Literature Review – Talent Management and Employee Retention

Introduction

Australia’s labour market has tightened markedly over the past decade, and competition for skilled staff has intensified across most industries. Jobs and Skills Australia (2024) has identified widespread occupational shortages, with around a third of assessed occupations in shortage, while the Australian Bureau of Statistics reports that roughly 8 per cent of employed Australians changed jobs in the year to February 2024 (ABS 2024). In this setting, an organisation’s capacity to attract, develop and, above all, retain capable people has become a central strategic concern. Talent management (TM) has emerged as the umbrella term for the practices through which organisations seek to secure that capability, yet its relationship with employee retention remains both conceptually and empirically contested.

This review synthesises the human resource management literature on talent management and its association with employee retention, with particular attention to the mechanisms that translate practices into outcomes. It pursues three aims: to clarify how talent management is defined and operationalised; to synthesise the evidence linking talent management to retention through engagement, perceived organisational support and career growth; and to consider what this body of work implies for Australian employers competing in a tight labour market. The discussion is organised thematically, from definitional debate through identification, development and turnover theory to employer branding and context, before a synthesis of gaps and implications.

Search strategy

Literature was located through Business Source Complete, Scopus and Google Scholar using combinations of the terms “talent management”, “employee retention”, “turnover intention”, “work engagement” and “employer branding”. The search prioritised peer-reviewed articles published between 2006 and 2024, supplemented by seminal earlier works and by recent Australian government and professional sources from the ABS, Jobs and Skills Australia and the Australian HR Institute. Studies were included where they addressed the conceptualisation of talent management or offered evidence on retention and its antecedents. Reference lists of key reviews were hand searched to capture influential work missed by the database queries.

Conceptualising Talent Management: Exclusive and Inclusive Perspectives

Despite two decades of practitioner enthusiasm, talent management continues to lack a settled definition. In an early and influential critique, Lewis and Heckman (2006) observed that the field was characterised by conceptual confusion, identifying three competing streams: talent management as a relabelling of conventional human resource practices, as succession and workforce planning, and as the generic management of high performers. Collings and Mellahi (2009) advanced the debate by proposing a strategic conception centred on identifying pivotal positions that contribute disproportionately to competitive advantage, developing a talent pool to fill them, and building a differentiated human resource architecture to support it. Their framework shifted attention from individuals towards the roles that most affect organisational performance.

A parallel strand interrogates the meaning of talent itself. Gallardo-Gallardo, Dries and González-Cruz (2013) distinguished object approaches, which treat talent as a set of characteristics such as ability or commitment, from subject approaches, which treat talent as a category of people, and they further separated inclusive views, in which every employee possesses talent, from exclusive views, in which talent denotes a select few. Meyers and van Woerkom (2014) extended this typology into four talent philosophies that vary according to whether talent is regarded as innate or acquired and whether it is distributed inclusively or exclusively. These distinctions are consequential for retention, because an exclusive approach that concentrates investment on a designated elite risks disengaging the larger group of employees who are not labelled as talent.

Talent Identification and Development

Once talent has been defined, organisations must identify and develop it. In practice, identification commonly relies on assessments of current performance and future potential, frequently visualised through a nine-box grid, with those rated highly on both dimensions designated as high-potential employees. Development then proceeds through accelerated assignments, mentoring, leadership programs and stretch projects intended to build capability ahead of need (Collings & Mellahi 2009).

Yet identification also carries risk. Designation as high potential raises expectations the organisation must then meet, and the opacity of many identification decisions can breed perceptions of unfairness among those excluded. Meyers and van Woerkom (2014) argue that a more inclusive orientation, which develops the strengths of the wider workforce, may better sustain the commitment of the majority. The identification decision is therefore not merely technical; it signals how the organisation values employees, with direct implications for their intention to stay.

The Talent Management and Retention Link and Its Mechanisms

The proposition that talent management improves retention is intuitively attractive, but the literature is clearest when it specifies the psychological mechanisms through which practices shape the decision to remain. Three recur: work engagement, perceived organisational support and career growth.

Work engagement

Work engagement describes a positive, fulfilling state characterised by vigour, dedication and absorption in one’s work. Saks (2006) demonstrated that engagement mediates the relationship between antecedent conditions, including job characteristics and perceived support, and outcomes such as organisational commitment and intention to quit. Talent management practices that enrich roles, clarify expectations and provide meaningful development can be understood as antecedents that raise engagement, which in turn lowers the likelihood of voluntary departure.

