By Paul Bergeron
October 4, 2021
Given that talent scarcity and readiness are the top-rated concerns among many CEOs, companies are identifying future leaders and promoting from within to stay competitive in their industries.
This workforce planning has become even more critical during the Great Resignation; SHRM research found that up to 40 percent of employees want or are planning to search for a new job.
It doesn't have to be that way, said speakers Julie Doyle and Jerri Hall, of HRC Consulting Services in Cincinnati, during their session "Gain a Competitive Advantage by Identifying & Developing Your High-Potential Talent" at the recent SHRM Annual Conference & Expo 2021.
Doyle and Hall presented the substantial benefits to retaining and developing leadership from internal staff, and outlined how companies can determine what skills they are looking for and how to identify them from within the company.
According to research from Deloitte, organizations are struggling to find and develop future-ready leaders; 80 percent of respondents rated leadership as a high priority, but only 41 percent thought their organizations were ready to meet the leadership requirements, Doyle and Hall noted.
Employees want the development, too: 69 percent of HR executives reported feeling pressure from employees to provide development opportunities that would prepare them for future roles.
Engaging Employees Leads to Greater Retention
A 2014 IBM study revealed that employees who do not feel they are developing at a company are 12 times more likely to leave it. Many times, the study found, companies see employee training as an expense rather than an investment and end up paying dearly for it in terms of low productivity and higher turnover.
Nearly all (94 percent) of employees said they would stay at a company longer if it invested in their career development, a 2018 Workplace Learning Report from LinkedIn Learning indicated.
The solution, Doyle and Hall said, is to have a development program that engages top performers. Companies that have actively interested and dedicated employees see a 41 percent lower absenteeism rate and a 17 percent higher productivity rate, according to a University of Louisville study. And a Gallup study found that employee replacement costs can total 150 percent or more of a worker's annual salary.
How to Select Top Performers
A standard way to select high-potential employees, noted Doyle and Hall, is to have managers nominate them and then have the CEO and HR team review and approve them. Selection is based on identifying mission-critical roles and the skill sets needed.
This is often easier said than done: A 2019 Korn Ferry report found that 98 percent of organizations said identifying high-potential employees was important for success, yet only 14 percent felt very confident they had selected the right people for the program.
Further, more than 40 percent of individuals in high-potential programs may not belong there, according to a 2019 Korn Ferry report; 12 percent of high-potential participants were in their organization's bottom quartile of leadership effectiveness; overall, 42 percent were below average.
To choose the best candidates, Hall and Doyle recommended focusing on objective reasons rather than subjective ones. Companies should define future stars as the people who will consistently generate exorbitant results.
Additionally, they said employees with volatile personalities, micromanagers and employees that are closed off would likely behave in a way that may be problematic in the future.
Another tactic to avoid is selecting long-tenured employees only because it is their "turn."
Instead, seek out employees who exhibit leadership traits such as persistence, tolerance of ambiguity, assertiveness and optimism, they said. Those who are strong in roles that require versatility and achievement through working with others are preferred to those who have a penchant for achieving on their own through professional mastery and expertise.
Hall and Doyle also said that learning agility—defined as having the willingness and ability to learn from experience and apply that learning to perform successfully under new or first-time conditions—is another desirable trait. Those candidates with aptitude for logic and reasoning are also desired.
Don't Just Choose 'the Usual Suspects'
About one-third of organizations said they had missed high-potential leaders by not looking deep enough, according to the Korn Ferry report. Survey findings show that only 45 percent of businesses consider mid-level leaders or below, and only about 30 percent consider early-career talent and first-line managers.
A 2019 Korn Ferry report found that "there are real benefits from democratizing opportunity, rather than picking from the usual suspects."
Another common mistake companies make is confusing high management performance with high leadership potential. High-potentials tend to also be high-performers, but high-performers aren't necessarily high-potentials, they said.
Success Through Mentorship
Organizations shared some of their high-potential program elements. Pairing high-potential employees with mentors, providing on-the-job stretch assignments and enrolling them in offsite development opportunities with other high-potential individuals have proved beneficial.
According to a recent study by the Association for Training and Development, approximately 71 percent of Fortune 500 companies use internal mentoring programs to develop high-potential employees. Through pairings with internal senior mentors, high-potentials are introduced to years of knowledge and experience.
Taking development initiatives outside of the classroom and putting employees to work solving real-world business issues was preferred by organizations. For example, groups of high-potentials and mentors can be posed a real-world challenge to solve. Many organizations have migrated to this approach to expand high-potentials' perspectives on how the business operates.
COVID-19 Challenges for Leaders
Leaders faced the most challenging crisis of their lifetime during the pandemic. The lack of precedents, patterns or best practices threw many leaders into uncharted waters. Decisions had to be made fast, with little experience or standards to fall back on, and some of these decisions had unintended consequences, Doyle and Hall said.
The competencies needed to overcome the challenges caused by the pandemic are the same areas of development for high-potentials. About half (49 percent) of CEOs said crisis management was a vital skill for the management team; 42 percent cited resilience.