The Care and Feeding of High-Potential Employees

News Updates

Up to one-quarter of your top talent might be fed up and thinking of leaving your organization. Consider 14 ways to retain these valued employees. 

Ambitious, motivated and highly intelligent, Eric G. is the quintessential high-potential employee. Three years ago, a large international consumer products company swept the freshly minted Stanford MBA off his feet with promises of exciting challenges aboard an express train leading straight to the C-suite.

"They throw you into the fray with a lot of exposure, responsibility and access," he recalls.

Now, after relocating internationally with his spouse five times in less than three years, and being force-fed uninspiring assignments, Eric’s fervor for the fast track has faded. Facing yet another "move or lose" relocation, he’s opting out. "We want to stay in the U.S. And with my son going to bed by 7 each night, I wasn’t seeing him at all during the week," he says.

As Eric begins his search for stable, family-friendly employment, he has plenty of company. More high-potential employees are jumping ship—or thinking about it.

In 2010, the Corporate Leadership Council of the Corporate Executive Board surveyed 880 high-potential employees. More than 25 percent said they planned to change jobs within the next 12 months. That’s potential attrition 2.5 times greater than just five years earlier. Among the dissatisfied, 64 percent said their current employment experiences are having little impact on their development. Engagement levels, measured by assessing levels of passion and discretionary effort, declined 30 percent from 2009 to 2010.

From employers’ perspective, the performance of those who are sticking around is similarly troubling. More than half of the executives surveyed said their organizations are ineffective at managing and retaining top talent. They said 40 percent of internal job moves made by high-potentials end in failure and fewer than 15 percent of their direct reports are ready for immediate transition to subsequent roles.

Who Are These People?

Corporate leaders typically look to the top-rated 3 percent to 5 percent of their employees as candidates for fast-tracking. Writing in the June 2010 Harvard Business Review, researchers Jay Conger, Douglas Ready and Linda Hill describe high-potentials as individuals who "consistently and significantly outperform their peer groups in a variety of settings and circumstances. … They exhibit behaviors that reflect their companies' culture and values in an exemplary manner. Moreover, they show a strong capacity to grow and succeed throughout their careers within an organization—more quickly and effectively than their peer groups do."

At a time when experts agree that homegrown talent is especially crucial, why are HR professionals having so much difficulty identifying, retaining and preparing the best and the brightest? Why are so many talented prospects dissatisfied?

First, researchers see a huge divide between what employers think motivates high-potentials and what actually motivates them. Employers cite lists of what "we’ve given them," including outstanding remuneration, to demonstrate the strengths of their programs. But attractive pay and benefits are on a high-potential’s " ‘I’m given’ list, meaning he or she can replicate them elsewhere fairly easily," says Roland Smith, lead researcher at the Center for Creative Leadership in Colorado Springs, Colo. "What they’re looking for instead are the things that truly differentiate employers. These include opportunities to more directly influence and direct their careers and more-challenging assignments with real risks and rewards."

It often takes more than compensation, stock and options to retain people, says Raoul Buron, vice president and chief learning officer at Prudential Financial in Newark, N.J. "If I know my career is being managed, that I will be regularly reviewed and given options in choosing my next move, it makes a big difference," he explains.

Second, high-potentials need smarts and experience to thrive, but ability and seasoning are only part of the recipe. "We know from our benchmarking studies that high-potentials don’t fail because they lack ability," says Jean Martin, executive director of the Corporate Leadership Council. "Most don’t succeed because they are not engaged and because the assignment they’re in is not what they want."

Here are some strategies you can initiate to boost morale and engagement:

Tell them they’re special. Center for Creative Leadership research reveals that only about 40 percent of employers formally tell high-potentials of their status. A second study from the center suggests that those who fail to do so pay a steep price in attrition. Of the high-potentials who were not formally told of their status, 33 percent were looking for another job. Of the high-potentials who were told they were special, only 14 percent were looking.

Align individual and company needs during a consultative process. High-potentials want to be involved in planning their development, not dictated to. Often, they’re presented with assignments knowing that if they decline or hesitate, they will be left behind. "Historically, the interaction has been a transaction—‘You do this, and we’ll give you that,’ " Smith says. "Now, in best-practice situations, it’s becoming more about mutuality and reciprocity. It’s a dialogue where interests on both sides are balanced."

The dialogue occurs around the time that the high-potential’s performance is assessed, but sometimes in separate discussions. At Fifth Third Bancorp, for example, development discussions are separate from performance review discussions. Yet development discussions are not viewed as once-a-year or twice-a-year events. "It’s a continuous journey to match organization needs with personal aspirations," says Lauris Woolford, executive vice president of organization development and planning at the Cincinnati bank.

General Mills represents another case in point. There’s a conversation that is driven by the employer. "We’re leading the way," says Mike Davis, senior vice president of global HR, based in Minneapolis. "We know the experiences our high-potentials need to grow and flourish probably better than they do. Still, if we say, ‘The next best opportunity is in Japan’ and the person says, ‘I don’t want to go to Japan,’ we scrap the plan and find another assignment."

