Talent Management and psychological contract content: differences caused by talent segmentation and type of employment relationship

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1 Talent Management and psychological contract content: differences caused by talent segmentation and type of employment relationship Master Thesis Ralph Ophelders MSc Goirkestraat 175, 5046 GH Tilburg Supervisor: Second assessor: dr. Mariëlle Sonnenberg dr. Marinus Verhagen Project Period: February 2010 March 2011

2 Talent Management and psychological contract content: differences caused by talent segmentation and type of employment relationship Master Thesis - Human Resource Studies Tilburg School of Social and Behavioral Sciences - Tilburg University Name : R. Ophelders, Address : Goirkestraat 175, 5045 GH, Tilburg Supervisor : Second assessor : dr. Mariëlle Sonnenberg Senior Manager at Accenture, Assistant Professor at Tilburg University dr. Marinus Verhagen Program Director of MSc Human Resource Studies at Tilburg University Project period : February 2010 March 2011 Graduation date : March 14th Talent Management: Psychological Contract Content

3 Preface After several months of joy, frustration, devotion and above all hard work this master thesis was finalized. The completion of this master thesis heralds the end of the master course Human Resource Studies at Tilburg University. I would like to use this opportunity to show my gratitude to several people who have contributed to the process of successfully writing my master thesis. First of all, I would like to thank Mariëlle Sonnenberg who as my supervisor provided solid and thorough insights that helped me improve my thesis. Moreover, Mariëlle s critical reflections on the thesis have been very helpful and clarifying to me. Also, I would like to thank Willemijn Noppers and Arjen Veenstra, who helped me and my colleagues with their supervision during our internship at Accenture Netherlands. Also, I would like to thank my parents, girlfriend and friends. For some of them the graduation process has been very challenging and demanding. Therefore, I hope that this master thesis is as satisfying to them as it is to me. A special thanks goes out to the interviewees and everyone who filled in the questionnaire that provided the necessary data for this study. Looking back on writing this master thesis, it has been a very challenging process. Therefore I am grateful to say that the people mentioned above provided the necessary support and inspiration to complete this master thesis. Ralph Ophelders Tilburg, February Talent Management: Psychological Contract Content

4 Content 1. Introduction Research question Relevance Theory The psychological contract Talent segmentation Type of employment relationship Organizational commitment Conceptual model Methodology Data collection and research design Sampling method and research population Measurement of central concepts Data analysis Sample statistics Results Descriptive statistics Correlations T-tests Multiple regression analysis Testing the mediator effect of the psychological contract content Conclusion and discussion Conclusion Discussion Talent Management: Psychological Contract Content

5 6. Limitations, recommendations and practical implications Limitations Recommendations Practical implications References Appendices Appendix 1. Regression analyses for testing the mediator effect Appendix 2. Tilburg Psychological Contract Questionnaire (TPCQ) Appendix 2. Items of the ACQ (Freese, 2007) Talent Management: Psychological Contract Content

6 Abstract The issue of talent management is becoming an important research area for academics and it recently has gained mainstream acceptance as an important management activity. This study focuses on the impact of both the employee s type of employment relationship and exclusive talent segmentation on the psychological contract content (perceived employee and employer obligations) and possible consequences for the employee s affective commitment, by examining the talent management policies of six large organizations and analyzing the data of 681 respondents. Results show that talents and other employees - with some exceptions- do not differ substantially with respect to the content of their psychological contract. However, talents proved to be somewhat more affectively committed than other employees. In contrast with what was expected this was not mediated by the content of the psychological contract. Moreover, the type of employment relationship did not prove to be an important factor in determining the employees psychological contract. Nevertheless, certain aspects of the employees psychological contract content proved to have a significant relationship affective commitment. Keywords: Talent Management, Psychological Contract Content, Talent Segmentation, Employment Relationship, Affective Commitment 1. Introduction The topic of talent management is subject to a growing interest, both in practice and academic literature (Rousseau & Tijoriwala, 1998; Collings & Mellahi, 2009). According to Collings & Mellahi (2009) this is due to a shift within traditional human resource management towards the management of talent in order to cope with the dynamic and competitive organizational environment. Nowadays organizations find themselves in an environment where talented employees and knowledge provide the competitive edge (Wiig, 1999). As a result talented employees are becoming an asset that organizations employ to build a sustainable competitive advantage. However, both business practitioners and academics indicate that talented employees Talent Management: Psychological Contract Content

