and if from within, what practices are
associated with developing and identifying the appropriate candidates? Talent management
obviously involves identifying the requirements of those strategic jobs as well as assessing and
developing the abilities of individuals; where the focus of attention should be between jobs and
individuals 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 to
explore briefly where it has come from. The notion of talent management as defined above is
associated with the rise of large corporations in the 1950s. The firms that dominated the early days
of industrial production had no talent management issues. The owners were the managers, but
there 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 changed with the creation of executive jobs prior to World War I. Once firms
grew large enough to have specialist functions, they needed someone to manage those functions at
headquarters. These newly created jobs had enough discretion to qualify as executive jobs. But, as
5
To the extent this has been studied, the literature has focused almost entirely on the CEO position, a context that is not
representative of the vast majority of jobs (Hambrick & Mason 1984) or labor markets (Khurana 2002). A recent
exception is Bidwell & Keller (2013), in which the authors found that performance variability and the supply of
potential internal candidates shape the decision to fill a job through promotion, internal transfer, or external hiring.
310 Cappelli Keller

business historian Thomas Cochran noted, although many of the administrative problems of
running large corporations had been solved by World War I, one important issue had not: how
[men were] to be trained, selected, and inspired to undertake the task of coordinating and directing
the enterprise as a whole (Cochran 1960, p. 70). There was no way to assess the capabilities of the
managers 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 meet
some but not all of the requirements for these executive jobs.
Most companies looked externally, importing candidates to fill executive jobs. Typically this
happened by acquiring smaller companies and their founders. This was an excellent approach
given that nothing in the science of prediction and selection beats observing actual performance in
an equivalent job (Cascio & Aguinis 2008b). One consequence of this approach, however, was
that 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 that
had some limited success because the supervisory jobs were not so different from the worker jobs.
But the leap from frontline supervisor to middle manager was a big one in that success in the former
role did not predict success in the latter. Although a few companies, GE foremost among them,
began experimenting with approaches to developing talent internally in the 1920s, the diffusion of
these models was set back considerably by the lack of hiring and development from the Depression
through World War II. Organizations during the postWorld War II boom responded just as they
had at the beginning of the century, by raiding competitors for talent. But the demand for senior
managers and executives exceeded the supply, creating a talent bottleneck so severe as to dwarf any
talent 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 to World War II, the Navy began what was arguably the first
truly systematic effort at large-scale management development and succession planning. Its effort
became a blueprint used by many companies as the basis for building their own talent development
programs, and a common model of internal talent management soon emerged.
This model was designed to provide a steady supply of internal candidates capable of filling
managerial and executive jobs. It began with careful recruitment and substantial investments in
identifying individuals with the potential to become executives, including the use of psychological,
vocational, and intelligence testing. Careers and career planning unfolded within all these large
corporations, with internal advancement supported by early investments in training and regular
movements within the firm to provide development opportunities. External hiring at the executive
level was virtually nonexistent; one study found that by 1950, 80% of current executives had been
developed from within (Newcomer 1955), and another shortly after found that few contemporary
executives in any company had begun their careers elsewhere (Steel 1957).
This model was predicated on the stability necessary to generate long-term forecasts of human
capital demand through workforce planning (see Cappelli 2011, p. 676). Succession plans were
but a subset of these broader workforce/manpower planning models covering entire organi-
zations, described by Vetter (1967) as manpower planning for high talent personnel. These
forecasts, which in some cases extended out a decade, were matched against estimates of the future
supply of internal candidates. The assumption was that the supply of talent for executive positions
was 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 career
system by including individual behavior and psychological variables, supervisory practices, group
norms, and labor market outcomes.
These practices were developed to support talent management within closed employment
systems (Althauser & Kalleberg 1981). Workers were shielded from external competition, and

mobility was governed by bureaucratic rules. Expectations of lifetime employment and steady
advancement opportunities provided a sense of stability to workers, who granted firms substantial
control over their careers within the organization. Because jobs above entry level were not freely
available to outsiders, there were limited opportunities for external advancement, and retention
was rarely a concern. Decisions related to investments in employee development and advancement
were largely handled by centralized personnel offices. Advancement occurred along narrowly
defined jobs located along clearly defined job ladders, structural features that emerged from the
need 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 management
were in place: workforce plans to set direction; sophisticated recruitment and selection techniques
for hiring entry-level candidates; assessments of potential (including assessment centers, ability
and personality tests, etc.); developmental assignments like job rotations, shadowing, and action
learning with coaches; assessments of performance such as 360 feedback and forced rankings;
career ladders; and succession planning to fill the important jobs. Virtually every contemporary
practice in talent management was developed and in place during this period. The academic world
investigated some of these topics, developing huge literatures on employee selection and assess-
ment, reflecting the interests of the I/O psychologists. Institutional economists and sociologists
created 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, Jacoby
2005) resulted in an opening of the closed employment systems of traditional internal labor
markets. The new competitive environment is characterized by uncertainty in both the demand
for and supply of talent (Cappelli 2008b), leading to a gradual disintegration of the structures
and processes supporting the traditional, internally focused approach to talent management and
with it, a sharp decline in many of the talent management practices associated with the traditional
model. 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 the
organizational structures began to shift in a direction which was no longer compatible with the
bureaucratic rules of the internal labor market.
Flattening organizational hierarchies combined with broader job definitions led to the gradual
disappearance 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 of
entry no longer restricted to lower-level jobs, employers now hire into almost all kinds of jobs at all
levels of the organization. Jacoby (2005) surveyed senior HR executives in 145 US firms in 2001
and found that none of them considered only internal candidates for managerial vacancies and
a mere 1% considered only internal candidates for nonsupervisory vacancies; these figures would
have been viewed as misprints only a few decades earlier. Cappelli & Hamori (2005) examined the
top 10 executives of the largest companies with the most sophisticated internal labor markets, the
Fortune 100 companies, in 2001 and compared their careers to their peers in 1980, finding that
executives now spend significantly less time with a single employer and are much more likely to
312 Cappelli Keller

