toward effective management of high-potential employees

© 2000 Corporate Executive Board

Corporate Leadership CouncilManaging High-Potential Employees Series, Volume II

Strategic Research • November 2000

Toward Effective Managementof High-Potential EmployeesIdentifying and Developing Early- andMid-Career Talent

� Accurate, Efficient Identification of Junior High-Potential Employees

� Appropriate Developmental Opportunities for High-Potential Employees

� Explicit Support and Accountability for the Developmentof High-Potential Employees

� Clear Understanding of the Efficacy of Talent Management Initiatives

ii


Note to Members

This project was researched and written to fulfill the research request of several members of the Corporate Executive Board and asa result may not satisfy the information needs of all member companies. The Corporate Executive Board encourages members whohave additional questions about this topic to contact their research manager for further discussion. The views expressed herein bythird-party sources do not necessarily reflect the policies of the organizations they represent.

Professional Services Note

The Corporate Leadership Council has worked to ensure the accuracy of the information it provides to its members. This project reliesupon data obtained from many sources, however, and the Corporate Leadership Council cannot guarantee the accuracy of the informationor its analysis in all cases. Further, the Corporate Leadership Council is not engaged in rendering legal, accounting or other professionalservices. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiringsuch services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsiblefor any claims or losses that may arise from any errors or omissions in their reports, whether caused by the Corporate Executive Boardor its sources.

© 2000 Corporate Executive Board Catalog No.: CLC-000-502

Corporate Leadership Council

2000 Pennsylvania Avenue NWWashington, DC 20006

Telephone: 202-777-5000Facsimile: 202-777-5100

166 PiccadillyLondon, W1J 9EFUnited Kingdom

Telephone: +44-(0)20-7499-8700Facsimile: +44-(0)20-7499-9700

www.corporateleadershipcouncil.com

Research Staff

Research AnalystsBrian Free

Rachel Telegen

Research ManagersRebecca Justice

Eve Meceda

Managing DirectorLarry Giammo

Creative Services

E.I. Publications SpecialistsJill Campbell

Jessie Ann DalrympleLisa Goffredi

E.I. Publications AssociateErin J. Pietrowski

DirectorRobert G. Headrick

iii


Table of Contents

With Sincere Appreciation • vi

The Argument in Brief • x

Council Essay—The Need for Identification and Development Processesfor Junior High-Potential Talent • 1

Requirement One—Accurate, Efficient Identification of Junior High-Potential Employees • 9

Profiled Practice: HIPO Nomination Review (Choice Hotels International) • 14

The manager-once-removed (a manager’s direct supervisor) rigorously reviews high-potentialemployee (HIPO) nominations, ultimately providing final approval for employees’ entry to the HIPOprogram. The manager-once-removed helps improve the identification process by communicating asingle standard for HIPO selection and cross-calibrating lower-level managers’ HIPO nominations.

Profiled Practice: Employee Potential Self-Assessment (Tenneco Automotive) • 16

Self-assessment tool enables employees to proactively rate their abilities and outline their desireddevelopment and career plans. After being validated by the manager, the employee self-assessmentis used to help construct the employee’s development plan and to identify HIPO talent.

Profiled Practice: Continuous HIPO Pool Recalibration (SBC Communications) • 20

Continuous nomination process solicits manager nominations of high-potential employees throughoutthe year. Ongoing HIPO nominations are used to continually add employees to(or subtract them from) the HIPO program.

Requirement Two—Appropriate Developmental Opportunities for High-Potential Employees • 23

Profiled Practice: Developmental Opportunity Principles (Alpha Company*) • 29

Principle-based decision-support tool outlines the key characteristics of positions appropriate forthe development of HIPOs. The support tool is used extensively in development-planning meetingsto evaluate and select roles for high-potential employees.

Profiled Practice: HIPO Database (Beta Company*) • 34

Intranet site provides managers with desktop access to a database of information regardinghigh-potential employees. The database allows line managers and human resources to easily accesscomprehensive information regarding HIPOs’ career backgrounds, interests and skills.

Profiled Practice: Blocker Management Tool (Alpha Company*) • 40

Decision-support tool enables the line and HR to proactively identify “blockers” (individualswith limited potential to advance) occupying developmental positions. Key to practice success isthat HR provides the line with clear strategies to manage blockers out of key developmental roles.

Profiled Practice: Stretch Role Developmental Agreements (Eli Lilly and Company) • 46

Developmental agreement articulates business results and personal development goals that employeesare expected to achieve within each stretch opportunity. In order to advance to a new assignment,employees must accomplish the objectives spelled out in their developmental agreement.

* Pseudonym.

iv


Table of Contents (continued)

Requirement Three—Explicit Support and Accountability for the Developmentof High-Potential Employees • 51

Profiled Practice: HIPO Responsibility Allocation Framework (Bank of Montreal) • 56

Organizational framework clearly divides responsibility for HIPOs between line and corporateunits, providing units with duties appropriate for their organizational level. The corporate centertakes responsibility for the development of employees whose career trajectory includes more seniorleadership roles and for the creation of developmental principles, frameworks and guidelines for theorganization. Line units are explicitly tasked with the development of more junior HIPOs accordingto the framework established by corporate headquarters.

Profiled Practice: HIPO-Development Sponsors (Deloitte Consulting) • 60

Senior-level line managers act as counselors, providing developmental guidance to designatedemployees within the organization. Key to practice success is that sponsors provide ongoingdevelopmental support and actively participate in employee performance reviews.

Profiled Practice: Managerial Incentives for HIPO Development (Monsanto Company) • 64

Performance-management system ties a significant portion of managers’ incentive pay to theircontribution to employee development. Managers formulate concrete objectives for employeedevelopment and receive ongoing support for, and review of, their developmental efforts.

Profiled Practice: HIPO Status Communication Guidelines (Gamma Company*) • 70

During development-planning meetings, managers convey to high-potential employees that theyare considered to possess strong career trajectories and are valued by the organization. Key topractice success is the use of managerial guidelines for communication with HIPOs (and withnon-HIPOs who ask about the HIPO program).

Requirement Four—Clear Understanding of the Efficacy of Talent Management Initiatives • 77

Profiled Practice: HIPO Management Metrics (Bank of Montreal) • 79

Structured reporting system monitors HIPO management metrics (movement, promotions,average time in position, etc.) for each business unit. The key feature is that the corporate centeractively monitors HIPO metrics and partners with individual business units to resolve identifiedtalent issues.

Appendix—Selected Key Readings • 87

Selected Bibliography • 91

* Pseudonym.

v


vi


With Sincere Appreciation

John BeesonPrincipalBeeson Consulting Inc.8611 West 63rd Street, Suite 106Overland Park, KS 66202United States1-913-722-4422

Lisa Burke, Ph.D.Assistant Professor, Department of

Management and MarketingLouisiana State University at

ShreveportOne University PlaceCollege of Business BE 304Shreveport, LA 71115United States1-318-797-5185

William C. ByhamPresident and CEODevelopment Dimensions

International1225 Washington PikeBridgeville, PA 15017United States1-412-257-0600

Maxine DaltonGroup Director, Global LeadershipCenter for Creative LeadershipOne Leadership PlaceP.O. Box 26300Greensboro, NC 27438United States1-336-545-2810

Josh SandiferPrincipalWilliam M. Mercer, Incorporated3700 Georgia-Pacific Center133 Peachtree Street, NEAtlanta, GA 30303United States1-404-521-2200

James W. Walker, Ph.D.PartnerThe Walker Group1568 Highland DriveSolana Beach, CA 92075United States1-858-259-2885

Special Thanks

The Corporate Leadership Council would like to express its gratitude to the followingindividuals who were especially giving of their time and insight in the development ofthis study:

vii


Advisors to Our Work

The Corporate Leadership Council expresses its appreciation to all of the individuals andorganizations who have so generously contributed their time and expertise to our work.Their contributions have been invaluable, and we extend our sincere thanks to all ofthese advisors:

3M Company

Abbott Laboratories

Air New Zealand Limited

American Express Company

Ansett Holdings Limited

AT&T Corporation

Bank of Montreal

Bell Canada International Inc.

Boise Cascade Office Products Corporation

BP Amoco p.l.c.

Capital One Financial Corporation

Celanese Mexicana, S.A. de C.V.

CF Industries, Inc.

Choice Hotels International, Inc.

Cintas Corporation

Citigroup Inc.

The Coca-Cola Company

Commonwealth Bank of Australia

Deloitte Consulting

Eckerd Corporation

Ecolab Inc.

Eli Lilly and Company

Enbridge Inc.

Foundation Health Systems, Inc.

Fuller Company

General Motors Corporation

GTE Corporation

Hewlett-Packard Company

Hoffmann-LaRoche, Inc.

Household International, Inc.

Merck & Co., Inc.

Microsoft Corporation

Monsanto Company

The Neiman Marcus Group, Inc.

Nortel Networks Corporation

PepsiCo, Inc.

Pfizer Inc.

Phillips Petroleum Company

The Prudential Insurance Companyof America

S.C. Johnson & Son, Inc.

The Sanlam Group

SBC Communications Inc.

Schneider National, Inc.

Sears, Roebuck and Co.

Shell Oil Company

Southern Company

The Standard Life Assurance Company

Tenneco Automotive Inc.

TRW Inc.

Unilever

United Parcel Service, Inc.

US WEST, Inc.

Weyerhaueser Company

Xerox Corporation

viii


Letter to the Reader

This study is the second part of the Corporate Leadership Council’s two-volumeseries on the management of high-potential (HIPO) employees. Challenges in ManagingHigh-Potential Employees: Results of the Council’s Membership Survey, released inApril 2000, described the talent management practices of 252 member institutions. Thesurvey reflected members’ concern that, in a time of increasing leadership needs, they maynot be prepared to identify and develop the key talent required to execute future businessstrategy. Of special concern to the membership was the development of early- andmid-career HIPOs—a valuable, but often neglected, source of future leadership talent.

To address this concern, the Council sought to investigate the practices that companieshave undertaken to support the identification and development of emerging talent. TheCouncil found that the most effective talent management strategies can provide juniorHIPOs with adequate developmental support without a significant expenditure oforganizational resources. During the course of research, the Council uncovered fouroverarching activities that, when taken together, comprise an outline of principled steps forthe effective management of emerging talent.

• Identifying Talent—In order to effectively deploy their developmental resources,companies must ensure that they identify those employees with the greatest potentialto advance within the organization. To efficiently and accurately identify HIPOs, somecompanies are increasing the number of information sources used during the HIPOselection process and conducting ongoing evaluations of talent.

• Providing Developmental Opportunities—To effectively accelerate the development ofemerging talent, corporations must identify stretch roles appropriate for high-potentialemployees. A number of companies have devised methods to identify appropriateHIPO developmental roles and systematically place HIPOs in them.

• Establishing Accountability for Development—Supporting HIPO advancement requiresclear accountability for the management and development of the HIPO population.Accordingly, some companies are defining and assigning responsibilities associatedwith the development of the firms’ potential future leaders.

• Tracking Talent Metrics—A final group of companies is beginning to develop keymetrics to measure the development of HIPO talent, a requisite step for understandingthe efficacy of company talent management initiatives.

It is the sincere hope of the Council’s Strategic Research service that this research willgarner further member input and interest in this terrain. In this regard, we look forwardto receiving your feedback and extend, as always, our continuing appreciation.

Washington, D.C.November 2000

ix


Managing High-Potential Employees Series

A report on the state of talent managementpractices at 252 member institutions;central areas of survey focus include:

• Extent of the leadership shortage

• Identification of high-potential talent

• Development of high-potential talent

• Communication of value tohigh-potential employees

• Health of talent pool andaccountability for high-potential talent

Tactics for addressing problems identifiedin Volume I; key practices profiled include:

• Establishing robust HIPOidentification systems

• Promoting HIPO mobility

• Providing accountabilityfor HIPO management

• Measuring the effectiveness of talentmanagement initiatives

Volume I Volume II

Challenges in ManagingHigh-Potential Employees

Results of the Council’sMembership Survey

Toward EffectiveManagement of High-Potential Employees

Identifying and DevelopingEarly- and Mid-Career Talent

Corporate Leadership CouncilManaging High-Potential Employees Series, Volume IExecutive Inquiry • April 2000

Corporate Leadership CouncilManaging High-Potential Employees Series, Volume IIStrategic Research • November 2000

x


The Argument in Brief

Observation #1 The impact of the current leadership shortage on the competitive capabilities ofthe corporation is significant. Leadership concerns now rank as a top priority ofCEOs across industries and are no longer the sole purview of HR.

