By Tom Payne: A Conceptualization of Potential and its Use in Talent Management
The 9-Box Talent Management model created the template for rating candidates for future leadership positions within an organization, comparing them on two different domains, their performance and their potential. It allowed people to compare candidates from different levels and parts of an organization to determine who and what to develop.
Most organizations have developed some reasonably accurate definition and assessment of performance. However, there is far less confidence in the definition and assessment of potential. Some (Silzer and Church 2009) have even referred to the “Performance-Potential Paradox” because of the difficulty people have had in assessing these two domains separately. The primary criticism of the 9 Box has been the struggle over the domain of potential.
The selection process routinely uses behavioral interviewing to predict future performance from past performance. Behavioral interviewing is built on the premise that past behavior predicts future performance. The process of interviewing a candidate works pretty well when a person is coming into an organization from a role very similar to the one they are being considered for or moving one step vertically within a function or role. When we start making decisions about moving a very good accountant into the role of finance manager, or an excellent sales person into the role of sales manager, we are confronted by the Peter Principle, promoting a person on their performance in current role into a much different role even within the same function. Past behavior as a predictor has its limitations. Behavioral interviewing will likely not identify the next CEO from a crop of sales recruits.
Since the 9 Box was introduced, we have sought to understand and differentiate between Performance and Potential. One of the reasons potential is an elusive term is that we have not settled on a definition. The other is that when we assess potential, we are predicting the future performance of an individual in a role they have never performed. Let’s take a look at four common scenarios for potential assessment:
1. Potential to move up one level–Assessing individuals for selection into a role that is closely aligned with their current role. This is usually the next higher level of an individual contributor role. (There is strong reliance on past performance and learning ability to reasonably predict future performance).
2. Potential to move up 2 or more levels–Assessing individuals who have potential for greater contributions in functional role, e.g. moving vertically in a technical role, like Finance, Research, Engineering, etc. Typically these new roles require higher levels of analytical and problem solving skills. There is a strong reliance on past performance and more heavily on an individual’s cognitive ability and learning ability as predictors of future performance.
3. Potential to move cross functionally or across business units–Assessing individuals who possess skills sets that are less likely to be observed in past performance. These are often moving from individual contributor or lower level supervisory roles into managerial roles. While past performance is still useful, we increasingly depend on an assessment of an individual’s cognitive ability or ability to learn and apply new skills as well as an assessment of their ability to adapt to a new environment and new team.
4. Potential for leadership and executive roles–Assessing an individual less on their past performance and more on their cognitive ability, their ability to learn and their ability to credibly engage with and lead others in dealing with an ever more complex and ambiguous work environment.
Depending on the selection scenario, up to a certain point, we are comfortable relying on past performance to predict future performance. As the potential assessment involves greater management challenges and greater ambiguity, our confidence in past performance as a domain to predict future performance or “potential” diminishes. In the past, organizations tended to rely more heavily on an individual manager’s assessment of an individual’s potential. This usually involved certain managers who were in the roles of recommenders, champions and those with veto power. Without a common measurement of leadership potential, inconsistency and bias have been constant companions of the TM process, at least for higher level positions.
The TM process tends to rely on the concept of the bell shaped curve, identifying approximately 20-30% of the people put through the process as high potential. For some organizations this raises fairness concerns and issues relating to diversity and adverse impact. This gives us all the more reason for eliminating as many causes of bias as possible and putting more reliance on standardized and validated assessments to predict important domains like potential. Without accurate and reliable definition and measurement of potential, most organizations struggle with trusting the TM or 9 Box process.
How do we assess potential for executive and leadership roles? In the book Advances in Global Leadership, 7 Edition (Mobley et al. 2012) we see many references to intelligence or cognitive ability playing a major role in executive success. For instance, in one study, CEO’s were shown to have IQ’s of 125 (almost 2 standard deviations above the general population average of 100). Along with IQ, or cognitive ability, we have seen the growth of Goleman’s work on Emotional Intelligence (EQ) and more recently the work on Cultural Intelligence (CQ). Both of these have been challenging to measure empirically. To many people they seem to make intuitive sense, in the same way that Maslow’s hierarchy of needs seems to make sense. However, as with Maslow’s work, it has been challenging for Psychologists to validate the impact of some of these theories to predict candidates’ performance and advancement potential. (chart of IQ and EQ as differentiators)
David Campbell (2014) notes: “There have been many psychological studies of people in leadership positions. The results generally show that, compared with other people, leaders:
- are bright, alert, mentally agile, intelligent,
- seek responsibility, enjoy taking charge,
- are skillful at whatever they are leading,
- are administratively and socially competent,
- are energetic, active, durable,
- are good communicators; they can speak or write clearly and forcefully.