build careers across firms. Royal & Althauser (2003) and Bidwell (2011) found extensive external
hiring to be common in mid- and upper-level jobs. These findings are consistent with extensive
work documenting the steady decline in job tenure (particularly in the United Sates) over the past
30-plus years (Hollister 2011). Whereas large employers in the United States filled only about 10%
of their vacancies from outside in the period from World War II to the 1980s, current estimates
suggest 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, creating
difficulties 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 planning
thorough 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 reported
engaging in any sort of structured workforce planning. The decline in overall workforce planning
was 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 about
a quarter appear to do any such planning more than two levels below the CEO (Cohn et al. 2005).
Uncertainty on the supply side arises from difficulties in predicting (a) skills and competencies
needed 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 organizations
can 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 of
experienced candidates from competitors has created retention concerns, further complicating
estimates of internal supply. Moreover, firms have limited control over the future availability of
skills and competencies available on the labor market (Cappelli 2008a).
Popular management books on talent management often put forward historical practices at
older companies such as GE as the model to emulate (e.g., Charan et al. 2011). However, such
models require extensive up-front investments that can be difficult to recoup if human capital needs
change 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 HiPo
employees are more than 50% more valuable than an average employee, less than a third reported
realizing a significant return on their HiPo investments (Martin & Schmidt 2010).
The reality of talent management under uncertainty is quite different from what existed under
the old model. External hiring has not only increased; it has become a de facto talent management
strategy for many firms, with just-in-time hiring emerging as a substitute for workforce and
succession planning, internal development, and even assessment (Cappelli 2010). Relying on
external hiring to fill strategic jobs leaves employers at the mercy of the labor market, resulting in
talent shortfalls and other costs whenever labor markets tighten. Just as it can be difficult for firms
to recoup their investments in internal development, recent research has identified informational,
social, and sociocognitive impediments limiting firms ability to recoup the costs associated with
identifying, attracting, selecting, compensating, and onboarding external candidates.
The traditional model of growing talent from within and the more recent just-in-time model
based on external hiring represent polar-opposite perspectives. Fortunately, these are not either/or
choices in practice. Cappelli (2008b) suggests an approach, based on supply chain management for
which addressing uncertainty in supply is the key concept, in which organizations recognize the
inevitable problems created by uncertainty and combine internal and external approaches to talent
management in ways that minimize the cost associated with those problems. A simple example of

the approach is to use internal development to address the most predictable aspects of demand and
external hiring to meet needs that are less predictable. Statistical tests and simple assumptions
allow reasonably precise estimates of the amount of talent that should be made versus bought
(Cappelli 2009). In nonstrategic jobs, the rise of alternative work arrangements (Cappelli & Keller
2013a,b), including the use of workers provided by staffing agencies, reflects one approach to
addressing this issue.
Strategic jobs can be filled internally or externally, and there has been substantially more work
on identifying and retaining internal talent than there has on identifying and selecting external
talent. Recent work on interorganizational mobility, however, has begun to shed light on chal-
lenges and institutions associated with external hiring, addressing Collings & Mellahis (2009,
p. 308) concern that solely relying on internal development and sourcing, with a general disregard
for the external sourcing of talent, is at odds with an increasing realization that careers are more
regularly 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 of
talent management practices are aimed at existing employees. And despite the attention in the
literature to strategic jobs, many of the major concerns in the practice of talent management have
to do with identifying individuals for development and future advancement. We consider what is
known 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 scarce
development resources. That group is often known as an organizations talent pool, and it is
typically seen as consisting of high performers currently in strategic jobs and HiPo candidates who
might 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 organizational
behavior (Cascio 2006, Pichler 2012, Roberson et al. 2007) and personnel economics (e.g., Grund
& Przemeck 2012), especially around the topics of performance appraisals and performance
management systems. The literature on these topics is vast, but we provide a guide to some of the
most 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 with
respect to both the aspects of performance and the level within each aspect, are common in most
jobs and are executed through performance appraisals. Concerns related to inequality aversion in
the form of leniency and centrality biases can combine to suppress variation in the performance
evaluations, thereby making it difficult to identify top performers. If the variation in appraisal
scores is compressed, then it also becomes more difficult to identify those strategic jobs in which
exemplary individual performance will have an impact on firm performance.
Organizations have attempted to overcome the challenge of identifying top performers that
results from the biases associated with performance appraisals through competency modeling,
which has replaced job analysis in many organizations. In contrast to job tasks, which are
attributes of jobs, competencies can be used in a more straightforward manner to assess individual
job performance, as they refer to behaviors or behavioral themes that are instrumental in the
314 Cappelli Keller

