Building the next generation of leaders is a major strategic issue. Yet many organisations still identify their future executives mainly on the basis of how they perform today. And performing well now does not necessarily mean being ready to lead tomorrow.
This article explains why it is essential to separate performance from leadership potential, and shows how personality assessment can make the identification of high potentials more objective, fairer and more predictive. You will also find the difference between leadership emergence and genuine effectiveness, the criteria to weigh at each level of responsibility, and the part strategic self-awareness plays in developing future leaders.
For executives, HR directors and heads of talent management, the point is clear: building a solid pipeline is not simply a matter of promoting the best individual contributors. It means identifying the people who will know how to mobilise others, grow teams and create lasting performance.
The future of your organisation's leadership matters. Consider this: who would genuinely be ready to take the helm if your CEO left the company?
Organisations naturally want their best people in their high-potential programmes. Yet identification processes built on performance do not work nearly as well as one might hope.
You might assume that close to 100% of the participants in a high-potential programme would go on to be more effective leaders than average. That is not the case. More than 40% of participants turn out to be less effective leaders than average, and around 12% even sit in the bottom quartile for effectiveness.¹
Imagine the consequences when one of these ill-suited leaders reaches the executive committee, and then fails in the role.
A CEO alone can shape up to 55% of a company's overall value.² Any derailment of an executive, or any behaviour poorly managed under stress and pressure, can therefore easily cost millions,³ without even counting the indirect losses in productivity, engagement or reputation.
The shrewdest organisations know they need a solid pool of high-potential people, capable of shouldering leadership responsibility in future. Yet many still rely mainly on performance to identify these talents, when what they should be doing above all is assessing their potential.
It is hardly surprising, then, that around half of new leaders fail when they take up their new roles.³
The success of your next generation of executives depends on one essential distinction: between the high potentials who look as though they have the makings of a leader and those who can genuinely lead effectively.
By assessing high potentials against the right criteria and with the right tools, organisations can stop promoting the wrong people and start developing those who truly hold the potential required.
The main trouble with using performance to identify potential lies in how subjective it is.
Performance reviews are often more a matter of opinion than of objective fact. Interviews readily reward charisma. As for internal organisational politics, they are frequently shaped by unconscious bias.
According to Trish Kellett, Executive Advisor, Strategic Initiatives at Hogan:
"Far too often, in identification processes, affinity bias takes up too much room: 'I want someone who looks like me.'"
Performance and potential are not the same thing. It is precisely when organisations confuse the two that they make poor decisions.
"High-potential programmes place excessive weight on current performance in their selection criteria," explains Jackie Sahm, Vice President, Integrated Solutions at Hogan.
Doing well in your current job simply does not tell you how a person is likely to behave in a new environment, faced with new demands.
The definition of leadership potential is not, in any case, identical at every level or across every organisation.
The first question to ask is therefore a simple one: potential for what, exactly?
What leadership potential means depends entirely on the context of the organisation and the role concerned.
Potential for the next role should never be tied solely to performance in the current one. High-potential people also need to show a capacity to exercise tomorrow the leadership the organisation will need.
Taking a forward-looking view does not, however, mean that leadership potential has to become subjective.
It is perfectly possible to identify the competencies likely to be decisive for success in a given context, then to assess individuals against those qualities.
Whenever an identification process rests on subjective criteria, the organisation risks perpetuating inequitable talent management systems.
According to Jackie Sahm, using performance reviews to determine who has potential can introduce bias into decisions whose consequences are considerable.
"The politics of potential are not just about the money spent. Who are we giving leadership opportunities to, and who, today, has no access to those opportunities? We risk overlooking a person who could help make working life, and even the wider world, a great deal better."
Personality assessment is one of the best ways to measure potential at different levels of the organisation, because it supplies fair, precise and objective information about how a person is likely to lead.
Personality data cannot, of course, predict every decision a leader will take.
What personality can indicate is whether that leader will tend to make decisions from tables of data or to rely more on intuition.
Current performance may serve as a precondition for entering a high-potential programme. But identifying candidates has to stay as objective as possible, while taking account of the specific needs and context of the organisation.
"Personality assessment is one of the least bias-prone methods available to us for measuring potential during the identification process, and also for supporting the development of participants in high-potential programmes," Sahm points out.
Knowing how to identify high-potential people also means understanding the difference between emergent leadership and effective leadership.
Leaders who succeed obtain their results indirectly: not through their own efforts alone, but through those of their teams.
On the view of leadership developed by Hogan, leaders succeed or fail according to whether their teams succeed or fail.⁴
The difference between emergence and effectiveness therefore bears directly on the ability to lead teams.
Emergent leadership is about holding leadership roles, moving up the hierarchy and giving the impression of having a leader's qualities.
Performance-based identification methods, such as nominations made by managers, tend to favour these emergent leaders.
Such people can appear confident and charismatic. They often have considerable relational skill, excel at building alliances and are remarkably good at putting their achievements forward.
But the characteristics that get you noticed are not, on their own, enough to succeed at the highest levels of responsibility.
Effective leadership means the ability to build and sustain a team capable of outperforming the competition.
Effective leaders excel at managing people and know how to rally others around shared objectives.
And high-potential employees report overwhelmingly that their main challenge lies precisely in managing teams.⁵
On average, managers devote only about 7% of their time to managing people.⁶ A better-than-average leader will probably give their team more than the roughly 34 minutes that 7% represents across an eight-hour working day.
But the best managers quickly discover that people-centred leadership is one of the main drivers of a team's success.
According to Erin Lazarus, Senior Director, Business Development at Hogan:
"To get results through others, you have to understand what inspires and motivates your people. You have to find the right balance between coaching and support, while accepting that you give up some of the control."
