Hudson - High potentials

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Hudson's insight into manging high potential talent

Hudson's insight into manging high potential talent

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  • 1. High PotentialsC r i t i c a l T h i n k i n gFa c t s a n d F i c t i o n
  • 2. High Potentials: Facts and“The business environment is considered as akind of test, with only the ‘lucky few’ findingtheir way to the top.“Current leaders often wrongly assume their in-house potential will emerge without any regard forHR-policies. This ‘survival-of-the-fittest’ assumptionpictures the high potential as a lonely warrior, whofights his way through the jungle with a machete.The business environment is considered as a kind oftest, with only the ‘lucky few’ finding their way to thetop. This may, however, cause leaders to overlookin-house potential, while boosting derailmentsin the evolution of identified high potentials.Current leaders are keen to regard the ‘survival-of-the-fittest’ assumption as true, because theyfrequently regard themselves as ‘survivors’ too.According to this assumption, it would appearto be perfectly feasible to select high potentialsbased on values, norms and personality traitssimilar to the current leaders. Only modestinvestments in HR-policies then appear tobe necessary as the current leaders believethey can best identify the future leaders.There is a significant danger that utilising informalselection systems promote employees on the basisof similarities they display and the network theybuild: i.e. those who attended the same educationaland training institutions, apply the same leadershipstyle, belong to the same social background andcome from the same ‘old boys club’. Applying the‘natural-selection-technique’ implies a number ofrisks, however, which can have an impact on thecontinued, long-term existence of the company.Informal and often self-designed ‘ad hoc’ systemsdo not constitute an effective strategy to identifyand develop the company’s future leaders. It isa luxury which companies can no longer afford,since the arrival of the second ‘war for talent’.Why the survival of the fittestassumption doesn’t work.Second war for talent has arrivedIt is often claimed that the demographic shortage oflabour will make the first war for talent (announcedin the late 1990s) look like a ‘minor and temporaryirritation’. The future shortage of labour is presentlya fact well documented by statistics. By way ofillustration, here are some figures: even if theUS economy were to grow over the next fifteenyears by only 2% for instance, the demand forsenior managers would still rise by about onethird. Meanwhile, the total potential labour forcein the US is declining: in 2005, the total of 35-year to 44-year olds decreased by some 15%.A similar phenomenon is happening in Europe:the number of employees aged 55 or older isset rise to 47% of the total European workingpopulation by 2010. By 2050, the situation willlook even more dramatic: by then as much as60% of the total European working population willbe older than 60 years. This demographic trendserves to underpin the rationale that investmentmade in attracting, selecting, developing andretaining in-house talent is a pressing need.Some companies will consequently push asidethis imminent problem of a structural shortage oflabour. It is true that until the year 2010, companieswill hardly notice any change, as a consequence ofincreasing female participation, large restructuringoperations and continuous economical fluctuations.However, demographical statistics suggestthe long-term trend is clearly a continuous andHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH
  • 3. High Potentials: Facts and High Potentials: Facts and Fictionwww.hudson.comIn contrast with the phenomenon of ‘cloning thecurrent leaders’, Hudson advises companies todevelop a formal high potential managementprogramme: an in-house ‘pool of high potentials’,which are closely monitored and developedin line with company strategy and companyneeds. Consequently, companies need to freeup the necessarily resources that will enablehigh potentials to perform at their best andgrow step by step towards a next job level.Up till today, companies are temped to play it safe:they confine resources only to the ‘establishedtalents’ at the top and invest little in thedevelopment of latent in-house potential at entrylevel. A formal high potential management programimplies that organisations must look ahead andtackle their leadership development proactively.Companies should opt for a wider approachtowards talent management, by identifying futureleaders early on in their career. It is indeed, ‘theearly bird that catches the worm’. Companiesmustn’t be afraid to evaluate their employeesand designate their high potentials in a formalmanner. The strength of successful companies istheir courage to differentiate and to be consistentin the application of a high potential policy.High potential managementprogramme as an answer to thenew