delivery of strategic results (Sanchez & Levine 2012, p. 408). They may also make it easier to
differentiate between average and top performers (Campion et al. 2011) by being more specific
about 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 open
question (Sanchez & Levine 2009, 2012).
Assessing potential. Finding those individuals who are capable of filling strategic jobs in the
futurethat is, those who have the potential to succeed at a job they have yet to dois more
challenging than assessing performance. HiPo programs are designed to meet the challenge. They
are 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 in
a new role (see Cascio & Aguinis 2008b).
The conceptual idea behind assessing potential has been to identify abilities, given that knowledge
and skills presumably can be learned through the development process (e.g., Fernndez-Aroz
et 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 simply
asking supervisors to make an assessment of potential, an approach built in to performance
appraisals 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 for
what constitutes potential, both within firms and within the academic literature (Fernndez-Aroz
et al. 2011, Silzer & Church 2009), gives us little reason to believe that this process should produce
valid information, despite its widespread use.
The lack of established criteria and tools for assessing potential has been cited as the primary
reason that roughly 40% of HiPo assignments 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 predict
future success in significantly different situations (Cascio & Aguinis 2008b, Silzer & Church
2009). As noted above, a move toward formal competency modeling may improve predictive
success, to the extent that the competency models consider future job requirements either directly
or 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 empirical
questions.
Communicating potential. A tactical challenge with HiPo programs is whether and/or how
widely employers should communicate HiPo status. Research drawing on organizational behavior
concepts has explored this question in an effort to better understand the effects of workforce
differentiation on individuals. Gelens et al. (2013) developed a theory suggesting multiple rela-
tionships between communicating HiPo status and perceptions of organizational justice. Dries
(2011) surveyed workers in organizations that disclosed their list of HiPo candidates and in others
that 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

respondents placed a high degree of importance on being formally identified as a HiPo employee.
Only 14% of formally identified HiPo employees were actively searching for other jobs, compared
with 33% of workers informally labeled as HiPo employees (Campbell & Smith 2010). Data from
the Corporate Leadership Council showed that although only 12% of formally identified HiPo
employees were actively seeking new jobs, 25% expected to leave their organizations within a year,
and nearly a third reported being disengaged (Martin & Schmidt 2010), demonstrating that
formally communicating HiPo status alone is not sufficient to retain members of the organizations
talent pool (also see Fernndez-Aroz et al. 2011).
What has not been examined carefully are the effects of communicating HiPo status on those
not chosen, who are sometimes referred to as LoPo employees. It is difficult to imagine any positive
effects for that group. No doubt the negative effects depend on how the assessment of potential is
made. If it is based on performance, it could motivate LoPo employees to perform better; if it

is based on attributes they cannot control, such as personality and IQ, it will quite likely have
a demotivating effect. It is also unclear how communicating HiPo status and then removing that
designation at a later date, a likely occurrence when performance influences the assessment of
potential 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 of
workers, recent research has shown that retention problems are largely self-inflicted. The increase
in external mobility has been driven more by changing employer preferences than by changing
worker preferences (see Bidwell et al. 2013, p. 76). No longer willing or able to provide any
assurance of continued employment, employers have encouraged workers to take control of their
careers, and as a result, employees around the world report being open to external opportunities
even when not seeking them directly (Towers Perrin 2006).
Talent-pool retention is a particularly pressing concern. A 20122013 Towers Watson survey
of global employers found 50% experiencing problems retaining top-performing employees; that
number rose to 55% for HiPo employees and 56% for employees with skills linked to the
organizations strategic competencies (Towers Watson 2013). Cappelli & Hamori (2005, 2013)
found, in two studies using two separate executive populations, that executives change
employers every three to four years and that almost 50% of executives were willing to consider
searching for a new job at another company when asked by a search firm. It is difficult to sustain
costly 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 target
retention efforts differentially toward the organizations talent pool, whose turnover is more likely
to be dysfunctional (Allen et al. 2010, Cappelli 2000). Hausknecht & Holwerda (2013) identify
five characteristics of turnover that are useful for assessing the impact of talent-pool turnover:
leaver proficiencies, time dispersion, positional distribution, remaining-member proficiencies, and
newcomer proficiencies. Kwon & Rupp (2013) provide empirical support for the differential
impact of talent-pool turnover, finding a significant negative effect of high-performer turnover
on firm performance, but no effect for turnover of the remaining workforce.
However, aside from a very specific literature exploring the retention of TMT members in the
context of mergers and acquisitions (see Krug et al. 2013), we have little understanding of how
executives, HiPo candidates, and top performers come to leave organizations. Research on the
unfolding model of voluntary turnover suggests that many turnover decisions commence with an
316 Cappelli Keller

