Human resources are among the main sources of competitive advantage for organizations. For this reason, employee turnover becomes a problem since it deprives companies of qualified employees, leads to increased costs because of the need to hire and train new workers, and results in morale damage and productivity loss (Narayanan, Rajithakumar, and Menon, 2019). To prevent employee turnover and gain a greater competitive advantage, organizations invest in talent management. Talent management means processes and activities that involve developing a talent pool of high performers, facilitating the filling of key organizational positions with these high performers, and ensuring their long-term commitment to the firm (Narayanan, Rajithakumar, and Menon, 2019). This paper aims to discuss talent management theories related to employee turnover, as well as practices of managing people lawfully and ethically. Additionally, it will evaluate the impact of these theories and practices on the strategic goals of PepsiCo, a US-based multinational company operating in the food and beverage industry.
Relevant Resourcing and Talent Management Theories
One talent management theory related to employee turnover is the resource-based view (RBV) theory. According to RBV, the organization’s competitive advantage stems from its resources that are “valuable, rare, difficult to imitate, and nonsubstitutable” (Narayanan, Rajithakumar, and Menon, 2019, p. 232). Based on these criteria, one may conclude that part of human resources comprised of the most talented, qualified, and high-performing employees may constitute the organization’s competitive advantage. Since not all resources equally lead to competitive advantage, RBV suggests that companies should invest in those resources that are strategically important to the organization (Narayanan, Rajithakumar, and Menon, 2019). In talent management, this leads to workforce differentiation, meaning that, depending on their strategic importance, employees receive different benefits and rewards (Narayanan, Rajithakumar, and Menon, 2019). RBV appears to be an appropriate talent management theory concerning employee turnover because it ensures that the organization invests in the key employees, the loss of which would lead to the greatest negative impact. Investment in strategically important employees also seems reasonable because organizations’ resources are limited, so they should allocate them wisely.
Another talent management theory linked to employee turnover is the social exchange theory (SET). It is based on three core ideas: norms and rules of exchange, exchanged resources, and relationships emerging as a result of exchange (Narayanan, Rajithakumar, and Menon, 2019). The relationships between employees and the organization depend on the extent to which they follow the specified norms and rules of exchange. According to SET, when companies take care of their employees, their exchange relationships improve. It results in employees’ developing positive attitudes toward their employers and feeling obliged to reciprocate the rewards and favors obtained from their employers (Narayanan, Rajithakumar, and Menon, 2019). This theory applies to employee turnover because it explains that employees’ turnover intentions stem from a breach in exchange agreement between the organization and employees. Therefore, to increase employee retention, companies should invest in their workers and maintain trusting relationships with them.
The Impact of Theories on the Organization’s Strategy
PepsiCo’s strategy focuses on multiple dimensions, ranging from designing healthy products to addressing climate change, but the most relevant strategic goal in the scope of this paper is developing human resources. The company aims to create a diverse and inclusive workforce and pays much attention to discovering, attracting, retaining, and developing talent (PepsiCo, 2020). If the organization applied RBV to accomplishing its strategic goals, it would focus on investing in its key employees that significantly contribute to its competitive advantage. These would include people in managerial positions, R&D personnel, and the marketing staff. RBV would be particularly useful for achieving organizational strategic goals of retaining and developing talent because it would encourage the company to invest in key people whose work creates a sustainable competitive advantage. At the same time, RBV could negatively influence turnover intentions in less important employees, but there is limited research on employees’ reactions to workforce differentiation to say this for sure (Narayanan, Rajithakumar, and Menon, 2019). Thus, RBV’s impact on PepsiCo’s goals would be generally positive because it would lead to talent retention and development.
The application of SET could have a positive influence on the achievement of the company’s aims. Since PepsiCo claims that its strategic focus is diversity and inclusion, its relationships with its employees are based on the organization’s fulfillment of these promises. Therefore, if the organization is indeed committed to creating a diverse and inclusive workforce and invests in talent development, its employees are likely to have decreased turnover intentions and increased engagement and commitment. In contrast, if the company violates these principles, its exchange agreement with employees will be breached, and they may want to quit working for this company.
The Practice of Lawful and Ethical People Management
Managing people lawfully and ethically is a significant part of talent management. According to Anlesinya and Amponsah-Tawiah (2020), talent management that pays particular attention to abiding by employment law and ethics is called responsible talent management. It is based on several principles: inclusivity, corporate responsibility, equity, and equal employment opportunity (Anlesinya and Amponsah-Tawiah, 2020). These principles are integrated into all major talent management practices: talent identification and attraction, talent development, and talent retention management (Anlesinya and Amponsah-Tawiah, 2020). Lawful and ethical talent identification means that organizations are accessible to all employees because every person has unique strengths that can contribute to organizational success. Regarding talent development, organizations should develop talent in all workers and provide them with equal opportunities and resources to assist them in realizing their full potential. Finally, responsible talent retention management means fairly and equally compensating workers and recognizing their contributions to the organization.
Overall, lawful and ethical people management appears to be in line with SET because employees usually expect organizations to treat them fairly, and equally, and follow the employment laws. Obeying laws and ethics is important because it promotes equal opportunities and inclusivity. When organizations neglect these principles, they fail to meet employees’ expectations and risk increasing turnover intentions and job dissatisfaction among their workers.
Incorporating the Practice into the Organization’s Strategy
The practice of lawful and ethical people management aligns with PepsiCo’s strategic talent management goals, and one may assume that the organization has already incorporated it into its business. For example, the organization strives for gender equality in the workplace and has already achieved 41% women in its managerial roles (PepsiCo, 2020). In line with the laws prohibiting discrimination based on race, gender, disability, and other characteristics, PepsiCo not only avoids workplace discrimination but also welcomes diversity. For example, among its managers, 8% are Black, and 9% are Hispanic, and the company aims to raise these levels to 10% for both groups (PepsiCo, 2020). PepsiCo also aims to provide its employees with equal pay. Thus, the company’s people management can be characterized as lawful and ethical because it is committed to achieving fairness and equal opportunities for all.
To sum up, talent management is significant for creating the organization’s competitive advantage, improving employee commitment and engagement, and reducing turnover intentions. Two prominent theories in this field are RBV and SET, which explain the organization’s priorities in talent management and prerequisites of employee turnover. It is also important to manage people lawfully and ethically, and the evaluation of PepsiCo shows that this company successfully meets this need.
Anlesinya, A. and Amponsah-Tawiah, K. (2020) ‘Towards a responsible talent management model’, European Journal of Training and Development, 44(2/3), pp. 279-303.
Narayanan, A., Rajithakumar, S. and Menon, M. (2019) ‘Talent management and employee retention: an integrative research framework’, Human Resource Development Review, 18(2), pp. 228-247.
PepsiCo (2020) Diversity, equity & inclusion annual report 2020. Web.