7 are becoming harder to find, more difficult to retain and easier to lose (Cheese, Thomas & Graig, 2008). Therefore, the importance of effective and efficient talent management is emphasized by multiple authors (Guest & Conway, 2002; CIPD, 2006; ; Cheese et al., 2009). Several changes have contributed to this competition for talent: the economic crisis, skill shortages, globalization, constantly changing markets, technology and products, traditional organizational structures are becoming more fluid (Stiles, Gratton, Truss, Hope-Hailey & McGovern, 1997; Cheese, Gartside & Smith, 2009). Talent management is defined as: the identification, development, engagement/retention and deployment of talent within a specific organizational context (CIPD, 2006). Talent management practices are not just the implementation of a firm s strategy in order to improve the work process, they also provide employees with information about organizational expectations and obligations (Guest & Conway, 2002). Following on the signaling theory, Sonnenberg (2006) argues that these signals can be seen as organizational characteristics influencing the employee s attitude toward the organization and subsequently the employee s behavior. Based on an individual perception of these signals the employee believes that he is obliged to perform or behave in a certain manner and believes that the organization has certain obligations and expectations towards him (Rousseau, 1989; Rousseau & Tijoriwala, 1998). This perception of mutual expectations and obligations is termed the psychological contract. Rousseau (1989, p. 123) defines the concept of the psychological contract as: An individual s belief in the terms and conditions of a reciprocal exchange agreement between the focal person and another party. A psychological contract emerges when one party believes that a promise of future returns has been made, a contribution has been given, and thus, an obligation has been created to provide future benefits. The interpretation and importance of these obligations varies across the workforce. Differences in the content of the psychological contract can be due to numerous individual differences (e.g. tenure, gender, age). This study focuses on two of these individual differences: differences due to exclusive talent segmentation and employment contract differences. Inconsistencies within perceived employee and organizational obligations will affect the employees attitude toward the organization (Turnley & Feldman, 1999). Subsequently, this may affect the organizational commitment of the employee. Or, as Shore & Barksdale (1998) emphasize: employees who feel that they are valued are likely to have a better job attitude, commitment, job performance and organizational citizenship behavior (OCB) Talent Management: Psychological Contract Content

8 In this study the framework of the psychological contract is used to explore the employment relationship between employee and employer. If organizations are to enclose their employees as a competitive advantage it is important to know what - talented employees in particular - expect from their employer, and to make these employees aware of what is expected from them in order to prevent friction and disappointment which in turn could lead to decreased commitment. To do so organizations have to be clear about what is on offer, meet obligations (or explain what went wrong) and regularly monitor employee attitudes (CIPD, 2009). 1.1 Research question Based on the literature, the type of employment relationship (permanent vs. contingent) and exclusive talent segmentation (talents vs. other employees) are expected to influence the content of the psychological contract. According to Guest (2004a) there is reason to believe that psychological contract content mediates the relationship between the employment relationship and affective outcomes such as commitment. Therefore, the following research question is posed: To what extent do type of employment relationship and exclusive talent segmentation influence perceived employee and employer obligations (psychological contract content) and to what extent does this influence the affective commitment of employees? 1.2 Relevance Despite the growing academic and managerial interest in the concepts of talent management, contingent employment relationships and psychological contract, a lot of questions remain. Most of the research on the psychological contract for example is on violating and/or fulfilling the contract (Rousseau & Tijoriwala, 1998). Little is known about the content of the psychological contract and how it affects organizational commitment (Guest, 2004; Herriot et al., 1997). Moreover, empirical research using content-oriented assessment of the psychological contract remains relatively absent. According to Freese & Schalk (2008), the relationship between perceived employer and employee obligations is a research area that needs to be elaborated if organizations want to be able to develop an understanding of what employees expect from them as an employer and what they can expect from their (talented) employees. From a theoretical stance, the results of this research can aid to the understanding of these various concepts, as they provide insights into the relationship between type of employment relationship, exclusive talent segmentation, the psychological contract and affective organizational commitment. The practical relevance is that organizations can gain better insight in what their employees expect Talent Management: Psychological Contract Content

9 from their employer and what obligations they have to meet. According to Herriot et al. (1997) apprehension of the content of the psychological contract is fundamental if organizations want to form satisfying employment relationships, based upon the psychological contract. Moreover, the findings in this research can provide organizations with insights in how to deal with different groups of employees (contingent workers, permanent workers, talents and other employees ) and how to keep them committed to the organization Talent Management: Psychological Contract Content