environmental shock that leads to a violation of the workers self-image (Holtom et al. 2008,
pp. 24748). It seems reasonable to expect that members of an organizations talent pool, es-
pecially those who are aware of their status, are likely to carry different self-images from and be
exposed to different shocks (e.g., calls from search firms, as explored below) than other members of
the organization. Understanding how these individuals come to leave may provide valuable insight
into effective talent-pool-retention strategies.
The idea of thinking about a pool of talent as consisting of many candidates deployed across
a range of jobs is not new, but it does represent a contrast to the succession planningbased idea
that each strategic job will have a successor who is expected to step into that job when it becomes
vacant. 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 candidates
developed more broadly becomes an attractive alternative to the succession model.
Employment contracts. A popular approach for addressing retention concerns, and one that is
relatively new, is the use of explicit employment contracts that try to restrict the ability of
employees to leave. It is not legalindeed, it is unconstitutionalto compel employees to stay on

a job. It is, however, legal to require that they pay back training and education investments if
they leave before a certain date. It is also legal to require noncompete agreements that prevent
employees 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 of
noncompete agreements. Noncompete agreements require employees to agree in writing that that
they will not use confidential information gained from their employment or for a limited time will
not compete against their former employers; such agreements trigger liquidated damages and
injunctive 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 over
70% of firms require their executives to sign noncompete agreements, and their use has steadily
expanded 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 do
reduce exits (see Garmaise 2011 for evidence on executives and Marx et al. 2009 for evidence on
inventors). However, using archival data, Garmaise (2011) found that although self-directed
investments in human capital among top managers are more likely to improve performance than
firm investments are, the use of noncompete agreements encourages firm investments while
discouraging self-directed investments. Using an experiment design, Amir & Lobel (2013) found
that individuals in the noncompete condition were generally less motivated and thus more likely to
leave a task uncompleted, although the results on overall job performance are mixed. Other
research has focused on the effect of noncompete agreements within geographic regions, showing
that 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 by
state, and courts are increasingly reluctant to enforce these agreements if they are restrictive
enough that they impair the ability to work.
Proactive job design. A very different approach to dealing with talent-pool retention involves
providing employees with the opportunity to proactively modify their own jobs, roles, tasks, and
terms of employment in ways that make these items more desirable to employees (Grant & Parker
2009, pp. 34751). Proactive approaches to job design include job crafting, role adjustment, and
idiosyncratic deals (i-deals). Although we were unable to find empirical evidence linking

proactive job modification to turnover, it seems reasonable that allowing workers to shape their
jobs 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 the
antecedents to voluntary turnover, such as job satisfaction, job stress, and organizational com-
mitment (Holtom et al. 2008). To the extent that workers engage in proactive job design to expand
their competencies as opposed to simply shaping their jobs around their existing competencies, this
also presents a unique approach to talent development. Certain jobs are more likely to provide the
situational opportunity for promoting proactive approaches to work design (Wrzesniewski &
Dutton 2001). Strategic jobs should be particularly amenable to such efforts, as they are much less
likely to be standardized, providing more discretion to incumbents.
Career Management
Career management has also undergone dramatic change. Once employees had opportunities to
go elsewhere if they did not like the moves their current employer required, organizations moved
away from the command-and-control model in which each organization moved employees like
chess pieces across a board to serve its own goals (Baruch 2006, p. 130). New conceptual models of
careers6 place the burden of career management on the individual rather than the organization (see
Sullivan & 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 mobility
takes 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 and managers to identify opportunities for
development and advancement. The idea that careers can be planned inside organizations is
effectively gone, as the job ladders around which career advancement was based no longer exist.
What has emerged is a system in which employees and employers actively seek opportunities to
make good short-term matches inside the firm and to assemble them in ways that meet talent needs
and lead to meaningful careers (Cappelli 2008b, pp. 2067). Two structures supporting this new
system are the career-lattice model and internal job boards.
Career lattice. A popular concept in the practitioner literature on career management is the
corporate lattice model (e.g., Benko & Anderson 2010). In contrast to the traditional job-ladder
model, the job-lattice model provides multiple paths for advancement and development resulting
from vertical and horizontal links among the jobs within an organization. The lattice model
embraces the theoretical concept of multidirectional careers (Baruch 2004), in which career
development and advancement result from a combination of lateral, upward, and even downward
moves. The lattice model offers an alternative to traditional succession planning. Rather than
developing employees to fit narrow jobs at a specific time in the future, this model develops broad
competencies in employees as lateral moves increasingly replace vertical moves as a form of
development (Van der Heijde & Van der Heijden 2006). Having developed a broader set of
competencies, the internal talent pool is more likely to meet the changing demands of future
strategic jobs.
6
These new conceptual models include protean and boundaryless careers (see Briscoe & Hall 2006), postcorporate careers
(Peiperl & Baruch 1997), and intelligent careers (Arthur et al. 1995).
318 Cappelli Keller

