Getting the Right People in the Hi-Po Pool

The logic of so-called high-potential (HiPo) programs is impeccable. There is clear evidence that promoting from within is far more cost effective and successful than bringing people in from the outside. Identifying those who show greatest promise for ultimately ascending to senior level positions is clearly a smart thing to do. Creating opportunities for them to grow and build relationships that would provide coaching or mentoring are obviously wise steps on the part of a company’s leadership.

However, there is much dissatisfaction with the current process for selecting high potential employees. A study conducted by the Kenan Flagler School of Business at University of North Carolina with organizations with HiPo programs indicated that only 29 percent of respondents reported being either “very satisfied” or “satisfied” with their organization’s current procedures for identifying HiPo program participants.

A HiPo employee is a person who has been identified as possessing the ability and the potential to not merely be promoted, but to ultimately ascend to the most senior levels of the organization. This is a distinction usually reserved for the top 5 percent of employees.

The assumptions are that this person not only possesses technical knowledge and intellectual capacity, but also has leadership capability. Placing someone in this group also assumes that the individual is somewhat aware of the rewards and personal costs of ascending to a senior level position, that this individual has or wants to develop the interpersonal skills required of senior leaders, and that they have the motivation to reach higher levels.

In sum, these are the best and brightest, most capable, and highly motivated people in the organization. They are deserving of further investment in their development to help ensure their preparation for positions of responsibility and power.

Working with three large, highly respected corporations from widely different industries, we collected data regarding 1,964 individuals who had been selected by their organizations as HiPo candidates. We utilized a 360-degree assessment to measure the leadership effectiveness of each candidate. The 360-degree feedback included evaluations from managers, peers, direct reports, and others. On average each leader received feedback from 13 different assessors.

We know that this leadership assessment is a valid predictor of a leader’s effectiveness, because it is highly correlated with organizational outcomes such as employee engagement, employee turnover, customer satisfaction and productivity. This held true in all three of the organizations.

As shown below, we found that the HiPo employees were indeed rated overall as more effective leaders than others in the firm — but only moderately better.

Concerns arose when we began analyzing data from the three large organizations. Analysis showed that more than 40 percent of individuals in such programs clearly do not appear to belong there, falling below the 50th percentile of all leaders we had assessed in their firms. For the three different organizations, the range was from 33 to 52 percent of HiPos who were assessed to be below average.

Twelve percent of these HiPo individuals were actually in the bottom quartile on their scores of overall leadership effectiveness. That is a long distance from being in the top 5 percent to which they supposedly belong.

What accounts for a person being identified as a HiPo when their overall leadership effectiveness is rated in the bottom quartile? To answer the question, we compared HiPos from one organization to over 7,000 other leaders. We examined the 360-degree feedback scores of those who were in the bottom quartile, yet they were still selected for their company’s HiPo program. Here’s what stood out:

1. Managing Up. Those who were rated as high potential but were in the bottom quartile as seen by their peers and direct reports, were much better at managing up (e.g., managing their manager). When we compared overall leadership effectiveness ratings to the ratings by their manager, the manager’s ratings were 8 percentile points higher.
    
2. Emphasis on current performance. They appear to have been chosen primarily for their current performance rather than for their long-term potential. Below are common characteristics that these individuals possessed, which held true across all three organizations being studied.
   

In addition to these skills we found that possessing a specific trait that fit well with the unique culture and created a positive impression often had a profound impact on being selected as a HiPo. One organization, for example, had a cultural trait of “nice” people being highly valued. Employees in this organization who showed high consideration and concern for others would often be considered as HiPo’s even though they lacked other leadership skills.

What Did the Misplaced HiPos Lack?

Many of the misplaced HiPos lacked interpersonal skills. They did not excel in their collaboration and teamwork and were not good at building relationships and reaching out to other groups. As a result, they did not inspire their co-workers to perform at their highest level and were not perceived as developing others. They tended to have an inward rather than outward focus and lacked good communication skills.

Other skills consistently missing in the misplaced HiPos were strategic perspective and the ability to inspire and motivate others. Research done for several other studies has shown that strategic perspective is the biggest difference between leaders at the highest level in organizations and those in mid-management. Inspiring and motivating others is a close second. These must be acquired for a person to succeed in a position two or more levels above their current role.

We know of no research that has attempted to rigorously quantify the cost of misplacing someone in a company HiPo program. That may be because it is an extremely complex calculation, as well as highly subjective. Some of the costs include:

1. Personal costs. Strong and effective individual contributors can be encouraged to pursue a management path that is the often the wrong place for them to be, which often results in a career detour. The company clearly pays some price, but worse yet, the individual’s career is mistakenly diverted or interrupted. They often pay the price for that in dollars, satisfaction, and personal happiness. 
   
2. Impact of wrong promotions. Nearly everyone knows about or has worked for a bad manager sometime in their career. Worse yet, most have worked in organizations with one or more ineffective executives. To the extent that the wrong person is promoted in part because of their inclusion in the company HiPo program, there are consequences. Poor leaders diminish: 

   -Employee engagement
   -Personnel retention
   -Customer satisfaction
   -Productivity
   -Innovation
   -Profitability
   

3. Opportunity costs. Money and time spent on the development of the wrong person is diverted from that same time and money being spent on the right candidate. The consequences of lost opportunity costs are obviously hard to calculate with precision, but they clearly exist. 

