Once again, there’s a war for talent and leaders are desperate for a high-potential employee assessment to ferret out their best workers. The last time I heard this much scuttlebutt about a shortage of people with leadership skills was before the Great Recession. But here we are, ten years later, and succession planning is back to being a hot topic.

As the competition for top talent heats up, companies are beginning to think more about how to develop high-potential employees. At the latest Leading Edge Consortium in Baltimore, management psychologists spent a lot of time talking about how to identify a high potential employee, and what to do when you do.

What used to work for identifying high-potential employees

The traditional method of selecting high-potentials, or HiPo employees, is to ask managers to nominate them. The thinking is that no one knows the quality of people’s performance better than their managers. But there are a couple of problems with this approach, as anyone who’s worked under a manager promoted too soon can attest.

First, performance does not equal potential. The fact that someone is doing a good job in her current role doesn’t necessarily mean she has the potential to advance to a higher level. A leadership potential assessment looks at an entirely different set of indicators, something few managers are trained to do.

The second flaw is that managers are people. They have favorites and biases like everyone else. Many managers fall into the trap of looking for someone who “reminds me of me.” These biases are often major contributors to the “pipeline” problem. In most companies, the employees at lower levels are much more diverse than those at higher ranks. Because someone needs to recognize them as a HiPo employee and promote them to the next level, unconscious manager bias can play a big role in keeping minorities and women stuck at the bottom of the company.

A better high-potential employee assessment

So, if we can’t rely on managers, what high-potential assessment tools can we use? The speakers at the conference suggested an interesting variety of approaches, many of which I’ve used to help my own clients pick their best leaders:

  • Formal leadership potential assessment tools: All psychological assessment tools have a margin of error, but there are now employee potential assessment tools which can be useful in predicting an employee’s leadership potential. Tests of personality traits, strategic thinking, learning agility, and others have all proven to have some predictive validity, making them a good starting point, if not a standalone solution.
  • Employee potential assessment centers: In this model, employees are put through a series of exercises to measure how they respond to simulations of real business challenges. Assessment centers are useful for employee potential assessment, but they are also expensive to run.
  • Self-selection: IBM invites all employees to nominate themselves for a high-potential employee program. They then take a leadership assessment and get feedback on their strengths and areas for development. While not everyone gets into the program, this eliminates the manager bias problem.
  • Testing everyone for high-potential characteristics: Some companies put all their employees through a leadership potential assessment. This eliminates manager bias and also draws in people who might hesitate to nominate themselves.
  • 360° assessments: These surveys about a person’s work performance are completed by his/her boss, peers, and subordinates, all of whom are encouraged to provide both quantitative and qualitative feedback. Having multiple raters theoretically offers a more complete picture of a person’s attributes, making them valuable for assessing employee potential. Still, they can become a popularity contest, with employees tailoring their behavior to earn good feedback instead of to do good work.

Clearly, no approach for identifying high-potential leaders is perfect. In part, this is because there continues to be controversy about what criteria differentiate high-potentials from the rest of us. I’ll dive into those characteristics in future articles, as well as what to do with high-potentials once you have identified them.

If you’d like to know more about how to identify and grow your top talent, email me.

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