Organizations need to do a better job of choosing and grooming their most talented employees in ways that impact business performance.
Don't let this belt-tightening, roller-coaster economy fool you. Short-term thinking isn't the way out of this mess. Future leaders are.
That's why leading companies are investing in their high-potential employees. Take Unilever North America, for example. It decided to create an action-learning-based program to develop its future leader pipeline. Meanwhile, IBM has a highly competitive Corporate Service Corps that's harder to get into than Harvard.
Then there's General Electric, which not only has two 100-year-old high-potential programs -- one for developing mid-level corporate audit staff and another for engineering-school graduates -- but also boasts that these programs have generated nearly a third of the organization's top 650 leaders.
With the coming demographic dip in the future-leader talent pool and the pending mass retirement of baby boomers (see sidebar), investing in a hi-po program is essential. HR professionals are increasingly being called on to support their organization's strategy through well-built career-architecture programs. Pay careful attention to that future-leader pipeline and those in it will be more engaged and well-positioned to direct strategy in the future.
How? That's what was addressed in a four-year study of 70 companies conducted by Claudio Fernandez-Araoz of Egon Zehnder International, Harvard Business School Professor Boris Groysberg and Harvard Business School Professor and Dean of Faculty Nitin Nohria. In their Harvard Business Review article last year, they cited three key elements for successful high-potential programs: alignment with the company's strategy, careful identification of hi-po employees, and effective development and reward systems.
"I think it's imperative for companies to get this right," says HBR study author Groysberg, professor of business administration in the Organizational Behavior unit at Harvard Business School.
It's not true that you can just "chase somebody else's stars" and plug-and-play them in your organization like computer components, he says. They won't know your culture, your leadership or your strategy well enough. "You can do it on a limited basis, but you cannot do it for every single opening that you have," he adds. "If you never pull [top-talented] people from outside, you're going to become a cult, [but] if you only hire [those] people from the outside, you won't have a unified culture."
The challenge, he says, is finding the sweet spot in the middle.
The sweet spot means aligning your leadership-development programs with your business strategy and developing people from internal and external sources to become future leaders.
Groysberg says tying high-potential programs directly to the company's strategy and keeping it up-to-date is a best practice not to be ignored. "You have to constantly revisit [the programs] and ask, 'Are we defining performance and potential right?' High-potential programs that have positive impact within organizations are aligned with the strategy [and produce employees with the] execution [skills] and capabilities necessary to implement [that] strategy," he says.
That's why Chris Herrick, Unilever North America's vice president of human resources, says his company engages high-potentials early to confirm that they "understand the company's mission and their role within the organization. Developing and retaining the right quantity, quality and diversity of people is crucial to our success and future growth."
To align top talent with the business, Unilever North America is borrowing its international operations' best practice by launching another level in its robust hi-po program: an action-learning program that identifies potential hi-pos who can then move into three different programs to feed the upper tiers of the organization.
The "grow your own talent" hi-po program meshes well with Unilever's strategic focus in its food and consumer-products business.
"We have a strong sustainability focus where we are very conscious of our carbon footprint and we harvest foods in sustainable ways, for example," says Sandy Lukavsky, director of leadership development at Unilever North America, based in Englewood Cliffs, N.J. "If you extend the idea of sustainability to talent, you look at the early days of a person's career and decide who you need to invest in more than anyone else."
To turn its hi-pos into leaders who will support its various business imperatives, General Electric offers programs in communications, engineering, finance, information technology, manufacturing and operations, and sales and marketing, says Janice Semper, manager of GE's executive-development programming, based in Fairfield, Conn.
About 3,000 employees take part in the various programs, which generally last two years and comprise three eight-month rotations to help workers understand the business from different functional and geographical perspectives. That meets GE's strategic objective to speed the development of high-potential employees, Semper says.
For example, the 100-year-old Edison Engineering Development Program (a reference to GE founder Thomas Edison) focuses on new hires fresh from engineering school. The Corporate Audit staff program, also about 100 years old, is for seasoned, mid-level career folks.
In the first, employees rotate through different jobs and in the second, they don't leave their day-to-day jobs, but rather go through extensive training and then take on two-year projects that they work on with senior-leader coaches. Each person's program is individualized, based on what skills and job experiences they need to advance their careers.
Strategically, the programs offer lots of feedback to participants and gives the company "a great way to stay close to the emerging talent that's coming into the system," says Semper. "We want to have a line of sight to these folks in the company. If you don't have that, it's easy to not see them."
Many companies, such as IBM and its 426,000 employees, capitalize on their hi-pos to support their international presence.
