Identifying and retaining the best employees have become immediate challenges for many organizations, but this must be achieved while ensuring the rest of the workforce remains motivated and committed.

In an economic environment characterized by intense competition and fast-changing business conditions, organizations must more than ever be able to create systems to identify, develop, and retain the employees best equipped to take on the leadership reins.

In practice, many companies already invest substantial resources in both formal and informal programs that are geared to developing high-potential talent. Despite these investments, most companies find they are not effective in either identifying or retaining their best. Not only that, but when poorly executed, these important programs have a potential downside: dissatisfaction and disengagement of the vast majority of employees who are not being groomed for leadership.

The challenge for organizations is to balance the need to identify and develop high potentials with the need to ensure that the rest of the workforce remains motivated and committed to the organization's mission. To achieve this balance, a high-potential program must have a well-defined structure, a clear benefit for the participants, and a transparent selection process.

AMA Enterprise conducted a survey in May 2011 titled "Your Organizations' High-Potentials," which examined the policies and perceptions related to high-potential programs. The survey population consisted of senior- and mid-level business, human resources, and management professionals. The key findings include

  • Companies make a half-hearted effort to identify high potentials.
  • One in four companies fails to keep high-potential employees.
  • Goals vary for measuring success of high-potential programs.
  • Many employees perceive high-potential leadership programs to be unfair.

Companies make a half-hearted effort to identify high potentials

The survey found that more than one-quarter of large organizations make virtually no attempt to identify their high-potential employees, while about half (48 percent) characterized their endeavors as "adequate." Just one in five (21 percent) regard their organization's program to spot future leaders as "extensive."

At a time when organizations are struggling to build their leadership pipeline, retain top performers, and plan for management succession, it is startling that so many are not effective at this first step—finding the most promising employees. Even more surprising, half of organizations do not seem committed to holding onto their talent and developing these people to contribute at higher levels of performance.

The survey also explored how organizations approach the challenge of identifying high potentials. Only 8 percent address the task in a truly systematic way, according to the respondents. When so many companies (44 percent) rely on "informal" methods, an alarm bell should sound for training and development professionals. Informal is often just explaining away a lack of rigor. Forty-two percent responded that they rely on a combination of informal and systematic methods, and the balance reported "Don't know."

Organizations use a variety of methods, typically more than one, to discover employees with significant promise as leaders. The most commonly used tool is the performance appraisal, according to the findings. Assessments are used to identify high potentials in only one-third of cases. When used properly, however, competency-based and predictive assessments can provide the hard data to minimize risk and maximize success.

Consider, for example, a leading global medical technology firm that has established a well-defined selection process to determine its high-potential leadership pipeline that includes senior management talent reviews on a biannual basis, assessments, performance reviews, and problem-solving task forces aligned with strategic growth initiatives. Then, in accordance with future corporate needs, the selected individuals are prepared through a variety of developmental experiences, including training, to be promoted. With this well-thought-out approach, they have been able to double the number of high potentials that are capable of tackling new assignments.

In another case, a healthcare organization established a program to ensure the retention of its key administrative professionals who were considered essential to maintaining productivity throughout the healthcare system. Applicants qualified through formal applications, interviews, management recommendations, and performance reviews. It was considered a highly desirable opportunity for which all could apply. The first program proved extremely successful—producing three promotions out of 20 participants in the first group, the employee of the year, and even spurred on several philanthropic community outreach projects.

The continuity within the high-potential group is enhanced by former group members mentoring each new selected group. The qualifications for participation were clear to all and the benefits to the individuals and the company have been readily evident. The organization has lost none of its top administrative professional talent in the past three years.

Thus, finding and developing high-potential employees should be at the core of every company's talent management strategy. There surely are obvious reasons for realizing this goal, but a key one may be the message that management sends to its workers—that they are valued, that they have a future, and that the organization has a stake in their career. If employees do not understand the key role they play, how can management expect to have an engaged workforce, or be surprised when the best employees decide to leave?