Although the lattice model has not been the subject of academic study, extant research suggests
that 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 advancement
opportunities often has negative consequence for the firms, both in terms of turnover intentions
and job performance (e.g., Blackl 1992, Near 1984, Stahl et al. 2009), which are problems that
may 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 find
alternative 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 other means, facilitating internal knowledge transfer (Van
Wijk et al. 2008).
Whether the lattice model actually exists in practice is not clear, however, and what employers
could do to implement it is not obvious. Specifically, whether careers can truly be said to advance
by 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 idea
may turn out to be an after-the-fact rationalization of how careers play out, which makes it less
useful 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 advance
in most large organizations. Recent data indicate internal job boards are used by over 95% of
organizations (Taleo Res. 2005). They are designed to facilitate the exchange of information
necessary 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 within
the firm.
Internal job boards are not new, having been introduced in collective bargaining agreements
following World War II. Their application beyond production jobs and their use as a market
mechanism are new, however. Early versions covered only a limited set of jobs and imposed
onerous eligibility requirements on potential applicants (typically seniority), and most com-
panies discouraged or severely restricted lateral moves, limiting their reach. By contrast, few
restrictions 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 their
own development.
Although job boards have received limited academic attention, several theories suggest their
use should have a significant impact on how careers unfold within firms. As a formal process for
allocating workers to jobs, internal job boards may be beneficial to the advancement of women
and minorities (Strum 2001), but, as with many organizational practices, their actual effect on
workplace inequality is unknown (Bielby 2000). The dissemination of information may help
overcome talent management failures attributed to agency problems and bounded rationality
(Mellahi & Collings 2010). Agency theory suggests that subunits may not want to share their
talent or help to develop talent located in other parts of the organization. Bounded rationality and
information asymmetries may result in the marginalization of talent located in more distant parts
of the organization, including international subsidiaries, as managers begin by searching locally
and have difficulty evaluating geographically and socially distant talent. Broadcasting oppor-
tunities internally may also facilitate the development of atypical career paths (Kleinbaum 2012) as
employees become aware of a wider variety of opportunities.

Staffing International Subsidiaries
The rising interest in global operations, driven by growing markets in Asia, has called special
attention 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 of
these 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 supply
of international managers (Scullion & Starkey 2000).
Recent work has expanded on early typologies of MNE 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 Tarique
et al. (2006) draw on personenvironment fit to identify strategic, national, and organizational
contingencies affecting MNE staffing decisions. Gong (2003) uses both agency theory and the
resource-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, Gong
2006) and organizational demography (Gong 2006) to explain the national diversity of the
subsidiary TMTs and subsequent performance. Collings et al. (2008) use a case study approach to
provide an important perspective on subsidiary TMT staffing decisions as a means of control and
on the relationship between control and organizational culture.
Developing Global Leaders

The growing importance of international business operations has increased the long-standing
talent management challenge of staffing leadership roles with executives who can operate in
a global environment. Although there are many factors that shape the performance of global
leaders, 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 work
successfully 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 of
conceptual papers as dynamic competencies that predict MNE managerial effectiveness (Caligiuri
2006, Johnson et al. 2006). Culture-general knowledge refers to knowledge of how cultures differ
and 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. Cultural
flexibility, the ability of an individual to substitute his or her preferred way of doing things with
activities and behaviors appropriate to the local culture, is another dynamic competency shown to
be positively related to job performance among multiple samples of global leaders (Caligiuri &
Tarique 2012, Shaffer et al. 2006). Ethnocentrism appears to be negatively correlated with
performance (Shaffer et al. 2006), whereas tolerance for ambiguity is positively correlated with
performance (Caligiuri & Tarique 2012).
Dynamic cross-cultural competencies are particularly important in the talent management
context, as they represent the knowledge, skills, and attitudes that can be acquired through
7
Parent-country nationals are nationals of the country where the MNE is headquartered; host-country nationals are nationals
of the country where the international subsidiary is located; and third-party nationals are nationals of one country, working in
a second country and employed by a MNE headquartered in a third country.
320 Cappelli Keller

training and development (Shaffer et al. 2006). An important theoretical development has been the
use of social learning and contact theories as a framework for understanding how different
developmental experiences affect performance by shaping dynamic competencies (Caligiuri &
Tarique 2012). High-contact developmental experiences, those involving behavioral modeling
and interpersonal contact (Caligiuri & Tarique 2009), are more likely to foster the development of
cultural flexibility and tolerance for ambiguity, as are nonwork cross-cultural experiences, which
also decrease ethnocentricity. Scholars have called attention to the need for additional research
taking into account the interrelationships among dynamic competencies and stable competencies
(aspects of personality and ability that are relatively fixed), developmental experiences, and
managerial performance.
NEW ISSUES WITH EXTERNAL TALENT

