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Do you have a high-potential program that is not producing desired results? Investing in designated hi-potential employees or HiPos who seem to have leadership capability is an expensive proposition when the program ROI fails to meet expectations. Either the wrong talent is identified, or the HiPos leave the organization after investing in their development. Looking at employees’ past performance or management recommendations has traditionally been how organizations identify high-potential employees, but that is not an effective process anymore for several reasons.
The next generation of leaders needs different skills than past leaders, given how the business environment has changed and how turbulent the future looks. There is also the issue of people who have not had equitable access to development and mentoring (including reverse mentoring) opportunities in the past but are people who have leadership potential if given the right opportunities. Looking at past performance is a way to identify some specifics about the person, but it doesn’t tell you what the person is capable of doing in an uncertain future under a variety of circumstances to meet organizational and workforce needs.
Selecting top performers seems like it should be fairly easy whether the person is a job candidate or a current employee. Just look at the work they have performed to date. The problem with this approach is that it doesn’t tell you whether the person has a career orientation, the ability to adapt to future changes, motivation, or even the emotional intelligence leaders need today. All that past performance tells you is that the person performed well in a given set of circumstances. A 2019 Korn Ferry report found that 98 percent of organizations believe identifying high-potential talent is important for success. Yet, only 14 percent believe they’re selecting the right people for their high-potential programs.
A person with potential can develop into a successful leader. The person may not have had the opportunity to develop leadership traits or been given developmental assignments or roles, or problem-solving opportunities. That doesn’t mean the employee doesn’t have the traits a strong leader needs. It just means the person has not been assessed for leadership potential based on the traits that are strong indicators of potential.
Performance refers to the results a person displays in their current or past roles. It looks at what someone has accomplished in the past or how well a person manages their current position. Potential predicts whether a person is likely to succeed in the future. Performance and potential are often used interchangeably in business, but that is a major reason why some high-potential leadership programs are not successfully identifying true HiPos.
Weak succession pipelines put organizations at risk. There is also the problem that an organization can invest in developing employees entering the leadership pipeline only to see them leave at the end of development or shortly after working in a leadership position. Vibhas Ratanjee, a Senior Practice Expert at Gallup, has researched HiPos and explained on a ProjectHR podcast that the average firm spends 27 percent of its learning and development budget on HiPo programs, yet 73 percent of HiPo programs are not effective. This is per CEB, a part of Gartner providing tech-based research. Gartner research found that organizations spend $4,000 and 39 hours of dedicated development time on high-potential programs.
Turnover is very costly, and there are different types of turnover. Zippia’s research summary says the 2021 national average annual turnover rate was 47.2 percent. Companies lose 18 percent of their workforce in turnover annually, with 12 percent of this voluntary. Among the voluntary quits are HiPos. The workforce is made up of approximately 5 percent of high-potential employees.
Preferred turnover refers to employees who should find another job. Avoidable turnover is when employees leave for a reason the employer could have prevented. Undesirable turnover is the loss of high-performing and high-potential employees. The loss of the current investment in development, future revenues, and leadership is enormous.
Senior woman working in a factory portrait
The first step in retaining high-potential employees is identifying the job candidates and employees who genuinely are HiPos. Utilizing performance ratings by managers and an employee’s past performance is too subjective. You want to identify people with the capacity to become leaders because they have talent. Talent is defined as an exceptional natural aptitude or skill. Notice it’s not defined as performance.
To identify high-potential individuals internally and externally, look beyond traditional search frameworks. Identify people who:
You should also ask if your leadership pipeline is diverse. If not, it indicates that the organization’s process for identifying HiPos is static and relies on traditional identification methods, i.e., managers select people who look and talk like themselves for leadership development and justify selection based on past performance. A leadership pipeline that isn’t diverse is likely due to biases.
The goal when recruiting high-potential job candidates and identifying employees for leadership development is to recognize those who exhibit the desired traits. Various assessment tools available today can identify critical thinking skills, emotional intelligence, agility and flexibility, motivation and ability to withstand psychological stress, and people skills. You want to predict how well a high-potential individual can handle increasing and changing complexities in a new role. A key aspect of developing high-potential employees is matching the assessment to the organization’s identification of the future of work. Remember that high-potential relates to forward thinking. You don’t want to assess a person based on the past or only on the here and now. There are different types of assessment tools available today.
An Aon study found that only 30 percent of business leaders have a clear, consistent definition of their organization’s future of work, but 70 percent agree it’s very or extremely important to plan for roles and skills for the future. In their Digital Readiness Model developed for companies under digital transformation, the core foundational competencies are agility, curiosity, and learnability. The model identifies traits like the drive to lead, collaborative abilities, humility, and empowerment.
A popular tool is Gallup’s CliftonStrengths assessment for leaders, designed to identify what a person is naturally best at doing. The strengths include traits like being a good communicator (woo factor), adaptability, activator, achiever, motivated, connectedness (relationship building), critical thinker, decision-making, and many more. The 34 traits are grouped into strategic thinking, relationship building, influencing, and executing.
The first step is to identify the people with the most potential, but now you need a targeted development program based on organizational needs. The learning and development program meets several goals. Gartner’s research found that the top reason is to build a pipeline for succession planning, followed by improving HIPO retention (38 percent), improving HIPO engagement (35 percent), and improving HIPO performance in specific skills (31 percent).
What are the specific skills needed for your organization to thrive in the future? You need to be able to answer that question to build an effective development program. Is your organization focused on becoming customer-centric, digitally transformed, and/or an industry innovator? Achieving these goals can only happen with the right leadership. From this perspective, the development program directly impacts organizational sustainability, so it’s not just a Human Resources initiative.
Following are examples of some of the features of an effective high-potential leadership development program.
Korn Ferry (mentioned earlier) describes two types of key experiences that can keep high-potential employees engaged. First is Key Challenges which are critical stretch assignments with “broad scope, high visibility, substantial ambiguity, and significant risk of failure.” The second experience is called Experience, which involves individuals working in various industries, functions, and countries for exposure to diverse people and business practices.
No single approach exists for high-potential employee development, whether a new hire or a current employee. Each organization has different needs. However, all effective leadership development programs include experiential and immersive development opportunities focused on future business needs.
Employee engagement remains a top priority, even after high-potential employees are in development and promoted into leadership positions. SHL’s (a part of CEB) research found that 66 percent of HiPos with low engagement will leave the HiPo program, while 60 percent with high engagement will stay. The leadership development program is an employee engagement tool, but engagement can decrease during the development process. In fact, retaining some high-potential employees can be a struggle during the development program if it’s not structured to develop the right competencies.
Some of the strategies for the successful retention of high-potential employees include the following.
It’s also critical that the manager the high-potential employee works for supports the individual’s development and understands the difference between high performance and high potential. Otherwise, there is a risk of bias entering the process, which can hold people back or drive them out of the organization.
Identifying, hiring, developing, and retaining job candidates and identifying, developing, and retaining internal employees as high-potential people is a Human Resources strategy for business sustainability. HiPos are valuable to your business; keeping them engaged is critical to retention. You invest resources in developing high-potential individuals because you need them. Watching them leave for a competitor is distressing in many ways, including the waste of development investments and the loss of future leadership skills required for future success.
One of the benefits of a successful high-potential employee development process is that it is inspirational for the workforce in general. Employee teams benefit from working with or for people who are honing their skills, including people skills. There is a ripple effect in that general employee engagement is elevated.
Contact IRI Consultants when your organization is ready to develop a process for developing and retaining high-potential employees.