THE BLOG
11/01/2016 04:17 pm ET

Why many companies are failing to unlock their future leaders' potential

Leadership is a major driver of organizational performance. The quality of a company's leaders determines employee engagement and productivity levels, which in turn determine the company's success relative to its competitors.

It is therefore unsurprising that organizations devote an increasing amount of time and resources to the identification and development of future leaders. This explains the recent proliferation of interventions targeting high potential employees (HIPOs): the individuals who show the biggest promise for leading the organization in the future. In order to win the war for talent, companies must ensure that they harness, engage, and retain their HIPOs. Failing to do so will cause them to defect for their competitors, and force them to replace them with sub-optimal external hires, who are not just more expensive but also slower to adapt.

And yet, despite good intentions and a great deal of evidence-based recommendations (which, to be fair, are rarely adopted), too many HIPO programs fail. Here are four common mistakes that contribute to the failure of these interventions, and some recommendations on how to avoid them:

1) Identifying the wrong people: The most fundamental flaw of HIPO interventions is that they often fail to identify the right people. This is frequently caused by an excessive focus on performance at the expense of potential, yet many employees who perform well at the individual contributor level will fail to perform well when they have to manage others. In addition, the most common method for designating HIPOs is a single rating by the candidate's direct line manager, which makes the nomination process not only subjective, but also political and biased. The solution to these problems is to minimize reliance on human intuition and rely instead on scientifically defensible tools, such as psychometric tests, as these can cut through the noise and pinpoint the real signals of potential (see next point). Although most laypeople feel equipped with the ability to evaluate these qualities spontaneously, they are way less accurate than they think, not least because of their unconscious (or conscious) biases.

2) Ignoring the basic ingredients of potential: Even when HR practitioners have access to reliable assessment tools, they often focus on the wrong indicators of potential at the expense of ignoring its critical or basic ingredients. And if you are really good at assessing the wrong thing, you wont get very far. Consider that companies spend an enormous amount of time (and cash) coming up with their own competency models, and that they often try to make these models as original as possible - as if the determinants of leadership effectiveness were completely context-specific and totally different in firm X and Y. Even when these models make sense, they are often too complex or detailed to be implemented, which explains why they are embraced only by HR (and the marketing people who contributed to them). A better, much simpler, alternative is to focus on the three key ingredients of potential: ability, likability, and drive. Ability concerns the person's intelligence, judgment, and expertise. Likability concerns their EQ and social skills. And drive is their level of ambition. When people have all of these three qualities, you can safely assume they are a real HIPO. With less than three, they will need more development, unless they can compensate for their deficits with extreme strengths on the other two.

3) Wanting a "finished product": Many companies expect their HIPOs to be a ready-made or finished product, but, as the very term indicates, potential is about probability rather than certainty. If a candidate is already performing well in a leadership role, or making an outstanding contribution to the organization, then they are not a HIPO - they are a shining star. The point is to spot the brightest butterfly among the caterpillars, or the vine that will become the best wine. In short, potential is about seeing talent before it's there - it is a form of hallucination because if it was really there, then everybody would see it and it wouldn't be potential. The critical point that companies must understand is that HIPOs will always need a great deal of development: no matter how much potential someone has, it will need to be nurtured and harnessed. But picking the right candidates will make any development intervention more effective - it is always easier to develop someone's skills or talent when they already have potential.

4) Repelling non-conformists: A final mistake companies make is to punish their HIPOs for their rebellious or non-conformist tendencies. Indeed, there is often a tension between a person's ability to lead and follow, which means that the people with the highest potential for leadership will sometimes be incapable of following orders or conforming to authority, in particular when they disagree with the rules. This is why many managers are more eager to promote individuals who are predictable and well-behaved, while punishing those who stand up to them. The problem is that if this replicates throughout the organization, the company is left with an army of YES men, and no generation of next leaders. The only way to fix this is to offer your talented-but-difficult HIPOs some protection: if their managers don't, then HR or senior leadership must be tasked with shielding these troubled gems from bureaucracy and conformity, so they can survive to implement a better order of things in the future.

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