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Identifying and Developing Future Leaders: Global Best Practices & Research Insights
One of the top challenges that organisations face is having a pipeline of strong leadership talent. Global Leadership Forecast 2021, a report published by a leading talent consulting firm, DDI, shows that 55% of leaders (out of over 15,000 leaders surveyed) rank “Developing next generation of leaders” as their top challenge. CEOs rank this higher than “Global recession and slowing economic growth”!
Status of Future Leader Development Progammes
Research by SHL, a leading talent management consulting company, shows that companies with strong leadership bench strength achieve twice the revenue and profit growth compared to companies with weak leadership bench strength. However, less than 1 in 3 Leaders including HR Heads say that they have the right leadership for their organisation. As Korn Ferry Leadership Potential Survey (2019) says, “it is obvious from our research findings that CEOs and Boards lack confidence in their future leadership pipelines”.
Many companies do not have a systematic process for identifying and developing their future leaders. The future leader programmes, often called FLPs or HiPo programmes, also fail to deliver results even in companies where they do exist. SHL’s HiPo E-Book says that only about 50% of the companies they surveyed have a systematic high potential programme and 73% of HiPo programmes fail to deliver business outcomes.
What Ails Future Leader Development Programmes?
There are three most likely reasons for this. The first and most important reason is the mistake that most organisations make of equating high performance with high potential. Performance is about delivering results, meeting or exceeding goals in current (or past) roles, whereas Potential is about the ability to succeed in more complex and higher roles. Performance is about past and present whereas Potential is about future. It is easier to measure performance as most organisations have a performance management system (PMS), whereas it is very difficult to assess potential.
SHL’s research shows that only 15%of high performers are high potentials (HiPo E-book). Hogan, another leading talent management consulting firm, says that 30% of high performers have high potentials (The Politics of Potential, Hogan). Therefore, identifying all high performers as high potentials, which many organisations do, leads to a failure of leadership development or HiPo programmes.
The second reason is that many organisations rely only on-line manager nominations of high potentials. Line managers’ judgements are subject to bias and the tendency is to prefer those who are most like them, i.e., have similar approach, interests, and background. Such an approach misses out on diversity of talent.
The third reason is not “casting the net wide”. For example, those managers working in H.O. or in the same locations as the nominating managers, tend to get favoured, compared to those working in far away locations. This results in missing out on potential candidates for consideration.
As Aon (a leading HR consulting firm) says in Finding the Future Leader white paper, “most organisations rely on a combination of performance data and gut instinct to make critical decisions about promotions and leadership development, a process that is unreliable at best and deeply biased at worst.”
How can organisations have a robust, reliable process for identifying and developing future leaders or high potential talent? A few key steps have to be put in place:
1. Defining the key competencies that future leaders need to demonstrate
2. A reliable, objective process for identifying the leaders’ strengths and areas of development
3. A talent board, chaired preferably by the CEO, to review the results of the process
4. Development programme tailored for high potentials
The above steps are described in more detail below.
Key Competencies of Future Leaders or High Potentials: 3 ARCs
Based on experience of working with many leading global organisations and research insights, I propose the following five key attributes as important for a future leader: Ability, Aspiration, Agility, Resilience and Commitment.
a. Ability:
One of the most important capabilities of a future leader or high potential is the ability to perform or deliver results at higher levels in the organisation.
Many organisations have clearly identified the competencies they expect from their leaders. These could be the basis for determining nominations to the high potential category. The leadership competencies should include: developing a vision or broad goal(s) sometimes called strategic thinking, effectively communicating to the team, gaining their commitment, developing the road map for achieving the goals, monitoring progress and delivering results. These broad set of competencies would also include competencies related to people, customers and stakeholders.
Future leaders or high potentials must demonstrate these capabilities or competencies.
Considerable research has shown that Emotional Intelligence is a key component of leadership ability. Emotional Intelligence has four components: Self Awareness, Self Management, Social Awareness and Relationship Management. Research has shown that successful leaders have high levels of emotional intelligence.
