Focus on: high potential talent

Drake Editorial Team

Identifying high-potential talent in the workplace

The key to an organization’s growth strategy and success is identifying and attracting high-potential talent. A UNC Kenan-Flagler Business School leadership survey in 2013 found that many talent management professionals reported a high demand for high-potential talent, yet 47% said their current high-potential talent pool did not meet their anticipated needs, and 65% were only slightly or moderately confident in their organization’s ability to fill mission-critical roles. Despite this, 84% said the demand for high-potential employees had increased due to growth and competitive pressure.

Having a good source of high-potential talent is vital to an organization because it builds its competitive advantage for the future (Snipes, 2005). Organizations continue to struggle, however, in identifying, attracting, and retaining high-potential talent. An AMA Enterprise survey found that just over half the respondents said their organizations were somewhat effective in their ability to retain high-potential employees (Nikravan, 2011).

Talent managers' dissatisfaction with their organizations’ effectiveness in identifying and developing high-potential employees may be due to their lack of formal high-potential programs, a finding of the AMA Enterprise survey. Even talent managers with a formal high-potential program in place seem to be dissatisfied with its effectiveness. In the UNC Kenan-Flagler survey, only 29% of respondents were “very satisfied” or “satisfied” with their organization’s current process for identifying high-potential employees.

What is a high-potential employee?A high-potential employee is one identified as having the potential, ability, and aspiration to hold successive leadership positions in an organization (Bersin by Deloitte staff, n.d.). Once identified, they are often singled out for focused developmental opportunities to prepare them for future leadership positions. High-potential employees constitute the top 3 to 5% of a company’s talent (Nikravan, 2011).

HR and talent management professionals have good reason to identify and develop high-potential employees. Respondents to the UNC Kenan-Flagler survey said the key drivers include the need to prepare the organization to meet the anticipated increased demand for future leaders (83%), retain key talent (83%), and improve organizational performance (73%). Developing high-potential employees also makes it more likely that they will stay and benefit the organization rather than taking their talent to a competitor.

This white paper:

• provides background on high-potential talent
• suggests steps HR and talent management professionals can take to establish an effective high-potential talent identification program.
• identifies the competencies leading organizations seek in high-potential talent.
• discusses other factors HR and talent management professionals should consider when identifying high-potential talent.

Ready, Conger, and Hill (Harvard Business Review, 2010) identified “X” factors that are common among high-potential employees:

• drive to excel
• catalytic learning ability — scanning and absorbing new ideas and translating them into productive action
• enterprising spirit
• dynamic sensors — using these to skirt risks
• innate feel for timing, ability to read situations, and nose for opportunity
• ability to deliver strong results by building trust, confidence, and credibility among colleagues, easily mastering new types of expertise and recognizing that behaviour counts

Identifying high-potential employees is an important step in any succession management or leadership development plan (Azzara, 2007), yet only 9% of HR and talent management professionals responding to the AMA Enterprise survey said they had a systematic process in place to identify them. The vast majority of 86% had a “mostly informal” or “combination of systematic and formal” process to identify high-potential employees.

Properly identifying high-potential employees in a formal, systematic fashion can help target individual development plans for this talent pool and build consistency and credibility across the organization.

How can you systematically identify high-potential employees?By properly identifying high-potential employees, HR and talent management professionals can reduce their drop-out rates and the associated wasted resources and expenses. Proper identification can also improve and target developmental plans for these individuals, resulting in more satisfied high-potential employees, who are more likely to stay with the organization. Other benefits related to accurate identification (PDI Ninth House staff, 2010) include:

• better bench strength for key positions
• smoother transitions and shorter learning curves
• reduced risk of career derailment
• more agility in key talent pools
• consistently high performance from a steady supply of superior talent

Formal, systematic high-potential identification also disabuses employees that high-potential programs are not applied consistently, a perception that can lower employee morale and increase employee turnover. The AMA Enterprise survey found that only 12% of respondents felt that high-potential programs in their organizations were administered impartially and even-handedly.

HR and talent management professionals can develop a systematic, criteria-based approach to identify high-potential employees and ensure the perception of consistency in its application by incorporating these steps into their own high-potential programs.

Step 1: Plan for the futureThe first step is to understand what the organization will need in the near future. HR and talent management professionals should identify anticipated leadership roles and positions, including the C-suite, the top 3% of senior leadership positions in the organization, hard-to-fill jobs, and the organization’s short- and long-term strategic needs. They then articulate the purpose, priorities, needs, and requirements for each role, as well as timeframes and existing talent pools — whether leaders will come from within or from outside the organization. Identifying future needs will help to define the high-potential criteria (PDI Ninth House staff, 2010).

Step 2: Define high-potential criteriaHigh-potential criteria are the qualities, characteristics, skills, and abilities a high-potential employee must have to successfully perform in a given position. The criteria can be gleaned by the series of questions HR and talent management professionals asked in the first step to determine the organization's current and future needs (Azzara, 2007).