It is hard to ascribe an exact dollar cost to each of the above factors. No two situations are alike. What is known is that the costs are real, and sometimes catastrophic. Senior leaders create the culture of the organization and culture determines its success in the long run.

Participants in a company’s HiPo program are most often selected by a group of executives who have in turn solicited input from their colleagues. Managers are often asked to nominate participants, and the power and persuasion skills of the nominator have a strong influence on who is included in the program. 

How do organizations improve their process in selecting the right people?

1. Be clear about the characteristics of a true HiPo. Many organizations have competency models that have been developed for purposes of providing direction to their leadership development activities. This is a good place to begin. Place emphasis on the candidate’s ability to think strategically and to provide inspiration and energy to those whom they would manage, given that those are the most notable deficiencies we found for those who did not belong in the HiPo group. Organizations need to ensure that their competency model reflects where they aspire to be, versus where they have been. If the organization aspires to become more global or to move into digital products and services, the competency model should ideally reflect those changes.
   
2. Seek data from several raters rather than relying on any one person’s views. Much has been written about rater bias. The evaluation a person receives is often strongly influenced by who does the rating. It can be nearly as much of a determining factor as the individual’s actual performance. While the manager’s rating is the single most accurate and predictive rating, it is not always the best measure of the person’s performance or potential. The way to combat single rater bias is to obtain data from multiple raters.
   

The best predictor of the future is the past. But is all past performance equal? Does it matter if the performance is recent rather than decades old? Does it matter if the past performance was in a similar role? Does it matter if the organizations were similar? We are convinced that past promotions received should be given greater weight as predictors of potential. Indeed, they may be the best single measure of performance and potential. 

There are two broad categories of individuals who are misplaced in HiPo programs: 

One group includes those who are simply there prematurely. They have not had the experience or time to acquire the skills, knowledge, and attitudes that the organization needs to have in a senior leader. Many in this group could acquire these skills given time and the right developmental opportunities. We’ll call this group “Premature.”  

The second group lacks the necessary skills and attitudes and give no signs of acquiring them, nor of a strong motivation to be elevated to more senior positions. We’ll use the shorthand term “Misplaced” to describe this group.

The organization should treat both groups respectfully, but they should anticipate different outcomes. Participating in a company HiPo program usually carries with it some benefits, and should also entail correlative responsibility. Every participant should have a personal plan of development that includes specific steps, milestones, and some measurement of progress. That plan should be regularly monitored by either the participant’s immediate manager or the executive responsible for the HiPo program. Ongoing participation in the company’s HiPo program should carry the expectation that it is producing measurable benefit.

Most organizations use their 360-degree feedback information exclusively for the individual’s development in the Premature group. It is not used for promotion or compensation assessments. However, asking a HiPo if they would like a coach to work with them in developing their development program is logical. Suggesting that an important source of useful data for that discussion is available in their past 360-degree feedback is also logical and justifiable. 

The best measure of progress is to have a repeat 360-degree feedback assessment that measures the progress being made by the individual. If the participant is in the Premature group, their progress can be measured. This group should have a variety of formal developmental experiences available that address specific needs. These could range from topics such as problem-solving skills, presentation and writing skills, financial acumen, and/or coaching skills. 

Other assessments that some firms use include psychometric tests and in-depth interviews with a professionally trained psychologist. Both can be valuable in providing insight. We conducted research on the predictive power of a highly respected psychological test battery. While two scales were predictive, the 360-degree feedback instrument was 4.7 times more effective in predicting potential ratings. The effectiveness of assessments via in-depth interviews is highly dependent on the experience and skill of the interviewer. That is why we place greater stock in the results of the multi-rater (360-degree) feedback process. 

Conversely, if the individual is making no progress, then this signals to them and the organization that they are Misplaced.

Some organizations inform members of the HiPo group that they are officially in it. Many do not. If people have not been told, then moving them out is simple. If they have been told, there needs to be a carefully explained rationale for taking them out of the HiPo pool.

We are concerned that many individuals currently in the HiPo program of their organization may not belong there. One consequence is that the organization is lulled into thinking they have a pipeline of leadership talent, which is far less than they believe. The organization may be investing resources unwisely and ignoring others who have greater potential. Those with poor leadership skills can develop, but the majority of those with poor skills don’t realize their deficiency. Accurate assessments can help HiPos understand their current strengths and weaknesses and allow them to develop the skills they are lacking.

Just as getting a product to market quickly has advantages, identifying HiPo leaders early in their career does as well. It affords the organization the time and opportunities for developmental assignments. Fine tuning a company’s HiPo program requires a rigorous selection process. The process separates the larger group of people currently performing in a stellar way from those who have the potential to function well at the most senior levels because of their leadership skills, keen intellect, aspirations for higher levels, comfort with power, intellectual curiosity, and ability to think strategically and energize the people they manage. 

Jack Zenger, D.B.A., is the CEO of Zenger Folkman.  He is the author or coauthor of 12 books on leadership development and 187 articles and blogs.  His career has spanned academic, corporate, and entrepreneurial roles over the past 55 years.  He received ATD’s Lifetime Achievement Award and was inducted into the HR Hall of Fame.  He can be reached at www.zengerfolkman.com.

Joe Folkman is cofounder and president of Zenger Folkman. He holds a doctorate in social and organizational psychology as well as a master’s degree in organizational behavior. He has over 30 years of experience consulting work with some of the world’s most prestigious and successful organizations. He is the author and coauthor of nine books and has a blog on both HBR and Forbes.