Idea in Brief
In the war for talent, the most effective weapon is the careful management of candidates for top jobs.
Unfortunately, the development of a company’s future leaders, or “high potentials,” is often haphazard: There are no agreed-on best practices. Selection criteria are confusing; solid contributors are often demoralized by their exclusion from the process; development programs tend to remove promising managers from day-to-day operations.
In a far-reaching research effort, the authors have identified several sets of activities—“emerging” best practices—employed by companies with strong talent programs. They include:
Aligning the programs with corporate strategy, rather than adopting cookie-cutter approaches that seem effective in other organizations.
Choosing candidates carefully, through a combination of nominations and objective assessments, so expensive resources aren’t wasted on the wrong people.Rotating people
through jobs that match their developmental goals and experiences.
Communicating honestly. Companies are often reluctant to acknowledge who’s made the list, but the only real reason to keep it quiet is that you suspect the process is overly subjective or unfair.
Artwork: Vincent Fournier, The Man Machine: ReemB #1, Pal, 2010, Barcelona
The war for talent shows no signs of letting up, even in sectors experiencing modest growth. According to a global study we conducted, only 15% of companies in North America and Asia believe that they have enough qualified successors for key positions. The picture is slightly better in Europe, but even so, fewer than 30% of European companies feel confident about the quality and amount of talent in their pipelines. Moreover, in the regions where many companies are focusing their growth strategies—emerging markets—the supply of experienced managers is the most limited, and the shortage is expected to continue for another two decades.
One popular battle strategy is to institute programs aimed at “high potentials”—the people that companies believe may become their future leaders. The appeal is clear for both sides: Promising managers are attracted to companies known for strong development opportunities, and a well-managed talent pipeline dramatically increases the odds that a company will appoint great leaders at the top.
But these programs aren’t simple to execute. The selection criteria are often confusing. Employees are frequently mystified by who’s included and who’s excluded. Company leaders have to weigh the upside of putting top performers into developmental opportunities against the downside of temporarily distracting them from an enterprise’s immediate needs. Firms risk demoralizing solid contributors who are not anointed as high potentials—the vast majority of managers, the people who keep the trains running on time. Sometimes the chosen few don’t stick around or don’t live up to expectations. And too often, the programs fail to maintain momentum, leaving companies unsure they have paid off and fueling worker cynicism.
There are exceptions, of course. Companies such as GE, Unilever, PepsiCo, and Shell have long been known for their careful attention to talent management. But those companies are not the norm.
As far as we know, no one has yet studied the process of managing high potentials from end to end. In order to fill this void, in 2007 we launched a joint research project with the executive search firm Egon Zehnder International, conducting a large-scale cross-sectional and longitudinal analysis of how companies assess and manage their rising stars. We also interviewed executives from 70 companies that have programs for high potentials—firms of all sizes, located around the world.
From this research, we identified a set of cutting-edge practices. Some are from unexpected places—such as an Argentine manufacturer of steel tubes that’s become an international leader despite regional and industry turbulence, and a Turkish bank that has gone global. Some are broad—such as the direct involvement of a pharmaceutical-device maker’s senior management team in the development of that company’s 600 most promising leaders. Though high-potential programs abound, the field is so new and so dynamic that these practices haven’t yet been time-tested. Still, they can provide valuable ideas and inspiration to companies looking to strengthen their talent pipelines.
One important finding of our research was that the effective management of the next generation of leaders always encompasses three sets of activities. The first involves the establishment of clear strategic priorities, which shape the way companies groom high-potential leaders. The second involves the careful selection of high-potential candidates—and communicating who they are to others in the organization. This can be touchy. And the third comprises the management of talent itself—how high potentials are developed, rewarded, and retained.
There is no cookie-cutter method for creating a successful program. Just as you can’t lift any other people management process directly from another company, you can’t assume that a high-potential program that works somewhere else will work for you. Your strategy and your culture influence the nature of the program that will be most effective. If your strategy is to aggressively expand through acquisitions in emerging markets, for instance, you’ll need a different type of program than you would if you were pursuing low-cost leadership through operational and productivity improvements.