Although most of the attention in talent management has been on internal talent, the focus in
practice and increasingly of new research has disproportionately been on outside talent. The
growing reliance on external hiring has led to a burgeoning literature on interorganizational

mobility in management, albeit outside of the traditional HR field. The institutions that support
external labor market strategies have also received attention. The actions that firms can take to
influence the quantity and quality of external applicants have been documented in recent reviews
of 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, and
knowledge 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 & Rosenkopf
2010, 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 key mechanism through which firms gain access to
and leverage social capital for influence (Dokko & Rosenkopf 2010); acquire new business
(Somaya et al. 2008); and weaken competitors through poaching (Chacar & Coff 2000, Somaya
et al. 2008). At the top of the organization, hiring is an exercise in impression management (Graffin
et al. 2011) and thus may provide status and legitimacy benefits through its effect on how the firm is
perceived by external stakeholders (Finkelstein et al. 2009, Khurana 2002).
Fully capturing these benefits, however, may be problematic. Information asymmetries result
in external candidates being paid a significant premium compared with internal candidates at all
levels of the organization, up to and including the CEO (Agrawal et al. 2006, Bidwell 2011). Firms
require stronger signals of observable ability from external candidates, but these signals often fail
to translate into higher levels of performance. Bidwell (2011) found that externally hired workers
exhibited lower performance for three years and were more likely both to quit their jobs and to be
terminated. Recent research on the mobility of knowledge workers underscores the importance of
intrafirm 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
8
This is not a universally held view among strategy scholars, however. For example, a foundation of the knowledge-based
view of the firm is the notion that hiring new workers is not equivalent to changing the skills of a firm (Kogut & Zander
1992, p. 383).

negative stock-market reactions, which suggests that filling strategic jobs through external hiring
may be perceived as a negative signal by external stakeholders. And sociocognitive barriers also
attenuate the performance of new hires, as individuals often have trouble overcoming institutional
and 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 market
intermediaries. Studies helping us understand how these intermediaries operate and how employers
use them as part of the talent management process are still nascent, although the importance of
the 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 by
search firms as opposed to candidates (Cappelli & Hamori 2013). Executive search firms play
a particularly important role in staffing those strategic jobs located in the upper levels of
organizations; what little data exist suggest that the majority of external hiring into such jobs is by
recruiting from a competitor through the use of an executive search firm (Cappelli & Hamori
2013), 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 supply
of external candidates by taking over the initial screening and assessment roles. Executive search
firms 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 exert
further influence on which candidates are considered by clients, and thus who gets access to certain
jobs, by filtering out what they consider to be unsuitable candidates (Fernandez-Mateo & King
2011, King et al. 2005; but see Khurana 2004 in the case of hiring CEOs, for which the boards of
directors play the key role).
One question about the search firm process is whether such firms provide more diverse slates of
candidates, both in terms of candidate experience and demographics, because they have better
information 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, Hamori
2010). Hamori (2013) found that moves mediated through executive search firms typically result
in executives moving into similar functional roles in similar industries. In terms of subsequent
performance, however, there is no evidence comparing the outcomes of matches facilitated by
retained search firms with those of matches conducted by firms themselves.
Online job boards and social media. For strategic jobs located at lower levels of the organizational
hierarchy, online job boards and social media sites are important intermediaries. They play an
information provider role, disseminating information about opportunities to potential candidates
and aggregating information on potential candidates for organizations (Autor 2001, Cappelli
2001). They also make it easier for employers to reach a larger audience of potential candidates as
well 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 media
sites would appear to provide employers with the ability to target their recruiting efforts to certain
groups or individuals, although little empirical research has examined either the use of these
322 Cappelli Keller

different sources or the topic of targeted recruitment more generally (for reviews, see Breaugh
2013, Dineen & Soltis 2011).
Research in personnel economics has shown that online job boards are used primarily by those
who are already employed (Stevenson 2009), reducing concerns about adverse selection, but the
ease with which candidates can apply has created an information overload problem, as employers
are routinely inundated with resumes (Autor 2001). In response, employers have adopted
computerized screening that substitutes for more systematic recruiting and selection practices,
creating unexpected (and understudied) difficulties in hiring as well as biases in who makes it
through the process (Cappelli 2012).
DISCUSSION
The practices associated with talent management and therefore the academic literature tracking
those practices are in considerable flux. The postWorld War II internal model was based on
workforce plans to determine future needs and relied on recruiting from schools for entry-level
jobs, sophisticated selection from that applicant pool, and assessment of potential. These practices
led to substantial investments in training and development, internal career plans, and then
succession planning to fill executive jobs. This model seems for practical purposes to be over. Many
of the largest and oldest corporations do retain some elements of this approach, although their use
has been substantially diluted by the rise of outside hiring. Smaller and newer companies never had
those practices. For them, outside hiring is often the de facto solution to talent management
problems. Research on the above practices has also declined sharply, perhaps because there are
fewer opportunities for data collection.
Also associated with 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 it
is now much more likely that any sophisticated assessment exercises will be done by vendors
(Ulrich et al. 2008). Research results have a much greater downside risk for a vendor than they ever
had for individual employers: A study showing that an employers practices are ineffective might be
a temporary embarrassment but would lead the employer to change those practices and improve its
outcomes. A study showing that a vendors 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 the
preserve of personnel psychology.9 That is no longer the case. Clearly there are a great many
practicing psychologists still engaged in designing selection and assessment systems, but research
on these and related topics is in sharp decline. The new topics, associated with external hiring, are
much more likely to be studied by researchers in strategy and organizational theory precisely
because those conceptual models better fit the phenomenon being studied.
Even with interest from researchers from these new fields, we know remarkably little about the
new practices in talent management. We lack even simple descriptive data about how employers
are handling the challenges of talent management: There are no systematic, representative data on
employment practices in the United States. Nor do we have detailed descriptions of how individual
companies handle talent management, although we see tremendous promise in academic
9
Workforce 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).