"Given the global nature of our economies, they are all integrated, more so than they've been in the past," says Tom Vines, IBM's New York-based vice president of business and technical leadership.
Even after more than a century of experience in employee-development programs, IBM created two new ones in 2008 -- the Corporate Service Corps and Global Enablement Teams -- to address its global-development needs through project-based learning.
The three-month-long Corporate Service Corps sends a 15-member team to a location, where it provides pro-bono counsel. Team members spend one month in the country and one month on either end of that to devote to planning and follow-up.
"They can help a client, a country, an economy," says Vines. "They get a lot out of it, not only in terms of helping a client but also in their personal development."
African countries are a special focus for Corporate Service Corps, which matches IBM problem-solvers and experts with challenges in the long-term process of building out the continent's technology infrastructure, as well as its civic, business and social institutions.
The Global Enablement Teams program sends five senior leaders from mature markets to work with IBM managers in emerging countries such as South Africa, Brazil, Turkey, China and Malaysia. For example, in South Africa, a U.S. technology executive helped local IBM leaders advise South African government officials on how to design an integrated financial-management system to span all government agencies. Strategically, it helped build IBM's reputation in the region.
In both cases, IBM builds a strong bench of globally aware leaders and hi-pos learn how to culturally adapt to a situation they are not used to, says Vines, who spent five years himself in Shanghai as part of his IBM career development.
Strategically, the two programs help future leaders see broader, deeper patterns in business opportunities to drive growth. In addition, Vines says, clients get to see how diverse the IBMer's experience is. "That's appealing because [clients] are dealing with their own global presence," says Vines.
These three examples -- Unilever, GE and IBM -- echo the best-practice results of an Aon Hewitt study on Top Companies for Leaders -- done in partnership with The RBL Group, a Provo, Utah-based strategic HR and leadership advisory firm, and Fortune magazine. All of the Top Companies for Leaders could articulate a clear strategic business case for investing in leadership development.
Carefully defining hi-pos and then selecting them is also at the heart of a good program, says FernÃ¡ndez-ArÃ¡oz, a senior adviser with the talent firm Egon Zehnder International, based in Buenos Aires, Argentina, and co-author of the HBR study.
He and his Harvard colleagues were "amazed to realize that most of the largest global companies don't have a formal, metric-based method for identifying their high-potentials," but, instead, the companies make up their own definitions such as "Creative Problem Solvers," "Innovative, Creative and Bright," "Vision-Oriented, Intuitive," and such.
"Our conclusion was that the state-of-the-art in this field, even at the definition stage, is extremely primitive," he says. "Many definitions were implicitly based on choosing a few attractive words that are synonymous with 'high-potential,' without any hard evidence to justify them," he says.
The smart companies, however, choose candidates carefully through a combination of objective assessments, so expensive resources aren't wasted on the wrong people, says Jackie Greaner, Atlanta-based North American leader of talent-management consulting for Towers Watson.
Greaner says many of those companies develop a leadership-competency model and a functional-competency model -- and high-potentials are then rated on their current performance leading to a profile of someone with a functional skill set plus leadership ability plus motivation.
That's what Unilever has done. The company brings together functional leaders to look at the hi-po pool. Candidates get to swim, as it were, based on a combination of referrals and assessments, including how they fare against a future job's professional skills competencies in a particular function. For higher-level people, Unilever also looks at how they do on 360 evaluations and in the annual global people survey. By looking at various cuts of data, the company can see whether someone is leadership material within the next three years or so.
"You've got to have the right people on the list," says Lukavsky. "Maybe you have sustained high performers rather than high potentials -- that's difficult to see sometimes. You have to ask, 'Do they really have leadership skills for the next level?' You can have a great scientist who does amazing work in a scientific way, who is without the interest or aptitude to be a manager of people. You have to be rigorous about the list, taking people off if you have to."
To do that, Lukavsky says, Unilever's leaders of its various functional areas monitor hi-pos' careers through meetings at least once a year, if not more, where they talk about hi-pos and discuss rotational moves. By continually comparing the person's development to metrics, the company can easily move people off the list who aren't, despite the hi-po development, landing opportunities. They also can be moved back on if they develop the needed skills.
Unilever will soon be rolling out an action-learning-based program to create the pipeline for people who have the potential to be high-potential. The one-year program includes training and then assignment to a team to tackle real business situations and work with a senior-level executive mentor, which are critical parts of the best high-potentials program, according to the HBR study. Once they've gone through the program, Unilever can assess their performance and then set them onto a regular hi-po track.
For GE, high-potential employees for its accelerator programs, such as the ones for corporate audit staff or for the newest focus on corporate leadership staff, are identified during the annual talent-management and succession-planning processes based on their job performance or they're nominated by their managers or by their businesses, says Semper.