Observation #2 Unfortunately, the situation will only worsen, as the shortage is an issue of bothquantity and quality of leaders. As companies devolve decision making lower inthe organizational hierarchy, they will not only require more leadershippositions but also positions that demand substantially different capabilitiesthan in the past.

Observation #3 Conventional wisdom suggests that the organizational de-layering of the pastdecade is to blame for the current leadership crisis. In this view, the middlemanagers eliminated during yesterday’s downsizing initiatives would have beentoday’s senior executives.

Observation #4 The real issue, though, is not the loss of a cadre of middle managers but the lossof middle-management positions that traditionally served as developmental“stepping stones” to senior-level roles. These positions afforded early- andmid-career employees the opportunity to build critical skills and increasetheir level of responsibility over time, ultimately preparing them for moresenior positions.

Observation #5 In a flattened organization, however, there is little, if any, opportunity forpromising talent to incrementally develop critical leadership skills andcapabilities. Although companies often identify pools of high-potentialemployees (employees perceived to have the potential to reach more seniormanagement positions), companies have difficulty promoting theirdevelopment within this environment. Often, the only way for high-potentialemployees—or “HIPOs”—to progress in a flattened organization is to assumepositions for which they are largely unprepared—both in terms of responsibilityand skills.

xi


Observation #6 The resulting problem here is twofold. First, moving unprepared junior talent(regardless of potential) to a position of substantial responsibility may place theorganization at an unsuitable level of risk from slowed, ineffective or inaccuratedecision making.

Observation #7 The second, related, problem is that the likelihood of HIPO failure increasessignificantly as the level of challenge in these positions increases.

Observation #8 Given that organizations are unlikely to return to the extensive, unwieldymiddle-management layers of the past, the real question, then, is: What cancompanies do to increase the success rates of early- and mid-career HIPOswho move into stretch developmental opportunities?

Observation #9 Council research indicates four key requirements for effective developmentof junior high-potential employees.

Observation #10 In some ways, these requirements for success run counter to the much-toutednotion of “career self-reliance” for junior talent. It is clear, however, that a freeinternal labor market cannot necessarily be relied on to develop a sufficientnumber of HIPOs quickly and completely enough to fulfill the leadership needsof the corporation. The reality is that even the most capable HIPOs may beunable to meet the challenges presented by significant stretch roles without somesupport and guidance. As such, the Council hopes that this report can providesome assistance in identifying the basic structures and strategies that maximizethe development of junior high-potential talent.

xii


1


Council EssayThe Need for Identification and Development

Processes for Junior High-Potential Talent

2 Toward Effective Management of High-Potential Employees


Professional/Technical Talent

ManagementTalent

Talent to RunComplex Global

Operations

0%

50%

100%

58%70%

83%

The impact of the current leadership shortage on the competitive capabilities of the corporation issignificant. Leadership concerns now rank as a top priority of CEOs across industries and are nolonger the sole purview of HR.

The current leadership shortage…

Percentage of Senior Executives Dissatisfied with the Supply of Talent

…represents a top priority for the CEO

Distribution of Responses to Statement:

“The CEO views leadership as a top priority for the organization”

Majority ofsurveyed Councilmembers reportsthat their CEOsview leadershipdevelopment as atop organizationalpriority

Source: Corporate Leadership Council, Challenges in Managing High-Potential Employees: Resultsof the Council’s Membership Survey, Washington: Corporate Executive Board, April 2000.

n = 150Source: Johnson, Mike, “Building and Retaining Global Talent: Towards

2002,” Economist Intelligence Unit Publications (1998).

StronglyDisagree

SomewhatDisagree

SomewhatAgree

StronglyAgree

0%

50%

100%

12%6%

18%

64%

Percentageof Senior

Executives

Percentageof Companies

n = 252

3Council Essay


Unfortunately, the situation will only worsen, as the shortage is an issue of both quantity andquality of leaders. As companies devolve decision making lower in the organizational hierarchy,they will not only require more leadership positions but also positions that demand substantiallydifferent capabilities than in the past.

Demand for more leaders with new skill sets…

…will further exacerbate the leadership shortage


“Across the next five years, the corporation will be ableto staff all key leadership positions with the desired talent”


“The number of leaders that the corporation willrequire within the next three to five years is significantly

greater than the number required presently”


“Within the next three to five years, the company willrequire leaders with significantly different skills than

those currently needed”

Troubling that less than aquarter of respondentshave strong confidence intheir ability to staff keyleadership positions in theimmediate future

Source: Corporate Leadership Council, Challenges in Managing High-Potential Employees: Results of theCouncil’s Membership Survey, Washington: Corporate Executive Board, April 2000, pp. 2–3.

StronglyDisagree

SomewhatDisagree

SomewhatAgree

StronglyAgree

0%

25%

50%

18%

10%

25%

47%

StronglyDisagree

SomewhatDisagree

SomewhatAgree

StronglyAgree

0%

30%

60%

6%10%

29%

55%

StronglyDisagree

SomewhatDisagree

SomewhatAgree

StronglyAgree

0%

20%

40%

17%

25%

34%

24%

n = 252 n = 252

n = 252



Conventional wisdom suggests that the organizational delayering of the past decadeis to blame for the current leadership crisis. In this view, the middle managers eliminatedduring yesterday’s downsizing initiatives would have been today’s senior executives.

The real issue, though, is not the loss of a cadre of middle managers but the loss ofmiddle-management positions that traditionally served as developmental “steppingstones” to senior-level roles. These positions afforded early- and mid-career employeesthe opportunity to build critical skills and increase their level of responsibility over time,ultimately preparing them for more senior positions.

In a flattened organization, however, there is little, if any, opportunity for promising talentto incrementally develop critical leadership skills and capabilities. Although companies oftenidentify pools of high-potential employees (employees perceived to have the potential to reachmore senior-management positions), companies have difficulty promoting their developmentwithin this environment. Often, the only way for high-potential employees—or “HIPOs”—toprogress in a flattened organization is to assume positions for which they are largelyunprepared—both in terms of responsibility and skills.

Loss of key middle-management positions…

The loss of middle-management positionsremoves many key developmental roles,which historically enabled junior talent toincrementally develop the skills necessaryto advance to senior-management positions

…has left many companies’ leaders unprepared for today’s business challenges

* Based on a survey of 200 top executivesat 77 participating organizations.

Source: Chambers, Elizabeth G., et al., “The War for Talent,” McKinseyQuarterly No. 3 (1998); Corporate Leadership Council research.

Developmental ExperiencePercentage of ExecutivesWithout Past Experience*

Leading a New Business

Cross-Functional Work

P&L Responsibility

66%

42%

34%

5Council Essay


The resulting problem here is twofold. First, moving unprepared junior talent (regardless ofpotential) to a position of substantial responsibility may place the organization at an unsuitablelevel of risk from slowed, ineffective or inaccurate decision making.

The second, related, problem is that the likelihood of HIPO failure increases significantly as thelevel of challenge in these positions increases.

Unprepared talent places the organization at an unacceptable level of risk…

Case in Point: Out of Their Element?

“It’s gotten to the point [in our organization] where we can’t fill our key positions with qualifiedtalent. Our mid-level employees simply don’t have the breadth of experience that we require at theupper-management levels.…This lack of experience shows; managers are slow to act and oftensecond-guess their decisions, which seriously jeopardizes our business.”

Director of Executive DevelopmentLarge Telecommunications Company

…and often increases the likelihood of HIPO derailment

Causes of HIPO Derailment Cited by Senior Executives

Europe

North America

* Based on interviews with 42 European senior executivesand 20 North American senior executives; respondentscould select multiple derailment factors.

Source: Leslie, Jean Brittain, and Ellen Van Velsor, A Look at DerailmentToday: North America and Europe, Greensboro: Center for CreativeLeadership, 1996, p. 11; Corporate Leadership Council research.

Inability toDevelop or Adapt

Inability to Buildand Lead a Team

Not Prepared forPromotion

Too NarrowFunctional

Orientation

0%

35%

70%

Percentage ofDerailments

Derailment Factors

62% 60%

24%

40%

18%

10%13%

20%



Profiled Practices:

Developmental Opportunity Principles (p. 29)

HIPO Database (p. 34)

Blocker Management Tool (p. 40)

Stretch Role Developmental Agreements (p. 46)

Given that organizations are unlikely to return to the extensive, unwieldy middle-managementlayers of the past, the real question, then, is: What can companies do to increase the success ratesof early- and mid-career HIPOs who move into stretch developmental opportunities?

Council research indicates four key requirements for effective development of junior high-potentialemployees, as listed below.

Profiled Practices:

HIPO Nomination Review (p. 14)

Employee Potential Self-Assessment (p. 16)

Continuous HIPO Pool Recalibration (p. 20)

Key Requirements for

*

*

*

* Pseudonym.

Requirement OneAccurate, Efficient Identification of Junior

High-Potential Employees

Most companies rely almost exclusively on directmanagers to identify high-potential employeesduring annual performance review processes. Yet,because potential is most difficult to identify inearly- and mid-career employees, the opinion of adirect manager once a year is simply not sufficientto identify high-potential talent. In a world oflimited resources, organizations must establishmore robust identification methods that directtheir developmental efforts toward junior employeeswith the greatest promise of advancement.

Requirement TwoAppropriate Developmental Opportunities

for High-Potential Employees

While most companies recognize the importanceof on-the-job learning for developing key skills,few have demonstrated significant success inmatching the developmental needs of each HIPOwith the appropriate stretch role. Thus, there is aclear need for more rigorous and systematicmatching of HIPOs to developmental opportunities.

7Council Essay


In some ways, these requirements for success run counter to the much-touted notion of “careerself-reliance” for junior talent. It is clear, however, that a free internal labor market cannotnecessarily be relied on to develop a sufficient number of HIPOs quickly and completely enough tofulfill the leadership needs of the corporation. The reality is that even the most capable HIPOs maybe unable to meet the challenges presented by significant stretch roles without some support andguidance. As such, the Council hopes that this report can provide some assistance in identifying thebasic structures and strategies that maximize the development of junior high-potential talent.

Maximizing HIPO Development

Requirement FourClear Understanding of the Efficacyof Talent Management Initiatives

Ultimately, the present crisis is as much a result ofa lack of awareness of the depth of the leadershipshortage as it is a failure to address it. Thecorporation’s ability to track indicators of thehealth of the talent pool directly affects its abilityto build a robust leadership pipeline.

* Pseudonym.

*

Requirement ThreeExplicit Support and Accountability for theDevelopment of High-Potential Employees

In most companies, development of junior-leveltalent has historically been everyone’s problem butno one’s responsibility. The success of juniorHIPOs in key developmental positions—and theavoidance of costly derailments—hinges on theassignment of clear accountability for the successof each high-potential employee. Significantly, asmall amount of well-timed and focused supportoften will make the difference between success andfailure for an early-career HIPO in a significantstretch role.

Profiled Practice:

HIPO Management Metrics (p. 79)

Profiled Practices:

HIPO Responsibility Allocation Framework (p. 56)

HIPO-Development Sponsors (p. 60)

Managerial Incentives for HIPO Development (p. 64)

HIPO Status Communication Guidelines (p. 70)

9


Requirement OneAccurate, Efficient Identification

of Junior High-Potential Employees



Requirement One Overview

Chapter Essay

• Early identification of emerging talent is essential for organizations to build more robustleadership pipelines. Without the accurate identification of junior HIPOs, companiescannot effectively deploy their resources to support the rapid development of futurecompany leaders.

• To facilitate the assessment of employee potential, many companies have sought scientifictools (such as assessment centers and questionnaires) to evaluate early-career HIPOs.

• Unfortunately, the utility of such one-size-fits-all tools is questionable, becausedifferences between company cultures, strategic leadership needs and otherorganizational factors tend to thwart any clear predictions of potential.

• Moreover, the sheer number of potential HIPOs at the more junior levels of theorganization makes the cost and time required for these tools prohibitive formost companies.

• By default, most corporations’ response to this challenge has been to depend almostexclusively on direct managers to identify employee potential during annual performanceevaluation processes. There are a number of problems with this approach:

– Limited managerial perspective—Lower-level managers may lack a strategic perspectiveof the company’s leadership needs at more senior levels, impeding their ability to selectappropriate high-potential talent.

– Inconsistent talent identification—Without a means to review and calibrate HIPOidentification across the company, organizations risk the inconsistent application ofHIPO criteria. Accordingly, companies may omit some high-potential employees fromthe HIPO program while expending developmental resources on employees whocannot fulfill the company’s long-term leadership needs.

– Limited window on potential—Junior-level employees generally have brief tenurewith the organization and hold positions of less responsibility, providing insufficientevidence of their potential and “fit” with the company’s future leadership needs.