Leadership competencies coupled with emotional intelligence are important requirements of high potentials.
b. Aspiration:
Aspiration is the strong drive to reach higher positions in the organisation. Future leaders have a high level of aspiration. This is backed by few other characteristics, viz., they are motivated by challenging assignments, exercise authority and take on responsibility, enjoy a wide variety of work, like to have the autonomy to take decisions. In addition to these characteristics, high potentials also put in the time and effort in selfdevelopment, take the initiative and take on the responsibility.
c. Agility:
As business conditions are getting more and more impacted by VUCA world, agility has emerged as a key attribute of future leaders. Agility is the ability to learn new aspects of the business quickly and act based on that learning. Agility is also the ability to anticipate future changes, market trends, competition and respond appropriately very quickly. Future leaders must score high on Agility.
d. Resilience:
The pandemic has brought to the fore a very important attribute of successful leaders, namely, Resilience. Many businesses have faced serious setbacks, and the ones which have pivoted their business models and are still growing are those with leaders who have resilience. Resilience is the capability to recover from setbacks, having the required mental and physical energies and an optimistic outlook to continue to work towards goals. Extracting valuable learning from failures and modifying future course of actions is a key attribute of these leaders. Resilient leaders also reach out to the right sources for support and knowledge. Resilience is a key attribute that we should look for in future leaders and high potentials.
e. Commitment:
For the organisation investing in the development of future leaders, it is important to know if the individuals will stay longer with the organisation. Future leaders demonstrate commitment to the organisation; they imbibe and demonstrate the organisation’s values and purpose.
They have both a rational and emotional commitment to the growth and success of the organisation.
This is demonstrated through putting in extra efforts, taking on challenges and in developing junior members of the team.
In summary, the five key attributes that distinguish a future leader or high potential manager are Ability, Aspiration, Agility, Resilience and Commitment, i.e., the 3ARC model.
Reliable Process for Identifying Future Leaders
What process should an organisation put in place to identify future leaders? Based on my experience consulting with many leading global organisations, I propose the following four-step process:
1. Nomination by line managers supported by performance data and the line manager’s rating on the 3ARC attributes. This step is important to ensure line manager involvement and commitment.
2. An objective process for assessing potential which should be conducted by an external agency specialising in potential assessments. Typically, this process would be a “Potential Assessment Centre” or “Development Centre”. The nominated managers go through business simulation exercises conducted by a group of experienced assessors over one or two days. The outcome will highlight the strengths and areas of development of each manager. This can be used to provide valuable feedback to the manager and can also be used as the basis for high potential identification.
3. 360 Feedback, which provides extremely valuable insights into an individual’s leadership behaviours as observed / perceived by subordinates and peers.
4. Talent Board comprising of CEO, CXOs and HR Head. The Talent Board reviews the data from 1, 2 and 3 above for each nominated manager. An indepth discussion of the capabilities of each nominated manager is required before the final identification of the high potential talent pool. This is an extremely important part of the process as this brings in top management commitment and involvement.
At the end of this process, it should be possible to place the talent pool into a nine-box grid as below:
Usually, the individuals in the green boxes would be classified as high potentials or future leaders. However, a detailed discussion on the individuals in other boxes would also be needed to determine their development inputs and career paths. This is talent planning and is a very important part of talent management. This process helps not only in identification of future leaders or high potential talent pool but also in career planning for the rest of the talent pool.
Development Inputs for Future Leaders
Having identified the future leader talent pool, the next important step is to provide them with the right development inputs. Traditionally, many organisations follow the 70:20:10 principle and place a lot of importance and invest significant amounts of resources in providing classroom training (workshops or executive education programmes) almost to the extent of 70%; followed by projects, assignments and mentors to the extent of the remaining 30%.
However, research has shown that the most effective development of high potentials is through experience, i.e., by getting them involved in high stretch, high risk projects and assignments, but with the safety net of job security. Job rotation, exposure to various aspects of the business are other development inputs. The expectation from the high potentials is that they should learn, reflect on the learning and get feedback as they progress through these assignments.
In terms of development inputs, on the job experience or handling stretch assignments should be about70% of the inputs and the remaining30% can come from workshops, classroom training and guidance from mentors.
A mentor who is at a very senior level within the organisation, who can guide and supervise the progress of the high potentials through their development programmes, would be needed.
Summary
Companies with strong leadership bench strength deliver superior performance. The existing programmes to identify and develop future leaders are not working well in most organisations. The main problem is in the way future leaders or high potentials are identified. Relying only on performance data or only on-line manager nominations is negatively impacting the identification process.
Ability, Aspiration, Agility, Resilience and Commitment (3ARCs) are the key attributes of a future leader.
A combination of line manager ratings, performance data, objective potential assessment through are liable, valid methodology, 360feedback and talent board review is likely to lead to a robust process for identifying future leaders.
Development inputs should consist primarily on the job experience (about 70%), and learning from mentors, coaches, etc., and formal training (about 30%). Development of future leaders is most effective through high stretch, high risk assignments, job rotation and exposure to all aspects of the business.