A natural orientation towards the team is therefore a particularly interesting disposition in a high-potential candidate.
Scientifically validated personality inventories measure not only a person's social and communication styles, but also their level of energy and motivation, the way they learn and solve problems, and their tolerance for stress.
The same data can also teach high potentials to adjust their behaviour, and so become more effective against the competition.
Hogan calls this capacity strategic self-awareness.
This capacity to evolve is exactly why assessing potential calls for different tools and criteria from those used to measure performance. It is also why looking at the two dimensions together requires a more nuanced approach.
Measuring leadership potential has to take account of the context and the level of management concerned.
"Potential will not look the same depending on the role you are preparing someone for," Erin Lazarus explains.
Organisations should draw on a competency model allowing them to assess their leaders, from the first levels of management up to the executive committee.
First-time managers need to show that they have the fundamentals of people management.
Middle managers and senior executives should be assessed against an organisational framework setting out the conditions for success.
Beyond their team's performance, they will also need to show that they are aligned with the organisation's values and its future strategic direction.
Executive leaders, finally, should be assessed against criteria specifically adapted to their individual role.
Those criteria may take account of the way a candidate's strengths and watch-outs complement those of the other members of the executive committee.
Succession planning, right across the talent management cycle, therefore depends on measuring high potentials objectively and precisely.
According to Jackie Sahm:
"Done well, personality assessment can help an organisation's leaders question their own assumptions about who they regard as the company's future leaders."
On Hogan's view, potential can be predicted from objective data about an individual's personality and core values. This information makes it possible to assess how likely someone is to succeed at the next level up.
Underpinning this conception of leadership potential, in theory, sits the Hogan Leadership Framework.
The model rests on four domains:
Every leader takes an approach of their own within each of these domains, and it is context that determines whether that approach will be effective or not.
Leadership potential is therefore not about whether someone will lead, but how effectively they will be able to do so in a given context.
As Jackie Sahm observes:
"The Hogan Leadership Framework recognises that leadership requires different approaches depending on the situation."
An effective leader has to be flexible, open to coaching and able to take feedback on board.
It is no accident that learning agility features as a criterion for identifying high potentials in more than half of the companies specialising in talent management.³
Sahm draws a direct link between coachability and humility:
"Leadership demands a willingness to learn and to question yourself, along with a tendency to focus on other people's needs rather than on your own career."
Of all the skills high potentials need to develop, the ability to manage others is arguably one of the most important.
Trish Kellett recommends in particular that high potentials take on project management roles, so as to be exposed to different dimensions of the business.
Leading a team or a project also separates excellent individual contributors from those who can genuinely deliver results through others.
"For high potentials, the ability to lead a team is going to matter more than ever," Trish Kellett states.
Why?
Because effective people management directly shapes how engaged those people are, and engagement in turn shapes practically every outcome the organisation cares about.
Between business units in the top quartile for engagement and those in the bottom quartile, the gaps can reach:
Above all else, managers want their people to deliver.¹ Productivity, in a word.
And the link between productivity and engagement is direct.
The relationship an employee has with their manager accounts for 70% of how they feel at work.⁶
Leaders of the highest-performing teams also tend to be strongly engaged themselves.
These leaders actively look for development opportunities. More than three quarters of the candidates surveyed say they attach great importance to developing their skills.⁷
According to Erin Lazarus:
"Leaders who feel personally engaged are inspiring. They bring passion and energy to their work, and that motivates others."
The present state of leadership is one of the major challenges organisations face.
Global CEO turnover remains high.⁸
More worrying still, over half of early-career professionals are actively trying to avoid management roles.⁹
Today's executives are gradually leaving the boardroom while their potential successors do not necessarily want to take their seats.
The most far-sighted organisations are already looking for answers to this coming shortage of leaders. The rest have yet to grasp its full scale.
Building a high-potential programme capable of producing a steady pool of talented people ready to take on leadership responsibility is therefore essential to the organisation's survival.
Trish Kellett sums up the issue this way:
"As a society, given all the technological change under way, we need to put far more emphasis on leaders as team builders rather than as individual personalities."
Scientifically validated personality inventories make it possible to spot and grow high-potential leaders who hold the strategic self-awareness that engaging a team effectively demands.
Yet many organisations still fail to draw a clear line between potential and performance, creating the conditions for a genuine talent management crisis.
As Erin Lazarus points out:
"It takes better leaders to create better leaders. That is precisely why Hogan exists."
To go further, see Your guide to building a complete succession planning strategy and strengthen your pool of future executives.
Identifying future leaders is not simply a matter of spotting the people getting the best results today.
Past performance provides useful information, but it is not enough to predict someone's capacity to succeed in a more complex environment, to rally a team, to handle pressure or to steer an organisation through transformation.
A genuinely sustainable HR strategy therefore has to combine performance, leadership potential, personality assessment and an understanding of the organisational context.
By supplying objective data on likely behaviours, motivations, values and watch-out areas, assessment and development tools make talent management decisions safer while giving future executives the keys to better self-awareness.
What is at stake goes well beyond succession planning. The point is to develop leaders capable of creating engaged teams, of supporting skills development, of strengthening organisational culture and of sustaining transformation over time.
Because in the end, the quality of a company's leadership depends less on its executives' ability to shine individually than on their ability to make other people succeed.
At Authentic Talent, we believe that objective assessment of talent and potential within organisations is a decisive factor in their future success. If you would like to discuss it with us, let's talk!
This article draws on an article published on the Hogan Assessments website: Potential Is Not Performance