– Infrequent identification processes—Annual evaluations of potential often fail to quicklyidentify and capitalize on some employees’ potential while allowing inappropriatetalent to continue receiving valuable developmental resources.

• These problems illustrate that, precisely because there is no single, easily applicabledefinition of a junior high-potential employee, companies must complement thecontribution of the direct manager with additional sources of input while simultaneouslyevaluating the pool of talent more frequently.

11Accurate, Efficient Identification of Junior High-Potential Employees


Featured Practices

HIPO Nomination Review p. 14

The manager-once-removed (a manager’s direct supervisor) rigorously reviews HIPOnominations, ultimately providing final approval for employees’ entry to the HIPOprogram. The manager-once-removed helps improve the identification process bycommunicating a single standard for HIPO selection and cross-calibrating lower-levelmanagers’ HIPO nominations.

Goal • To ensure that the HIPO program identifies all true HIPOs and excludes allnon-HIPOs

Profiled Practice: Choice Hotels International

Employee Potential Self-Assessment p. 16

Self-assessment tool enables employees to proactively rate their abilities and outline theirdesired development and career plans. After being validated by the manager, the employeeself-assessment is used to help construct the employee’s development plan and to identifyHIPO talent.

Goals • To ensure the selection of employees whose career goals accord with thecompany’s HIPO requirements

• To increase managers’ ability to match HIPO talent to appropriatedevelopmental roles

Profiled Practice: Tenneco Automotive

Continuous HIPO Pool Recalibration p. 20

Continuous nomination process solicits manager nominations of high-potential employeesthroughout the year. Ongoing HIPO nominations are used to continually add employees to(or subtract them from) the HIPO program.

Goal • To ensure that HIPO identification can occur at the most appropriate point in anemployee’s development, reducing the likelihood that managers will nominatetheir HIPOs too early (risking derailment) or too late (risking departure)

Profiled Practice: SBC Communications



Limited Perspective Impedes Accurate Talent Selection

“In many companies, the primary vehicle for assessing an individual’s career potential is anexecutive’s discussion of top people at an annual succession planning review.…Having a singlesource of assessment…[creates the potential for] a number of…problems. Examples includeoverrating staff out of personal loyalty or underrating someone’s readiness for a new assignment forfear of losing a talented performer.

“A more fundamental problem is lack of perspective. It is extraordinarily difficult, if notimpossible, for a manager to assess someone’s potential to succeed at an organizational level higherthan one’s own.”

John BeesonPrincipal, Beeson Consulting Inc.

Direct managers’ ability to assess employee potential may be impeded by a lack of perspective onthe company’s long-term leadership needs at the more senior levels. Reliance on the direct managerto identify HIPOs may further thwart the effective development of company leaders if managers’HIPO nominations are not reviewed and calibrated across the organization.

Managers’ limited talent perspective…

…leads to inconsistent identification of talent

Manager-Once-Removed

Manager Manager Manager

…companies risk inconsistentselection of HIPO talent;identification processes may omitqualified talent while selectingemployees who cannot fulfillcompany leadership needs

Source: Corporate Leadership Council research.

SelectedHIPOs

Without a means to clearlycommunicate HIPO criteria todirect managers and calibratetheir talent nominations acrossthe organization…



To help improve the accuracy of talent identification, Choice Hotels International involvessenior-level supervisors throughout the HIPO nomination process. Senior manager involvementhelps the company ensure clear communication of HIPO criteria and consistent talent selection.

* The Council would like to extend special thanks to RobertBarner, Vice President of Organizational Development andLearning at Choice Hotels, for his assistance with this research.

HIPO Nomination Review

Choice Hotels International, the world’s second-largest hotelfranchiser, generates approximately $160 million in annual revenuesand employs approximately 2,000 people.*

• Choice Hotels solicits the input of the senior manager to whom the potential HIPO’sdirect manager reports, or the manager-once-removed (MOR), during each stage of theHIPO selection process.

• The MOR communicates HIPO criteria to lower-level managers and reviews managers’HIPO nominations, intervening as necessary to ensure the appropriate selection of talent.

Manager-Once-Removed Input in the HIPO Nomination Process at Choice Hotels

Nomination Process at Choice Hotels Role of the Manager-Once-Removed

HIPO Nominated by Direct Manager

Employee’s direct manager completes the HIPOnomination form, rating the employee on 10leadership competencies

Clarify Selection Criteria and Methods• MOR communicates the criteria for the selection of

HIPOs and the leadership needs of the organization.• MOR also discusses effective assessment techniques

for proactively identifying HIPO talent.

Review Manager’s Ability to Judge Potential• MOR determines manager preparedness to rate

employee potential. MOR works closely with newmanagers, or managers challenged by the identificationof talent, to accurately identify high-potential employees.

• MOR also becomes more involved with these managers’direct reports throughout the year, allowing a betterassessment of their potential.

Manager Submits HIPONominations for Approval

HIPO nominations must beapproved by the MOR beforeemployees are selected as HIPOs

Review Omitted Candidates• MOR and the direct manager review any employees

that the MOR feels were incorrectly omitted from themanager’s nominations.

Address Inappropriate Nominations• MOR discusses any inappropriate nominations with the

nominating manager, coaching the manager on how toproperly identify high-potential talent.

HIPONomination

Form

Source: Choice Hotels International;Corporate Leadership Council research.



Council Assessment:HIPO Nomination Review

Differentiating Features

• Active review of managers’ nominations and the clear communication of HIPO criteriadistinguishes this tactic from standard practice; while many companies require MORapproval of HIPO nominations, this authorization often tends to be a perfunctory stepin the HIPO selection process.

• MOR participation in the HIPO selection process provides a simple, nonbureaucraticmeans to calibrate talent identification and to help managers proactively identifyhigh-potential talent more accurately.

Implementation Tips

• Both MORs and direct managers should be held accountable for the quality of HIPOnominations. Performance appraisals, pay and other mechanisms should reflectmanagers’ contribution to the identification and development of HIPOs. (For furtherinformation, see Requirement Three.)

Caveat

• Although MOR input should refine (and, if necessary, correct) the opinion of the directmanager, MOR involvement should not preclude pivotal input of the HIPO’s directmanager. The direct manager’s exposure to the potential HIPO provides a strong basisfor assessment; identification processes that do not incorporate direct manager inputignore a critical source of information.

Applicability

• Managerial span of control—Practice may prove impractical in organizations in whichMORs supervise a large number of employees. MORs must possess significant knowledgeof individual HIPOs in order to accurately review HIPO nominations. Even withinorganizations with large spans of control, however, MORs can help communicate HIPOcriteria and leadership needs to direct managers.



The brief tenure of early- and mid-career employees provides organizations with limitedinformation on their “fit” with the company’s future leadership needs. In order to improvemanagers’ ability to identify HIPO talent, Tenneco Automotive solicits employees’ opinionsof their perceived potential and their desired career and development plans.

Employee Potential Self-Assessment

Tenneco Automotive, an international auto parts manufacturingfirm, generates revenues of approximately $3 billion annually andemploys approximately 23,000 people.

• During the development-planning process, all exempt employees completeself-assessments of their abilities and career interests.

• After addressing any employee misperceptions, managers and employees use thecompleted assessments to jointly construct employee-development plans.

• In turn, managers use the employee self-assessments, development plans and otherinformation to identify high-potential employees.

Self-Assessment Form at Tenneco Automotive

Prepared by: Aran Dahl Supervisor: J. Livingston

Source: Tenneco Automotive; Corporate Leadership Council research.

Aran Dahl 044133Finance Manager Finance Lake Forest

noneX

XXXX

XXX

X

XXX

Morena Newton, Claire CormackClaire Cormack

William Doherty

Finance Senior Manager

Sales Manager

Finance Director

XX

X

XX

X

Because Tenneco operates factoriesin 21 countries and maintains multipleinternational ventures, unwillingnessto relocate may disqualify anemployee from HIPO consideration

Employees’ assessment of their potentialimproves managers’ ability to identifytalent prepared for promotion and theHIPO program



Source: Tenneco Automotive; Corporate Leadership Council research.

Council Assessment:Employee Potential Self-Assessment


• Self-assessment of a potential HIPO represents a valuable, but infrequently used, sourceto inform managers of employee potential and ambitions. Explicit questions regardingpotential, mobility and preferred positions represent a significant departure fromstandard self-review practices.

• Practice prevents managers from selecting HIPOs with little desire to assume leadershippositions, allowing company resources to be directed to employees with the greatestlikelihood of entering leadership ranks.

Implementation Tips

• To ensure collection of data that is informative for managers, HR must provide clearassessment standards by which employees can rate their abilities and potential.

• Self-assessment must be critically evaluated by the direct manager to serve as a usefulinput to the identification of employee potential, as employees are prone to overestimatetheir abilities.

• Managers must inform subordinates if their self-assessments do not accord with themanager’s perceptions. Failure to correct employee misperceptions may lead tounreasonable promotion expectations, dissatisfaction and turnover.

Additional Benefit

• Employee insight into perceived developmental strengths and weaknesses enhances thedevelopment-planning process by providing managers with additional informationregarding employee needs.



Traditional HIPO identification processes occur annually or semiannually, limiting the line’s abilityto frequently reevaluate the HIPO pool. These static, inflexible processes are poorly equipped tokeep pace with changing business strategy and employee developmental progress.

Shortcomings of Annual Nomination Processes

Rushed Evaluation

Inability to Respond Quicklyto Business Change

Wasted DevelopmentalResources

Annual nomination process createspressure for managers to nominateemployees, lest managers forceemployees to wait an entire year tobe added to the HIPO program.

Company enters e-commerce venture andrequires leaders conversant in Internet strategy.Appropriate talent is not identified until theannual process, preventing the rapid developmentof talent critical to the execution of the newbusiness strategy.

An employee demonstrates significant leadershippotential after the completion of the annual HIPOnomination cycle. Because the employee cannotbe placed on the HIPO list, the company does notconsider him for a key leadership position andfails to effectively leverage his abilities.

Manager supervises an employee who is nearlyready for HIPO status. Rather than delay heraddition to the HIPO program for another year,the manager nominates the employee before shehas reached the appropriate developmental stage.

A new manager notes that an employee identifiedas a HIPO is unqualified, but the employee is notremoved from the HIPO program. The employeecontinues to receive special developmentalopportunities at the expense of other talent.

Oversight of Talent

Need for Ongoing Talent Identification

“People do not develop on a cycle, and it is unreasonable to expect a onetime annual process tocapture all of your company talent. Without an ongoing identification process, you risk ignoringthose employees who have a lot of potential to lead, but who may develop ‘off-cycle.’ This oversightcreates a risk of losing key talent and prevents a company from fully leveraging its employees.”

Director of Leadership ProgramSBC Communications

Source: SBC Communications; Corporate Leadership Council research.

Business strategy may require more(or fewer) HIPOs or HIPOs withdifferent capabilities.

Annual nomination process preventsthe addition of employees whodemonstrate high-potential capabilities“off-cycle.”

Inappropriate additions to the HIPOpool may not be removed until theannual process, leading the company toexpend developmental resources ontalent without potential to excel.

January February March

April

October November December

June

SeptemberAugustJuly

May

Potential Problem Representative Example

$ $

$ $

THE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICA



Source: SBC Communications; Corporate Leadership Council research.

HIPO Nomination Processes at SBC Communications

January

AnnualNomination

Process

February

March

OngoingNomination

Process

December

Components of Continuous HIPO Pool Recalibration

Component #1: Business unit reviews of emerging talent

• During frequent (often quarterly) talent reviews, business unitexecutive teams may choose to add or remove HIPOs based ontheir recent performance and the assessment of the company’sfuture business objectives.

• Business unit HR generalists promote ongoing identification ofpotential, communicating to managers that candidates may beadded to or removed from the HIPO program at any time.

Component #2: Individual manager proposals to change the HIPO pool

• If a manager identifies an employee whose performance merits theiraddition to (or removal from) the HIPO program, the manager maypropose changes to the HIPO pool.

• Manager proposals to add to or subtract from the HIPO programrequire approval from the appropriate business unit executive.

Components of the Annual HIPO Nomination Process

Annual Business Unit HIPO Selection

• Business unit leaders conduct a series of meetings to discuss and identifynew HIPO talent.

• Managers reexamine the potential and performance of current HIPOs,removing any unqualified candidates.

• Business units identify “watchlist” employees who meet many, but notall, of the HIPO criteria. Watchlisted employees are closely observedthroughout the year.

In order to better monitor emerging talent, SBC Communications develops an ongoingnomination process to complement the existing process. The ongoing process allows line managersand business units to continually recalibrate the HIPO pool to meet business needs and account foremployee developmental progress (or derailment).

