White Paper Article

Why past performance is not enough to predict future success in new position
in today's turbulent economy

The changing world of work and the current business climate – volatility and unpredictable change plus increased complexity of doing business in a global economy – means it is more critical than ever to have pools of talent ready and capable to navigate and drive strategic change in the new competitive landscape.

Downturns place companies talent strategies at risk. The risk of putting high performers and high potentials under tremendous pressure and the risk of losing valuable contributors and damage the company's internal morale and external reputation due to aggressive headcount reductions is huge.

Being a great bench builder and talent leader in today´s complex world is more challenging than ever, however the complexity also offers new opportunity for differentiation on the market in terms of outperforming competitors in fostering talent by launching talent strategies that are solid despite of economical fluctuations.

In this era of leadership it goes without saying that it is not enough to identify talent only based on past performance, experience and CV data. Often companies have a fairly good understanding of the performance track record of their top talent but lack competence and tools to assess future potential. Surprisingly often even senior management and HR is lacking a proper and easily applicable definition and criteria of how to define and measure future potential. As a consequence promotions are in the majority of the cases based on past performance instead of in addition to past performance also predicting future potential.

Research shows that a high-potential employee is more than 50% more valuable to their respective organization than an average employee. However, companies often lack competence in assessing the future potential of their key people. Succession strategies are often based on performance management process and high performance criteria only. However, high performers with key deficiencies in potential have almost no chance of being successful at the next level of the organization and often jeopardize succession strategies. Organizations that successfully identify and develop high-potential leaders enjoy direct and measureable financial performance advantages over their peers.

(Source: Corporate Executive Board: Identifying High-Potential Employees (HIPOs) through Performance Management Process – January 2008)

Why is that?

One reason might be a lack of understanding of what behavior correlates with high potential whereas assessing performance is often seen as more tangible and easy to grasp. However rating the potential based on solid and research based models of defining a high potential employee has started to evolve as part of developing contemporary talent strategies in a turbulent world and is seen in the most developed talent cultures. Research shows that high ability (cognitive ability, learning agility, emotional intelligence as well as leadership/functional skills) in combination with high aspirations and high engagement provides a good platform for being recognized as a high potential employee. (Source: Corporate Leadership Council). If the high potential employee at the same time is seen as a high performer exceeding expectations year after year it is evident that we are talking about a true top talent.

With such an extensive list of attributes, these individuals can be difficult to find, so identifying and retaining them needs to be a primary concern. These individuals can also be great role models for future talent and a source of inspiration for accelerating the development of key contributors. By modelling excellence the behaviours of high potential employees can be transferred to other leaders in the pipeline and accelerate the personal growth path of future leaders or early career potentials.

Making promotions and talent strategies purely on high performers is a risky way forward especially in the rapid change and increased complexity of the competitive landscape of businesses today. Past performance is just one of many indicators predicting success in a future position. When we see executives derail this might be one of the most common reasons for failure to succeed. To assess the risks of wrong promotions can save companies tremendous amount of money and negative effects of poorly made promotions. Knowing the derailment behaviours and individual risks should be part of any companies future talent strategies and talent pool thinking.

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