Perceived organisational support

Perceived organisational support refers to employees’ beliefs about the extent to which their organisation values their contribution and cares about their wellbeing (Eisenberger et al. 1986). Investment in development, fair recognition and access to opportunity are read by employees as evidence of support, generating a felt obligation to reciprocate through loyalty and continued membership. Saks (2006) found perceived support to be a significant antecedent of engagement, positioning it as both a direct and an indirect influence on retention.

Career growth

Career growth captures the progress employees perceive in meeting career goals, developing skills and advancing within the organisation. Where talent management offers visible pathways and continued development, employees have less incentive to seek advancement elsewhere. Conversely, the perception of blocked mobility is a common precursor to turnover, particularly among ambitious high performers whose expectations for progression are elevated.

Models of Employee Turnover

Understanding retention requires an account of why employees leave. Job embeddedness theory, advanced by Mitchell et al. (2001), offers an influential explanation that complements attitudinal models focused on satisfaction and commitment. Embeddedness comprises three components: links, the formal and informal connections an employee has with people and activities; fit, the perceived compatibility between the employee and both the organisation and the wider community; and sacrifice, the material and psychological costs of leaving. The theory distinguishes on-the-job from off-the-job embeddedness, recognising that community ties can bind an employee to a location and, by extension, to an employer.

Mitchell et al. (2001) demonstrated that embeddedness predicts voluntary turnover over and above job satisfaction and perceived alternatives, extending earlier equilibrium models that framed leaving as a function of the ease and desirability of movement. For talent management, embeddedness implies that retention depends not only on how employees feel about their work but also on the accumulated connections, fit and prospective sacrifice that a well-designed talent system can strengthen.

Employer Branding and the Employee Value Proposition

Employer branding connects talent management to the external labour market. Backhaus and Tikoo (2004) conceptualised the employer brand as the package of functional, economic and psychological benefits associated with employment, and argued that a strong employer brand builds two forms of equity: brand associations that shape the attractiveness of the organisation to prospective employees, and brand loyalty that supports the retention of current staff. The employer brand is frequently expressed through an employee value proposition, the distinctive set of rewards and experiences an organisation offers in exchange for contribution.

Importantly, the employer brand’s internal and external functions are interdependent. A promise made to attract candidates must be honoured in the lived experience of employment, since talent management practices are the principal means by which that promise is delivered internally. Where expectation and reality diverge, trust erodes and exit follows.

Contextual Considerations: SMEs and Tight Labour Markets

Much of the foundational literature assumes the resources and formality of large corporations, yet most employment occurs in smaller organisations. Festing, Schäfer and Scullion (2013) found that medium-sized firms typically practise talent management informally and inclusively, shaped by resource constraints, close employer-employee relationships and reliance on regional labour markets. Such firms may lack sophisticated systems, but their personal, flexible approach can itself foster the embeddedness and support that underpin retention.

Gallardo-Gallardo, Thunnissen and Scullion (2020) reinforce the point that context matters, noting that the transferability of talent management prescriptions across sectors, sizes and national settings is far from assured. In the Australian setting the contextual pressures are pronounced. Jobs and Skills Australia (2024) documents widespread occupational shortages, the ABS (2024) records substantial job mobility, and the Australian HR Institute (2023) reports average voluntary turnover of around 18 per cent across surveyed workplaces. Together these conditions raise the cost of attrition and sharpen the strategic value of effective retention.

Table 1 summarises the principal studies that inform this review, spanning conceptual and empirical work across several national contexts.

Table 1: Summary of principal studies on talent management and employee retention

Synthesis and Research Gaps

Figure 1 draws the reviewed themes into a single map. The literature converges on a mediated view in which talent management practices, together with the development and branding activities that surround them, influence retention indirectly through the psychological states they cultivate. Engagement, perceived organisational support and career growth operate as the proximate mechanisms, while job embeddedness describes the accumulated connections and costs that make staying the path of least resistance. The relationship is moderated by context, including organisational size and the tightness of the surrounding labour market.

Several gaps remain. First, the balance of evidence still derives from large firms and from North American and European settings, leaving the Australian small and medium enterprise experience comparatively under researched. Second, most studies are cross-sectional, which limits causal inference about whether talent management practices produce retention or merely accompany it. Third, the consequences of exclusive talent management for the excluded majority are theorised more often than they are measured, despite their evident relevance to overall retention. Finally, the field would benefit from clearer and more consistent operationalisation of talent management itself, so that findings can be compared and accumulated with confidence (Gallardo-Gallardo, Thunnissen & Scullion 2020).