Continuous HIPO Pool Recalibration

SBC Communications is the United States’ second-largest local phonecompany, generating more than $49 billion in annual revenues andemploying over 200,000 people.

• Responding to business units’ desire to better monitor junior-level talent, Corporate HRat SBC Communications develops an ongoing HIPO nomination process.

• The ongoing process allows managers to add employees to (or remove them from) theHIPO program throughout the year.



Council Assessment:Continuous HIPO Pool Recalibration


• Continuous nomination process represents a significant departure from standardannual or semiannual nomination schedule.

• The ability to continually add to, or subtract from, the HIPO program allowsidentification of HIPOs at the most appropriate stage of individual employeedevelopment. With an ongoing process, managers are less prone to introduceunqualified candidates to the HIPO pool.

• Frequent talent reviews enable the line to better monitor the progress of emergingtalent and to modify the HIPO pool as required by changes in business strategy.

Implementation Tip

• Practice efficacy requires that managers are well informed of the continual nominationprocess during the yearly nomination cycle. To ensure managerial understanding of theability to add or remove candidates throughout the year, HR should clearly and frequentlycommunicate the “rules of engagement” for the continuous recalibration process.

Caveats

• Companies may wish to consider eliminating annual nomination processes ifnominations throughout the year represent a substantial portion of HIPO nominations.Maintenance of both annual and ongoing nomination processes may help facilitate atransition to an entirely continuous process.

• Alternatively, companies that wish to use an annual nomination process as the primaryvehicle for HIPO identification still benefit from the added flexibility of an ongoingprocess. (A yearly nomination process may prove most useful to organizationsunaccustomed to identifying high-potential talent, providing the necessary momentumto encourage line managers to identify HIPOs.)

Applicability

• Business cycle time—An ongoing nomination process is most critical in fast-cycle businessenvironments. The ability to continually modify the HIPO pool helps to ensure that theHIPO program provides the company with an adequate number of qualified leaders.

23


Requirement TwoAppropriate Developmental Opportunities

for High-Potential Employees



Chapter Essay

• Companies have increasingly recognized on-the-job learning as the most effectivemeans of preparing junior high-potential employees for more senior leadershippositions. Despite the clear importance of positions that promote the mastery of keyskills, few companies have yet to demonstrate significant success in matching individualHIPOs to suitable developmental roles.

• Matching HIPOs to appropriate positions and ensuring that they develop the desiredskills within their designated roles has proven a difficult task for three reasons:

– First, managers lack information regarding the positions that are most likely tooffer significant developmental opportunities for high-potential employees. Withoutthis information, managers are more likely to place HIPOs in roles that hindertheir career trajectory.

– Second, many developmental roles are already occupied by “blockers”—individualswho are performing adequately but have limited potential to advance. Mostcorporations indicate that they have had little success removing these “blockers”from development-friendly roles.

– Third, HIPOs lack a clear sense of how to focus their development once placed in astretch role. Without clear direction or support, HIPOs are less likely to develop theskills required to execute the company’s long-term business strategy.

• In order to overcome these obstacles, companies must identify roles that providedevelopmental challenges and promote the attainment of critical business andleadership skills.

• After identifying developmental roles in the organization, companies must activelyfacilitate rapid movement into these positions and provide HIPOs with clear guidanceregarding the skills that they are expected to develop.

Requirement Two Overview

25Appropriate Developmental Opportunities for High-Potential Employees


Although companies often create developmental programs that rely on off-the-job activities, suchas management workshops or artificial company projects, these efforts are (at best) tangentiallyrelated to employee job duties. In contrast, on-the-job developmental opportunities build thecritical skills necessary for junior HIPOs to successfully move into senior leadership positions.

Despite frequent use of “off-the-job activities”…

Source: Alter, Allan E., “Leadership Development: What Works?” Computerworld(22 March 1999); Caudron, Shari, “Learning Revives Training,” Workforce(1 January 2000); Corporate Leadership Council research.

Percentageof Cases

Having a Varietyof Career

Experiences

Being Placedin a High-Risk

Situation

InformalCoaching

Other

* Based on HR interviews with the top 200 individuals atEntergy Corporation. Employees were asked to relatethe factors most important to their career development.

Off-the-Job Development: Producing Few Results

“Most executives look at traditional training and assume that new skills and knowledge will bedeveloped [and] that training will be aligned with business objectives.…Unfortunately, theseassumptions don’t always prove true.”

Chuck RabinVice Chairman, The Delta Consulting Group

“Eighty percent of development is life experiences on-the-job. I don’t kid myself that formal learningexperience adds a lot. So if you are running [a development] program, how do you shape leaders?Put them in real-life situations.…Otherwise, a lot of management education is intellectualentertainment.”

Noel TichyFormer head of General Electric’s Leadership Development Institute

…on-the-job experiences remain the best means to develop HIPOsfor senior-level positions

Top Developmental Experiences at Entergy Corporation*

Leaders overwhelmingly cited on-the-jobexperiences as their most beneficialdevelopmental opportunities



0%

25%

50% 46%

26%

10%14%

4%

Despite the importance of on-the-job development, few companies have demonstrated success insystematically identifying positions that promote rapid HIPO development or in matching HIPOsto appropriate stretch roles. The key to overcoming these problems lies in identifying appropriatedevelopmental positions for each HIPO, removing “blockers” from those positions and ensuringthat HIPOs have clear skill objectives once they are placed in these roles.

Distribution of CompaniesSystematically Identifying and

Cataloging Development Opportunities

Distribution of Companies Placing HIPOsinto Developmental Opportunities Based on

Their Individual Skill Development Needs

Difficulty matching HIPOs to appropriate developmental roles…

…rooted in organizational obstacles to HIPO development

Non-HIPOs block HIPO advancement

• Developmental Opportunity Principles(see page 29)

• HIPO Database(see page 34)

Source: Corporate Leadership Council, Challenges in Managing High-Potential Employees: Results of theCouncil’s Membership Survey, Washington: Corporate Executive Board, April 2000, pp. 18–19.

Do NotEmployPractice

Preparing toImplement; JustImplemented

EmployPractice; No/Low Impact

Employ Practice;Moderate

Impact

EmployPractice;

High Impact

0%

20%

40%

20%

32%

12%

24%

12%


Preparing toImplement; JustImplemented


Employ Practice;Moderate

Impact

EmployPractice;

High Impact

• Stretch Role Developmental Agreements(see page 46)

• Blocker Management Tool(see page 40)

Inability to identify appropriatedevelopmental roles

Lack of focus within developmental role

Obstacle to HIPO Development Solution

?

?

n = 252 n = 252



* Pseudonym.

Featured Practices

Developmental Opportunity Principles p. 29

Principle-based decision-support tool outlines the key characteristics of positionsappropriate for the development of HIPOs. The support tool is used extensively indevelopment-planning meetings to evaluate and select roles for high-potential employees.

Goal • To enable the line to better identify roles that facilitate HIPO developmentwithout placing the organization at risk

Profiled Practice: Alpha Company*

HIPO Database p. 34

Intranet site provides managers with desktop access to a database of information regardinghigh-potential employees. The database allows line managers and human resources to easilyaccess comprehensive information regarding HIPOs’ career backgrounds, interests and skills.

Goal • To facilitate the movement of junior HIPOs into developmental roles bydisseminating HIPO information to HR and line managers

Profiled Practice: Beta Company*

Blocker Management Tool p. 40

Decision-support tool enables the line and HR to proactively identify “blockers”(individuals with limited potential to advance) occupying developmental positions.Key to practice success is that HR provides the line with clear strategies to manage blockersout of key developmental roles.

Goal • To open developmental positions to those employees who exhibit the greatestpotential for advancement

Profiled Practice: Alpha Company*

Stretch Role Developmental Agreements p. 46

Developmental agreement articulates business results and personal development goalsthat employees are expected to achieve within each stretch opportunity. In order toadvance to a new assignment, employees must accomplish the objectives spelled outin their developmental agreement.

Goal • To ensure that employees focus on crucial developmental objectives and producesignificant business results while in their stretch roles

Profiled Practice: Eli Lilly and Company



Identifying Appropriate Developmental Opportunitiesfor Junior HIPOs

Although many companies recognize the importance of on-the-job development, few organizationshave demonstrated success in identifying roles that develop key skills among high-potential talent.To assist managers in identifying appropriate developmental opportunities for HIPOs, AlphaCompany articulates the key components required of HIPO stretch roles. Management teams usethese principles during planning meetings to match HIPOs to experiences that facilitate rapiddevelopmental growth.

1 Pseudonym.2 At Alpha Company, HIPOs are defined as employees who are immediately promotable or employees who

can grow into leadership positions. Individuals are evaluated against a competency model, perceived potentialand risk of loss. There are no restrictions regarding how many individuals may be selected as HIPOs.

Developmental Opportunity PrinciplesAlpha Company1 operates in the information technology industry. Thecompany generates annual revenues of approximately $10 billion andemploys approximately 50,000 people.

Situation

• Increasingly competitive industry environment creates the need for leaders with skillsdifferent from those possessed by the current leadership team. The CEO directs business unitexecutive teams to conduct development-planning meetings to place junior HIPOs in rolesthat facilitate rapid development of these new skills.2

• Unfortunately, business unit senior managers express difficulty in identifying experiencesthat optimize the development of these new leadership capabilities. The inability to matchHIPOs to appropriate developmental positions creates concern that the company will failto develop a robust pipeline of internal talent.

Action

• Corporate HR examines sources of executive derailment and business units’ developmentalbest practices in order to identify the job components essential for HIPO development.

• Based on its research, corporate HR creates a document that articulates the key attributesof stretch roles suited for HIPO development.

• The principles are distributed to the line for use during succession- and development-planning meetings. Business unit managers rely on the principles to match HIPOs topositions that offer appropriate developmental opportunities.

Impact

• Articulated principles for stretch roles have aided business units in matching HIPOs todevelopmental opportunities during periods of organizational change. As the organizationand established positions undergo change, the principles have allowed managers to identifynew opportunities for HIPO development.

• The ability to identify stretch roles has accelerated the development of HIPO talent; thecompany has successfully met the CEO’s targets for internal hiring into executive positions.Additionally, candidates developed internally are two to three times more likely to succeedin leadership positions than are external hires.



To identify the key components required of HIPO stretch roles, Alpha Company’s corporate HRdepartment researches the causes of derailment among company executives and the practices ofbusiness units adept at developing talent. This information is distilled into a set of criteria that linemanagers can use to identify developmental opportunities appropriate for high-potential employees.

Developmental Opportunity Principles, Alpha Company*

Identifying High-Potential Stretch Roles:Attributes of Developmental Positions

To aggressively drive the developmental growth of emerging talent, positions orassignments for HIPOs should have many or all of the attributes described below.

Acceptable Developmental Risk

Position must provide HIPOs with developmental challenges without endangeringbusiness unit performance.

• Developmental Challenges—Individuals should be placed in roles for whichthey are not entirely prepared. Filling positions with entirely qualifiedcandidates sacrifices the development of organizational leadership capacity forthe certainty of short-term performance.

• Employee Ability—Candidates must, however, have the capability to performwithin a given stretch role. If individuals are severely unprepared for theposition’s responsibilities, business performance will likely suffer.

Appropriate Tenure

Stretch role must be structured to permit HIPOs to remain in the role for anappropriate amount of time.

• Length of Position—Most stretch roles should last 9 to 12 months, althoughpositions that require greater expertise may last longer.

• Risks of Rapid Movement—Gaining content knowledge, building relationshipsand contributing to company interests all require time; moving employees tooquickly impedes HIPOs’ ability to absorb learning from the position and limitsthe utility gained from their efforts.

• Risks of Slow Movement—If employees remain in positions for too long, theywill not be exposed to an adequate number of company practices or functionsand may not continue to find developmental challenges.

Acceptable Internal Turnover

Position must allow for frequent internal turnover without harming organizationalinterests.

• If company interests are furthered by continuity in the position (e.g., positionrequires deep subject matter expertise, the maintenance of externalrelationships), the position is not appropriate for a stretch role.

* Illustrative based on information provided by Alpha Company. Source: Alpha Company; Corporate Leadership Council research.

Page 1



Source: Alpha Company; Corporate Leadership Council research.

Broad Company Exposure

Position must provide HIPOs with broad exposure to company business practices.

• Narrowly defined company roles do not promote strategic thinking or allowemployees to develop a vision of company direction.

• Employees should also have the opportunity to work with senior-level leadersin order to observe executive leadership styles.

Appropriate Content Exposure

Position must offer HIPOs the opportunity to develop the business or technicalexpertise required by the organization.

• Business strategy must be considered to determine which skills are critical tofuture organizational success.

• Generalist positions offer broad skill and content development and arepreferable to specialist positions.