practitioner collaborations. Although organizations have become adept at collecting rich, detailed
data on job applicants, hiring practices, performance, mobility, and a range of other employment
practices and outcomes, few companies possess the conceptual and empirical tools necessary to see
the links among these various data, to actually link them together, and to analyze them in ways that
produce meaningful insights. These are all skills academics bring to the table. Each of the new
issues related to internal and external talent management mentioned above holds tremendous
theoretical and practical appeal, providing a winwin situation in which organizations provide
researchers access to detailed data in return for help generating insights and answers to questions
of interest to both parties. Beyond collaborations with individual organizations, we encourage
researchers to consider reaching out to organizations that collect data on multiple firms, such as
consulting firms, employment agencies, and executive search firms.
Although our review of the conceptual literature led us to define talent management as the
process through which organizations meet their needs for talent in strategic jobs, efforts to identify
strategic jobs are noticeably absent from the extant literature (Huselid & Becker 2011). Efforts to
operationalize the strategic jobs concept and to empirically identify such jobs within and across
organizations, particularly those located outside the executive suite, are sorely needed. Descriptive
data 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 many
identify 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 to
include new realities, including career management within organizations and identification and
development of HiPo employees. How organizations deal with the uncertainty involved in pre-
dicting what future strategic jobs will look like and how the pool of talent for those jobs will evolve
over time are other issues with significant theoretical and practical appeal.
Beyond these reasonably practical issues are the broader questions associated with talent
management. The practices associated with talent management within an organization matter to
those outside that organization because they determine access to important and desirable jobs. The
actions taken by workers in strategic jobs (which are often powerful positions) are shaped at least
in part by the processes that identify them, shape their attributes, and advance them from one job
to the next. Who gets ahead in this new system is a central issue for social scientists interested in the
individual, organizational, and societal outcomes of the interaction of workers, firms, and other
labor market institutions.
One conceptual issue driven by changes in the practice of talent management is whether the
focus 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, such
a change might lead to a shift from a psychology-based focus on individuals to a more organization
theorybased focus on the organization itself. In the heyday of traditional, postWorld War II
talent management, the focus was clearly on the individual candidate. Large numbers of such
candidates were being hired, developed, and moved through reasonably identical jobs in huge
corporations with massive management hierarchies. In virtually all such companies, the idea was
that an executive could be an expat leader now, a marketing leader in a few years, an HR leader after
that, and so forth. Rotation across jobs and functions was by design, without worrying even about
the fit between any specific requirement of each job and the attributes of the rotating manager who
might 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 on
the job and its requirements, including particular attributes of the organization. Then the process
moves to searching for a candidate who might fit those requirements. For current employees,
324 Cappelli Keller

internal job boards, as described above, bypass development and assessment processes when
candidates move.
The relative absence of academic research on talent management no doubt reflects these
developments. The research group with the long-term interest in talent managementpsychol-
ogistsis not positioned or perhaps interested in analyzing the new developments in the practice of
talent management. The fact that so much of the literature reviewed above that does relate to
contemporary practice comes from fields such as business strategy may reflect a long-term and
fundamental change in research.
FUTURE ISSUES
1. How do employers think about talent management in practice? To what extent does
talent management rely on completely ad hoc responses (e.g., wait for a vacancy and then
weigh the options available for filling it)?
2. How do employers think about the make-versus-buy choice?: Why do some decide to
promote from within, whereas others rely on outside hiring? Within organizations, when
do they decide to use one strategy or the other?
3. How do the institutions and vendors within talent managementexecutive 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, do
individuals with certain attributes come out ahead? Do certain jobs have advantages
in securing candidates?
5. What does career progression mean in practice inside organizations now? When there
is 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 well
do the arrangements work?
7. When organizations have HiPo programs, what are they based on, and how well do they
work?
8. How do organizations plan for the future when there is uncertainty surrounding the
future attributes of strategic jobs and the knowledge, skills, and abilities of those
individuals most likely to fill those jobs?
DISCLOSURE STATEMENT
The authors are not aware of any affiliations, memberships, funding, or financial holdings that
might be perceived as affecting the objectivity of this review.
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Interpersonal Construct
Amy C. Edmondson and Zhike Lei . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Personality and Cognitive Ability as Predictors of Effective
Performance at Work
Neal Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Perspectives on Power in Organizations
Cameron Anderson and Sebastien Brion . . . . . . . . . . . . . . . . . . . . . . . . . . 67
WorkFamily Boundary Dynamics
Tammy D. Allen, Eunae Cho, and Laurenz L. Meier . . . . . . . . . . . . . . . . . 99
Coworkers Behaving Badly: The Impact of Coworker Deviant
Behavior upon Individual Employees
Sandra L. Robinson, Wei Wang, and Christian Kiewitz . . . . . . . . . . . . . . 123
The Fascinating Psychological Microfoundations of Strategy and
Competitive Advantage
Robert E. Ployhart and Donald Hale, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . 145
Employee Voice and Silence
Elizabeth W. Morrison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
The Story of Why We Stay: A Review of Job Embeddedness
Thomas William Lee, Tyler C. Burch, and Terence R. Mitchell . . . . . . . . 199
Where Global and Virtual Meet: The Value of Examining the
Intersection of These Elements in Twenty-First-Century Teams
Cristina B. Gibson, Laura Huang, Bradley L. Kirkman,
and Debra L. Shapiro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
viii
Learning in the Twenty-First-Century Workplace
Raymond A. Noe, Alena D.M. Clarke, and Howard J. Klein . . . . . . . . . . 245
Compassion at Work
Jane E. Dutton, Kristina M. Workman, and Ashley E. Hardin . . . . . . . . . 277
Talent Management: Conceptual Approaches and Practical Challenges
Peter Cappelli and JR Keller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Research on Workplace Creativity: A Review and Redirection
Jing Zhou and Inga J. Hoever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
The Contemporary Career: A WorkHome Perspective

