Best and Brightest

The high-potential employee is back in vogue.

Overshadowed in recent years by management's focus on shedding redundant or poorly performing talent, identifying and grooming rising stars has reemerged as a top priority for senior leaders. That's because more executive teams have seen the fallout of failing to prepare promising employees for future roles or the problem of key people leaving the company for a lack of developmental opportunities or challenging assignments. As a result, they've come to see poor talent management as one of the quickest ways to lose a hard-earned competitive edge or to constrain strategic plans.

But designing and managing programs for high-potential employees (HiPos) is a complex business, one fraught with pitfalls that can trip up even the most well-meaning companies. For one, identifying the "right stuff" in future leaders is more challenging than simply taking an inventory of the current top performers. Reaching consensus on what constitutes high potential in someone is rarely easy, and predicting employees' capacity and motivation to succeed in roles that often require dramatically different competencies than jobs they've already mastered is a difficult art.

And if HiPo programs aren't managed effectively, they can de-motivate employees who aren't tabbed as high potential and create dissatisfaction or unwanted turnover among HiPos who come to believe their "anointed" status ensures promotion to coveted leadership jobs within the organization.



Flawed assessment processes

Some compelling research also has fueled senior leaders' renewed interest in high-potential programs. A recent Hewitt Associates' study of 100 large U.S. companies, for example, found just over half consistently use a formal approach to identifying HiPos, but those that do perform in the 75th percentile or higher for total shareholder return.

Those results improve even further when organizations formally develop and track the performance of HiPos. Other studies suggest companies miss out on opportunities for strong return on investment from HiPo programs because of flawed nomination practices, one of which is a belief that past or current performance is the best predictor of high potential for other jobs.

While a series of sterling performance appraisals or history of meeting the numbers should play a role in HiPo nominations, too often organizations use it as the primary—and in some cases, only—criteria for making such decisions, along with other nomination processes rife with subjectivity or bias.

"Transitions into roles of greater responsibility have very different kinds of requirements in terms of competencies, the experience base needed and new types of challenges that will be faced," says Patrick Hauenstein, a senior consultant with Personnel Decisions International (PDI), a Minneapolis-based company that specializes in assessing leadership potential.

To help HiPos avoid falling prey to the "Peter Principle" in which star performers in a current role get promoted, then struggle mightily or even fail in their new jobs, Hauenstein says companies have to carefully assess other factors like HiPo candidates' behavioral predispositions, aptitude for strategic thinking, emotional intelligence and career aspirations, or whether they have fire in the belly for higher-level (and usually more stressful) leadership jobs. For example, while a predisposition such as attention to detail might be an advantage at the first-line supervisory level, it could prove a drawback at middle management or executive levels if it translates into micromanaging.

Organizations with good track records of accurately gauging people's potential or readiness for bigger jobs typically supplement analysis of job performance with reliable and validated measurement tools such as assessment centers, psychometric tests, work-style inventories, structured career interviews and more.

"It takes courage to stand up and say someone who has been hitting his numbers, is productive and is liked by his subordinates or peers may not be a high-potential employee," says Jim Kauffman, a senior consultant with Pittsburgh-based Development Dimen-sions International (DDI).

Companies that lean too heavily on current performance as a predictor of potential also tend to overlook hidden talent, Kauffman says, or those who may be in job positions or have personalities that fly beneath radar. These employees often have the aptitude or skill to flourish in advanced roles where they can put strengths such as strategic thinking or emotional intelligence to work.



High potential to whom?

Kauffman says most organizations with successful HiPo programs "calibrate" their nomination decisions, or first seek consensus on what factors constitute high potential, then use round tables or other collaborative decision-making methods to vet individual managers' nominations of high-potential employees on their staffs.

In a recent study, DDI asked 200 organizations if they conducted such calibration of HiPo nominations. Of those who did, Kauffman says 70 percent said they felt they had selected the right people for their high-potential pool, while only 30 percent of those who hadn't used a calibration process believed they had made the right choice.

Nominations grow even more reliable when line managers receive some instruction in how to spot potential on the job, Kauffman says. "Once they understand what traits, aptitudes or skills are good predictors of potential for certain leadership levels, managers can start to look for their behavioral manifestations," he says.

BMO Financial Group, a Toronto-based financial services company, is a big believer in calibration as a way to limit subjectivity or bias in HiPo nominations. The organization uses leadership round tables to discuss and challenge those nominated for HiPo status by individual managers; round table members have worked with or been exposed to candidates in some meaningful way.

The tables assess the potential of candidates from the junior leadership level up to the executive level along several dimensions, including track record of results, ability to handle increasingly complex roles and career goals.

"How people have achieved results in the past also matters a great deal to us," says Lynn Roger, BMO's director of talent strategies and executive succession. "We look closely at how candidates have related to other employees, how they manage or motivate work teams, how effectively they've worked across departmental lines and more."

BMO made a major change to its HiPo governance structure last year, shifting primary responsibility for managing the program from the human resources group to line managers. The idea was to get leaders more intimately involved in development planning and coaching of their HiPo employees. "It reflects the organization's desire to make people management as important as managing the financials," Roger says. "We also feel by involving managers more, it will better align the development of individuals with the needs of the business."

While Kauffman applauds giving line managers more accountability, he says retaining a central level of oversight is critical to making HiPo programs work.