10 2. Theory 2.1 The psychological contract The concept of the psychological contract has been defined by numerous authors. In this research the psychological contract is defined as an employee s perception, shaped by the organization, concerning terms of an implicit accommodation between the employee and the organization (Rousseau, 1995). The concept of psychological contract has become prominent in articles on management development and human resource management. This is because the psychological contract is seen as a key concept for organizations to overcome changes in the workplace in order to remain competitive (Stiles et al., 1997). A psychological contract arises when employer and employee induce promises that lead to mutual obligations (Rousseau, 1989). The psychological contract refers to the perceptions of mutual obligations toward each other held by the employee and the employer (the two parties involved in the employment relationship) (Herriot, Manning & Kidd, 1997). Rousseau & Tijoriwala (1998) emphasize that a psychological contract is an individual perception, meaning that a psychological contract is subjective and as such, can be interpreted differently by the parties involved (Rousseau & Tijoriwala, 1998). This individual perception of the psychological contract can lead to problems and misinterpretations in the employment relationship between employee and employer. If organizations want to hold up to their side of the bargain, they have to be informed about what employees expect from them. The psychological contract differs from the formal employment contract in that the latter is considered to be transactional, focusing on economic and extrinsic aspects, specific, close-ended, static and public, while the psychological contract is outlined as both economic and non-economic, intrinsic, socio-emotional, open-ended, indefinite, dynamic and subjective (Rousseau, 1990). Rousseau & Tijoriwala (1998) distinguish three ways to assess the concept of the psychological contract: (1) content-oriented research, (2) feature-oriented research and (3) evaluation-oriented research. This study focuses upon the specific terms of the contract and can therefore be labeled content-oriented. Rousseau & Tijoriwala define this type of psychological contract assessment as: Examining the content of the contract including its terms and the interrelations among terms (e.g., contingencies and/or reciprocities among specific employee and employer obligations) (Rousseau & Tijoriwala, 1998, p. 685) Talent Management: Psychological Contract Content

11 Feature-oriented research makes a comparison between the psychological contract and some attribute or dimension (e.g., the degree to which the contract is implicit/explicit, static/dynamic, written/unwritten, or stable/unstable) (Rousseau & Tijoriwala, 1998). The feature-oriented approach is used extensively to describe the characteristics of the psychological contract (Freese & Schalk, 2008). Psychological contracts have been termed: transactional, balanced, transitional, relational, team player, loyal, instrumental, weak, unattached, investing and strong (Macneil, 1985;McFarlane Shore, & Tetrick, 1994; Rousseau & McLean Parks 1993; Rousseau & Wade Benzoni,1994; McLean Parks, Kidder, & Gallagher, 1998; Rousseau & Tijoriwala, 1998; Van den Brande,2002; Sels, Janssens & van den Brande, 2004). The variety of characterizations stems from the difficulty to develop a standard measure to study the content of the psychological contract. Moreover, Freese & Schalk (2008) emphasize that psychological contracts may be comprised of hundreds of items that can be specific for a person or organization. Therefore, many researchers choose to describe features or dimensions of the psychological contract. However, this feature-approach does not include perceived employee and organizational obligations and therefore cannot explain why different groups of employees perceive them differently (Freese & Schalk, 2008). Furthermore, Freese & Schalk (2000) argue that feature-oriented assessment is not the preferable manner to measure the psychological contract because of inconclusive results and conceptual problems. According to Rousseau & Tijoriwala (1998) this type of assessment is well suited to compare how individual employees perceive mutual obligations of both the employer and employee across organizational roles or positions. Evaluation-oriented research compares individual judgments about the degree of fulfillment, or violation of the psychological contract (Rousseau & Tijoriwala, 1998). Most of the academic literature and research on the psychological contract uses this type of assessment. In general, the majority of authors on evaluation-oriented research agree upon the proposition that when one of the two parties involved in the psychological contract (employer and employee) does not live up to the perceived obligations of the other party involved, this leads to psychological contract violation (Robinson & Rousseau, 1994). This violation of the psychological contract in turn leads to negative responses (i.e. reduced loyalty, commitment and OCB) (Robinson & Rousseau, 1994). This study focuses on content-oriented research of the psychological contract. However, this does not imply that both feature-oriented and evaluation-oriented research of the psychological contract are considered to be vicious or less important. The reason for focusing on content-oriented research derives from the belief that in order to expand the knowledge of psychological contract features and Talent Management: Psychological Contract Content