Management Responsibilities

Position must provide leadership experience as well as team-based work; HIPOsmust develop the ability to work with and manage other employees.

Significant Exposure to Pressure

Position must have significant performance demands to prepare HIPOs to dealwith pressure and to thrive in demanding situations.

Employee Support

Position must provide the employee with access to developmental resources andorganizational support. If a position is not conducive to project mentoring orperformance feedback, it may impede HIPO development.

Developmental Opportunity Principles (Continued), Alpha Company*

Identifying High-Potential Stretch Roles:Attributes of Developmental Positions

Page 2

* Illustrative based on information provided by Alpha Company.



Business units rely on the principles during succession- and development-planning meetings inorder to match HIPOs to positions that optimize their developmental growth. The guidelinesensure that HIPOs are placed in positions appropriate for their needs without exposing thecompany to unnecessary risk.

Placement of HIPOs into Stretch Roles at Alpha Company

Manager discusses HIPO’sdevelopmental needs with succession-and development-planning committee.

Committee discusses timeline andstrategy for move.*

Manager communicates stretch roleopportunity to the HIPO.

HIPO moves to new role.

* If position is occupied, Alpha Company may move currentjob occupant. (See Blocker Management Tool practice, p. 40.) Source: Alpha Company; Corporate Leadership Council research.

HIPO completes performancereview process:• Self-Review• Performance Review• Developmental Discussion

Committee identifies positions thatmeet HIPO’s developmental needs.

Committee assesses identified positionsagainst principles for stretch roles,selecting most appropriate stretch rolefor the HIPO.

1 2 3

4

567

HIPO: J. MetsRole: SalesManagerTimeline: 6–9 mos.Next Steps

Position

JuniorManager✕

Position

SalesManager

Position

TechnicalLead✕



Stretch roles identified through the use of clear guidelines have contributed substantially to thedevelopment of Alpha Company’s leadership capability. The company has achieved the CEO’starget for increasing the supply of internal leadership candidates, and these internal candidatesdemonstrate significantly higher success rates in leadership positions than external candidates.

Council Assessment:Developmental Opportunity Principles


• Clear articulation of key attributes of HIPO developmental roles improves upon thestandard practice of creating static lists of developmental positions. Providing linemanagers with these principles facilitates a more dynamic review of developmentalopportunities that may be beneficial to emerging talent.

• Broad organizational understanding of components required for HIPO developmentenables the deliberate placement of HIPOs into roles promoting rapid individualdevelopment.

Implementation Tips

• Involving line managers in the creation of stretch role principles will improve the validityof the principles while also encouraging their application by the line.

• Companies should solicit ongoing feedback from managers regarding the validity andvalue of the principles. To ensure relevancy of the practice, companies should reviseprinciples in response to line manager feedback or dramatic changes in the developmentneeds of the organization.

• Practice success requires that principles are distributed throughout the organization.Managers must be aware of, and understand the rationale behind, principles in order tomake informed decisions regarding talent movement.

Caveat

• Key components required for HIPO development will not be uniform across allorganizations; principles must address specific organizational environments anddevelopment needs.


A Source of Consistency

“The strength of the principles is their permanence; even as individual jobs change, or asour leadership needs evolve, the principles remain a valid tool for identifying developmentalopportunities.…Identifying these opportunities has been integral to our success in developingleaders within the company. ”

Director, Executive DevelopmentAlpha Company



Although principles for stretch roles help identify positions appropriate for high-potentialemployees, many companies must gather information from a variety of sources in order to matchHIPOs to the right positions. Beta Company relies on an online talent management database tofacilitate the matching of employees to open positions. Line managers and employees areresponsible for submitting employee information, which is instantly accessible to HR staff.

1 Pseudonym.2 At Beta Company, HIPOs are defined as managers who have

the potential to reach senior-management positions. Managersare evaluated during the annual performance review process.

HIPO DatabaseBeta Company 1 operates in the consumer products industry. The companygenerates approximately $8 billion in annual revenues and employsapproximately 40,000 people.

Situation

• Lack of information regarding employee potential and availability prevents HR fromquickly filling open positions with qualified HIPOs2 who can develop within the roles.The current paper-based talent management system requires days to collect (oftenoutdated) employee information from line managers.

• The labor-intensive and inefficient talent management system is targeted for overhaul aspart of a company cost-cutting effort.

Action

• Corporate HR creates an online talent management system that incorporatesinformation from all employees (HIPOs and non-HIPOs) at the manager level andabove. The system is backed by an Oracle database.

• The online system is comprised of three components:

– Component #1: Employee entry of biographical information

– Component #2: Manager entry of performance information

– Component #3: HR-facilitated matching of talent to open positions

Impact

• Line entry of employee information reduces company labor and technical costs, saving BetaCompany $400,000 to $500,000 annually. Savings result, in part, from the consolidation oftalent management systems (and subsequent reduction in licensing payments).

• The online system reduces the time required to fill open positions, as HR canimmediately access employee data—a process that previously required three days.



Beta Company’s online talent database relies on entry of information by the line. Employeesand their managers submit employee information, which HR uses to match employees toopen positions.

Employee

Component #1: Employee entry of biographical information

Description: Employees (at the manager level and above)continually enter and update their leadership profile via thecompany intranet.

Key Inputs:• Skills• Experiences• Interests

Component #2: Manager entry of performance information

Description: As part of the company’s performance-management process, managers submit assessments of theirsubordinates’ performance and perceived potential. Thesystem also enables managers to update this information asneeded throughout the year.

Key Inputs:• Employee performance data• HIPO status• Developmental needs

Manager

Oracle Databasewith Intranet Front End

Open Position Employee

Finance Manager B. Felder

Finance Analyst R. Jillen

Sales Associate E. Coren

Computer Tech R. Ralston

Tech Support Y. TrentHR Director

Component #3: HR-facilitated matching of talent to open positions

Description: When positions become available, HR staff access thedatabase to select the appropriate job candidates. HR also uses thedatabase to create company succession and development plans.

Key Outputs:• Qualified candidates for open positions• Required areas of development for identified candidates• Succession and development data

Source: Beta Company; Corporate Leadership Council research.

Overview of Talent Management System at Beta Company

➤➤

➤



Leadership Profile: Cindy Korten

Components #1 and #2: Employee entry of biographical information and manager entryof performance information

Using the company intranet, employees enter comprehensive biographical informationand managers submit confidential employment data.

Employees submit biographical data to the database…

…and managers enter sensitive employment information

Leadership Profile: Cindy Korten

PersonalInternal Work HistoryExternal Work HistoryInternational ExperienceLanguages

EducationCompetenciesAwardsCredentialsDevelopment History

Community ActivitiesCareer Interests

Employment Status: High Potential

Leadership

Management

Project Management

Analytical Ability

Professionalism

Fails Expectations Meets Expectations Exceeds Expectations

Update Profile View Profile

Education

Degree Major Institution Year

Ph.D. Psychology Stanford University 1999

MA Business Strategy Iowa University 1990

BA Communications Yale University 1982

Submit

Line managerscommunicate thatthe leadershipprofile is used toidentify candidatesfor open positions,providing employeeswith incentive toactively update theirinformation

Performance Assessment

Employee Developmental Needs:Project management represents a developmental area for Cindy. A position withmultiple project responsibilities would prove beneficial to her development.


✘

✘

✘

✘

✘

Desktop accessto the companyintranet enablesemployees tocontinually enterand revise theirleadershipprofiles

Line managers submitinformation thatemployees may notaccess (such as HIPOstatus) or informationthat employees maytend to misrepresent(such as performanceratings)

Specifying employees’developmental needspermits BetaCompany to matchemployees topositions that furthertheir developmentalgrowth



Employee Database


Component #3: HR-facilitated matching of talent to open positions

When a position becomes available, HR staff searches the database by employee characteristics andcapacity in order to identify employees who can perform well and develop rapidly in the position.

Database Talent Search

Instantaneous Matching Maximizes HIPO Development

“Our investments in the employee database have really helped us improve our HIPO-developmentprocess. Previously, it might have taken us days or weeks to match the skills and developmentalneeds of a HIPO to an available position. With the online system, that information is availableinstantaneously, so we can act immediately to place a HIPO in an appropriate stretch opportunity.”

Director of Succession ManagementBeta Company

Click to Add Criterion:

Personal Internal Work History External Work History International HistoryLanguages Education Competencies Awards Credentials Development HistoryCommunity Activities Career Interests

Employees Returned: M. Kirsten E. Miller K. Land J. Myhre J. CorkerSearch

Employee Status

Languages

Tenure

Employee Level

ExpertiseSpanish

5+ Years FinanceMarketing

HIPONon-HIPO

ManagerSenior ManagerDirector

Database allowssearches bymultiple employeecharacteristics,providing acomprehensivereview of talent

Online systeminstantaneouslyreturns qualifiedcandidates; HR mayimmediately selectan employee forthe position or mayconduct furtherassessment todetermine thebest talent match



Council Assessment: HIPO Database


• Desktop accessibility of the online talent management system facilitates continualupdating of employee information by the line. Line entry ensures that the companymaintains current, relevant information regarding organizational talent.

• Immediate access to employee capabilities and development needs enables theorganization to quickly and appropriately leverage organizational talent while furtheringemployee development.

Implementation Tips

• Talent database should provide line managers with access to employee ratings anddevelopment needs in order to increase their involvement in the selection and placementof candidates for open positions.

• To prevent the improper use of data, companies must employ adequate securityprecautions; access to employee information should be limited to select managers andHR professionals.

• Database should include HIPOs and non-HIPOs to allow for churn within the HIPOpool. Limiting the database to HIPOs requires the constant addition and removal ofemployee data and provides a narrow view of organizational talent.

• Proactive employee entry of information is key to maintaining relevant data. Companiescan encourage employees to frequently update their online profiles by communicating—and demonstrating—that the database is used to select candidates for open positions.

Caveat

• Talent database is no substitute for a thorough review of organizational talentby company leaders; leaders should continue convening in order to address theorganization’s long-term developmental goals and the more strategic placement ofhigh-potential talent. A talent database can inform the movement of employees andallow appropriate placement between formal development-planning sessions.

Additional Benefit

• Talent management database allows HR to monitor the mobility and progression ofindividual employees, providing quantifiable evidence of HIPO advancement anddevelopment (or lack thereof).



Removing “Blockers” from Developmental Opportunities

Systems designed to move HIPOs to developmental positions are futile if key positions are alreadyoccupied by non-high-potential talent. To free developmental positions for HIPOs, AlphaCompany creates a process to remove “blockers” (employees whose potential has plateaued)from stretch roles. HR provides line managers with strategies for moving employees within,or out of, the company.

Blocker Management ToolAlpha Company 1 operates in the information technology industry. The companygenerates revenues of approximately $10 billion and employs approximately50,000 people.

Situation

• Increasingly competitive industry environment creates need for leaders with differentskills from those possessed by the current leadership team. CEO directs business unitexecutive teams to conduct development-planning meetings to place junior HIPOs inroles that facilitate rapid development of these new skills.2

• Unfortunately, these meetings reveal that HIPO movement into developmental roles isfrequently blocked by non-HIPO employees occupying developmental positions. Whenemployees with limited potential to advance (or “blockers”) occupy developmental roles,the company is unable to optimize the opportunities offered by these positions,preventing the rapid development of internal talent.

Action

• HR creates a process to automatically review—and possibly remove—employees indevelopmental roles. The process consists of two key steps:

– Step #1: Employee movement metrics trigger automatic review of potential blockers

– Step #2: Line manager selects appropriate move for identified blocker

Impact

• Process has accelerated the movement and development of HIPOs by removingnon-high-potential employees from developmental positions.

• Providing HIPOs with developmental opportunities has aided in the retention ofhigh-potential talent; the turnover rate for HIPOs is now half that of non-HIPOs.

• Strategies to move employees within the organization have allowed Alpha Companyto retain and appropriately place valuable (but non-HIPO) talent.

1 Pseudonym.2 At Alpha Company, HIPOs are defined as employees who are immediately promotable or employees who

can grow into leadership positions. Individuals are evaluated against a competency model, perceived potentialand risk of loss. There are no restrictions regarding how many individuals may be selected as HIPOs.



Step #1: Employee movement metrics trigger automatic review of potential blockers

HR measurements of employee mobility and of the number of candidates prepared for a positionindicate when an employee may be blocking the development of HIPOs. If the metrics signal thepossibility of a blocker, HR brings that employee to the attention of the management team, whichreviews the employee and determines appropriate action.

Development-Planning Review:Developmental Positions

DevelopmentalPositions

Finance Generalist

Marketing Analyst

Marketing Manager

HR metrics signal potential blockers…

Currently inPosition

Rob Telton

Marie Gamay

Brent Peers

…for review by the management team

Employee Movement Decision Matrix


Top TalentTop talent (often designated HIPOs)exhibit both the ability and potential toexcel within the company.

