Development centers were first established in the 1950s by US telecoms giant AT&T to assess employees’ potential in a separate location away from their regular work place. Numerous research studies have shown that established development centers (DCs) are one of the most reliable ways to predict the quality of employees’ potential to excel at more senior jobs.
In India, DCs have been used by companies for about two decades now, but many HR managers in the region are still unclear about whether or not to use one.
Performance and Potential Are Not the Same Thing
The key to a DC’s usefulness is in the observation that high performance is not the same thing as high potential. Most managers are not able to objectively and correctly assess the potential of their direct reports.
Managers are trained to assess performance — what the individual has done or achieved in the past. And performance indicators are mostly measurable; clearly identifiable KPIs can be assessed through performance management systems and processes. Assessment of potential, on the other hand, is about the future. It is about assessing whether the individual will deliver results in a different role — typically a higher-level role than the one they currently occupy.
Managers often confuse performance (the past) with potential (the future). But in most companies, as CEB research shows, one of the main reasons high-potential programs fail is that managers mistakenly identify all high performers as high potentials. In reality, only around 15% of high performers are actually high potentials, according to CEB data.
The Power of Potential
There are a lot of benefits to identifying this 15% slice of an employee population, as it will help with a numerous talent management decisions, such as succession planning (i.e., identifying managers who will fill the positions opening at higher levels due to attrition or retirement), developing future leaders, identifying what type of development will improve employees’ performance in current roles, and in identifying high potentials and fast-tracking their careers.
Participants in a DC go through multiple exercises while trained observers assess them against a predetermined set of competencies — typically the competencies required to deliver desired performance at higher levels. (In some cases, it may be necessary to assess competencies required at employees’ current levels to identify development areas or training needs).
The most common exercises consist of online assessment tools (e.g., a personality profiling tool, cognitive ability or critical reasoning tests, and a motivation profiling tool) and in-person business simulation exercises such as role playing, case analyses, and group exercises.
It is important that all the exercises — whether online tools or business simulation exercises — provide a reliable and valid assessment of the competencies they are used to assess.
Use External Vendors
It is possible for a company to conduct DCs in-house, which can keep costs down, but using an external agency does have its benefits.
Objectivity: The trained observers or assessors used in a DC must be totally objective in their assessment. Participants must also believe the assessors are neutral third parties or the organization risks alienating its workforce. This perception is best achieved through an external consulting firm.
Specialization: The assessors must be trained in observing participant behaviors and in scoring and recording observations. This requires rigorous training and continuous practice. Typically, managers in organizations, given their regular work pressures, are unable to achieve this. Reputed consulting firms invest considerable time and effort in training their assessors.
Reliable and valid DC exercises: One of the most critical aspects of the DC is the use of highly reliable and valid exercises, whether they are online tools or in-person business simulation exercises. Top consulting firms specializing in conducting DCs conduct extensive research to establish the reliability and validity of the tools they use.
Benchmarking: If a company conducts DCs in-house, it does not have access to benchmarking data (i.e. comparing how its managers stack up against others in the industry). Top consulting firms with experience in conducting DCs for many companies in many industries can provide valid benchmark data.
How to Choose an External Agency
HR teams should consider three important questions when choosing an external agency or consulting firm to provide a DC.
Does the firm have reliable and valid online tools and business simulation exercises that have been well researched?: Ask for reliability and validity data to substantiate their claims. Better still, ask whether the tools have been certified by a reputed agency such as the British Psychological Society.
How long has the consulting firm been conducting DCs?: This is particularly important when you are looking for benchmarking data. Experience in a wide range of companies and industries and experience in assessing junior to senior management levels show the firm has a deep understanding of local management talent and business conditions.
Does the firm have a trained and experienced assessor pool?: The assessors must have extensive industry experience either in senior HR roles or in senior leadership roles in other functions or better still as CEOs or MDs. Is the firm investing in continuously training these assessors?
DCs Still Need to Be Face-to-Face
While technology has made considerable progress and enabled many components of a DC to be conducted virtually, there are several aspects that require face-to-face interaction. Internet speeds, the availability of sufficient bandwidths, and uninterrupted video conferencing facilities are still not adequate in most places.
In role playing and in providing feedback, face-to-face interaction provides tremendous advantages over video calls. The body language and the warmth and connection so important in feedback and role-playing cannot be duplicated in a virtual scenario. Group discussions — an important exercise in assessing how a manager behaves and interacts with peers — is also not as effective in a virtual setting.