12 evaluations a sound and accepted theoretical foundation of the content of the psychological contract has to be in place (Rousseau & Tijoriwala, 1998; Freese & Schalk, 2008). Freese, Schalk & Croon (2008) developed an instrument to measure the psychological contract: the Tilburg Psychological Contract Questionnaire (TPCQ). Based on factor analysis they distinguished five perceived organizational obligations scales, based on theories about work values and employment satisfaction: content of the work, career development, social atmosphere, organizational policies and rewards. Perceived employee obligations are divided in two scales: in-role behavior and extrarole behavior. The items on perceived employee obligations are derived from the work of Rousseau & De Palma complemented with items that are concerned with internal absenteeism (Freese et al., 2008). The psychometric qualities of the scales are good and the test-retest reliability can be labeled as reasonable to good (Freese et al., 2008). For an overview of the items used in the TPCQ see Appendix 1. Table 1 provides the constructs, domains and example items of the psychological contract. Table 1. Constructs, domains and example items of the psychological contract (Freese, 2007). Constructs Domains Example items 1. Employer obligations Job content Challenging work Career development Career opportunities Social atmosphere Support from colleagues Organizational policies Clear and fair rules ` Work-life balance Adjust working hours to private life Rewards Pay for performance 2. Employee obligations In-role behavior Working with integrity Extra-role behavior Volunteering to do additional tasks 3. Evaluation * Fulfillment To what extent did your employer fulfill Obligations, such as challenging work Violation I feel frustrated * The evaluation construct is not part of this study 2.2 Talent segmentation Talent segmentation in general takes two forms: exclusive and inclusive. With inclusive talent segmentation, talent management practices are targeted at all employees within the organization, while with exclusive talent segmentation, talent management practices are focused on a specific group within the organization (e.g. high potentials, young professionals) (CIPD, 2006). Exclusive talent segmentation could lead to differences between employees, as with exclusive talent segmentation, talent management practices are focused on a specific group ( talents ) within the organization (CIPD, 2006). Consequently, when employees are not labeled as talents they might Talent Management: Psychological Contract Content

13 perceive less or different signals compared to talented employees, resulting in different attitudes about what their obligations are toward the organization and what the employers obligations should look like. This difference in perception may evoke inconsistencies within the psychological contract. It is important to note that there will still be differences in the content of the psychological contract between individual employees when an organization induces inclusive talent segmentation, however these differences will be due to other personal traits (e.g. job tenure, age, job function). Guest & Conway (2002) and Sonnenberg (2006) argue that talent management practices provide employees with signals about both employee and employer obligations. When a group of employees is subject to talent management practices and others are not, these two groups receive different signals from their employer. Different signals can cause employees to perceive personal and organizational obligations differently. For instance, when an organization employs pay-for-performance only for talented employees, this signals these employees that the organization values individual performance, while employees that are not subject to this talent management practice do not perceive these signals. As a result, this may lead to different perceptions of both employee and employer obligations. When an organization induces an exclusive talent segmentation, talented employees are more likely to be subject to talent management practices and as such receive more signals about what the organization expects from its employees and what the employees in turn can expect from the organization (the psychological contract content). This could cause talented employees to perceive that their employer has more obligations to them as talented and thus valuable employees compared to other employees. Therefore, it is expected that talented employees perceive more employer obligations (i.e. more job content, career development, social atmosphere, organizational policies, work-life balance and rewards). Furthermore, when employees are subject to talent management practices they are more likely to feel valued and as such they are more likely to reciprocate by engaging in extra-role behavior (Coyle-Shapiro & Kessler, 2002). Put differently, exclusive talent segmentation could cause talented employees to feel valued over other employees and as such they could be more willing to walk the extra mile. Therefore, it is expected that talented employees perceive more employee obligations (i.e. extra-role behavior). This will be tested by hypotheses 1a and 1b. Hypothesis 1a: Talents will perceive more of employer obligations (i.e. job content, career development and rewards) compared to other employees. Hypothesis 1b: Talents will perceive more employee obligations (i.e. extra-role behavior) compared to other employees Talent Management: Psychological Contract Content

14 2.3 Type of employment relationship According to Dyne & Ang (1998) the employment relationship is an important factor in exploring the relationship between employees and their organization as it is likely to influence the employee s perception of both employer obligations (e.g. job security, access to training and opportunities for career development) and employee obligations (e.g. extra-role behavior). In this study a distinction is made between two types of employment relationships: contingent employment and permanent employment. A distinguishing characteristic of a contingent employment relationship is the absence of a continuous relationship between the employee and the organization (McLean Parks et al., 1998). The definition by Pot, Koene & Paauwe (2001, p.2), is used to define contingent employment: Any employment relationship that, within a limited period, can be terminated by the user organization without costs. Based on this definition, contingent employment relationships include: agency work, limited employment contracts, on-call contracts and self-employed workers that are hired by the organization (Pot et al., 2001). According to Guest (2004a) the growth of the number of contingent contract employees signals a shift of risks from the employer to the employee. While Esteban-Pretel, Nakajima & Tanaka (2009) stress the importance of the introduction of legislation to make the labor market more flexible and reduce costs for organizations. Contingent employment relationships are used as a means to ensure complete and efficient use of human resources (Guest et al., 2006). However, these benefits for organizations may threaten the employee s security (Guest et al., 2006). Because of this lower certainty employees with a contingent employment relationship would expect less from their employer causing them to perceive less employer obligations (van Dyne & Ang, 1998). Employees with a permanent employment relationship are for instance more likely to perceive career development like training and development practices as an employer obligation than their contingent counterparts, because of the very nature of their employment contract (van Dyne & Ang, 1998). Accordingly it is argued that employees with a permanent employment relationship perceive a broader range of employer obligations as a result of their employment relationship: Hypothesis 2a: Employees with a permanent employment relationship will perceive more employer obligations (i.e. job content, career development, social atmosphere, organizational policies and rewards) compared to employees with a contingent employment relationship Talent Management: Psychological Contract Content

