Regardless of size or ownership structure, every business needs high-potential employees who can be its future leaders and high-performing employees who excel in their roles. Company leaders generally assume that high performers are inherently high-potential employees, but that assumption often leads to poor hiring outcomes for critical management roles at the lower, middle, and upper levels.
It takes more than past performance to identify who has the most potential to rise through your company ranks and eventually join your C-suite.
Distinguishing the High-Potential vs High-Performer Employee
All high performers have the aptitude and work ethic to succeed in their current roles, evidenced by their consistent ability to exceed performance goals. But not every high performer can translate that winning combination into a more complex, critical, or influential position, whereas their high-potential counterparts can.
Furthermore, high performers may lack the drive and/or interpersonal skills needed to take on a leadership role. On the other hand, high-potential employees thrive on such a challenge and enjoy engaging in the relationships that comes with it. Gartner differentiates it this way: “A high-potential employee (HIPO) is someone with the ability, engagement, and aspiration to rise to and succeed in more senior, critical positions.”
Here are three examples of high performers who should be valued for their productivity but not necessarily pegged as those with the most potential to be your company’s next-gen leaders.
Knowing How to Identify High Potential Employees on Staff and in Searches
Now that you’ve seen some of the key red flags signaling employees who are strictly high performers, it’s time to learn how to identify high-potential ones. These methods apply whether you’re searching for a CFO, another C-level executive, a mid-level manager, or a team supervisor among your own ranks or in the general marketplace.
According to the SHRM Executive Network, your “ultimate goal is a robust pipeline of talent ready to take on greater responsibility from junior roles all the way to the CEO’s job.” To find that talent, it recommends looking for these X-factors, which it says, “don’t usually show up on lists of leadership competencies or on performance review forms.”
- Situation sensing: To quickly grasp their manager’s priorities and those of company leadership.
- Talent accelerating: To be interested in and skilled at finding and developing talent in others.
- Career piloting: To readily adapt to quickly changing environments by thinking outside the box to solve problems but staying focused on the end goal.
- Complexity translating: To synthesize “seemingly disparate data and information into strategic and relevant insights” and effectively communicate that to others.
- Catalytic learning: To use lessons learned to improve individual and team performance.
James Intagliata, Ph.D., a partner and senior advisor with ghSMART, says high potential boils down to three psychological quotients, which his team shared in the Harvard Business Review:
- Cognitive quotient: To use their intellect to see the big picture, anticipate the what-ifs, and make the best decisions.
- Drive quotient: To apply their energy “not just to maximize their own performance but to develop and leverage the capabilities of others.”
- Emotional quotient: To engage for impact, intentionally influence, and be adept at delivering “difficult messages with courage and empathy.”
Building a Team of High Potentials and High Performers to Grow Your Company
The SHRM Executive Network recognizes that organizations typically have scarce budget resources to develop top talent: “The smartest choice is to invest these limited dollars and opportunities in individuals with the absolute greatest potential.” Nowhere is this truer than for private equity and venture capital firms trying to make the most of their investments in a short timeframe.
Take a private equity firm that acquires a founder-led company. As the investors assess the talent of the inherited staff, they look for people who possess both the skills and the institutional knowledge needed to bring its investment thesis to life. Some employees in this population will be the high performers who keep operations humming, revenues steady, and regulatory compliance fulfilled.
Beyond that, investors need a pool of high-potential employees who can rise to a new challenge, rally the troops, modernize operations, digitize processes, and drive strategy, even when—and especially if—things aren’t progressing as planned.
As a company executive, if you’re not looking for high-potential employees or don’t know how to spot them, you could be spending your valuable talent development dollars on the wrong employees or hiring the wrong candidates for leadership roles. Even worse, you could be disregarding those whom it makes the most sense to develop as your next-gen leaders.
By Alesha Herbert, Managing Director