As organizations look to drive growth in challenging markets, they increasingly recognize the need for a strong bench of rising talent that can evolve with the shifting needs of the business.
Recent CEB research has found that organizations with strong benches experience double the rate of revenue and profit growth compared to organizations with weaker bench strength.
Unsurprisingly, many organizations are focused on developing their high-potential talent. Relative to the broader workforce, so-called HiPos are almost twice as valuable to an organization and three times more likely to succeed as future leaders. As a result, many organizations are investing in programs to identify and develop these future managers and leaders. Since 2012, 68 percent of organizations have increased their investment in HiPo programs, spending several billion dollars in the U.S. alone.
Unfortunately, while these programs make a great deal of sense in theory, many fail to deliver results in practice. High rates of employee attrition and underachievement cause many HiPo investments to leak out of the organization. CEB research has found that 55 percent of employees entering HiPo programs drop out within five years. And, among those who do stay the course, almost half do not meet business objectives in their first assignment as a leader. Furthermore, many are disengaged. Up to a third report they are looking outside the company to realize their career goals. Understandably, executives charged with managing these programs question their effectiveness: Only one in six human resource professionals are satisfied with their high-potential programs.
Given the discouraging statistics, why bother with HiPo programs? While many programs are broken, a few organizations are realizing significant returns on their investments. These elite organizations tend to do three things differently: They establish a clearer definition of potential distinct from current performance in role, they use more objective measures of potential (rather than manager judgement alone), and they create differentiated development experiences for HiPos.
So what can you do to maximize your HiPo investments?
1.Redefine “potential.” Many organizations confuse performance to date with potential for the future. Those that succeed with their HiPo programs, however, recognize that employees need something more than strong performance in their current role to succeed in future roles. Employees need to have the motivation to rise to a more senior role (aspiration), the capacity to manage and lead effectively (ability), as well as the desire to realize their career goals with their current employer (engagement).
2.Measure potential objectively. Rather than relying solely on subjective manager nominations or evaluation, these organizations ensure systematic, fair and valid identification of HiPo talent through scientific assessment and objective evaluation of aspiration, ability and engagement within the organization.
3.Create differentiated development experiences. Typical HiPo programs provide opportunities for incremental skill building, but fail to prepare HiPo employees for realistic future roles. The best organizations help potential employees not only learn new skills, but also apply existing skills in different roles by exposing them to high-impact development experiences. They also find ways to more effectively enlist managers and leaders as coaches of HiPos.
One global electronics company ties together these key steps by taking a stage-gated approach to HiPo development. They provide development experiences that align with the challenges HiPos face at three specific stages en route to senior executive roles — leading a high-performance team, leading a business unit and leading a global, multi-business organization. Additionally, they rigorously review and manage the potential and progress of individual HiPo candidates to ensure they have the skills, knowledge and experience to be successful in senior positions.
In a world emerging from some of the toughest economic conditions for decades, many organizations, and particularly their chief financial officers, are asking what return they can expect from human capital investments. Surfacing talent in organizations has to shift from an art to a science if organizations are going to see return-on-investment from these programs. The choice is simple: better leaders building stronger organizational performance or a failure to deliver those leaders resulting in poorer performance.
The best organizations are future-proofing returns on HiPo investments by redefining potential, adopting objective measures and differentiating development experiences.
» Eugene Burke is chief science and analytics officer at CEB. Michael Griffin and Jean Martin are executive directors in the human resources practice.
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