At Fifth Third Bancorp, high-potentials are asked to indicate in advance if they’re willing to relocate. "If you say you’re mobile but when we ask you to move you say, ‘Not yet,’ we’ll only come back to you once or twice," Woolford says. "If you choose to stay where you are, we will develop you as high as you can go, but eventually you will reach your ceiling. If you really aspire to be a regional president, you can expect to make two or three moves."

Delegate real responsibility. Research shows that high-potentials thrive when they’re truly accountable for something. But employers are often reluctant to give them the reins. "When they get the more significant assignments, they’re being told what to do rather than being assigned to direct or co-direct," Smith says. "Within reason, you have to be prepared to let them make mistakes. What got them into your program is the ability to succeed on their own" expertise.

General Mills gives its high-potentials "really meaty assignments," Davis says. "They want to be challenged all the time—to play backhand tennis even though they know forehand is easier. We move them into stretch roles across borders, give them cross-assignments into new areas, or take them out of a business they know and put them into another. They’re pushed and expected to produce."

Be flexible. Inflexible assignments, especially those that require relocation when people have young children and employed spouses, can be morale busters or worse. Finding creative solutions that respect lifestyle needs and still provide seasoning for advancement can differentiate an employer. One alternative to a full-blown international experience: Put high-potentials in charge of a country or a piece of a country requiring them to travel for two or three weeks at a time, instead of the usual two-year deployment. Or, assign them to host when people from other countries visit, says William Byham, chairman and chief executive officer of Development Dimensions International, a consultancy in Bridgeville, Pa.

Show them they matter. The single biggest factor in retention is whether people feel valued, says Michael Critelli, former executive chairman of Pitney Bowes Inc. in Stamford, Conn., and current CEO of Dossia in Cambridge, Mass., an employer-led group dedicated to empowering individuals to improve their health. "I spent a lot of time in one-on-ones with people at all levels," recalls Critelli, who has experience as an HR leader.

"Hug your high-potentials because if you don’t, someone else will," Woolford advises. "Make them know that you would not want to run your business without them."

Tap effective mentors. Who the mentor or coach is makes a difference. High-potentials want access to people in the hierarchy that they respect. "In a lot of mentoring arrangements, you’re assigned or pick from a pool," Smith observes. "That tends to be hit or miss, and often the relationships are not really that good."

Finding leaders who can step into the mentoring role can be challenging. "C-suite executives are good at challenging people and assessing them, but not always as good at supporting them," Smith says. "They may find it hard to invest the relational time that people want."

Foster visibility. Employers insist that substantive exposure to top decision-makers—not just face time with them—is essential. Boards of directors should "get out to remote facilities to see people in their native settings," says Critelli, who currently sits on the board of Eaton Corp. "Boards should go somewhere away from headquarters at least once a year so members can see promising people below the top tier in action."

Make learning and advancement seem never-ending. At Nestle USA Inc., "There are real opportunities to move around location-wise," says Jeffrey Ertel, vice president of human resources. "If you don’t want to move, we can move you within your location and get you a different experience." Ertel exemplifies someone who benefitted from the challenges that Nestle continually makes available: "I’m in HR now, but I started in marketing. Along the way, I’ve done sales, purchasing and been involved in a joint venture that sold coffee. I was fortunate. I was asked by the division president when I was a marketing guy to go run a purchasing department. He saw something in me that led him to give me a chance. I did OK, and they kept moving me."

Naturally, HR professionals in mid-size and large companies can create more opportunities. With 195,000 employees, HCA Inc. in Nashville, Tenn., is an example. "There are always opportunities available," says John Gering, group director of organization effectiveness. The varying sizes of HCA hospitals and health care businesses let someone begin as an administrator in a small facility and advance by moving up to a larger facility.

By establishing talent or "acceleration" pools, employers such as HCA identify and isolate high-potentials for special treatment in the earlier phases of their careers without earmarking them for one particular job or position. Acceleration pools offer flexibility, guarantee more candidates for jobs that open up and enhance retention.

People in this type of environment "are so engaged that they tend not to look outside," Byham says. "As soon as they complete their current assignment, they’re on to another job. There’s a long list of things a person needs to master."

In smaller organizations, HR leaders may find it more difficult to produce a steady stream of learning opportunities. One option: Encourage high-potentials to master skills and gain transferable experience outside of work. For example, Critelli says one of the best preparations for his job as CEO at Pitney Bowes was to be the vice president of his homeowners’ association. "I learned a lot about conflict management," he recalls.

Promoting outside experience only works, however, if you’re giving due weight to these activities in selection and advancement decisions.

At General Mills, leadership experience counts a lot in a company culture that prizes community service. "We stretch our high-potentials by encouraging them to take leadership roles on local boards," says Kevin Wilde, vice president of organization effectiveness and chief learning officer. "The development that occurs in those roles is powerful."

Focus on developing the attributes leaders are bound to need. High-potentials are savvy; they read the business press, field phone inquiries from headhunters regularly and communicate endlessly with colleagues through social media. They know what they want from a development program. Keep their desires in balance with company objectives. "Target the competencies that will enhance your organization," advises Sandi Edwards, senior vice president of AMA Enterprise, a specialized division of the American Management Association in New York City.

