It’s one of the biggest challenges businesses face today: how to identify and develop leaders. The common approach for many businesses is to create a system for identifying high-potential employees. Oftentimes, a high-performer is promoted to leadership because he or she is deemed a high-potential employee. But there is a difference between a high-performer and a leader, and not understanding the difference can lead to failure in a new leadership role.
According to Arlington, VA-based consulting firm CEB Global, 46% of leaders fail to meet their business objectives in a new role. Suffice it to say, high-performers are not the same as high-potentials. In fact, CEB research shows that only one in seven high-performers is actually a high-potential employee. Don’t be mistaken; performance is an indicator of potential, but it is not the only one. Make sure you’re looking at the right type of performance.
Take a look at the following examples to determine how effective your company is at identifying high-potential employees.
Diversity of thought
In 1919, a young man working for the Kansas City Star was fired because he “lacked imagination and had no good ideas.” Sure, Walt Disney’s editor would have said he was not high-potential employee, but of course, this story ends in tremendous success because of his imagination and good ideas. Eventually, The Walt Disney Company bought the Kansas City Star.
When identifying high-potential employees, a company must take care to have diversity of thought in the ranks of leadership. There are two points where diversity at the leadership level is at risk. The first is when there is no unbiased system in place for identifying high-potential employees, meaning leaders are more apt to look for people who are similar to themselves. The second is when the process of identifying high-potential employees is so rigid that it only identifies one type of person. Companies should be asking, “Does our system for identifying these types of employees create diversity of thought?”
Results through failure
If you asked Art Modell, the 1995 owner of the Cleveland Browns, if Coach Bill Belichick was high-potential, he probably would have said no, considering he fired him. However, Mr. Belichick later led the New England Patriots to five Super Bowl appearances, including three Super Bowl titles, and was awarded NFL Coach of the Year in 2003, 2007 and 2010.
Many times, high-potential employees are promoted with the assumption that they will succeed under any circumstance. What organizations often fail to recognize is that people learn as much — if not more — from failures as they do from successes. By only promoting those who have been successful each time, every time, the pool of high-potentials becomes very small. It is true that failure will most likely come at the most inopportune time, such as when they are leading others. Consider Jack Welch, who said, “I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. ‘No,’ I replied, ‘I just spent $600,000 training him. Why would I want somebody to hire someone else?’ ” Rather than passing people over based on failure, look at how they respond to failure and consider what they’ve learned from it that will improve their ability to lead.
Removal of barriers
When Henry Ford, Jr., led Ford Motor Co. in 1978, he fired Lee Iacocca, whom he likely didn’t consider a high-potential employee. Chrysler hired Mr. Iacocca, and he took the company from a $204 million loss in 1978 to nearly $1 billion in profit by 1983.
Mr. Iacocca’s success at Chrysler is well-documented, including his ability to successfully remove barriers, which is another attribute of high-potentials. His work with the government and lending institutions removed financial barriers in incredible ways.
How much is the ability to remove barriers about asking how reactive a person is versus how proactive? Reactive employees will be reactive leaders, constantly solving problems rather than proactively removing barriers. Look for employees who are proactive and remove barriers before they become problems.
Knowing the business
If you asked the leaders of home improvement chain Handy Dan if Bernie Marcus and Arthur Bank were high-potential, they might have said no, considering they both were fired from the company. Over the next decade the two opened more than 100 new stores and earned more than $2.7 billion in sales under the name of Home Depot.
So what was special about Mr. Marcus and Mr. Bank? It’s the difference between knowing the business and knowing the job. This may be the clearest separator between a high-performer and a high-potential. All high-performers know their job … but many don’t know the business. You can’t be an effective leader if you don’t know the business; this is what enables a leader to be results-oriented. This is how leaders translate strategy and vision — in other words, the business — into meaningful objectives that can be carried out by tactical employees. Look for employees who know the business and not just the job.
Look to the future
On October 2, 1954, Elvis Presley performed at Nashville’s Grand Ole Opry for the first and only time. After his performance of “Blue Moon of Kentucky,” he was advised to return to driving a truck in Memphis. Elvis swore to never perform there again, a vow he kept. The Grand Ole Opry was looking for what it had always looked for — not necessarily where the industry was headed. When identifying and developing high-potential employees, consider not only where the business currently is, but where the business and the industry are going. Don’t just fill an immediate need, but also look for what the business will need from leaders in the future.
All these examples illustrate how easy it can be to miss a high-potential employee when not looking out for the right things.
After conversations with several executives trying to find the root reason for identifying high-potential employees, it comes back to one central concern: How much time and effort will it require to develop an effective leader? It is important to identify those individuals who can most efficiently get to the point of leading effectively.
Knowing this helps organizations recognize that regardless of who is given leadership responsibilities, there is time and effort involved. When this aspect of high-potentials is overlooked, it becomes easy to assume that there will be requirements necessary for them to successfully lead. This is the final — and possibly the most important — recommendation. Rather than looking at it in black-and-white terms of who is high-potential and who isn’t, look at it from the perspective of who is worth the time and effort. How much attention will this individual require to learn how to lead effectively? The answer will differ from one organization to another. A big company with a large pool of potential leaders can reasonably expect a lower requirement, but a small organization with a small pool of potential leaders can reasonably expect a higher input of time and effort.
Leaders are everywhere. To identify and teach them, ensure you have the right amount of diverse thought in your leadership; look for people who have experienced and learned from failure; place value on proactively removing barriers; find people who know the business and not just the job; consider the future needs of the business and where the industry is going; and evaluate individuals in terms of reasonable time and effort requirements.These considerations can increase the likelihood of success and minimize the risk that great leaders will be overlooked.