15 According to Guest, Oakly, Clinton & Budjanovcanin (2006) the use of contingent employment relationships may bring benefits to the organization, but it may also cause employees with a contingent employment relationship to feel less valued than core employees with a permanent employment relationship. Moreover, since employees with a contingent employment relationship lack the certainty of a continuous employment relationship, they may have less incentives to invest in their employment relationship. Therefore, it is anticipated that permanent employees perceive more employee obligations (i.e. extra-role behavior) compared to employees with a contingent employment relationship: Hypothesis 2b: Employees with a permanent employment relationship will perceive a broader range of employee obligations (i.e. more extra-role behavior) compared to employees with a contingent employment contract. 2.4 Organizational commitment Organizational commitment has become a conventional concept when it comes to studying organizations, work attitude and behavior (Meyer & Allen, 1991; Meyer & Allen 1996; Ko et al., 1997). The interest for organizational commitment stems predominantly from its impact on constructs like turnover and absenteeism (Meyer & Allen, 1996; Ko et al., 1997). Throughout this study the definition by Mowday, Steers & Porter (1979, p. 226), in which they distinguish three elements of organizational commitment is used: (1) accepting the goals and values of an organization, (2) being willing to put in significant effort on behalf of the organization and (3) the desire to remain part of the organization. Meyer & Allen (1990) elaborated upon the concept of organizational commitment in depth by identifying three types of organizational commitment: affective, continuance and normative. Affective commitment concerns: identification with, involvement in, and emotional attachment to the organization (Meyer & Allen, 1997, p. 253). When employees show strong affective commitment they want to remain with the organization (Meyer & Allen, 1996). Continuance commitment concerns the willingness of an employee to stay an organizational member (Meyer & Allen, 1997). This willingness stems from the investments the employee has made as an organizational member and the costs associated with leaving the organization. Accordingly, when continuance commitment is high employees will remain with the organization because they feel that they need to (Mowday et al., 1979; Meyer & Allen, 1996). Normative commitment can be defined as the (feeling of) obligation an employee holds to his or her organization (Bolon, 1993). Employees with strong normative commitment feel that they ought to remain with the organization Talent Management: Psychological Contract Content

16 Various authors (Shore & Martin, 1989; Ko et al., 1997; Becker, 1992; Mathieu & Zajac, 1990), have justifiably criticized continuance and normative commitment scales for various reasons. Also, previous research of Sturges, Conway, Guest & Liefooghe (2005) showed that only affective commitment has a significant relationship with the psychological contract. Therefore, only affective commitment is included in this research. Affective commitment is measured by the Affective commitment Scale (ACS) of Freese (2007) (appendix 2). The relationship between the psychological contract and affective commitment has already been explored and proven to exist (Guest, 2004b; Sturges et al., 2005; Freese, 2007). However, these studies focus on the relationship between psychological contract fulfillment and affective commitment. Empirical evidence on the relationship between the content of the psychological contract and affective commitment is lacking. Nevertheless Guest (2004a) states it is reasonable to expect that the relationship between the employment relationship and affective commitment is affected by the content of the psychological contract. Yet it is plausible to expect that employees that perceive more employee obligations (e.g. more extra-role behavior like participating in social activities of the organization) - and thus feel obliged to put in more effort - are more affectively committed to the organization than employees that perceive less employee obligations. For instance employees that perceive working overtime as an employee obligation are willing to walk the extra mile and as such they are likely to be more affectively committed to the organization. Therefore, the following hypotheses will be tested: Hypothesis 3a: More perceived employer obligations will lead to higher affective commitment. Hypothesis 3b: More perceived employee obligations will lead to higher affective commitment. Employees who feel that they are valued are likely to be more committed to the organization than employees that do not feel valued (Shore & Barksdale, 1998). As noted before, exclusive talent segmentation may cause talented employees to feel valued more than other employees. Accordingly, it is reasonable to expect that these talented employees will be more affectively committed to the organization than other employees. This will be tested by the following hypothesis: Hypothesis 4: Talented employees will have stronger affective organizational commitment compared to other employees Talent Management: Psychological Contract Content