war for talentHudsondeveloped10guidingprinciplesforinstallingahighpotentialmanagementprogramme, based on hundreds of assessment and development centres, contactswith business leaders, HR experts and academics in all parts of the world, anelaborated literature study and quantitative research on high potentials:10 guiding principles forinstalling a high potentialprogrammeH H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H HH H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H HH H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H HAlign the programme withthe company strategy“The problem of our times is that the future nolonger is what it once was” — ValeryThe unified commitment of the company to investin in-house potential is decisive for the successof the high potential programme. The programmeshould therefore be placed on the managementagenda and clearly aligned with the companystrategy, ensuring all personnel decisions madewith the long-term future of the company in mind.High potential management presupposessufficient awareness of the company strategy andthe strengths and weaknesses of the companyleaders, both today and in the future. In thatsense, the profile of the future leaders of thecompany comes forth — in an almost natural way— from the dialogue on the strategic imperativesand associated challenges the company will befacing. Hudson recommends organising a ‘highpotential workshop’, where the CEO and the seniormanagement sit around the table and reflect onleadership and challenges future leaders will face.The acknowledged current and future challengescan then be used as the guiding principles duringthe workshop. It is important also to benchmarkwith other companies, in order to see whatinitiatives the competition is taking to develop itsin-house potential. The CEO and the managementshould be challenged to define a clear definition,programme principles, objectives and roledistributions. In principle, the owner and sponsor ofthe high potential programme should be the CEO.The role HRM has to assume is not a minor one,however. The role of HRM is to help put in placethe systems and processes and to monitor theseprocess and safeguard their continuity and quality.Hold the managementresponsible“I used to select jerseys, now I select people”— Wexner, CEO of The Limited.Engaging the management in the identificationand development of the high potential pool is onlypossible when they are held formally responsible.They are the ones who can provide high potentialswith the appropriate in-house and external training,let them go through rotational assignments and12ever-quicker tightening of the labour market.There is, a growing awareness that companiesmust develop a long-term strategic HR policy inorder to win the war for talent: They must devotemore attention to attracting and retaining theirhuman capital and develop potential internally,rather than ‘buying’ it externally. Increasingly,companies are translating this awareness into anin-house ‘high potential management programme’.
  • 4. High Potentials: Facts and High Potentials: Facts and Fictionwww.hudson.comact as mentors. Responsibility can be assigned tomanagement by linking development goals to anannual bonus system. The basic principle underlyingthis bonus system is that behaviour pointing toactive participation in the development should beremunerated. The objectives relating to the in-housedevelopment of potential can account for 20% ormore of the manager’s bonus. The time and energyinvested by management in the development ofhigh potentials thus becomes an integral partof the managers’ objectives. In this respect,management is seen and deployed as a ‘discovererof burgeoning talent’. Only the managementcan free up the talent of the organisation bytreating them as an organisation-wide resource,which has to be fully developed over time.Organise a high potentialexecutive committee“The challenge a company is facing consists inhaving talented employees who change alongwith the organisation as and when technology,competition or the entire industry changes”— Allaire, CEO Xerox Co.Putting in place a ‘high potential executivecommittee’ which takes over the ownership ofthe high potential pool, constitutes an essentialelement of the development programme. There isstill too much evidence that nepotism, and actionstaken out of self-interest, affect the correctnessof high potential pre-selection and selection. Theappointment of a group of selected ‘equals’ ina high potential executive committee will in anyevent enhance the objectivity of any ‘propaganda’or ‘killing’ tactics. Each business unit or divisioncan have a ‘subcommittee’ where the informationabout each high potential is collected anddiscussed. Ideally, one day per quarter should bespent on discussing the individual cases and onpreparing and monitoring the individual tracks.Regular follow-up and reporting by thesubcommittee to the executive committeeensures management is, each quarter or half year,required to map the actions they have taken andthe actions