PDI Ninth House International recommended that HR and talent management professionals set high-potential criteria by reviewing relevant research; defining terminology such as potential, performance, readiness, and fit to ensure a consistent understanding at all organizational levels; and specifying high-potential criteria and attributes for the organization as a whole as well as for specific roles and positions.

Identifying high-potential talent is a team undertaking and should include managers and leaders from all organizational levels. Defining the terminology gives those involved a clear direction for nominating and evaluating high-potentials, sets direction when discussing high-potential candidates, and ensures consistency when rating them.

HR and talent management professionals may find that the criteria and competencies they identify and define differ from those of other organizations. Each organization is different and will give different weight to their organization’s and high-potentials’ strengths, weaknesses, and anticipated needs based on their existing high-potential talent pool.

The UNC Kenan-Flagler survey found some commonalities among the competencies organizations look for in their high-potential candidates: 70% of respondents looked for future performance potential, 69% strategic-thinking ability, 67% a drive for results, 66% current and sustained performance, 59% culture fit, and 47% commitment to the organization.

Other attributes organizations look for in a high-potential employee (Snipes, 2005) include:

• respect and trust of supervisors, peers, and subordinates
• high level of competence in their technical or functional discipline
• ensuring that team goals are achieved within cultural and ethical guidelines
• bias for action and catalyst for change
• open to feedback and criticism
• ability to self-manage in a way that fosters learning and high performance
• creative problem solving
• actively leading and managing teams that create loyalty and a sense of community

Step 3: Make the high-potential criteria measurableWhen developing a high-potential identification program, making the high-potential criteria measurable can help narrow down the organization’s high-potential talent pool by offering non-emotional measurements to managers and senior leaders, many of whom may be “championing” one or more candidates.

Organizations use a number of assessment procedures to identify high-potential employees. The “buddy approach”, the least sophisticated assessment, involves managers and senior leaders selecting high-potential employees. This approach is subjective and can lead to accusations of unfairness in the identification process. The “manager appraisal approach” lets managers develop their own high-potential criteria to select high-potential employees. Like the buddy approach, this can lead to inconsistency within the organization, allegations of unfairness in the process, and lower employee morale. With the “decision-makers consensus approach”, decision makers in an organization meet to discuss an employee’s suitability for promotion. There is usually little in the way of formally identified criteria, and this can lead to conflict within the group, particularly when a team member is sponsoring an employee under consideration (Azzara, 2007).

The most sophisticated approach is the “criteria-based approach”, in which criteria have been established that articulate what the organization is looking for in a high-potential employee. Assessment tools used in this process include 360° feedback, assessment centres, role-plays, and scenarios (Azzara, 2007).

Step 4: Identify high-potential candidatesWith defined and measurable criteria, HR and talent managers can identify and select high-potential candidates using structured talent reviews. Candidates can be nominated, screened, and assessed based on the criteria and their performance (PDI Ninth House staff, 2010).

A common challenge in identification is the tendency to confuse potential with readiness. Potential is the candidate's motivation and focus on values and results desired by the organization, as well as attributes required for more senior levels. Readiness is the candidate's ability to step in and perform well in targeted jobs or stretch assignments (Hanson, 2011). Defining high-potential criteria and terms and making them measurable early in the identification process can eliminate or minimize this confusion.

Should employees be informed they are high potentials?The age-old question in succession planning and in the development of high-potential employees is whether they should be told of their status in the organization. Conventional wisdom usually errs on the side of caution with a resounding “no”. Proponents of keeping high-potential lists under wraps cite everything from inflated egos and increased expectations of promotions and salary increases to fear of employee-poaching by competitors.

However, many organizations now admit that employees know their employers have high-potential lists and who is likely on them, whether publicly acknowledged or not. The UNC Kenan-Flagler survey found that 58% of respondents tell employees they have been identified as having high potential. The Center for Creative Leadership found that one-third of high-potentials not informed of their status looking for another job; of those who knew their status, only 14% were looking (Grossman, 2011).

Doug Ready, founder and president of The International Consortium for Executive Development Research (ICEDR) and professor of the Practice of Leadership at the Kenan-Flagler Business School, advises employers who inform high-potentials of their status that there should be swift action and follow-through once they have been informed, because lack of action can be a source of dissatisfaction and cause lower morale.

ConclusionProperly identifying high-potential employees using a formal, systematic approach can improve high-potential selection, increase the perception of fairness and impartiality within an organization, and reduce drop-out rates and turnover. It can also increase an organization’s bench strength, giving employers an edge over their competition.

This UNC Kenan-Flagler white paper excerpt is reprinted with the permission of the author, Kip Kelly, Director of Public Programs for UNC Executive Development and by the UNC Kenan-Flagler Business School. The complete White Paper can be accessed at http://unc.live/1WYXvf8  For more information, email [email protected]