For many organizations, the top 1% of your workforce accounts for 10% of organizational output, while the top 5% accounts for 25%. So, it's no wonder that 66% of organizations report leveraging high-potential programs, better known as HiPo programs, to intentionally identify and cultivate top-performing employees' skills.
HiPo programs focus on incubating internal talent that possesses the potential to succeed in leadership positions, and they're becoming increasingly popular. Between 50 and 70 percent of organizations feel a shortage of qualified leaders impacts them and are turning to HiPo programs to help facilitate professional growth. Many organizations design their HiPo programs to backfill a sparse leadership pipeline.
However, in organizations that intentionally identify HiPo employees, only 24% of senior executives consider them successful. That's because 40% of internal job moves made by high-potentials fail. Even with these HiPo programs in place, organizations are more likely to look outside the organization to fill leadership positions.
Why are so many organizations' HiPo programs failing? It may very well stem from a lack of quality data.
Identifying talent who should participate in a HiPo program is subjective. In many cases, managers themselves identify the "secret sauce" that makes someone a HiPo based on their "gut feel." The result is a leadership pipeline filled with talent selected based on their culture fit or high performance as an individual contributor.
But just because someone is a fantastic contributor does not mean they’ll make a good leader. That’s because leadership positions require a whole new set of competencies. High-performing individual contributors get pushed into HiPo programs based on their past results, not their future potential.
There are models out there that measure leadership potential; Korn Ferry, for instance, outlines “Seven Signposts” that identify high-potential leaders, which include traits like self-awareness, drive, and reasoning. Similar institutions have identified learning agility — the ability to learn from experience — as the key indicator of high potential globally.
To avoid falling into a bias trap, organizations have hired consultants who have developed these models to perform psychometric tests within the organization to identify individuals who exemplify the markers of high potential. However, the non-scalable and expensive nature of this process has meant that it's been reserved for senior managers and above.
The advent of psychometric assessments has removed many of these barriers, allowing the expertise of data-driven selection to be far more accessible for many organizations. Although organizations are beginning to introduce psychometric assessments into their hiring process, many do not see the potential of implementing these predictive selection methods into other facets of talent management — including HiPo programs.
Psychometric assessments can measure this “secret sauce” — talents like learning agility, drive, and resilience. A data-driven approach to HiPo programs moves beyond subjective selection and quantifies individuals’ HiPo dimensions. Instead of throwing away this data after a single-use case, data-driven organizations could greatly benefit from storing it and leveraging it to make other talent decisions, such as promotions, professional development, and career pathing.
The introduction of psychometric assessments allows these tests to be distributed at a scale that was not previously possible. Now, HiPo programs can help measure the leadership potential of every employee rather than being reserved for a few senior managers and above.
When top performers are identified based on their future potential rather than past results, a HiPo program selection process is halved. Suddenly, much younger talent can be considered for leadership roles, boosting retention. These individuals need challenging work to feel fulfilled, and your organization’s commitment to their growth and development will reduce the chance of them leaving. This is critical to ensuring the success of long-term succession planning, particularly among the Millennial and Gen Z generations, whom Gallup uncovered as the most likely to abandon ship when presented with new job opportunities.
Unfortunately, the traditional approach to high-potential selection is fraught with bias. The Harvard Business Review found that one of the top characteristics for which organizations were selecting high potentials was how well they fit into the organization's culture. Selecting individuals based on "culture fit" perpetuates a "just like us" mindset and disregards marginalized groups. A data-driven approach to HiPo programs can help remove these barriers by quantifying performance potential and reducing the potential for bias to sneak into selection decisions.
Building a leadership pipeline with more diverse perspectives and backgrounds can also drive significant success in boosting your performance metrics. McKinsey found that organizations in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. For racial diversity, it’s 35%. Pinterest learned it could only attract more female engineers by putting more women in engineering leadership positions. Diversity has a trickle-down effect.
24% of organizations aren’t measuring the effect of HiPo programs on promotion rates, and 21% aren’t even measuring the impact on retention. It’s no wonder that so many companies feel in the dark about the effectiveness of their HiPo initiatives.
It’s not an earth-shattering fact that objective data is much easier to track and measure than a subjective approach to HiPo programs. When you can plug that data directly into your HCM, you can measure the effectiveness of your HiPo program against promotion and retention rates.
Although there are services for every other facet of talent management, no software seems to collect and track HiPo data. As a result, many organizations assume there are only two approaches to HiPo selection — consultants or “gut feel.” We believe there is a third option.
A data-driven approach to HiPo programs takes models already developed by research groups and uses Industrial Organizational Psychology to scale and democratize the psychometric tests that quantify traits like learning agility.
Plum has aggregated the research and has distilled the traits that make an emerging leader into one simple to use platform. Learn more about the science of Plum here.