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High-Potential Employees

How to Design a HIPO Strategy in an Era of Constant Change

HR teams shouldn't just look for HIPOs with the agility to cope with change but make HIPO processes more agile as well

High-potential employees are the rare and beautiful plants of the business world. Much like a gardener will spend an inordinate amount of time cultivating stems to create the few delicate flowers that will transform his garden, HR teams spend huge sums on finding employees with high potential and slowly turning them into the few high-performing leaders each company needs to secure its success.

But that’s where the difference ends. Gardeners will happily grow a hundred plants from seed when they know they only need a handful, and will certainly be ruthless about pruning and discarding those that don’t make the cut. Companies, however, with strict cost measures in place, want a better return than that.

In fact, the average firm spends 27% of its learning and development budget on its high-potential (HIPO) program, and two-thirds of companies divert budget away from other talent investments to fund HIPO initiatives. And this is considered too high a price to pay when only 24% of HR leaders consider their HIPO strategy to be an overall success.

The Need for More Agile HIPO Processes

One reason that HIPO programs have had such a shaky track record recently is the amount of change that companies have had to cope with over the past five years or so. This means that the leadership roles current HIPOs are aiming for will look significantly different compared to the roles of today.

Most HR professionals expect that, within five years, more than 40% of today’s leadership roles will look dramatically different, and among those companies where roles are changing especially quickly, one-third of leaders don’t believe they can predict what those changes will be. The logical response of many HR teams has been to focus on HIPOs that have the necessary agility to cope with such an ambiguous future.

Unfortunately it hasn’t paid dividends. During the time that HR teams have focused on these agile individuals, managers’ confidence in the next generation of leaders has gone from bad to worse. The percentage of companies with a strong leadership “bench” – companies confident that their stock of leaders are sufficient to meet current and future demands – has declined from 17% in 2013 to a meager 13% in 2016, according to CEB data.

Rather than looking for agile individuals, it’s far better to create agile HIPO processes that can change as the needs of the company change, and find employees with the right type of ability, aspiration, and engagement to suit the company’s needs. This focus on HIPO processes makes it 70% more likely that a company will have a strong leadership bench (see chart 1).

Impact on bench strength of agile people vs. agile HIPO strategy

Chart 1: Impact on bench strength of agile people versus agile HIPO strategy  n=142 leaders   Source: CEB 2016 HIPO Survey; CEB analysis

Three Ways to Create an Agile HIPO Strategy

There are three steps HR teams should take now to make their HIPO processes more agile.

  1. Look beyond HR to identify future leadership requirements: 72% of HR executives say that current criteria are not accurate or relevant predictors of potential for future leadership requirements, and simply tacking agility onto existing HIPO criteria is not enough.

    HR teams should partner with other stakeholders who may have a better understanding of changing leadership requirements such as line managers and, in some cases, customers.

  2. Manage HIPO aspiration over time: The aspiration to get into a leadership role is what motivates many HIPOs but aspirations shift over time for business and personal reasons. The reality is that within three years of a major change, up to one-in-three employees’ aspiration will change to an extent that they no longer desire leadership roles. Similarly, one in three employees who don’t currently aspire to the company’s senior leadership will do so in the next three years.

    HR leaders need to stay on top by tracking HIPO aspiration frequently and ensure HIPOs still aspire towards the right kind of roles throughout their time with the company.

  3. Take ownership of HIPOs’ career progression: HIPOs value opportunities for progression, not just promotion. But in an environment of flatter org structures and fewer promotions, managers struggle to provide HIPOs the right opportunities at the right time.

    HR should take a greater interest in HIPOs’ career progression so managers can find and offer growth opportunities both within and outside HIPOs’ current roles.

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