Lombardo and Eichinger (2000) felt that Learning Agility was the key to leadership potential. They identified 4 Dimensions of Learning Agility; Mental Agility, People Agility, Results Agility and Change Agility. These dimensions combine the domains of personality and intelligence as important to predicting leadership potential.
There are two dimensions that seem to be important in the assessment of leadership potential. One is Intelligence or Cognitive Ability. The other is supporting personality traits. Both of these dimensions are measurable.
We know that an individual’s IQ does not grow much after their early 20’s. After this age, it tends to remain fixed. The research on Personality also shows that Big 5 Personality traits stay within a range after an individual is in their 20’s and not move substantially in adults. If potential is a matter of IQ and Personality and they don’t change much, is there opportunity for personal growth? How much can people develop, either on their own or with help?
Heslin (2009) notes that there are assumptions that people hold about the plasticity of personal attributes that guide personal growth. Helsin notes that managers’ mindsets about potential can sway their opinion of whether or not an individual who works for them has or does not have potential. Some managers are felt to have a “fixed mindset” meaning that an early assessment of potential is likely to be held as static as they believe that people can’t improve themselves that much or if they have potential, they have it forever. The “growth mindset” manager is likely to be more optimistic about an individual’s future development and will only come off that optimism when presented with data showing declines in performance.
Silzer and Church (2009) wrote about the role of the “latent potential” that can exist in individuals who work in organizations that are unsupportive and/or unchallenging.
The book on the Enron crises, “The Smartest Guys in the Room”, chronicles how intelligent individuals or even groups without the right supporting personality traits can and do get themselves and their organizations in trouble. If we look at executive placement success, we would have to admit there is considerable room for improvement. According to the Harvard Business Review, 2 out of 5 new CEOs fail in their first 18 months on the job. The success rate and longevity of top executives is vastly different than a generation ago. In the past two decades, 30% of Fortune 500 CEOs have lasted less than 3 years. It appears that the major reason for the failure has nothing to do with competence, or knowledge, or experience, but rather with hubris and ego and a leadership style out of touch with modern times. Research shows when someone assumes a new or different leadership role they have a 40% chance of demonstrating disappointing performance. Furthermore, of the executives who derail, 82% do so because they fail to build partnerships with subordinates and peers.
Sydney Finkelstein, author of Why Smart Executives Fail, researched several spectacular failures during a six-year period. He concluded that these CEOs had similar deadly habits of which most were related to unchecked egos. David Dotlich and Peter C. Cairo, in their book, Why CEOs Fail: The 11 Behaviors That Can Derail Your Climb To The Top And How To Manage Them, present 11 cogent reasons why CEOs fail, most of which have to do with poor personality fit. Call it overconfidence or ego, but powerful and successful leaders often distrust others or feel they don’t need advice from anyone.
Our concern for accurately assessing and putting the right people with potential for leadership into executive roles has a strong business case beyond the cost of executive placement failure. Ullrich and Smallwood noted that investors identified three important variables in valuing a company for investment. They are:
1. Organizational Performance (38%),
2. Industry favorableness (33%) and
3. Quality of Leadership (29%).
Leadership pipelines have been strong considerations for investors. Organizations need to have a good TM process to keep their leadership pipeline clear of obstructions.
Executives are facing an ever more complex decision making environment. Berman and Karsten (2010) discussed the rapid escalation of decision complexity facing global leadership.
Work recently done in the area of brain complexity shows that as people in challenging roles gain more experience, they are able to face increasingly complex problems by relying on their previous decision making experience and using that to solve newer, seemingly more complex problems. Keagan (2012) is able to show four increasing levels of brain complexity without an increase in IQ score. This increased problem solving capability may be linked to the concept of what humans throughout history have referred to as “wisdom”.
Author David Campbell in his book “If I’m in Charge Here Why is Everybody Laughing?“(fourth edition 2014) talks about this concept of leadership development through experience in various roles on the way up. “Leaders climbing up the leadership ladder still do it by ascending an upward spiral of Experience—Creativity—Leadership: Gaining experience, being creative, then making things happen.” Old dogs seemingly can learn new tricks.
We see that intelligence plays a role in predicting executive success but we also see that personality appears to play an ever increasingly important role in executive success or failure (derailing).
Even though they support the development of an overall standardized Potential measure, Silzer and Church recognize that there are many variables, including the organization culture that can and do influence who is identified as being high potential and potential for what from organization to organization. Silzer and Church advocate for a standardized process and focus on the individual traits that they see being common to individuals. However, they note that putting all the emphasis on assessments and leaving out managerial judgment may remove a critical step in making sure that the organizational culture will accept certain people. We believe that given a more accurate and predictive assessment, these discussions will be less prone to bias and therefore more fair and accurate.