The popularity of high-potential — also known as HIPO — employee programs has been growing over the last 15 years. Identifying and developing promising employees is a practical necessity and companies are investing significant resources in cultivating future leadership talent.
So, how are Canadian companies doing in this regard? The results of an online survey of HR professionals conducted in partnership with Canadian HR Reporter, York University in Toronto and the University of Ontario Institute of Technology in Oshawa, Ont., are alarming.
Two-thirds of respondents say senior managers are only “somewhat effective” at identifying high-potential employees and an additional 22 per cent feel senior managers are either “not very effective” or “very ineffective.”
Only 10 per cent believe senior managers are “highly effective” at spotting talent, found the survey of 220 respondents representing a cross-section of industries and sizes ranging from under 100 employees to more than 20,000 employees.
While most respondents (85 per cent) reveal their organizations have some form of a HIPO program in place — which typically involves identifying up to 10 per cent of employees as high potentials and providing them with leadership development opportunities — only a handful (seven per cent) identify their future leaders in a systematic manner, which closely parallels the results of a recent survey of companies in the United States by the American Management Association.
Most of the reported programs entail a high level of informality. For example, more than one-half of respondents to the Canadian HR Reporter survey say the process for identifying high potentials is applied inconsistently across their organizations.
This reality stands in sharp contrast to advice provided to companies by both HR professionals and academics regarding the need to apply HIPO programs systematically.
Even more alarming is the widespread lack of validation of approaches to the identification process. Only a small minority (13 per cent) have formally evaluated the accuracy of their methods for identifying high potentials.
And a staggering 82 per cent say their organizations do not evaluate the accuracy of their HIPO identification processes.
Given the strategic importance of leadership development and the significant investment made by organizations, it’s troubling most companies choose not to validate or systematically examine their predictive models but rather “drive blind.”
One might expect this failure to validate is based on an overly optimistic belief HIPO programs are delivering results. However, respondents are cynical about the effectiveness of their companies’ approaches.
Only a small number of respondents (17 per cent) report being satisfied with their organization’s practices.
This result closely reflects a finding by the Conference Board in 2005 that only 15 per cent of respondents are satisfied with their organization’s HIPO practices.
The low level of satisfaction seems to be reflected in the respondents’ perception of their organization’s ineffectiveness at accurately identifying HIPOs. Only four per cent feel their organization is “highly effective” while about one-half believe their programs are ineffective.
Over-reliance on job performance problematic
The HIPO identification process is primarily based on an employees’s current job performance along with the recommendations of an immediate supervisor or upper-level manager.
Other methods for assessing high potentials — such as competency-based interviews, input from peers, assessment centres and various measures of learning ability, and emotional intelligence — are used much less often.
In addition to examining an employee’s job performance record, managers evaluate employees in terms of their motivation and engagement (such as drive, energy and aspiration), managerial skills (such as influencing, empowering and developing others), cultural fit and commitment to the organization.
But the heavy reliance on current performance for evaluating future potential is both understandable and problematic. There appears to be a genuine state of confusion around what is the right set of key competencies and assessment instruments that should be used for measurement purposes.
Consequently, organizations feel most comfortable simply relying on employee performance as a proxy for future potential, supplemented by managerial observations.
However, this approach is problematic because current job performance has not been shown to be a reliable predictor of potential for superior performance in higher level positions. Only a minority of high-performing employees have the critical abilities to excel at the next level, according to research.
Some positive sides to employer approaches
Most of the organizations surveyed indicate they start the identification process early in their employees’ careers. Two out of every 10 organizations surveyed attempt to spot HIPOs during the hiring stage.
Seventy per cent seek to recognize future potential during the early years of employment, either at the non-managerial employee level or junior manager level. Only 10 per cent wait to identify HIPOs at the senior manager level.
Aside from serving as a tool for building a leadership pipeline, organizations believe HIPO programs motivate employees to perform and raise performance expectations in general.
Overall, the survey results suggest companies are concerned about cultivating leadership talent and actively engage in the process of identifying HIPOs.
That’s the good news. The bad news is we desperately need to revisit our practices in this area. Respondents indicate they view their companies’ approaches to identifying high potentials as severely deficient. This suggests many companies may well be missing out on tapping their true potential.
Tips for employers in identifying HIPOs
There is a need to develop better assessment tools for more accurately identifying high potentials, as well as to promote more systematic implementation of the process. Rather than simply relying on measures of current performance, take a hard look at additional measures of potential that tap such skills as learning ability, managerial capabilities and talent for innovation.
Organizations can undoubtedly benefit from engaging in a methodical, data-driven scrutiny and validation of their HIPO identification processes.
The widespread suspicion of respondents that programs are ineffective, combined with lack of data to the contrary, suggests considerable resources are probably being wasted on inadequate HIPO identification programs.
Perhaps most troubling is organizations might be overlooking the true hidden treasures inside their walls. Two-thirds of the surveyed organizations say their employees are either completely unable or highly unlikely to attain an executive position without having been identified as possessing high potential first.
The problem is most organizations don’t appear to have a system in place that is capable of accurately spotting this potential and, consequently, many truly high-potential employees may go unnoticed and not be given a chance to prove themselves.
Igor Kotlyar teaches in the Faculty of Business and Information Technology at the University of Ontario Institute of Technology in Oshawa, Ont. He can be reached at email@example.com. Len Karakowsky teaches in the School of Human Resource Management at York University in Toronto. He can be reached at firstname.lastname@example.org.