they will be taking to further develophigh potentials. This is also an opportune timeto provide information on the high potentials’reaction to certain experiences, to assessretention risks and implement or suggest possiblechanges in the development track based on theexecutive committee members’ discussions.Identification criteria linkedto transition phases“Failure to learn new things results almost inevitablyin failure to perform in a management role in thelong-term” — KovachIt seems as if there is a widespread need to believethat there is a magical ‘set’ of generic qualitiesfor identifying high potentials. The list of qualitieshigh potentials are endowed with seems endless,and — in some cases — even contradictory. Butwhat if there is no such magical success formula?Furthermore, there is a common believe that this setof competencies remains constant over time. Whatif high potentials, like white knights, have to learnhow to ride their horse and handle their sword?Even intuitively, it seems absurd to assume that a25-year old has the same knowledge, skills, andattitudes as a 45-year old. To benchmark a younghigh potential against successful acknowledgedtalent, is a bad way to identify potential. In linewith this reasoning, identification criteria shouldshift according to different career stages.If the idea that a basic set of unequivocalcompetencies is decisive for the identification ofhigh potentials were to be abandoned, it wouldopen the way for seeing high potentials for whatthey are: high performing employees with thepotential — in time — to grow. Hudson advisescompanies to start spotting the high potentialsbased on three basic criteria: learning ability (LQ),emotional (EQ) and intellectual intelligence (IQ)and attitude (A). In-depth interviews with highpotentials in various age categories show that ontheir way to the top, they go through a number3of ‘phases of transition’. Each step on the careerladder requires the high potential to acquire a newset of competencies. Each phase of transitionassumes a leap in responsibility and autonomy.Once high potentials have mastered a certain jobor competency level, they will go in search of waysto raise the bar once more and look for a newchallenge. If there is one element that is decisive inmaking a distinction between high potentials andother employees, it has to be the exceptional speedat which they are able to develop the knowledge,skills and attitudes needed to assume a newposition. One should not benchmark a 25-year oldto 45 year old, but to a ‘norm’ of what is expectedof someone given his age or work experience.Keep high potentials andhigh performers separate“What’s in a name?” — ShakespeareCompanies might be tempted to look atperformance in the current job, rather thanpotential when identifying high potential. Excellentperformance is often an identification criterionof high performers quite simply because it isthe most easily observable criterion. In addition,politically it is simpler and less sensitive to putemployees on a list of high potentials based ontheir exceptional performances rather than theirlatent potential. When only having eyes for the45Hipo Identification
  • 5. High Potentials: Facts and High Potentials: Facts and Fictionwww.hudson.cominterview data) as a ‘zero measurement’. In thevery first career phase, organisations can opt firstto invest in the build-up of expertise of the youngpotential or to let him rotate through a numberof business activities. A more in-depth follow-upmeasurement can best be made after a period ofapproximately three years, from which a proposedcareer and development plan is drawn up resultingin active development of the high potential.A second and crucial measurement is thedevelopment centre that takes place betweenthe ages of thirty-five and forty years. It is thismeasurement that has a truly fundamentalimpact on the final and detailed arrangementof the hipo track from a long-term perspective,in order to avoid the syndrome of the ‘inch-deep-mile-wide’ manager. Also, informationthat can prevent the ‘Peter Principle’ frommanifesting itself often comes to the fore.Hudson recommends one more formalmeasurement (‘end assessment centre’),to evaluate and validate whether the highpotential will ultimately be admitted to thehighest decision-making body of the companyor not, and in what capacity. At the end ofthe day, spread over the total career of a highpotential, there should be at least four importantmeasurements, which will impact decisively onthe high potentials track. Companies can — atregular intervals — adjust the high potential track,based on the development centre results.performance of employees, companies couldbe in for some unpleasant surprises when thehigh performer is promoted at a higher level withdifferent duties and responsibilities. A study showsthat nearly all high potentials (93% to be exact)are also high performers: performances seem tobe a must for high potentials to be perceived andidentified as such. The same study shows thatonly 29% of the high performers