Succession Planning and Identifying Future Leaders Is Key to Growth

Here’s a thought experiment. Imagine that you need to identify promising individuals for your 2027 C-Suite. Your selections will dramatically shape the future success of the company.

As such, you are given additional resources for selection. Your company provides you with a scouting team to watch employees all year during their day-to-day activities. For each employee, scouts bring you notable patterns and profiles of strengths and areas of growth. You also have videos of each employee to dive deeply into specific actions.

For example, you are able to watch an employee lead a department meeting in slow motion to see exactly how she involves others and stays on message. Last, you host events where each employee is tested and measured on exercises that they do frequently during the work day.

[bctt tweet=”86% of companies globally cited “gaps in their leadership pipeline” as one of their top three issues.” username=”reflektive”]

With these resources, could you fill the C-Suite with the right people? Maybe not.

As Malcolm Gladwell famously chronicled, identifying the next great quarterback is difficult, even when NFL teams have the aforementioned resources. Traditional companies are also struggling to find the right leaders. In 2015, 86 percent of companies globally cited “gaps in their leadership pipeline” as one of their top three issues. Similarly, six in ten companies from a 2008 survey confronted a shortage of talent in leadership roles. And the trend seems to be worsening.

So for organizations who cannot afford the selection resources that professional sports teams enjoy but whose needs are arguably more important, how can they identify their future leaders?

SEE ALSO: Why HR Is Obsessed With Employee Performance Check-Ins

The Stakes Are High; We Can Do Better

Failure to identify potential leaders is costly in myriad ways. Financially, replacing current leaders from outside the organization is expensive; one report suggests that replacing senior leaders can cost more than two years of their annual salary. This is significantly lower than training and developing from within.

Companies tend to fall short of effective identification.

Beyond financial implications your company suffers loss in productivity, knowledge, and culture when a high-potential employee decides to leave. Moreover, high-potential employees are also “force multipliers” that boost performance for those around them. In short, identifying and training from within is much more cost-effective than finding and recruiting from outside of your organization.

Yet despite the high stakes, companies tend to fall short of effective identification. Recent research suggests that less than half of people were satisfied with identification processes. For example, we interviewed a large healthcare tech company at Reflektive, and they shared that identifying high-potential employees with a consistent process is their biggest pain. Too often people are identified as a high-potential employee as a tool for retention rather than an authentic appraisal of one’s potential.

Additionally, the selection process and decisions are often opaque, and poor communication about this process can leave employees guessing and demoralize those who are not selected. Fresina and colleagues studied more than 200 organizations; they found that nearly 80 percent of companies did not inform high potentials, but 90 percent of employees were aware anyway. In sum, too often companies select poorly and communicate those selections poorly, which has negative consequences for all employees.

Succession Planning: A Call to Action

Actually, here is a call to four actions: (a) measure predictive traits; (b) align on your strategy; (c) use multiple measures; and (d) consider bias.

Align on Strategy

Company values and ethos are unique, so a generic selection model of leadership development will not suffice. Fernándex-Arároaz and colleagues remarked, “Potential is situational, and programs that manage it should be aligned with a company’s strategy… Best-practice organizations start with this strategic focus but periodically re-examine their strategic priorities and refresh their pool of candidates.”

Aligning strategy and leadership traits requires knowing what stage your company is and what its needs are. Go back to our initial thought experiment. How would you instruct your scouting team to identify future leaders of your organization and not just any organization? Further, how would your instructions change over time as your organization evolves?

Select high-potential employees based on strategic vision / planning and motivating / inspiring / leading others.

Measure Predictive Traits 

Harvard Business Review, Enterprise Innovation, and the Center for Creative Leadership recommend selecting high-potential employees based on strategic vision / planning and motivating / inspiring / leading others.

Tracking these traits will lead you to a more promising candidate pool than tracking other traits like performance / results in one’s current role and taking initiative. Via Forbes, Chamorro-Premuzic distinguishes between emergence and effectiveness. As an example, he notes, “Self-promotion, political skills, and networking skills will play a major role in getting people into leadership positions… However, in order to lead effectively people need good judgment, empathy, and self-awareness.” That is, traits that beget current success may not beget success at the next level, so be thoughtful in the traits you measure.

Use Multiple Measures

Church and Rotolo recently reviewed the peer-reviewed literature, and they recommend the use of multiple measures to identify high-potential employees. Multi-source (360) ratings, personality inventories, and interviews were the most commonly cited. Specifically, adding nine-box grid to a 360 review can provide a simple mechanism for raters to distinguish between current performance and future potential of the review without adding significant time to your review process. The nine-box measure can scaffold developmental conversations and empower employees on how to improve. For more benefits and how-to recommendations on the nine-box, see Dr. Assi’s review.

Consider Bias

Bias, both unconscious and conscious, impacts assessment and identification of high-potential employees. For example, the similarity bias is the tendency for appraisers to rate employees that share their traits more favorably than employees who do not share those same traits. This is especially important when considering the racial and gender composition of future C-Suites. Information on additional biases — e.g., structural and calibration biases — can be found on this Bersin overview and Reflektive’s webinar.

Bias, both unconscious and conscious, impacts assessment and identification of high-potential employees.

Go Forth

Alas, infinite resources for identification will elude you. And perfect identification is likely unreachable. Nonetheless, it is well worth your time to examine, re-envision, and maintain your process to identify high-potential employees. And you now have four actions to better identify those folks. Your 2027 C-Suite awaits.