Talent management

High potential employees (aka HiPo’s) are known to contribute greatly to organizational performance. According to a Harvard Business review article, the top 1% accounts for 10% of organizational output; the top 5% accounts for 25% of organizational output; and the top 20% is responsible for 80% of organizational output. With these dramatic figures in mind, it makes sense that organizations would want to proactively and aggressively identify and develop their high potential employees. But this leads to a negligible dilemma, namely, ‘’who are our best potentials” and are they necessarily our best performers”?

But is this the right approach? We try to answer the question.

The relationship between high performance and high potential

Annual performance review scores are not necessarily the wrong place to start, but there’s more to consider. For starters, by focussing on the definition of each of these terms, the complexity becomes immediately clear – ‘performance’ focuses on what an employee is currently capable of, while ‘potential’ focuses on what an employee is capable of in the future.

In an attempt to align current performance with potential, a McKinsey/General Electric collaboration decades ago saw the introduction of the well-known 9-box grid, which, subsequently, assisted thousands of  organizations to integrate the relationship between HP’s and HiPo’s.

It worked like this:

In this format, the 9-box-grid actually provided a relatively complex means for understanding the interplay among performance and potential and has been the inspiration for many organizational talent management processes since.

The first observation is that good performers are not necessarily best potential employees, and thus answers our main question, i.e. high performers are not (necessarily) high potentials. (In fact, in their article The HR Guide to Identifying High Potentials, CEB SHL Talent Measurement suggests that only one in seven high performers is a high potential).

There are, for example, ‘enigma’s’ who have great potential, but who are not necessarily performing well. On the other hand, one could find an excellent performer, who doesn’t show high potential, and can thus be seen as a ‘trusted professional’. According to the 9-box grid’s rationale, the ‘ideal’ relationship would be where the highest potential intersects with the best potential to create a ‘future leader’ (also called ‘star’ by subsequent proponents).

As is, the grid serves as a rational, albeit ‘theoretical’ means of categorizing employees and to make an overview of the talent pool. Its practical application, however, is found wanting. (One of the dilemmas with this approach lies in how does one tailor one’s talent strategies with regard to each of these categories?).

What do we mean by ‘potential’?

What we’ve learned from the 9-box grid, is that both performance AND potential should be the starting point for successful high potential programs.

Assuming that the organization has a controlled performance management methodology in place to enable a stable, ‘performance’ index per employee, we turn to the next question:  “What do we mean by high potential?” and “Potential for what?” Do we want to identify the potential ‘future leaders’ (meaning our leadership pipeline) or also other categories such as ‘high impact performers’ or ‘growth employees’?

Should potential as leaders be the focus, these may are the characteristics that should be considered:

  1. The intellectual ability to take on more complex tasks in future
  2. Emotional intelligence to manage oneself and maintain sound relationships with others
  3. Self-motivation and drive

Research cited by the Harvard Business Review article consistently shows that high potential individuals have the above characteristics in common. In addition, CEB Talent also stresses the importance of active employee engagement as a further key characteristic of high potential individuals (it would not be in the interest of any organization to identify employees meeting the first three criteria and then those individuals don’t enjoy working at the organization)!

Potential for leadership – diving deeper

Of course, there’s more to ‘leadership potential’ than meets the eye, as the next question is: ‘leadership at which organizational level’?

Here Elliot Jacques’ stratified thinking and the philosophy upon which The Leadership Pipeline has been built, can help HR significantly in being successful in helping organizations identifying the right leadership ‘potential’.

Both these approaches rest on the assumption that different levels of leadership requires a different approach and skills sets. To illustrate the point, first line leaders (termed as Leaders of Others within The Leadership Pipeline context) deal with different issues, at a less complex level than, for example, Leaders of a Business. Therefore, different intellectual capabilities and a different range of emotional management skills may be required, if we use points 1 and 2 of the characteristics cited above.

Given the above, it is clear that leadership potential should be differently defined at different organizational levels.

Conclusion and key take-aways

Organizations who wish to embark on a successful talent management program need to realize that systematically assessed performance data could, indeed, be a starting point for identifying and investing in ‘stars’.

However, to ensure that the most suitable employees are identified, ‘potential’ for future success also needs to be factored into the identification process.

In bringing ‘potential’ into the equation, organizations should not gloss over the importance of defining what they mean by it – clear guidelines need to be provided, i.e. with regard to employees who have potential for growth versus employees who have potential for leading others. For leadership roles, a further question should be asked, namely, ‘’potential for leadership at which organizational level?’’

In the absence of clear definitions of potential, organizations may find, when it is too late, that their talent management processes and financial investment only resulted in glaring talent gaps and an unjustifiable low ROI.

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