effectively werehigh potentials as well. This suggests there is areal danger of terminology confusion regardinghigh potentials, causing strong performers withoutgrowth potential to contaminate the pool of highpotentials. The inconsistent use of the term ‘highpotential’ has resulted in contamination of theterm both in the literature and in business.Communicate openlyon the status of the highpotential“The question is not whether or not we will tell highperformers that they are high potentials, but howwe are going to tell them” — YoungAs a rule, high potentials are not formally toldnowadays about their special ’status’. Moreoften than not, the individuals whose namesare on the secret list receive a few hints abouttheir status: they know that they have beendefined as high potential by the people theyhave lunch with, the mentor who supportsthem and the exposure they receive.Formally allocating a high potential label isconsidered to be tricky: in regard to communicationon the label, as many advantages as disadvantageshave been defined. In a tightening labour market,however, communicating on the label can formpart of the strategy aimed at retaining thistarget group. It could potentially encourage highpotentials to remain with the company for longer,even if a head-hunter contacts them and theyare offered a job in which they can earn moreimmediately. A Hudson study (2006) revealedthat allocating a high potential label — whetherformally or informally — has a positive implicationon the work satisfaction of the employees. Thelabel is regarded as a proof of the faith andengagement of the company in their development.When organisations are in doubt about whetherto award a hipo label or not, the question is not:Shall we inform employees about their potential?But rather: How shall we inform them about theirpotential? The risks related to allocating labelsare often linked with perceived promotion pledge:the label is often considered as a guaranteeof future success and it is this assumption thatbrings employers into problems. No responsiblemanager or HR professional -responsible cangaze into a crystal ball to predict the future,therefore allocating a label makes it more difficultto manage the expectations of high potentials.For this reason Hudson advises companies toset a time constrain on the label. High potentialsneed to become aware that their label is nota ‘wild card’, but an acknowledgement of theirpotential at a certain moment in time. By addinga time constrain to the label, the status is ‘up fordiscussion’, creating the possibility of stimulating afrank debate between HR, the management andthe high potential: ‘What do you want and wheredo you want to go?’ As against: ‘What do we want,and where do we want you to go?’ Testing oneanother’s needs can be regarded as a first step inthe development and retention of high potentials.Use development centretechniques to identify highpotentials“You can only keep track of what has beenmeasured” — Old Dutch proverbAn evaluation of high potentials early on in theircareer enables a follow-up trail, covering thedevelopment of the high potentials over the years.Ideally, as from the start of the high potentialscareer, organisations use the data available fromthe selection phase (such as personal data or76Overview ChartOverview Chart
  • 6. High Potentials: Facts and High Potentials: Facts and Fiction11www.hudson.comManage the tailor madehigh potential track“Don’t judge each day by the harvest you reap, butby the seeds you plant” — WilburThe high potential track is a flexible path, itsdirection being continuously adjusted, either basedon changing external circumstances or on the highpotentials’ personal development needs. It mustbe ensured that management are responsible fordeveloping high potentials in the right direction,aligned with the strategic objectives of the business.For years, stretch assignments have beenan important technique to develop potential.Stretch assignments are issued based on theinherent belief that offering high potentials a newexperience allows them to acquire new skills,knowledge and attitudes. An essential condition is,however, that the hipo receives sufficient supportand is adequately monitored while learning. Inaddition, Hudson advises open communicationchannels between management and thehigh potential about the type of developmentpractices that both parties regard as efficient.Embrace derailment ofhigh potentials“It is not a question of whether the high potentialswill derail, but rather of when they will derail andhow they will react to this failure” — KovachMonitoring high potentials over time, brings upa painful contradiction: the competencies highpotentials often rely upon to be identified in anearly stage, are often the same as those thathamper their growth to a subsequent phase intheir career. The behaviour that is endorsed andrewarded by the management in a certain careerphase is admonished in a subsequent one. Thismakes the ongoing monitoring of high potentialsand continuous feedback loops throughout