17 The direct relationship between type of employment relationship and affective commitment has been elaborated upon by several authors (Pearce, 1993; Eberhardt & Moser, 1995; Guest & Conway, 2000). The limited evidence shows that there is little or no difference in affective commitment between permanent and contingent employees. Therefore, it is assumed that this will also be the case in this study. 2.5 Conceptual model This study examines the relationship between both the employee s type of employment relationship (permanent vs. contingent) and exclusive talent segmentation (talents vs. other employees) and the content of the psychological contract. According to Guest (2004a) there is reason to believe that psychological contract content mediates the relationship between the employee s employment relationship and affective outcomes such as commitment. Also a direct relationship between exclusive talent segmentation (talents vs. other employees) is anticipated. Figure 1 provides a conceptual presentation of this study. Exclusive talent segmentation (talents vs. other employees) Type of employment relationship (contingent vs. permanent) 1 2 Perceived employee and employer obligations (psychological contract content) 4 3 Affective commitment Figure 1. Conceptual model Talent Management: Psychological Contract Content

18 3. Methodology 3.1 Data collection and research design The data was gathered together with three colleagues, within a large talent management study in collaboration with Accenture (located in Amsterdam, the Netherlands). The participating organizations were approached on behalf of Accenture. First, explorative interviews with HRmanagers of these organizations were conducted to get a better contextual understanding of the organization s talent management policy. During these interviews, HR- and TM-managers of the participating organizations were asked what type of talent segmentation is applied in their organization. Additionally the HR-managers were asked to randomly assign a representative sample of talented employees and other employees. Subsequently, these employees received a questionnaire with additional information. The data from the questionnaires was imported in the statistical analysis program SPSS. Consequently the method of this study is both qualitative and quantitative. According to Conway & Briner (2005), questionnaire surveys are the conventional method to measure the psychological contract. The data was gathered at one point in time and as such, the study can be labeled cross-sectional (Pallant, 2005). 3.2 Sampling method and research population In collaboration with Accenture Netherlands, Six organizations (with over 500 employees) of which five are situated in the Netherlands and one in Malaysia - were targeted to participate in this research. Employees of the participating organizations with contingent and permanent employment relationships were selected as well as employees that are subject to exclusive talent segmentation (both employees that are labeled talent and employees that are not). Employees that are working in organizations that employ an inclusive talent management segmentation strategy were excluded from the study, because only employees that are subject to an exclusive segmentation strategy can feel valued differently as a result of the segmentation strategy. Because the data is gathered from individual employees, the unit of analysis is at the individual level. 3.3 Measurement of central concepts The employment relationship of respondents was measured by asking respondents about their contract type (permanent or contingent). Following Pot et al. (2001, p. 2) contingent work relationships were defined as: Talent Management: Psychological Contract Content

19 Any employment relationship that, within a limited period, that can be terminated by the user organization without costs. Based on this definition, contingent employment relationships include: agency work, limited employment contracts, on-call contracts and self-employed workers that are hired by the organization (Pot et al., 2001). Next a dummy variable was created, were permanent employment relationships function as the reference group. Exclusive talent segmentation (talents vs. other employees). First, human resource managers were asked to deliver a list of approximately 100 talents and 100 other employees. Next, employees were asked to indicate which type of talent management segmentation strategy (exclusive, or inclusive) fits best to the actual strategy that is employed within their organization (employees that perceived the strategy to be inclusive are not part of this study). In order to divide employees in two categories (talents vs. other employees) a dummy variable was created where talents function as the reference group. Perceived employee and employer obligations were measured by using the Tilburg Psychological Contract Questionnaire (TPCQ) (appendix 1) of Freese et al. (2008). They used factor analysis to distinguish five perceived organizational obligations scales: (1) content of the work, (2) career development, (3) social sphere, (4) organizational policy en (5) rewards. Perceived employee obligations are divided in two scales: (1) in-role behavior and (2) extra-role behavior. Freese et al. (2008) make use of a unilateral approach, meaning that employees are questioned about how they perceive both employee and employer obligations. The items for perceived employer obligations and perceived employee obligations were measured on a 5-point Likertscale (ranging from 1 = no obligation at all to 5 = very strong obligation). Affective commitment is defined as: identification with, involvement in, and emotional attachment to the organization (Meyer & Allen, 1997, p. 253) and is measured by using the Affective Commitment Questionnaire (ACQ) (appendix 2) of Freese (2007). The items were measured on a 5- point Likertscale (ranging from 1 = totally disagree to 5 = fully agree). In order to improve the comparability of the sample population control variables are used to control for variables that (may) have an effect on the relationships that will be examined (Pallant, 2005). In this study these are: age, gender (dummy), tenure and the organizations country of origin (dummy). For gender as well as for the organization s country of origin dummy variables were created; dividing the sample in two groups. With gender males function as the reference group, while with the Talent Management: Psychological Contract Content