Research from the association suggests that some employers are not focusing sufficiently on developing the leadership capabilities their businesses will need to remain competitive. For example, 68 percent of the 939 HR and other high-level managers who responded to the Developing Successful Global Leaders survey said their development programs did not "to a high or very high extent" build "agility and adaptability to manage global shifts." The study was conducted with the Institute for Corporate Productivity.

Give managers assessment tools they need and will use for selection. Even with tools in place, talent management and succession planning often falter because managers do not have comprehensive systems for their high-potential programs. One area that suffers from lack of attention in many companies, for example, is the selection process. According to a survey of 120 HR professionals responsible for high-potential programs, 48 percent of managers are ineffective at identifying high-potentials because of a lack of standards or inconsistency or lack of rigor in applying them, says George Penn, senior director for CLC PRO, a technology product offered under the auspices of the Corporate Leadership Council.

Use a systems approach. The solution, Penn says, is to create a comprehensive system. "Provide processes for creating criteria, assessing performance and controlling for compliance in administration," he advises.

A systems approach does not require sophisticated software. Penn says about 25 percent of organizations with systems use binders and Excel programs to monitor and chart performance. But more-sophisticated software is worth exploring, and some options are described in "Sizing Up Talent" in the April 2011 issue of HR Magazine.

Yet creating a database of employees’ skills is only part of the process. Penn says newer products are more comprehensive and may focus exclusively on high-potentials. Information may be processed in-house, through a vendor or with a hybrid model. No matter how automated the system is, the idea is to control the whole process from profiling and employee feedback to standardizing, where possible, selection processes and criteria for judging performance. Many types of integrated talent management software have these features.

General Mills is among many companies whose HR professionals have developed or are developing comprehensive talent management systems. "We have been using a homegrown system and are now looking to integrate a ‘grown-up’ system. Candidly, it’s not about the software, ever," Wilde explains.

The 9-box grid, a three-by-three matrix, is a tool that helps produce rational assessments, increasing the odds that you will snag the best candidates for high-potential treatment. It is readily embraced by line managers who sometimes are averse to more-complex instruments that they see as HR mumbo jumbo. "It helps you identify key players so you can direct your development efforts and care to the people who are most likely to fill your leadership slots," says Ursula Fairbairn, president and CEO of the consulting firm Fairbairn Group LLC in New York City.

At Discover Financial Services in Riverwoods, Ill., the 9-box grid approach is used in seven business units and then converted to a companywide matrix. "The rubber really hits the road when you match up the people in the top three boxes against your business needs. There has to be alignment," says Jill Zimmerman, vice president of talent acquisition and development.

For more on the 9-box grid, see "On the Grid."

Put assessment to the transparency test. Morale suffers when employees say the selection process is unfair or built around favoritism. This was the case at the Bermuda Hospital Board in Hamilton, Bermuda, which runs the only hospital system serving the 65,000 residents of the island nation of Bermuda. Initially, in targeting native Bermudians for high-potential status, succession planners got off on the wrong foot. Favoritism trumped training and competence, hurting morale and performance. And, "People were pushed ahead into positions they were unprepared to fill," recalls Venetta Symonds, deputy CEO and executive vice president.

Symonds, a native Bermudian, sits in an unusual position: A high-potential herself, she is slated to take over as CEO; she is also instrumental in revamping the high-potential program with the assistance of Development Dimensions International. "Our new process helps us focus on competencies and skills," she says. "It gives us the ability to assess each person objectively, and for each person to go through his or her results with a coach to gain understanding."

Part on friendly terms. Inevitably, some high-potentials will depart, making critics question the investment in talent now benefiting others. Part on good terms, however. "We’re good at keeping someone in our plans even when they leave," Prudential’s Buron says. "We’re always trolling in the market.

"We may go back out and recruit that same person later. For example, someone re-joined us recently. When he left, we hated to see him go. But he went to a smaller company where he got more experience than we could give him at the time. We let one of our colleague companies continue to develop him," Buron adds.

Get buy-in from top leaders. Unless leaders agree to the financial investment and make a personal commitment to the initiative, HR professionals’ efforts are destined to end in frustration. "When we look at organizations that are best in class in identification, selection and development of high-potentials, the senior-most executives are directly involved and understand it’s a key responsibility," Smith says. "Where it’s not as successful, development of high-potential talent is not as important to the CEO."

Offer What You Can Afford

Meanwhile, Eric G. is back in the job market and weighing a short list of prospective employers. Work/life balance and flexibility remain high priorities. "I’m being more careful in screening the culture of each of the companies, spending more time getting at what a typical day is like for the department and team where I’d be working," he says. "I expect to work hard, but having the opportunity to manage my day so I can spend time with my son is essential. I’m also looking for a company with sufficient resources in place so taking a vacation will not be a problem. Where I was before, because of the demands of the job, I couldn’t get away."

Keep Eric’s priorities in mind next time you’re given responsibility for the care and feeding of your high-potential employees. But note that balancing priorities goes both ways: Weigh carefully whether your company can afford to pay the total rewards that high-potentials like Eric want, given all other competing demands. Smart money says you’d be wise to do so.

The author, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.