Recent media coverage of the Debenhams CFO stepping down due to poor profit performance has prompted many investors to question whether the right leadership is in place in their organisations. Our research shows that organisations with stronger leadership gain double the revenue and profit growth than those with weaker leadership. This highlights the importance of effective leadership and underlines the need to develop talent programmes that identify and nurture top talent as the UK is poised for economic recovery.
Savvy business leaders are realising the value of investing in top talent, but this throws up several challenges. Why should investment be made in high-potential programmes and what is the probable ROI? How do they identify the organisation’s high-potential individuals? And more importantly, how do they know these high flyers will stay with the business for years to come?
High-potential: the value and reality
According to our recent whitepaper ‘Improving the Odds of Success for High-Potential Programmes’, high-potential employees are seen as almost twice as valuable to their organisations as employees who are not high-potential. A whopping 5 in 6 HR managers state they are dissatisfied with the results these programmes deliver; 50% of individuals identified as high-potential drop out of their programme within five years and just 1 in 6 employees entering a high-potential programme will succeed in a senior role. This reality shows that high-potential programmes are failing to deliver. This investment is at best wasted and, at worst, feeding competitors’ talent pipeline with the most valuable people.
Assumptions lead to the wrong investment
The reason for such a low success rate is that organisations fail to define exactly what a high-potential employee is and define what they are high-potential for. One of the most common errors in high-potential programme design is to assume that the organisation’s employees who are performing well today are also its high-potential employees for tomorrow.
Secondly, organisations are continuing to put forward the wrong people, investing in those who do not have the aspiration, ability and engagement to succeed in a senior role. This misidentification of talent is preventing those with the strongest potential from reaching the top, where their talents are most critical to the organisation’s future, impacting productivity, innovation and performance.
Changing the odds of success of high-potential programmes
With the C-suite placing increased pressure on the HR department to prove the value of any talent investment made, using a best-practice framework will allow them to have a deeper understanding of the motivations, qualities and capabilities needed for future generations of leaders.
Interestingly, only a third of organisations are using valid assessment methods to identify high-potential talent and almost half lack any systematic process for identifying and developing these candidates. This represents a missed opportunity and a clearer framework is needed for identifying true leaders.
By using objective data and re-thinking high-potential programmes, the success of these initiatives can be improved by a factor of 11. Organisations need to collect data which indicates whether an employee will rise to a senior position, whether they will be effective when they get there and if they will still be with the organisation when they reach this level.
Securing engagement and the potential to stay
Less than half of high-potentials intend to stay with their employer but if engaged, they’re much more likely to rise to new positions, and realise their potential. High-potentials value recognition – but most organisations don’t even tell these individuals that they’re high-potential. While there may be cultural or other reasons to keep the high-potentials lists confidential, not informing these candidates and celebrating their accomplishments is a lost opportunity to improve satisfaction and engagement.
Doubling up on success
Overall, it is more cost-effective in the long run to develop a high-potential employee than have a person underperforming in a senior role or flees the company. If the wrong candidate reaps the benefit of the high-potential programme and then leaves the organisation to a rival firm, then your business is at risk of developing your competitors’ talent pipeline.
Companies have the opportunity to double revenue and profit if they re-engineer their high-potential programmes. Reap the rewards of a fruitful talent pipeline to capitalise on future growth and new markets. High-potentials are an organisation’s future leaders, and strong leadership is fundamental to a business’ growth and productivity.
By Eugene Burke, chief science and analytics officer at CEB