Emerging TalentEmployees exhibit potential to advancebut currently lack the business skillsrequired for leadership positions.

Blockers Non-Blockers

Council Comment

The employee movement decision matrix provides a highly simplified framework that mayhelp guide decisions regarding the removal of an employee from a developmental position.Actual determinations regarding employee movement will inevitably incorporate additionalvariables (salary, tenure, available replacements, etc.) and require thorough deliberation.

HIPOs Readyfor Position

1

1

5

Years inPosition

4

1

2

Low-Value EmployeesEmployees perform poorly withinpositions, offering little contributionto company growth.

Valued Contributors

Although employees are unlikelyto advance in the company,their skills make them valuedorganizational assets.

➤Potential

➤

Ability

Employees areautomatically reviewedif they have occupied adevelopmental positionfor over three years orif the companydevelopment plan notesthat a number of HIPOsare ready to fill theposition

Alpha Companydesignates positionsas appropriate forHIPO developmentbased on principlesfor developmentalroles (seeDevelopmentalOpportunityPrinciples, p. 29)

Although employeemovement metricsindicate whenemployees may beblocking HIPOdevelopment, furtheranalysis is necessary;business unitmanagement teamssometimes determinethat reviewedemployees areappropriately placed

Blockers maybe divided intoemployeesvaluable to theorganizationand those whoadd little valueto the company



Step #2: Line manager selects appropriate move for identified blocker

If the management team determines that an employee with little potential to advance is blockingHIPO development, a line manager is tasked with moving that employee from his current position.HR provides managers with a catalog of options to move employees within, or out of, the company.

Communicating to Blockers

Prior to moving blockers, line managers meet with employees to address the following issues:

Employee performance—Manager explains that employee performance is inadequate or hasplateaued, necessitating his removal from the developmental position.

Future development—Manager and employee address employee’s developmentalobjectives within future positions, using feedback from the management team’s reviewof employee performance.


Moves for Valued Contributors

Valued contributors play a significant role in company success and should be retained;the options below provide strategies to move valued contributors internally.

Positions’ responsibilities may be divided into component pieces,such as management and technical duties. Employees may be assignedresponsibility for the area in which they excel.

Employees may be placed on short- or long-term projects that leveragetheir skills. Projects must be of high value and not simply “busy work.”

Employees may be reassigned to a location where their skills arein demand.

Moves for Low-Value Employees

Low-value employees add little to Alpha Company’s growth and should be removedfrom the company. The options below suggest ways to facilitate employees’ departurefrom the company.

When tax or legal implications prevent releasing employees, they may beplaced with nonprofit organizations. (Alpha Company may pay employees’salaries, which become tax deductible.) Contact Human Resourcesregarding nonprofit opportunities.

Employee may be offered benefits to induce early retirement. Contact HRregarding benefit packages.

Employee may be hired to work with the company on a part-time orcontingency basis.

SpecialProjects

SplitPosition

Opening Developmental Positions: Possible Employee Moves*

Relocation

ExternalPositions

EarlyRetirement

ConsultingPosition

Catalog of Blocker Movement Strategies, Alpha Company

Options for blockermovement provideline managers withstrategies for freeingdevelopmentalpositions; managersmay select andtailor opportunitiesaccording toemployee ability

* Illustrative based on information provided by Alpha Company.



The process of removing blockers from developmental positions reserves valuable stretchroles for Alpha Company’s high-potential talent, thus allowing the company to maximizeits developmental resources.

External Opportunity

• A number of HIPOs require management experience to advance within the organization.Of special concern are HIPOs who have expressed frustration regarding the lack ofdevelopmental opportunities and are at risk of departure. Because all positions withmanagement duties are filled, the management team reviews employees within such roles.

• The management team reviews the performance of an operations manager who hasproven unable to manage a large number of employees. Despite this shortcoming, themanager’s technical expertise makes her a valued contributor.

• The management team determines that the employee is a blocker and should be movedinternally in order to continue leveraging her technical expertise. The manager taskedwith moving the blocker divides the operations manager position into technical andmanagement roles, reserving the latter position for a HIPO.

• During the development-planning process, the management team determines that aspecific HIPO requires sales experience in order to reach senior-management levels. Theposition of sales manager, which fulfills the criteria for a developmental position, isreviewed by the management team.

• The management team finds that the performance of one sales manager has plateaued;although the manager possesses strong ability to build relationships, the manager haslimited potential to reach company leadership positions.

• The management team decides to move the manager within the company. He istransferred to the company’s new e-commerce initiative, which temporarily requiresindividuals with sales experience.

• HR metrics indicate that a senior finance manager has occupied a key developmentalposition for four years.

• Review of the manager reveals that his performance has continued to decline over time.

• The management team determines that the senior manager’s poor performance requiresremoval from the company. Unfortunately, contractual obligations prevent the companyfrom dismissing the senior manager. Using established company contacts, a line managerarranges a teaching position for the employee at the local university. The companycontinues to pay the employee’s salary and receives a tax deduction.

* Hypothetical examples based on Alpha Company practices. Source: Alpha Company; Corporate Leadership Council research.

Split Position

Special Project

Representative Case Examples*Strategies to

Move Blockers



Council Assessment: Blocker Management Tool


• Proactively moving employees who block HIPO development represents a markeddeparture from standard practice; the Council’s membership survey indicates that70 percent of companies do not remove plateaued employees from positions ideal forHIPO development. Removing blockers from developmental positions accelerates HIPOdevelopment by providing HIPOs with key on-the-job growth experiences.

• Strategies for moving valued (but non-high-potential) employees within the companyfacilitate the retention of appropriate talent without forsaking the developmental needsof the organization.

Implementation Tips

• Providing line managers with strategies for moving employees increases the ability of theline to proactively move blockers whenever appropriate. Failure to provide options forthe movement of employees dramatically reduces the likelihood that identified blockerswill in fact be removed from key developmental positions.

• Practice requires candid communication with employees who are removed fromdevelopmental positions. Well-structured conversations provide an opportunity toaddress employees’ developmental objectives in their future positions.

Caveats

• Even with open communication and employee movement strategies, some employeesmay resent being removed from their position. Nonetheless, the organizational benefitsof HIPO development will likely outweigh the costs of dissatisfaction among a smallnumber of employees.

• Removing employees from the organization may carry legal ramifications, which shouldbe discussed with the company’s general counsel.

Applicability

• Employee Mobility—The practice may prove easier to implement (although lessnecessary) in organizations that maintain high levels of employee mobility.(Implementing company practices that create regular churn among positions mayreduce, or even prevent, the need to remove employees from developmental positions.)



Ensuring That HIPOs Develop Fully in Stretch Assignments

Once HIPOs are placed in developmental positions, there is often considerable ambiguity regardingthe skills that the position is designed to develop. Many companies fail to provide clear guidancefor HIPOs—in the mistaken belief that development will occur naturally in a stretch assignment—resulting in unfocused and inefficient development. In order to address this problem, Eli Lilly andCompany managers and employees use performance-management development plans(agreements) that explicitly specify developmental goals and expected business contributions foremployees in stretch roles.

Stretch Role Developmental AgreementsEli Lilly and Company produces pharmaceutical and nutritional products,generating annual revenues of approximately $10 billion and employingapproximately 31,000 people.

Situation

• Lilly uses cross-functional and international rotations in order to promotedevelopmental growth and increased breadth of business experience. To effectivelyexecute on its ambitious growth plans, the company seeks to fill all top executivepositions with individuals who have had cross-functional experience.

• Believing that advancement opportunities can be enhanced by multiple rotationalopportunities, employees often move rapidly between company assignments. Managersare sometimes hesitant to prevent employees from prematurely moving fromassignments because they do not want to thwart employees’ perceived career growth.

• Unfortunately, rapid employee movement can impede the attainment of expertise,preventing rich individual development. Further, employees frequently depart fromrotational assignments without significantly contributing to company objectives.

Action

• To ensure that rotations promote organizational interests, HR develops guidelines for thecreation and maintenance of developmental agreements during rotational assignments.

• The developmental agreement process, which is now being adopted by various companyunits, consists of three key elements:

– Element #1: Creation of a developmental agreement for the rotational assignment

– Element #2: Use of developmental resources and support while on assignment

– Element #3: Review of developmental agreement objectives and next steps

Impact

• Since the inception of the developmental agreements, some managers have expressedmore confidence in their ability to determine when employees have maximized aposition’s developmental opportunities and can be moved to a new role.

• The manager of succession planning predicts that stipulating rotations’ desireddevelopment and business outcomes will make rotations more meaningfuldevelopmental experiences that better contribute to company interests.



Source: Eli Lilly and Company; Corporate Leadership Council research.

Prior to assuming a new functional role, employees meet with the manager of the functionalassignment to establish goals for the rotation. After completing this agreement’s objectives,employees have the opportunity to advance to a new assignment. This end-to-end managementof employee development in stretch roles ensures that each assignment is well leveraged for boththe employee and the company.

Developmental Agreement Process at Eli Lilly

Stage Key Elements

Element #1: Creation of a developmental agreement for therotational assignment

The manager and employee create a developmentalagreement using HR-formulated rotational guidelines.

The guidelines dictate that individuals are ready to movewhen they have:

• Made a significant contribution to the company

• Demonstrated the ability to make decisions quickly andwith confidence

• Remained long enough to learn from the consequencesof their actions

• Transferred their expertise to other employees withinthe function

Element #2: Use of developmental resources and support whileon assignment

• Manager and employee meet throughout the year to addressprogress toward agreement completion

• Manager and employee continue to conduct traditionalperformance reviews

• Employees are also encouraged to solicit developmentalsupport from mentors and peer coaches

• Personnel representatives assist employees in identifyingresources that facilitate their development

Element #3: Review of developmental agreement objectivesand next steps

• If either the manager or the employee feels that the conditionsof the agreement have been fulfilled, they meet to address theemployee’s development and business contributions

• If the manager determines that agreement objectives have beencompleted, the employee has the ability to pursue a new assignment

Prior toRotation

Rotation

AssignmentCompletion

Developmental Agreement

Expected Employee Development

• Become proficient at buildingexternal relationships

• Learn to communicate businessimperatives

• Become one of the top five sales agents

Expected Business Contribution

• Create sales strategy for underservedmarkets

• Update sales incentive package

• Mentor four new hires

Employee: Functional Manager:

Eric FrankMark Chung



Source: Eli Lilly and Company; Corporate Leadership Council research.

By explicitly documenting the desired outcomes of stretch roles, the company expects thatdevelopmental agreements will help employees focus on key developmental and business objectiveswhile in these roles. Significantly, agreements also provide a useful tool for Lilly line managersto prevent the transfer of talent before employees reach a suitable developmental stage. Theagreements have helped managers rely on agreement objectives, rather than time guidelines, as thebasis for employee movement.

Developmental Stages of Stretch Roles

EmployeeDevelopmental

Growth

Time in Position

DevelopmentalStage:

Employee BecomesAccustomed toNew Position

Employee DevelopsSkills and ContributesSubstantially to the

Business

Employee Contributesto Business but Finds

Few AdditionalDevelopmental

Challenges

EmployeeDevelops Skills

Developmental agreementshelp managers and employeesdetermine the ideal point ofdeparture from stretch roles

➤

➤

Prior to the use of developmentalagreements, employees left rotationalassignments before maximizing theirindividual development or significantlyimpacting business growth



Council Assessment:Stretch Role Developmental Agreements


• Articulating the objectives to be achieved during developmental assignments bringsthe rigor of traditional development planning to stretch roles. Although nearly allorganizations conduct development planning, few companies develop explicitdevelopmental and business objectives to measure the success of employees placedin stretch roles.

• Developmental agreements ensure employee awareness of crucial objectives of stretchroles, encouraging appropriate focus throughout the assignment.

• Developmental agreements provide managers with measurable outcomes by which togauge employee progress within stretch roles and employees’ suitability for newdevelopmental opportunities.

Implementation Tips

• Open, two-way discussion between manager and employee is required in order to deviserealistic objectives that address the employee’s developmental concerns.

• Organizations must provide appropriate developmental support to allow attainment ofarticulated objectives. Support should be specified in the developmental agreement toincrease employee awareness of available resources.

• Managers must be held accountable for the creation and review of appropriateemployee-development and business objectives. To facilitate managerial involvement,HR should also provide adequate guidance to managers regarding the creation ofdevelopmental agreements.