One in four companies fails to keep high-potential employees

The study also found that one-fourth of employers are seen as ineffective in retaining high-potential workers. While more than half (56 percent) are considered "somewhat effective," only 18 percent are "very effective" at keeping such high-performing contributors.

Management succession and future leadership are paramount concerns at most companies today. Yet their efforts to hold onto to their best people often seem to fall short. Some organizations make only intermittent attempts to identify their up-and-comers, and it seems that those that do so frequently meet with only mixed success.

Goals vary for measuring success of high-potential programs

The true focus of high-potential programs is leadership development. Talented, motivated individuals need to be developed in a number of ways, including mentoring or coaching, training, stretch assignments, action projects, cross-functional teaming, and job rotation. Naturally, such programs should align with the business needs of the organization.

Finally, employers must measure the desired behaviors and calculate success. Organizations measure the success of their programs in several ways, according to the findings, with the most popular being positive business results being attributed to program participants.

If a high-potential program is designed and executed in the right way, the outcomes should be retention of participants and enhanced business performance. But this is not always the case.

The leadership development team at one Midwest financial institution that AMA Enterprise encountered had designed a great high-potential program, but it had not built in any level of measurement and received zero senior-level support. It was doomed for failure from the start. And consider another large employer that took pride in its new leadership program, which no doubt was a great benefit to the participants—but made no connection to business objectives of the organization.

Transparency should be the watch word when it comes to high-potential programs. When selection criteria are held secret, eligibility is by its nature ambiguous, or high-potential participants themselves are left to wonder what happens next in the program. The lack of transparency may relate to why many organizations find it hard to hold onto their high-value talent. Also, employees must align such programs with the business needs of the organization, recognize results, and celebrate successes to ensure sustainable growth.

Many employees perceive leadership programs to be unfair

The survey found that corporate programs to identify and develop certain employees for future leadership positions are often regarded as unfair and "political" by other workers. In fact, according to the survey, as many as one-quarter of employees in the United States and Canada tend to regard talent development programs as less than equitable. On the contrary, just 12 percent consider efforts to identity and develop future leaders as impartial and even-handed.

The survey respondents suggest that even employees who may be favorably disposed to leadership programs think they are in some way flawed. Equally striking is that 37 percent of respondents have little idea how development programs may be perceived by employees as a whole.

A reason for the perceived unfairness is the lack of weakness of a participant-selection process. It is no surprise that organizations are inclined to limit who may apply for such programs, much less who are actually selected for leadership development. Many may wish to participate, but few are chosen. Or, it could be the case that not everyone is eligible for participation given roles and responsibilities. So some unavoidable resentment has to be factored in.

As understandable as some employee resentment may be, senior management should not be complacent. At the core of effective talent management and employee engagement is a shared sense of openness and fairness. A real attempt must be made to let everyone know the program criteria and to leave open the possibility that others might be selected at a future date. Keeping open the door of opportunity may be key to holding onto good workers. If an individual does not make the cut for entry to a program, he should know that the chance will come up again.

Avoiding a leadership void

Strong leadership is critical to the success of any organization. Thus, identifying and developing future leaders are critical business functions. Yet most companies do not have in place the formal high-potential programs needed to find the exceptional employees who will succeed the current management and lead the company into the future.

The survey findings suggest serious shortcomings in the identification, development, and retention process for high-potential talent. AMA Enterprise has observed that organizations tend to make classic mistakes when it comes to leadership programs—no measurement; a faulty selection process; no senior executive support, which lessens the program's credibility, and no expectation that the program will translate into improvements in job performance. Some organizations also mix management levels (both junior and senior people) in the development process, which stirs resentment, and think training can do it all when there are complementary initiatives that need to be figured into the mix such as stretch assignments.

If these shortcomings are left unaddressed, companies could face a leadership void at precisely the time when such leadership is desperately needed. High-potential programs can be an integral part of addressing the issue of leadership development, but such programs must be carefully crafted to enhance the strength of the entire organization.