Implications for Australian Employers

For Australian employers, the literature offers several practical implications. In a market where Jobs and Skills Australia (2024) reports sustained shortages and the ABS (2024) records high job mobility, the cost of preventable turnover is considerable, a concern echoed in the turnover figures published by the Australian HR Institute (2023). The evidence suggests that retention is served less by isolated perks than by a coherent system that raises engagement, signals genuine organisational support and offers credible career growth.

Three priorities follow. First, employers should lean towards a more inclusive orientation that develops the wider workforce rather than concentrating investment on a designated elite, thereby protecting the engagement of the majority (Meyers & van Woerkom 2014). Second, flexibility has become a material retention lever; the right to request flexible working arrangements under the National Employment Standards in the Fair Work Act 2009 (Cth) can be used proactively rather than treated merely as a compliance obligation. Third, line managers require the capability to translate talent and support policies into daily practice, since employees experience the employer brand chiefly through their immediate manager. For smaller Australian firms, the informal, relationship-based approach identified by Festing, Schäfer and Scullion (2013) is a genuine advantage that deserves to be cultivated rather than abandoned in imitation of larger competitors.

Conclusion

This review has traced the literature connecting talent management to employee retention and has argued that the link is best understood as mediated and contextual. Talent management shapes retention through engagement, perceived organisational support and career growth, reinforced by job embeddedness and by an employer brand that must be honoured internally to retain its value. The strength of these relationships depends on organisational size and labour market conditions, both of which are salient in the current Australian environment. For employers facing persistent skills shortages, the implication is clear: retention is a systemic outcome of coherent, inclusive and well-delivered talent practices, not the product of any single intervention. Addressing the identified gaps, particularly through longitudinal Australian research, would further strengthen that evidence base.

References

Australian Bureau of Statistics (ABS) 2024, Job Mobility, Australia, February 2024, ABS, Canberra.

Australian HR Institute (AHRI) 2023, Turnover and Retention Report, AHRI, Melbourne.

Backhaus, K. & Tikoo, S. 2004, ‘Conceptualizing and researching employer branding’, Career Development International, vol. 9, no. 5, pp. 501-517.

Collings, D.G. & Mellahi, K. 2009, ‘Strategic talent management: A review and research agenda’, Human Resource Management Review, vol. 19, no. 4, pp. 304-313.

Eisenberger, R., Huntington, R., Hutchison, S. & Sowa, D. 1986, ‘Perceived organizational support’, Journal of Applied Psychology, vol. 71, no. 3, pp. 500-507.

Fair Work Act 2009 (Cth).

Festing, M., Schäfer, L. & Scullion, H. 2013, ‘Talent management in medium-sized German companies: An explorative study and agenda for future research’, The International Journal of Human Resource Management, vol. 24, no. 9, pp. 1872-1893.

Gallardo-Gallardo, E., Dries, N. & González-Cruz, T.F. 2013, ‘What is the meaning of talent in the world of work?’, Human Resource Management Review, vol. 23, no. 4, pp. 290-300.

Gallardo-Gallardo, E., Thunnissen, M. & Scullion, H. 2020, ‘Talent management: Context matters’, The International Journal of Human Resource Management, vol. 31, no. 4, pp. 457-473.

Jobs and Skills Australia 2024, Australia’s skills shortages: Annual report, Jobs and Skills Australia, Canberra.

Lewis, R.E. & Heckman, R.J. 2006, ‘Talent management: A critical review’, Human Resource Management Review, vol. 16, no. 2, pp. 139-154.

Meyers, M.C. & van Woerkom, M. 2014, ‘The influence of underlying philosophies on talent management: Theory, implications for practice and research agenda’, Journal of World Business, vol. 49, no. 2, pp. 192-203.

Mitchell, T.R., Holtom, B.C., Lee, T.W., Sablynski, C.J. & Erez, M. 2001, ‘Why people stay: Using job embeddedness to predict voluntary turnover’, Academy of Management Journal, vol. 44, no. 6, pp. 1102-1121.

Saks, A.M. 2006, ‘Antecedents and consequences of employee engagement’, Journal of Managerial Psychology, vol. 21, no. 7, pp. 600-619.