Applicability

• Employee mobility—Guidelines for advancement in stretch roles are most valuable forcompanies in which employees move rapidly between positions. Organizations that relyheavily on rotational assignments, for example, may find the practice especiallybeneficial. Nonetheless, all organizations should be using stretch roles to develophigh-potential talent and can utilize developmental agreements.

51


Requirement ThreeExplicit Support and Accountability for theDevelopment of High-Potential Employees



Chapter Essay

• Companies frequently divide control over high-potential talent, assigning organizationalresponsibility based on the HIPO’s career level. Too often, however, companies fail toarticulate a clear division of responsibility and accountability for the management oftheir junior HIPO employees.

• The problem with this approach is that without an explicit assignment of responsibility,the development of junior HIPOs is likely to be neglected. In the absence of a cleararticulation of responsibility, managers are prone to focus solely on immediate talentshortages and neglect the long-term imperative of developing a robust leadership pipeline.

• The answer clearly does not lie with the corporate center assuming direct responsibilityfor early- and mid-career HIPOs; neither the corporate center nor HR possess thecapabilities or resources to actively manage all junior HIPOs. Rather, effectivedevelopment of emerging talent requires that responsibility be shared by line andcorporate units.

• Council research indicates that the line should assume responsibility for the managementof all but the most promotable (and senior) talent, whose development should be stewardedby the corporate center. Effective development of emerging talent also requires the corporatecenter to support the line in the management and development of its junior HIPOs.

• Moreover, companies must also maintain mechanisms that promote individualaccountability for the development of junior HIPOs. The most effective systemsemphasize accountability for HIPOs’ direct managers and communicate developmentalexpectations to HIPOs themselves.

Requirement Three Overview

53Explicit Support and Accountability for the Development of High-Potential Employees


Task Line Managerswith Identification

Provide Linewith Criteria

Provide Line withSupport for HIPOIdentification and

Development

0%

50%

100%

69%

44%36%

Although the line is generally tasked with the management of junior HIPOs, specific lineresponsibilities often remain vague. The ambiguous assignment of responsibility and lackof corporate support frequently lead to the neglect of emerging talent.

Although companies frequently delineate control, few articulate responsibility…

Corporate Support for HIPO Development

…and even lesssupport the line inthe identification anddevelopment of HIPOs

n = 246

…leading to lack of accountability for junior HIPO development

Distribution of Companies Holding Managers and ExecutivesAccountable for the Development of Promising Leaders

Source: Corporate Leadership Council, Challenges in Managing High-PotentialEmployees: Results of the Council’s Membership Survey, Washington:Corporate Executive Board, April 2000, pp. 36, 40.


Preparing toImplement/

JustImplemented


EmployPractice;

ModerateImpact

EmployPractice; High

Impact

0%

20%

40%


34%31%

17%14%

4%


n = 252

Although 69 percent ofcompanies task the linewith HIPO identification…

…only 44 percent of companiesprovide the line with criteria toidentify HIPOs…



Featured Practices

HIPO Responsibility Allocation Framework p. 56

Organizational framework clearly divides responsibility for HIPOs between line andcorporate units, providing units with duties appropriate for their organizational level.The corporate center takes responsibility for the development of employees whose careertrajectory includes more senior leadership roles and for the creation of developmentalprinciples, frameworks and guidelines for the organization. Line units are explicitly taskedwith the development of more junior HIPOs according to the framework established bycorporate headquarters.

Goal • To appropriately deploy the company’s resources for the development ofhigh-potential talent at all levels

Profiled Practice: Bank of Montreal

HIPO-Development Sponsors p. 60

Senior-level line managers act as counselors, providing developmental guidance todesignated employees within the organization. Key to practice success is that sponsorsprovide ongoing developmental support and actively participate in employeeperformance reviews.

Goals • To provide employees with senior-level guidance regarding career development

• To provide the organization with a more informed view of employeedevelopment and performance

Profiled Practice: Deloitte Consulting



Featured Practices Continued

Managerial Incentives for HIPO Development p. 64

Performance-management system ties a significant portion of managers’ incentive payto their contribution to employee development. Managers formulate concrete objectivesfor employee development and receive ongoing support for, and review of, theirdevelopmental efforts.

Goals • To expand managerial understanding of what constitutes crucial employee-development goals

• To hold managers accountable for employee development

Profiled Practice: Monsanto Company

HIPO Status Communication Guidelines p. 70

During development-planning meetings, managers convey to high-potential employeesthat they are considered to possess strong career trajectories and are valued by theorganization. Key to practice success is the use of managerial guidelines for communicationwith HIPOs (and with non-HIPOs who ask about the HIPO program).

Goals • To retain high-potential employees by articulating their opportunities withinthe organization

• To further involve HIPOs in the career planning process by explicitly articulatingdevelopmental expectations and responsibilities

Profiled Practice: Gamma Company *

* Pseudonym.



Delineating Explicit Responsibility for Junior HIPOs

Although many companies divide responsibility for HIPOs between the line and the corporatecenter, the line is rarely provided with a clear delineation of its duties. This poor articulation ofresponsibilities, combined with a lack of corporate support, often leads to organizational neglectof junior HIPO development. Bank of Montreal prevents this talent problem by explicitly assigningHIPO identification and development responsibilities to corporate and the line. Supported by thecorporate center, the line is assigned primary responsibility for the development of nonexecutivehigh-potential talent.

HIPO Responsibility Allocation FrameworkBank of Montreal, Canada’s third-largest bank, generates approximately$11 billion in annual revenues and has over 32,000 permanent employees.

Situation

• Bank of Montreal’s corporate center focuses on the development of senior managerialtalent, devoting resources to employees at or near the executive level. The developmentand management of other employees is primarily the responsibility of the line.

• In the past, business units did not apply consistent definitions for key talent, whichled to inconsistent standards for the management and development of high-potentialindividuals.* Because line managers did not always have knowledge of developmentalopportunities outside their unit, they had difficulty providing a full and complete rangeof developmental options for high-potential people.

Action

• The corporate center creates distinct pools of corporate- and line-level talent, providingeach with unique developmental opportunities. Responsibilities for each pool areexplicitly divided between the line and the corporate center.

– Line responsibilities—The line is assigned primary responsibility for the developmentand management of nonexecutive HIPOs and valued employees without high-potentialstatus.

– Corporate responsibilities—The corporate center provides support to the line for themanagement of nonexecutive HIPO talent. The center assumes primary responsibilityfor the corporate development of senior manager corporate HIPOs.

Impact

• Division of corporate and line responsibilities for HIPOs has allowed Bank of Montrealto strategically deploy its developmental resources, providing developmental benefitsappropriate for individual talent.

• Managers report that a consistent definition of key talent has improved the reliabilityof information regarding the identification and reporting of high-potential employees.

* At Bank of Montreal, HIPOs are defined as employees who demonstratesignificant leadership capabilities and performance results. These employees includehigh-potential managers and high-potential professional or technical employees.



To better support the development of high-potential talent, Bank of Montreal divides its talentpools and explicitly assigns organizational responsibility for each talent group. To segment itstalent, the company assesses its employees to determine their abilities and potential to advance andplaces them in one of several categories. The corporate center and the line are each responsible fordifferent aspects of the development of employees in the distinct talent categories.

HIPOs• Approximately top 5 to 10 percent of employees

at the nonexecutive management levels• Demonstrate strength in:

1. Leadership capability2. Performance results

• Not prepared for enterprise-wide assignments

Corporate HIPOs• Senior Manager HIPOs with

the potential to reachexecutive positions

• Ready to assume enterprise-wide assignments

Potential

Ability

Key Resource Employees• No guidelines for number of employees selected• Employees instrumental in accomplishing business strategy• Includes emerging resources and promising newcomers, who may have

HIPO capabilities but who require more experience and whosepotential must be assessed

Source: Bank of Montreal; Corporate Leadership Council research.

Categories of Talent at Bank of Montreal

Corporate Responsibilities—The corporate centerassumes responsibility forthe corporate developmentof senior managercorporate HIPOs

Line Responsibilities—The developmentof HIPOs and key resource employeesis the responsibility of the line

Low High

Low

High




To encourage the line to assume greater responsibility for the development of emerging talent,Bank of Montreal’s corporate center provides line managers with explicit support for thedevelopment of HIPOs and key resource employees. This support allows the center and the lineto work as partners to promote the development and advancement of the company’s key talent.

Corporate Support of Line HIPO Responsibilities at Bank of Montreal

Corporate Resources for Developing HIPOs and Key Resource Employees

Table of Contents

Line Managers: Although the line is primarily responsible for developing nonexecutive HIPOs and keyresource employees, there are many corporate resources available to support line managers’ developmentalefforts. The enclosed literature addresses in detail the corporate support provided to line managers.

Creation of HIPOand Key Resource

Programs

Talent Identification

TalentDevelopment

TalentManagement

Program Creation and Structure• Rationale for HIPO and Key Resource Employee Program 7• Suggested program responsibilities by position: 10

– Executive duties– Developmental advisor duties– Managerial duties– Line HR duties

Program Evaluation• Program auditing process• List of suggested program metrics

HIPO and Key Resource Nomination• Suggested step-by-step nomination process• Nomination forms

Selecting Top Talent• Definitions of HIPOs and Key Resource Employees• HIPO competencies and behaviors• Percentage of employee pool appropriate for selection

Developmental Planning• Development-planning process 19• 15-question framework for determining developmental needs 20• Selected use of assessment center evaluation of HIPO developmental needs 21

Developmental Roles• List of suggested developmental roles 23• Mechanisms for matching talent to developmental roles 23

Developmental Opportunities• Three-week leadership course 25• Four-year (part-time) M.B.A. program 25

Performance Evaluation• Performance standards 27• Performance planning and review process 28

Talent Retention• Retention Manager: retention strategies for top talent 30• Compensation and Benefits: partnership with the line to offer competitive

compensation for top talent

Available Corporate ResourcesMajor Line Responsibilities Page

The corporate centerprovides guidelines andtemplates to assist theline in the developmentof junior talent; the lineis encouraged toinnovate with corporatematerials as needed




The division of corporate and line responsibility for top talent allows Bank of Montreal toeffectively leverage its developmental resources, accelerating the development of both its seniorand emerging high-potential talent.

Benefits of Explicit Line and Corporate Division of Talent Responsibility

Corporatewide definition of top talent enables consistent identification of talentacross the organization.• Business units are confident in HIPO abilities, allowing the transfer of talent

across business units.• Standards ensure that business units set appropriate priorities for their

developmental investments.

Council Assessment:HIPO Responsibility Allocation Tool


• Clear definition of line responsibilities and corporate support distinguishes this practicefrom the standard tactic of pushing HIPO development to the line without providingadequate assistance. Corporate support significantly improves the line’s ability tosuccessfully identify and develop line talent.

• Tasking the line with the development of their talent allows for extensive corporatedevelopment of senior corporate talent—without neglecting the needs of future leaders.

Implementation Tip

• Inadequate corporate support for line responsibilities will make it difficult for the lineto assume the task of developing high-potential talent. Clear communication regardingwhat support is (and is not) available to line managers is key to practice success.

Line-Led Developmentof Line HIPO Talent

Corporate Focus onCorporate HIPO Talent

Consistent Definitionof HIPOs

HIPOs

The clear articulation of responsibilities has improved the line’s understanding of theirroles and responsibilities in the development of talent.• The focused development of emerging leaders has helped to provide the organization

with a broader pool of key talent and increased confidence in the company’s leadershippipeline.

Clear delineation of line responsibility for line-level talent allows the corporate center tofocus on a select group of corporate HIPOs.• Bank of Montreal’s Executive Resource Group manages the career development of

corporate HIPOs, identifying developmental opportunities intended to accelerate thedevelopment of corporate HIPO talent.



Establishing clear responsibility and accountability for the development of junior HIPOs is madeconsiderably more difficult by an increasingly project-based work environment. In manycorporations, employees work for several managers over the course of a year, making it difficult toensure that emerging talent receives the guidance necessary to gain critical leadership skills andexperience. To address this problem, Deloitte Consulting assigns a counselor to all client servicepractitioners (i.e., employees). Counselors—senior-level line managers—play key roles in theircounselees’ development and evaluation.

HIPO-Development SponsorsDeloitte Consulting, a subsidiary of Deloitte Touche Tohmatsu, generates annualrevenues of approximately $5 billion and employs approximately 12,000 people.

Situation

• Deloitte Consulting employees operate in a project-based environment, typically workingon multiple projects throughout the year. As a result, employees report to multipleproject managers during the course of the year.

• Under this organizational structure, additional steps are required to ensure thecommunication of employees’ overall progress and performance within the firm. Asynthesized view of employees’ developmental needs and the clear articulation ofemployees’ performance objectives are viewed as crucial components for developingleaders within the organization.

