Experience has taught chief learning officers that they’re better off developing a strong base of talent internally as much as possible. It’s generally less expensive, allows them to motivate and retain key staff, and, as long as they balance the value of organizational experience with sustained independent thinking, it reduces the risk of the unknown. But with minimal resources and self-constrained budgets, how do we identify and then cultivate star performers – those high-potential employees right in front of us, but who are just a bit lower on the corporate ladder?
High-potential employees embody passion and are characterized by a quick movement through various roles in a company, a carefully monitored career path and an elite, but usually secretive, status. As the future leaders of their organizations, high-potentials slide into new positions, receive special coaching and mentoring, and are expected to deliver superior performances.
Ideally, these top performers are identified as early as possible and benefit from specialized career development plans that ensure those that are the best and brightest quickly rise to the top. Just as competitive advantage can be generated by a speed-to-market product strategy, it also can be created with a firm’s ability to accelerate the development of leadership talent. By efficiently developing leadership skills and competencies, high-performing organizations can distinguish themselves from opponents and extend their competitive advantage in the market.
Supply, Demand and Results
The demand for these leaders of tomorrow is rapidly outgrowing the supply. As a result, most organizations are actively focused on identifying and cultivating those employees with the greatest potential to grow into business-critical leadership roles. Unfortunately, surprisingly few organizations are doing this effectively.
A recent Corporate Leadership Council survey found that approximately three-quarters of companies worldwide are not confident in their ability to effectively staff leadership positions over the next five years. Moreover, a 2002 Conference Board report shows that only 34 percent of companies are effective at identifying capable leaders early in their career.
In contrast, companies that identify and develop high-potential employees show dramatic shareholder returns. According to a recent Hewitt Associates study surveying large U.S. companies, only a bit more than half consistently use a formal approach to identifying high-potentials, yet those that do perform in the 75th percentile or higher for total shareholder return (TSR). The heightened results and shareholder returns increase even further when these organizations go on to formally develop and track the performance of their high-potentials. (See Figure 1.) Thus, to achieve consistent measurable success, an organization must enforce an effective and sustained identification and development process that focuses on the desired traits and abilities of high-potential employees.
High-potentials tend to rise up out of the crowd and achieve stellar results relative to their peers. But to identify them formally, managers must communicate, utilize multiple methods of assessment and compare the results with known criteria that are associated with a specific leadership level. The results of these assessments provide guidelines for training and mentoring a high-potential to take on greater leadership responsibilities and build strengths.
Employees who are part of high-potential development programs often find themselves under continuous scrutiny. These aspiring leaders face one of the most challenging stages of their professional life as they try to understand their environment, set goals and prove their worth.
There are conflicting opinions over whether it’s beneficial to inform employees of their high-potential status. Informing employees is a powerful indication that the company values their contributions to the business and believes in them enough to invest in their future. This opinion is furthered by the suggestion of a greater risk that if not told, the employee will resign and move on to an organization that will recognize and develop their talent.
The motivation for not disclosing high-potential status also is compelling. Organizations risk creating a three-class system of the “haves,” the “almosts” and the “have-nots,” and create divisive resentment throughout the organization. Either way, high-potential employees tend to know their potential, whether they are officially told or not. Most organizations today are of the opinion that if the high-potential isn’t told by them, someone else eventually will.
In defining the criteria for selecting high-potential employees, many organizations link the identification of their talent to current job performance rather than using an inventory of ideal attributes. This method is effective but should be coupled with clear criteria that evaluate and measure future potential. This hybrid approach should not only increase the quality of the candidate, but also provide a road map for success as they progress through the program. Moreover, by basing assessment on a combination of current and future skills, organizations will have more confidence in their high-potential employees and measure success with greater accuracy.
Specific skills and characteristics should be flexible enough to capitalize on the strengths of each individual and are greatly dependent on each organization’s unique culture and operating needs. That being said, most organizations seeking to develop high-potential employees are looking for common attributes:
- Has the respect and trust of supervisors, peers and subordinates.
- Maintains a high level of competence in technical or functional discipline.
- Consistently produces tangible, measurable results above expectations.
- Ensures that team goals are achieved within cultural and ethical guidelines.
- Has a bias for action and is a proactive catalyst for change.
- Is open to feedback and constructive criticism.
- Self-manages in a manner that fosters learning and high-performance.
- Thinks and solves problems creatively and from a position of inquiry (versus advocacy).
- Contributes critical judgment at some level of setting organizational strategy.
- Has a broad acumen of the organization’s business and his or her role in its goals.
- Actively leads and manages teams that create a sense of loyalty and community.
- Is intimate with and strives to anticipate and deliver on customer’s needs.
- Navigates and leverages resources within an increasingly distributed organization.
Best Practices for High-Potential Development
There are two distinct categories of high-potential employees. Late-stage high-potentials include experienced managers ready to make their way into the executive ranks. This group is typically identified as middle or senior managers and participates in a wide variety of formal training: specialized mentoring, executive retreats, personal coaching, real-world action learning, global rotation and more. These senior managers are among the top 10 percent of an organization, and significant costs are incurred to prepare them for senior executive roles within the organization.
