Talent management and cultural assumptions of the psychological contract

Since a team from the US consulting firm McKinsey published “The War for Talents” in 1998, strategies to attract, develop and retain people considered to be talents have become a priority among companies operating in competitive international markets. However, over time, the programs that have evolved as a crucial ingredient to participate in this «war» have shown to have quite meagre results. Despite all the resources invested, a study by CEB/SHL has shown that 55% of participants will drop out of the program within five years, and participants in these programs are just about as likely as others to leave the company.

In the discussions that have followed to address the issues of the talent programs, one of the aspects that have been highlighted is the place of the so-called «psychological contract». What this concept suggests is that the written contract between an employer and an employee is far from enough to understand how they actually relate to each other. This is not the least visible in talent programs, where those who have been chosen to participate in them all the sudden start thinking about themselves and their relation with the company in a new way, but are actually also seen by others in the company in a different light. Expectations have shifted, because the relation has changed. If the previous relation was between an employer and an employee, the new relation could rather be described as playing out between current and future leaders of the company.  A talent will therefore start assuming that the company will be offering attractive positions, and that the salary will be raised, among other things. One of the reasons why people leave after finishing the talent programs is because their expectations are not met.

These insights have been important to propose improvements to talent management strategies. For example, an obvious step is to clarify what the expectations can actually be, formulating a career plan. In this way, the discussion on the psychological contract has proven to be a welcome contribution to the difficulties that have been facing talent programs. However, what tends to be left out of the picture are the cultural variations within a company, which are especially relevant when it comes to companies operating on an international arena. The problem with the psychological contract is that it is not located exclusively in people’s psyche, but in the culture that they are part of.

In practice, and even despite efforts to do otherwise, international companies always adapt to the cultural realities of the places where they operate, as authors such as Geert Hofstede have shown. Some countries for instance tend to be more individualistic, while others have a more collectivistic inclination. In some places, the hierarchies are relatively rigid, and only the ones at the top are expected to take all the initiatives, while the opposite is true elsewhere. The ways that companies will actually work will thus conform to these cultural particularities. When it comes to the discussion about talent management, nevertheless, this is something that is normally not considered. What you will find is rather cultural assumptions that are common in the US, where the preoccupation with the war for talents started. Much as in the US at large, you have a strong focus on the individual, and the key for innovation is believed to be found in relatively flat organizations. The problem here is that these assumptions don’t necessarily hold all over the world. In a country such as Mexico, with much more collectivistic, but also more hierarchical preferences, you can expect the existence of a talent program as such to be perceived in a different way than in the US. This is also true concerning the expectations that a “talent” will have.

So, if the so-called psychological contract shifts when somebody is chosen for a talent program, the way that this implicit contract is configured in practice will depend on culturally informed assumptions. If these cultural assumptions are not taken as seriously as the psychological contract, the risk is that we once again lose sight of the implicit features of work relations that are so important for the success or failure of talent programs.