20 organization s country of origin Dutch organizations function as the reference group. The decision to add or remove individual control variables was based on the correlation between these control variables and the main variables (shown in Table 3). 3.4 Data analysis First, exploratory and graphical analyses were conducted to check for consistency in the dataset. Missing values were removed and scores that are out of range were deleted. Secondly, the data was assessed on normality and checked for linearity. To check for normality a normal probability plot was used. In a normal probability plot, the cumulative distribution of the analyzed variable ( Observed ) is plotted against the cumulative distribution that one would expect when the distribution is normal ( Expected ) (De Vocht, 2008). In order to check if the scales of the ACQ (Meyer & Allen, 1990) and TPCQ (Freese et al., 2008) consistently reflect the construct that is measured they were checked on internal reliability by analyzing the Crohnbach s alpha (= α). For the affective commitment scale (see Appendix 2) the Crohnbach s alpha was.858 and no items were deleted. Table 2 provides the number of items that make up the subscale, (possible) deleted items and the Crohnbach s alpha of the eight psychological contract subscales (i.e. job content, career development, social atmosphere, organizational policies, work-life balance, rewards, in-role behavior and extra-role behavior) (see Appendix 1 for an overview of the individual items). Table 2. Psychological contract subscales (α, number of items and deleted items). Construct Subscale items α Item deleted Employer obligations Employee obligations Job content Balance in workload (3) Career development Social atmosphere Organizational policies Work-life balance Rewards In-role behavior Dealing with private matters at home (41) Extra-role behavior In the conceptual model perceived employer and employee obligations moderate the relationship between exclusive talent segmentation ( talents vs. other employees ) and affective commitment as well as the relationship between type of employment relationship (permanent vs. contingent) and affective commitment. Baron & Kenny (1986, p. 1174) describe a moderator variable as: Talent Management: Psychological Contract Content

21 a qualitative, or quantitative variable that affects the direction and/or strength of the relation between an independent or predictor variable and a dependent or criterion variable. According to Baron & Kenny (1986) this implies that the statistical analysis must measure and test the differential effect of the independent variable (i.e. exclusive talent segmentation and type of employment relationship) on the dependent variable (affective commitment) as a function of the moderator variable (i.e. perceived employee and employer obligations). To do so, Baron & Kenny (1986), suggest to analyze the moderation effect by use of multiple regression analysis. This analysis will also function as a check for the results that are obtained from the separate analyses of hypotheses 1, 2, 3 and 4. However if hypotheses 1,2,3 and 4 are significant, this does not automatically mean that the moderator hypothesis has to be significant (Baron & Kenny, 1986). The individual hypotheses can be significant, but in order to prove that perceived employee and employer obligations moderate the effects of talent segmentation strategy and type of employment relationship, the interaction effect has to be significant (Baron & Kenny,1986). 3.5 Sample statistics In total six organizations participated in this study, leading to 681 respondents (an overall response rate of 49%). Based on the organization s specific definition of talent, 330 respondents can be considered as talents (response rate of 54%) and 351 as other employees (response rate of 45%). 203 of these 681 respondents were excluded because they perceived the talent segmentation of their company to be inclusive, leading to a sample population of 478 respondents. Table 3 provides an overview of the sample characteristics. Table 3. Sample statistics. Mean SD Percentage N = 478 Number of organizations = 6 Age 37,75 8,85 Work experience 14,05 10,13 Tenure 8,45 7,86 Gender - Male 69.8% - Female 30.2% Educational level - Lower education 13.8% - Higher education 86.2% Type of employment contract - Permanent 93.1% Talent Management: Psychological Contract Content

22 - Contingent 6.9% Position - Managerial 50.3% - Non-managerial 49.7% Of the 478 respondents 255 (53.3%) are labeled as talents by their organization evidently 223 (46.7%) respondents are labeled as other employees. The sample consists of 333 (69.8%) men and 144 (30.2%) women. Of the total sample 412 (86.2%) employees are highly educated. The average age is 38, the average tenure is 8 years, while the average work experience is 14 years. Moreover, 239 (50.3%) respondents hold a management position within their company, while 236 (49.7%) do not. The vast majority of the sample (93.1%) has a permanent employment contract while only a small part (6.9%) has a contingent employment contract. Furthermore, the greater part of the sample is highly educated (84.5% has completed a secondary maturity level education). Overall, the sample is relatively young, highly educated and mainly male. This should be kept in mind when comparing the sample to the overall population Talent Management: Psychological Contract Content

