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If there is one thing organizations struggle with more than anything else in the talent development space, it is correctly classifying talent, especially high-potential talent. We have all seen the damage done to both individual careers and organizational success by moving the wrong person into a stretch assignment, or losing a high potential who was not identified as such and stuck somewhere.
So, how do market-leading organizations differentiate talent successfully? There are several things that separate the best from the rest, one of which is having a clear and robust definition of potential. Many organizations really struggle to come up with a good definition of potential that is easily understood by managers and executives. Also, they struggle to define potential in a way that is measurable.
With these limitations, what inevitably happens is that managers use performance as a proxy for potential. The conversation you hear in these organizations goes something like this: The manager, in speaking about a direct report says, “They are a top performer, of course they have potential.” Unfortunately, we know this is not the case. A 2005 survey by the Corporate Leadership Council shows that higher performers are not always high potentials. In fact, the survey results showed that over 70% of high performers are not high potentials. Yet, managers continue to misclassify high performers as high potentials.
Most companies don’t have unlimited resources to invest in developing their employees. They have to use a differentiated approach to development, putting greater resources to those individuals who have a greater chance of rising higher and contributing more to the organization over the long term. While all employees deserve some type of development, those organizations that do talent management right are able to successfully differentiate development based on a combination of performance and potential.
Another thing that separates the best from the rest when it comes to successfully differentiating talent is using a 9-cell performance potential matrix. Instead of the classic replacement planning, where each leader on the chart has a list of potential successors, the top companies in talent management have moved to the use of a 9-cell performance potential matrix and use this for pool planning. This is an example of the 9-cell matrix from Korn/Ferry Lominger:
Some organizations reverse the axes, putting potential on the vertical axis and performance on the horizontal. There are also many ways to label the cells, and each organization should devise labels that fit with their culture but are still somewhat descriptive of that cell. Some organizations have definitions of the cells as well. Korn/Ferry Lominger’s Succession Architect provides both cell labels and definitions as a starting point for organizations.
While many organizations have moved to the 9-cell matrix, there are common mistakes they continue to make in its use. First, the performance axis really should be long-term performance; many organizations continue to plot last year’s performance. The reason for using long-term performance is that you want to see how employees perform over time and in different assignments, not just their most current job. Using long-term performance will give you more accurate cell placement.
The second issue many companies struggle with is accurately defining potential. I have seen everything from the ability to move up two levels in the organization to being consistently strong performers. The problem with the first definition of potential is that it does not define the traits and attributes of someone who can move up two levels. The outcome cannot be the definition. The issue with the second definition is that it is based solely on performance.
So, how do you define potential? Come back for my next post and we will explore the components of potential.