Early-stage high-potentials are different. These new managers and individual contributors are at the beginning of their careers and are identified more by their talent and drive than their track record. Early-stage high-potentials are found in the lower ranks of an organizational structure, and their employers are generally not yet ready to invest the same amount in their formal training and development. While historically organizations have focused primarily (if not entirely) on their late-stage leaders, more organizations today are adopting an aggressive program for developing bench strength at all levels. Top-performing organizations in particular now recognize that the earlier potential talent is identified and put into the pipeline, the sooner the entire organization reaps the rewards of more productive and effective leadership.
At the minimum, early-stage high-potentials should be identified within the first two to four years of employment. Both human resources and business line managers should be involved in the identification process so assessments are driven from both empirical performance of the high-potential and the organization’s ideological criteria and vision.
When planning and implementing an integrated program for early-stage high-potential development, there are many factors to consider. The first step is critical but often overlooked. Holistically, the organization must agree on and then support the goals of the proposed development program. Specifically, the organization must justify the program by answering the following questions:
- Why do we need a high-potential program?
- How will it support our business strategy and improve our competitive advantage?
- How will it benefit the organization, the high-potentials and the rest of our employees?
- How will we measure the success of the program, and what dollar value will we place on high-potentials at different stages of development?
Once the organization’s goals for the program are clear, the next challenge is how to develop a relatively larger group of early-stage high-potentials at a fraction of the budget of late-stage candidates for senior management. Here are some cost- and resource-efficient best practices that top-performing organizations use when implementing a successful early-stage high-potential program:
- Specialized leadership development tracks: In a recent Ninth House Leadership Index study on Fortune 500 organizations, most companies reported having a well-defined leadership curriculum in place. Yet a majority of respondents indicated that the curriculum was more voluntary than mandatory in character. Only a few organizations referenced having specialized, highly customized, mandatory leadership development tracks for their high-potential employees. For those that did, there was a tendency to identify the program as being distinctive and highly effective in elevating the leader potential of their organizations.
- Multi-disciplinary rotation program: Another experience-based leadership development tool is the rotation of managers across disciplines, divisions and geographies. The fixed-choice component of the same study found less than half (45 percent) of organizations using rotational or developmental assignments as a regular component of their leadership development package. In contrast, significantly more top-performing development practitioners utilize this technique to provide a more diverse base of experience and perspectives for their future leaders.
- Unlimited learning opportunities: Most organizations restrict the number of courses available to all employees. This helps both to control costs and to reserve coveted development opportunities for peak performers later in their careers. While it’s important to focus high-potential employees’ attention on priority topics and not waste time on the mastery of less relevant knowledge, they tend to seek and absorb behavioral skill building at a much greater pace, and top-performing organizations provide them unlimited access to self-paced learning programs that accelerate their growth.
- Leverage technology: Recent studies indicate that technology-enhanced learning is now independently sufficient to improve leadership behavior on the job. The combination of synchronous and asynchronous tools and content, especially when paired with reinforced group application, can not only improve the high-potential employee’s performance, but can do so at a fraction of the time and cost of classroom training. (Up to 90 percent reductions were reported CNA in 2005).
- Action learning: By taking development initiatives outside of the classroom and putting employees to work solving real-world business issues, action learning is taking over as the classroom trainer’s interactive simulation. Groups of high-potentials and mentors are put into a situation and must solve the challenge. Many organizations are migrating to this approach as a way to expand high-potentials’ perspectives on how the business operates.
- Mentoring: According to a recent study by the American Society for Training & Development (ASTD), approximately 71 percent of the Fortune 500 use internal mentoring programs to develop high-potential employees. Through pairing with internal senior mentors, high-potentials are introduced to years of knowledge and experience.
According to a recent Accenture study, companies with forward-thinking learning organizations have a far greater impact on overall business performance when compared to their peers. Does this mean that identifying high-potentials and deploying a comprehensive program is a guarantee of success? Not necessarily. Nowhere is it written that a promising 26-year-old high-potential matures into a successful 55-year-old executive leader. Yet only by combining potential talent with access to and time for learning new skills will an organization consistently and cost-efficiently develop its high-potential leaders.
It also is important to note that high-potential programs can be controversial to implement. Lack of transparency in the process of selecting high-potential employees has been known to cause serious morale issues. Employees who are passed over or deprived of the progress may even leave. There also are concerns regarding the pressure organizations put on high-potentials. If the process is not monitored carefully, high-potentials can burn out. Organizations should provide necessary support mechanisms, such as counseling and mentoring.
Reflecting on what we know today about programs to systematically and consistently develop high-performers, a few conclusions have become clear:
- While continuing to invest heavily in late-stage high-potentials, the earlier we start focusing on early-stage high-potentials the greater their impact on the organization will be.
- There are now cost-efficient techniques that make it possible to effectively develop large numbers of early-stage high-potentials with limited internal budgets and resources.
- If we want to maintain our growth rate and unique competitive advantage, we can’t afford not to implement a formal program for internal high-potential development. Now it’s time to get the rest of the organization on board.
Jeff Snipes is the CEO and founder of Ninth House Inc., a leadership development firm that provides blended learning. He can be reached at email@example.com.