Candidates in the early-career-leadership-development programs are usually first identified through college/university recruiting efforts and then must apply; the screening process includes a number of interviews with a variety of people such as HR staff, representatives from the leadership-development program, the hiring manager in the business and members of the business team.
The entry-level programs have been successful in a variety of areas; for example, 62 percent of the staff who report to John Lynch, senior vice president of human resources, originally came through the HR leadership program.
Each year, IBM's Corporate Service Corps program accepts about 500 IBMers who are chosen by a steering committee from a pool of competitive applications. About 1,500 people have been sent to 120 engagements in 24 countries since the program launched in 2008.
To qualify, candidates must have been at the company for at least two years and show high potential through performance reviews and manager recommendations.
Once selected by the steering committee, they are assigned to a project based on their expertise and suitability by the IBM team that leads the program, which is part of the company's Corporate Responsibility and Corporate Affairs division.
Harvard's Groysberg says the best-practice companies don't always go it alone when identifying hi-pos: They sometimes bring in external consultants to determine who they are based on their assessments of whether they're the best and the brightest in the industry via benchmarking against major competitors.
Authors of the HBR study and other experts contend that being thoughtful and clear in communications with hi-pos is also a best practice.
As Unilever's Lukavsky put it, "If you have people on the hi-po list and you decide to go outside to fill a position, what is that message that you are delivering to them?"
Towers Watson's Greaner says she "had one client that was losing critical leaders because they did not think they were high-potentials who were going to advance. We were hired to help them figure out why they were leaving."
And when they did, the company started being more mindful about letting high-potentials know where they stand. Having a strong performance-management system also helped. "That's what separates Intel and GE from the others," Greaner adds.
All three companies keep their employees in the loop by including career discussions in the performance-management process and keeping them engaged through the various hi-po projects. As people move up in their career, the mentors they've worked with along the way continue to stay in contact.
Develop and Reward
Finally, meaning and purpose are crucial for building an effective initiative, say experts. World-class programs develop skills and offer experiences that the high-potential employee values, whether it is working with senior managers, doing job rotation in foreign countries or contributing to meeting the corporate strategy.
"We have to recognize that it's a talent war out there," says Lukavsky. "If these are the people who have potential to do great things for our company, these are also the people other companies are trying to attract away from [us]. You need to pay a lot of attention to these people to make sure that they are engaged, that they are valued by the company, and that they know they have a future so they're less inclined to listen when that recruiter calls them on the phone."
Paying attention can be as simple as tapping hi-pos for other projects. For example, General Electric called on 21 next-generation leaders to form a new Global New Directions Team to focus on employee retention.
GE's Semper says they turned the assignment around and gave the company ideas for attracting, developing and inspiring employees. One of their ideas was to build greater connections within their own regions by mixing folks from different departments -- HR and finance, say -- rather than treating them as separate groups.
The popularity of action-learning projects, in which hi-pos tackle real business problems, also is increasing, says Seymour Adler, senior vice president for Aon Hewitt's talent and rewards practice based in New York.
He says this economy has made it easier to get people to pitch in to "roll up their sleeves and do hands-on projects," which becomes a great way to "get really good thinking on the cheap."
From a development standpoint, he adds, it also means you're "not just thrusting people into high-visibility projects." Instead, companies can do a lot of hand-holding in the first year and then, in year two, let the high-potentials have higher visibility and be more or less on their own.
Finally, it's hard to find successful and sustainable hi-po programs that do not have senior-management involvement, say the experts.
Adler, who worked on the Top Companies for Leaders research, noted that all CEOs and senior managers at those top companies lead and participate in their organizations' leadership-development programs. Further, 92 percent of CEOs and 100 percent of senior managers at top companies are involved in coaching and mentoring initiatives.
IBM's Vines says his company's culture has "an appetite of curiosity," which has fed into the organization's transition from a traditional classroom transfer of knowledge from leaders to a select set of students doing more experiential learning. "We continue to drive this leaders-developing-leaders model within our culture," he says.
Deidre H. Campbell, managing director for the public relations/communications firm Burson-Marsteller, based in New York, which conducted a Great Place to Work Institute study, says "high-potentials want to know that their companies are investing in them. Knowing the brand mission allows them to have a passion for driving performance in the same direction that management wanted to drive it."
The companies in the GPWI study were "really clear about what the company was all about, which allowed high-potentials to align their vision and drive and their intelligence against the same [objectives]," she adds.
"It's not just getting in there and making a good widget. It's about being really creative and innovative behind where the company was going and being a part of taking it there."