Jeffrey H. Greenhaus and Ellen Ernst Kossek . . . . . . . . . . . . . . . . . . . . . 361
Burnout and Work Engagement: The JDR Approach
Arnold B. Bakker, Evangelia Demerouti, and Ana Isabel Sanz-Vergel . . . 389

The Psychology of Entrepreneurship
Michael Frese and Michael M. Gielnik . . . . . . . . . . . . . . . . . . . . . . . . . . 413
Delineating and Reviewing the Role of Newcomer Capital in
Organizational Socialization
Talya N. Bauer and Berrin Erdogan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439
Emotional Intelligence in Organizations
Stphane Ct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
Intercultural Competence
Kwok Leung, Soon Ang, and Mei Ling Tan . . . . . . . . . . . . . . . . . . . . . . . 489
Pay Dispersion
Jason D. Shaw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521
Constructively Managing Conflicts in Organizations
Dean Tjosvold, Alfred S.H. Wong, and Nancy Yi Feng Chen . . . . . . . . . . 545
An Ounce of Prevention Is Worth a Pound of Cure: Improving
Research Quality Before Data Collection
Herman Aguinis and Robert J. Vandenberg . . . . . . . . . . . . . . . . . . . . . . . 569
Errata
An online log of corrections to Annual Review of Organizational Psychology and

Organizational Behavior articles may be found at http://www.annualreviews.org/
errata/orgpsych.
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ANNUAL

REVIEWS Further Talent Management:

Other articles in this volume

Wharton School of Business, University of Pennsylvania, Philadelphia,

Annu. Rev. Organ. Psychol. Organ. Behav. 2014. Keywords

DEFINING TALENT MANAGEMENT

306 Cappelli  Keller

A SURVEY OF THE CONCEPTUAL LITERATURE

Inclusive and Exclusive Approaches to Talent Management

www.annualreviews.org  Talent Management 307

Individuals and Jobs as the Loci of Workforce Differentiation

308 Cappelli  Keller

www.annualreviews.org  Talent Management 309

THE PAST AND PRESENT OF TALENT MANAGEMENT

310 Cappelli  Keller

www.annualreviews.org  Talent Management 311

Decline of the Traditional Model

312 Cappelli  Keller

Toward a New Model: Talent Management Under Uncertainty

www.annualreviews.org  Talent Management 313

NEW ISSUES WITH INTERNAL TALENT

Identifying the Internal Talent Pool

314 Cappelli  Keller

www.annualreviews.org  Talent Management 315

made. If it is based on performance, it could motivate LoPo employees to perform better; if it

316 Cappelli  Keller

developed more broadly becomes an attractive alternative to the succession model.

employees to leave. It is not legalindeed, it is unconstitutionalto compel employees to stay on

www.annualreviews.org  Talent Management 317

318 Cappelli  Keller

www.annualreviews.org  Talent Management 319

Developing Global Leaders

320 Cappelli  Keller

NEW ISSUES WITH EXTERNAL TALENT

growing reliance on external hiring has led to a burgeoning literature on interorganizational

Promise and Perils of External Hiring

www.annualreviews.org  Talent Management 321

Institutions Supporting External Hiring

322 Cappelli  Keller

www.annualreviews.org  Talent Management 323

324 Cappelli  Keller

www.annualreviews.org  Talent Management 325

dividual perspectives. Career Dev. Int. 9(1):5873

326 Cappelli  Keller

Philadelphia: Wharton Digit. Press

Ind. Labor Relat. Rev. 6(4):874901

www.annualreviews.org  Talent Management 327

328 Cappelli  Keller

www.annualreviews.org  Talent Management 329

Peiperl M, Baruch Y. 1997. The post-corporate career. Organ. Dyn. 25(4):722

330 Cappelli  Keller

www.annualreviews.org  Talent Management 331

Volume 1, 2014 Contents

What Was, What Is, and What May Be in OP/OB

Lyman W. Porter and Benjamin Schneider . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Contemporary Career: A WorkHome Perspective

Arnold B. Bakker, Evangelia Demerouti, and Ana Isabel Sanz-Vergel . . . 389

An online log of corrections to Annual Review of Organizational Psychology and

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