The reality is that managers are busy people, and the training and coaching of their staffs often fall far down to-do lists. "We've found if you leave development solely to the high-potential person and their direct manager, chances are not much will happen," he says. "You need to build in some process tension and have senior level stakeholders accountable for managing development of the talent pool as well."



Pitfalls of high-potential status

It's an ongoing debate among managers of HiPo programs, one with few easy answers: Should HiPos be told of their status?

Some believe such overt labeling can create resentment among those left off HiPo lists and engender a sense of entitlement among those crowned the "anointed few." Others believe keeping the status confidential allows for more flexibility in moving people off and on the list as their performance dictates.

The opposing argument holds that it's naive to think such standing can be kept a secret, since HiPos will be easily "outed" or identified by the nature of developmental opportunities they receive.

There's also the belief that failing to tell talented people they've been fast-tracked can cause them to seek opportunities with other companies that aren't so reticent about recognizing their potential or showering them with plum developmental assignments.

BMO Financial is among the companies that shy away from the HiPo label. "We encourage our managers to have meaningful development conversations with all of their employees, and if someone is perceived to have significant growth potential, to communicate that to the person, but to avoid using labels in doing so," Roger says. "We feel if you give one person the label and not another, you risk disaffecting the person who is left out."

While the development path for those considered high potential will likely be different from others, "both groups are equally important to us," Roger says. "If we are only successful in developing high potential people, then we're not really successful." BMO also stresses that being part of the HiPo talent pool isn't employees' only route to promotion.

Marc Sokol, a vice president with PDI, says he believes companies that funnel development dollars to high potentials at the expense of good performers who keep organizations functioning day-to-day, but who may not carry the HiPo tag—customer service staff, information technology specialists, administrative assistants—are playing a dangerous game.

"I want to have meaningful development both for high potentials and for solid performers who may not be perceived as future stars," Sokol says. "You want to show each group you care about them and that they are essential to the company in different ways. But that's not a training philosophy we see in most organizations."

Sokol also encourages companies to help HiPos consider multiple career paths to avoid problems that can result from too narrow of a promotion focus. "Someone might have their sights set on a specific job in a company, and maybe he or she has potential for it but isn't the highest potential candidate and someone else gets the job," Sokol says.

"If that person doesn't have other lateral or upward options in the company, you've taken a valued and highly capable person and potentially demoralized them."

Managing expectations

Some companies have learned the hard way how important it is to carefully manage the expectations of HiPo talent pools.

Harrah's Entertainment, the casino and hotel company, has been identifying and developing high-performing supervisors since 2002, nominating them through a combination of job performance, assessment-center testing and "level up" surveys where subordinates rate them in areas such as integrity, fairness, employee engagement, feedback skills and more.

Early in the program Alice Reitmaier, Harrah's director of talent development systems in Memphis, Tenn., began noticing an unusual amount of turnover among these high performers, so she and her team began calling them to try to find out why.

"The problem was a lot of them felt the company was going to tap them on the shoulder and let them know when the ideal promotion opportunity came along," Reitmaier says. "They weren't watching the job posting boards because they felt their status meant someone higher up would tell them when the perfect job came open. But that wasn't the case. They needed to pursue openings like anyone else, and when they wouldn't get these jobs, they'd leave the company."

To address the problem, Harrah's developed a new "management prep" program highlighted by creation of an internal headhunter position to help high-potential supervisors pursue next-level leadership jobs in the company.

"The headhunter monitors opportunities across the Harrah's system and informs high potentials of when there are openings that fit their promotion criteria," Reitmaier says.

Supervisors can "pre-apply" for jobs that fit geographic or other advancement criteria, and those choices are loaded into the headhunter's database to form a ready pool of candidates once jobs open. The headhunter also coaches candidates during their preparation for job interviews. Reitmaier says as a result of the program, 28 percent of management-level opportunities across Harrah's properties were filled in 2004 with someone from the HiPo pool, a significant increase from past years.

DDI's Kauffman also believes it's important that companies communicate to HiPos that membership in the "club" isn't forever.

"We tend to use an 18-month time frame where high potentials can focus intently on their development, get into some high-profile or challenging job assignments and then make a transition to another level or not, with the development focus then shifting to new people moving into the talent feeder pool at that level," Kauffman says.



Oft-overlooked: The development piece

HiPo employee programs are two-act plays, and the time or dollars spent identifying HiPos can go for naught if companies don't follow-up by carefully planning the developmental training needed to groom HiPos for more challenging roles in the company.

"You might spend countless hours creating a list of 100 high potentials, but if you don't then develop them through key job assignments, leadership training exercises or by pairing them with mentors, it just becomes a list of names," Kauffman says.

Experts suggest some mix of development experiences that includes simulation of challenging roles pegged to the leadership levels HiPos are being groomed for, job rotations that help provide a "macro" view of the company, action learning exercises and mentoring relationships.

But how these experiences are timed makes all the difference, says PDI's Sokol. Just-in-time training ensures HiPo employees get just the development they need at the point in their evolution when they are most ready for promotion.

"It's one thing if you teach me how to drive a stick shift and I can get into a car and start using and practicing those skills right away," he says. "It's another thing altogether if I won't have an opportunity to get into that car and practice for two years following the training."





Dave Zielinski is a contributing editor to Training magazine. To contact him with comments on this article, e-mail edit@trainingmag.com. Please put "HiPos" in the subject line of the e-mail.


See also Do They Have What It Takes?

Have an opinion you'd like to share with Training readers? E-mail your letter to edit@trainingmag.com and put "Letters to the Editor" in the subject line.