Grooming The Next Generation Of Leaders: Developing "High Potential" Talent

Leading Companies (And Their Shareholders) Learn It Pays To Build Leadership Bench Strength.

It's worrying enough to consider that half of America's 500 largest companies expect to lose 50 percent of their senior management to retirement over the next four to five years.

Now consider that three quarters of those same companies are not highly confident that their current management talent pool will be capable of meeting the organization's future needs.

If your business is also faced with the stark realities revealed in a study by RHR International, there's no doubt it is now exposed to serious double jeopardy that could stunt growth, squeeze profitability, and see its investment in people wasted when the best among them aren't groomed to assume top leadership assignments.

That's because leading organizations with significant depth in their executive leadership ranks consistently deliver higher returns to their shareholders than their talent-starved rivals. And because organizations that fail to identify, develop, and otherwise prepare emerging leaders for bigger management responsibilities seriously inhibit their own management succession plans (assuming they have a plan, and too many simply don't).

Does your organization know whom among its younger, 'high potential' leaders it simply can't afford to lose or see jump to the competition? Does it know which of them has the right stuff to become CEO or some other C-suite leader someday? It should.

"If you're not developing your 'high potentials,' you're going to pay for it later and the cost is going to be a lot more than you think," says author Marshall Goldsmith, Ph.D., who, much like our team at Kincannon & Reed, believes there are a lot of good reasons why your organization should be investing in executive talent development.

For starters, organizations that identify "high potential" leaders early in their careers and help them develop their skills, strengthen their weaker points, and gain meaningful organizational exposure are more capable of retaining those individuals, fueling management succession, and delivering better results for shareholders.

Goldsmith says 90% of the organizations that have already launched aggressive 'high potential' development programs have focused those efforts on the top 5% to 10% of their workforces. They have relied mostly on educational initiatives, developmental or "stretch" assignments that challenge and refine skills, as well as mentoring and providing special access to senior leaders.

The companies that have experienced the best results with such programs, he adds, are those that have leveraged all of those types of programs, instead of putting everyone through just one or two 'ticket punches' to qualify for promotion and organizational advancement. Of course, now the question is how to maximize these programs to realize their true retention value.

Retaining the best and brightest is, after all, the ultimate goal of management development programs. That's because your company can't get the most out of the talented individuals it has already invested in nor fit them into succession plans if they've lost faith in the organization or felt ignored and left for greener pastures. Worse yet, they may have departed to join your competition.

Understanding how personal development and advancement potential factors into your emerging leaders' career management considerations is important because, for them, developing new skills and gaining new experiences that may open up new leadership opportunities usually ranks ahead of interest in bigger salaries.

That means that most emerging executives would rather risk being somewhat underpaid in the short term than risk putting themselves in a job and/or organization that inhibits their ability to gain new experience, assume more responsibility, and eventually earn much more in a more senior management role.

But your organization could risk wasting much of the time it spends tying its executive talent development initiatives to selection and performance assessment if it fails to link top leadership competencies directly to key business-building activities like sales, business development, and, we might add, recruiting smart, hardworking people.

The challenge for today's leading organizations is to identify and build their top leadership teams around the right set of leadership competencies. Competencies that support the mission of the organization, translate effectively into language that everyone can understand, and reward those skills and behaviors that have both a significant and demonstrable impact on corporate earnings.

Until next time...

Kincannon & Reed
November 2006