thedifferent transition periods key elements to keephigh potentials on track. Many young potentialsclearly feel confused and frustrated when theyfind out that competencies, such as ‘assertiveness’and ‘self-confidence’ are suddenly describedas ‘aggressiveness’ and ‘self-glorification’.The success of a high potential often brings abouta kind of blinding arrogance as a result of whichcolleagues no longer want to work with them.Based on the belief that they are special andstand apart from the mass, the high potential’sego inflates to bursting point. This self-imageexposes them to the risk of not wanting to listento others anymore. They no longer ask for inputof others, and no longer check their ideas withothers because they rely too much on their own.They start extrapolating their capacities to differentactivities and topics about which they have lessexpertise, and are perceived as pedantic as aresult. They merely continue to build on their‘strengths’ and lose sight of their ‘weaknesses’.This causes them to make mistakes, which theythen painstakingly try to cover up in the hopethat nobody will ever find out that they are notquite as ‘special’ as they thought they were.Generally, with each transition of a high potentialto a new role or job level, the chance of derailmentis real. Derailment doesn’t have to be a badthing, however. On the contrary, the loss of thehigh potential status forces them to practiceintrospection, learn from their mistakes and soto reinvent themselves. Failing is a worthwhilelesson and can be instructive for high potentials,because handling it gives them the chance todiscover their own limitations. This event cantherefore bring the high potential back to the highpotential track. Just like the hipo status, derailmentis not a permanent but a temporary state.9H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H HH H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H HH H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H8
  • 7. High Potentials: Facts and High Potentials: Facts and Fiction13www.hudson.comRemunerate highpotentials by investingin their development“If you want one year of prosperity, grow grain; ifyou want ten years of prosperity, grow trees; if youwant a hundred years of prosperity, grow people.”— Old Chinese proverbIn an ever tightening labour market, retention oftalent is becoming increasingly important. Manycompanies and their leaders offer astronomicalsalaries to secure themselves to maintain highpotentials in the company. Hudson advisescompanies to consider the remunerationpackage as the combination of compensation,benefits, environment and development.level’ broadband. Neither benefits, nor generaljob environment conditions should be used todifferentiate in investments in development.Remunerating high potentials by investing morein their proper development has a dual effect: onthe one hand companies offer high potentialschallenges and opportunities to learn new skills andon the other high potentials grow to a subsequentjob level more rapidly, and — as a consequence— their fixed salary will rise without having todepart from formal company salary policies.Some high potentials are blinded by the trappingsof success rather than by the process that leads toit. The high potential executive team has to supporthigh potentials in this. While rapid promotion andhigh salaries can be dazzling, opting for this routemeans that high potentials are not always able todo enough ‘swotting up’ for a subsequent challenge.It does not allow for sufficient time to assimilatethe competencies they need in a subsequentjob or role. A more successful approach is to gofor a well thought-out and sufficiently detaileddevelopment plan which gives the high potentialtime to acquire new competencies, allows them togrow and prepare for a subsequent, more complexroles with more autonomy and a wider scope.10Reward QuadrantsCompensation by way of salary should be basedon an employee’s performance: in line with thisassumption, a high performer will receive similarpay to a high potential. Both turn in performancesthat are exceptional compared with the averageemployee and for these performances they shouldbe remunerated. The remuneration policy of mostorganisations provide for the possibility of payinghigh performers and high potentials a slightlyhigher than average salary, within a certain ‘jobCOMPENSATION BENEFITSDEVELOPMENT WORK & ENVIRONMENT“People are seeking out organisations that offer them development opportunities …they seek organisations where there is a winning mood, a strategic angle which makesthe organisation successful whether it is a small or large entity, and very importantlyalso they seek organisations with confirmed A-players from whom they can learn. Whenyour brand reflects all this in your specific sector, then you have a good chance to be atthe top of the Talent Food Chain.”Marc TimmermanHigh PotentialsT h e C o m p e t i t i v e E d g e W i t h i n y o u r C o m p a n yMarc Timmerman & Charlotte Sabbe
  • 8. HudsonAsia Pacific | Europe | North