23 4. Results 4.1 Descriptive statistics In order to get a better understanding of the main variables that are included in this research, Table 4 presents the statistics of the scales measuring these concepts (range, minimum score, maximum score, N, mean score, standard deviation, number of items and Cronbach s alpha). First of all, the employee s perception of employer obligations is studied in six domains: job content, career development, social atmosphere, organizational policies, work-life balance and rewards. Perceived employee obligations are addressed in terms of in-role behavior and extra-role behavior. Table 4. Descriptive statistics. Employer obligations Range Min Max N Mean SD items α 1 Job content Career development Social atmosphere Organizational policies Work-life balance Rewards Employee obligations 7 In-role behavior Extra-role behavior Affective commitment Correlations The Pearson correlation (r) is used to indicate the strength and the direction of the relationships between the main variables and control variables in this research (without making any assumptions about causality) (Pallant, 2005). The correlation matrix (Table 3) - shown on the next page - provides the mean, standard deviation (SD) and the correlation coefficients of these main variables and control variables Talent Management: Psychological Contract Content

24 The value of the correlation coefficient - indicating the strength and direction of the relationship - can range from (perfect negative correlation) to 1.00 (perfect positive correlation) (Pallant, 2005). When interpreting the strength of the relationships, Cohen (1988) suggest the following guidelines: small.10 to.29, medium.30 to.49 and large.50 to All of the control variables (i.e. age, tenure, gender and the organizations country of origin) show significant correlations with at least one of the main variables. Therefore, all control variables are included in the regression analyses testing hypotheses 3a, 3b, 4 and the mediator effect of perceived employer and employee obligations in the relationship between exclusive talent segmentation and affective commitment. The segmentation between talents and other employees, that stems from an exclusive talent segmentation, only significantly correlates with job content (.104 * ). Therefore it can expected that talents and other employees only differ to the extent they perceive their employer to be obliged to provide that with job content. The type of employment contract only shows a significant result for in-role behavior (-.104 * ). Furthermore, affective commitment shows several significant correlation coefficients with both individual employer and employee obligations, indicating that the content of the psychological contract could be an important aspect affecting the affective commitment of employees Talent Management: Psychological Contract Content

25 Table 5. Correlation matrix. 1 Age Tenure ** - Mean SD Gender ** ** - 4 Organizations country of origin ** * Exclusive Talent Segmentation **.144 ** Employment relationship ** ** Job content ** ** * * Career development ** **.146 ** ** - 9 Social atmosphere * **.124 ** * **.505 * - 10 Organizational policies * ** **.498 **.517 ** - 11 Work-life balance ** *.090 * ** **.401 **.404 **.438 ** - 12 Rewards * **.435 **.407 **.509 **.481 ** - 13 In-role behavior **.140 ** ** *.229 **.236 **.306 **.512 **.179 **.233 ** - 14 Extra-role behavior **.100 * **.148 **.183 **.302 ** **.498 ** - 15 Affective commitment ** ** *.092 * ** **.146 ** - * p <.05. ** p < Reference category: male = 0 2 Reference category: Dutch organizations = 0 3 Reference category: talents = 0 4 Reference category: permanent employment relationship = 0

26 4.3 T-tests In order to test the relationship between exclusive talent segmentation ( talents compared to other employees ) and both perceived employer and employee obligations (as stated in hypothesis 1a and 1b) independent samples t-tests were conducted. Table 6 and Table 7 show the mean scores, standard deviation (SD), t-value for both talents and other employees. Table 6 shows whether talents and other employees differ significantly in terms of their perceived employer obligations. While Table 7 does the same for perceived employee obligations. Hypothesis 1a: Talents will perceive more of employer obligations (i.e. job content, career development and rewards) compared to other employees. Table 6. T-tests employer obligations (talents and other employees) (n=473). Talents Other employees Mean SD Mean SD Sig. (2-tailed) t Job content * 2.34 Career development (1.92) Social atmosphere (.472) Organizational policies , (-.863) Work-life balance , (.802) Rewards (-.369) * Mean difference is significant at the.05 level (2-tailed). For talents the mean score on job content is 3.98 and the standard deviation is.54, while for other employees these scores are 3.84 and.70. Moreover this difference is significant (.020) and the t- statistic is This leads to an eta squared value of.011 effect (1,1% of the variance in job content can be explained by the division between talents and other employees ). According to Cohen (1988), this indicates a moderate For the other employer obligations the difference between the mean scores is not significant. Therefore, differences between talents and other employees on career development, social atmosphere, organizational policies, work-life balance and rewards are considered to be absent. Overall, this leads to a partial acceptance of hypothesis 1a: Talents perceive their employer to be more obliged to provide them with job content, compared to other employees. However, it is