Action

• Deloitte Consulting senior-management team assigns line managers as counselors,tasking them with responsibility for employee development. There are two componentsof the counselor system:

– Component #1: Rigorous employee–counselor matching—New employees are matched tocounselors upon their arrival to the firm. During an annual counselor switchingprocess, employees may select the counselor who best meets their developmental needs.

– Component #2: Explicit definition of counselor responsibilities—Counselors areresponsible for actively stewarding employee development by providing developmentalguidance and assisting in employees’ performance evaluation. HR provides training incoaching skills and the developmental resources available to employees.

Impact

• Assigning line managers to developmental roles has successfully increased organizationalattention to employee development. Employees report being better informed regardingdevelopmental opportunities within the organization.

• The professional development manager reports that the use of counselors has increasedemployees’ ownership of their developmental process. By informing employees ofdevelopment opportunities and providing performance feedback, counselors facilitateemployee-development efforts.



Component #1: Rigorous employee–counselor matching

After assessing the developmental needs of new employees, HR matches employees to counselors.During an annual switching process, employees may select the counselor of their choice.

Employee–Counselor Matching Process at Deloitte Consulting

Step One: HR Assessment ofEmployee-Development Needs

HR assesses the developmental needs of incomingemployees based on employee resumes and employmentinterviews. Developmental areas may include suchtopics as:

• Technical skills• Business analysis• Functional knowledge

Step Two: HR Matching of Employees to CounselorsHR pairs new employees with counselors based on thefollowing requirements:

Position—Counselors are full-time manager-level consultantsor partners. Counselors are typically a few levels senior totheir counselees.

Availability—Counselors can assume responsibility for no morethan six counselees.

Practice Area—Counselors often work in similar practice areas astheir counselees in order to promote understanding of employeeresponsibilities. Counselors and counselees are not, however,assigned to the same practice area, thus ensuring that counselorsare not placed in direct management roles over their counselees.

E. JohnsonRecent graduate• Lacks financial

background

K. ChenSenior-level hire• Requires experience in

the software industry

L. LewisMid-level hire• Will work within the

transportation industrygroup

B. BoydPartner• Previous experience in the

software industry• Has no counselees at this time

B. JacksonManager• Strong financial background• Has only three counselees

J. CollinsSenior Manager• Knowledgable about the

transportation industry• Has only four counselees

Note on Employee Selection of Counselors

On an annual basis, employees may select counselors who best meet their needs. Employeessubmit three choices to HR, which facilitates the matching based on availability and counselorpreference. Approximately 15 to 20 percent of employees switch counselors annually.

Reasons for switching counselors include:

• Promotion of employee to counselor’s management level

• Developmental mismatches

• Change of employee location

Source: Deloitte Consulting; Corporate Leadership Council research.

➤

➤

➤



Source: Deloitte Consulting; Corporate Leadership Council research.

Component #2: Explicit definition of counselor responsibilities

Counselors are explicitly assigned responsibility for the development and evaluation of theirrespective counselees. Counselors provide ongoing developmental guidance and play a lead rolein the semiannual review of their counselees’ performance and potential.

Counselor Roles at Deloitte Consulting

DevelopmentalGuidance

Counselors frequently interact with counselees to provide developmental guidance and support.Counselors often provide employees with information or advice on the following areas:

• Developmental resources • Performance assessments• Developmental objectives • Promotion criteria• Training opportunities • Career goals

Counselors’ preparation and accessibility is evaluated via counselees’ upward feedback, whichfigures prominently in manager reviews and promotion decisions.

Counselors often advise employees on appropriate movement within the company, helpingthem to identify projects that promote their development.

If counselees are unable to identify appropriate projects or are dissatisfied with availableopportunities, counselors may become involved in helping HR resolve the staffing issue.

As a result of their ongoing contact with their counselees, counselors are well informed ofemployee potential and developmental progress. Counselors are active in the semiannualmanagement review of talent, assuming the following roles:

• Presenting the employee’s developmental needs and performance history, based on projectevaluations and coaching sessions.

• Contributing to the management group’s determination of employee performance ratingand HIPO status.

Providing Counselors with the Tools They Need

Before serving as counselors, managers must complete a one-day training course providedby HR facilitators and experienced counselors. This specialized training includesinformation regarding:

• Counseling skills and processes

• Company developmental resources

• Company policies

Advising EmployeeMovement

Reviewing Talent



Council AssessmentHIPO-Development Sponsors


• Designating sponsors for talent development represents a clear departure from standardinformal mentoring programs by explicitly assigning responsibility for employeedevelopment. The counselor is designated (and evaluated) as a key resource fordeveloping organizational talent.

• Counselors’ active involvement in the review of employee progress and performanceprovides the organization with a more informed view of employee potential. Counselorsalso gain other managers’ feedback regarding employee performance, facilitating asynthesized view of employee contributions and developmental needs.

Implementation Tips

• Practice requires that counselors be held accountable for the development of theircounselees. Organizations must measure employee developmental progress and rewardcounselors accordingly.

• Counselors should receive HR support for their duties. Failure to provide managers withadequate support or sufficient time for their duties decreases the likelihood that they willassume an active role as counselors.

• Processes to rematch counselors and employees must occur frequently enough toaccommodate organizational change; infrequent matching processes may leave talentwithout adequate guidance for unacceptable periods of time following promotions,employee moves, etc.

Applicability

• Project-based environments—Counselors provide the most benefit for organizations inwhich employees do not have primary managers or managers cannot play as active a rolein employee development (due to large spans of control, limited contact, etc.).Nonetheless, even in organizations with more traditional structures, counselors can serveas a useful supplement to development programs.

Caveat

• Although companies with low confidence in line managers’ ability to develop talent mayuse counselors to temporarily fill the developmental void, the use of counselors does notreduce the need to augment line managers’ ability to develop their staff.



Ensuring Managerial Attention to HIPO Development

Effectively allocating responsibility for HIPO development requires that individual managers areheld accountable for their development of high-potential employees. In order to focus managers onthe development of company talent, Monsanto Company creates a performance-based pay systemthat rewards managers for their contributions to both their own and their employees’ development.

Managerial Incentives for HIPO DevelopmentMonsanto Company generates annual revenues of approximately $5 billion andemploys approximately 15,000 people in the agricultural products industry.

Situation

• The CEO reorganizes the company’s businesses to create synergies across previouslyautonomous units. The CEO and HR determine that in order to capitalize on thisreorganization, the company must develop critical skills across business units andimprove the organization’s ability to attract and retain talent.

• Individual businesses employ distinct development practices, impeding uniformdevelopment of the skills required by the new organization. Moreover, within somebusiness units, people development does not represent a top organizational priority.

Action

• The CEO sets the expectation that people development be considered a key priorityacross the organization.

• A cross-functional team led by HR creates a performance-based pay system that rewardsemployees for development and business results. Approximately half of managers’incentive rewards are based on their contribution to personal and employee development.

• The performance-based pay process includes three steps:

– Step #1: Manager articulates goals for self- and employee-development

– Step #2: Manager receives ongoing coaching and feedback

– Step #3: Manager’s performance evaluated and rewarded

Impact

• The vice president of human resources credits the performance-based pay system withcreating a culture in which managers are increasingly attentive to employee development.

• Line managers report being better informed of their people’s developmental needs andperformance as a result of the rewards system. This information has enhanced managers’ability to offer targeted individual development for their employees and to identify key talent.

• Increased managerial attention to development has enabled Monsanto to identifyeffective and ineffective developmental practices across the company. Based onmanagers’ feedback, the company is revising the talent review process to better addressthe company’s developmental concerns.



Council Comment

Monsanto Company’s incentive-based pay system is designed to promote the developmentof all company talent. Nonetheless, the Council feels that this practice may also be used tospecifically support the development of high-potential employees.

The Monsanto incentive pay system is a long-term company initiative that continues toundergo changes. Monsanto is currently working to better define managers’ contributionsto employee development and is creating standards and methods to facilitate a moreaccurate measurement of these contributions.



Performance Goal Setting and PlanningHow do I add value to company strategy?

Step #1: Manager articulates goals for self- and employee-development

To focus managers on the development of company talent, Monsanto ties managers’ incentive payto personal and employee development. Incentive rewards are based on annual performance anddevelopment goals that managers create with their supervisors. Significantly, corporate guidelinesbase half of managers’ incentive rewards on their developmental contributions.

Creation of explicit developmental goals…

…rooted in the incentive pay system’s clear emphasis on people development

Source: Monsanto Company; Corporate Leadership Council research.* Illustrative based on information provided by Monsanto Company.

Position

People Managers

Individual Contributors

Business Results

50%

75%

Development

50%

25%

Managers use theirbusiness performancegoals to help identifyappropriate personaland employee-development goals

Monsanto Development Performance and Rewards SystemIncentive Pay Allocation Guidelines

(subject to business unit modification)Managers’ contribution todevelopment consists oftheir role in developingthemselves and otherMonsanto employees,particularly those whoreport to them

Development Goal Setting and Planning*

Manager: A. Largent Date: January 2000

Directions: Managers are expected to identify areas ofdevelopment for their people and themselves throughthe use of performance reviews, surveys and frequentcommunication.

My objectives for Monsanto employees’ development:Increase team knowledge of company research initiativesMove direct reports to stretch roles that offer learning

experiencesGain promotions for top direct reports to managerial levelProvide senior guidance to less experienced manager by

serving as a peer coach

My personal developmental objectives:Build managerial cross-functional relationshipsSpeed decision-making abilityUnderstand R&D protocolsImprove writing and communication skills

Managers’ goals are notlimited to the developmentof direct reports; managerscan assume a number ofdevelopmental roles, includingcoaching roles for peers oremployees in other divisions



Steps #2: Manager receives ongoing coaching and feedback

Managers’ supervisors and other Monsanto employees help managers identify the resources andmethods necessary to effectively impact people development. Throughout the year, managersobtain ongoing feedback regarding their developmental contributions. Managers compile thisfeedback into a summary document to demonstrate progress toward their people-development goals.

Managers receive ongoing support in their developmental efforts…

…and solicit continuous feedback regarding their developmental contributions

Representative Sources of Managers’ Feedback

360-Degree ReviewPeers rate career guidanceto be a model for theorganization

SurveysEmployee survey revealssatisfaction withdevelopmental coaching

E-mailsCoaches’ e-mails note significant progresstoward developmental goals

Informal DiscussionsDirect report conveys that suggestionto enroll in financial class proved useful

Team ReviewsTeam members rate developmentalopportunities highly

December January

DevelopmentalFeedback Summary

Name: A. Largent

• Team reviews• Employee surveys• Formal discussions

Source: Monsanto Company; Corporate Leadership Council research.

➤

Ongoing Discussions—

You, your selected coaches and people managerdiscuss progress toward performance goals as wellas development goals. Coaching includes supportin the form of:

• Assistance with identifying resources andaddressing barriers

• Clarification, redirection and realignment

• Open dialog and joint problem solving

Appropriate Adjustments—

Based on these discussions, you make appropriateadjustments that may include:

• Resource needs

• New learning and development needsand opportunities

• Modified goals

Steps for Ongoing Coaching

Managers select coaches,who provide ongoingsupport toward theirpeople-developmentefforts; coaches caninclude supervisors,peers, team members orother people with whommanagers frequentlyinteract

* Illustrative based on information provided by Monsanto Company.



Step #3: Manager’s performance evaluated and rewarded

During year-end reviews, managers and their supervisors discuss managers’ contributionsto people development. Supervisors use this discussion and written summaries of managers’accomplishments to determine appropriate incentive rewards.

Incentive Rewards at Monsanto Company

Development Performance Rewards*Incentive Rewards 2000

J. Robb

Development

Business Results 50%

Outstanding

40%

$13,000

Development 50%

Business Results 50%

Weak

40%

$9,000

ManagerPotential

Percentage ofIncentive Pay

PerformanceLevel

Supervisor Summary CommentsActual

IncentivePay

TotalIncentive

Pay

IncentiveComponent

A. Largent

50%

Strong

Strong

Employee development—Ann’s developmental impacton her team and other employees is exemplary.Employee feedback reflects her proactive concernfor development.Personal development—Ann demonstratedconsiderable personal growth over the year.

Business results—Ann had a significant impact onunit performance this year. She played a key rolein a very productive strategic planning effort.

50%

Employee development—John paid insufficientattention to team members’ and peers’ developmentover the year. His activity as a manager and coachdid little to develop company talent.

Personal development—John demonstrated personaldevelopment as a result of his proactiveeducational efforts.

Business results—John was one of the top drivers ofsales earnings for his product line. His productivityincreased over the year and he met most of hisannual objectives.

10%

Note on Incentive Rewards at Monsanto Company

Incentive Decisions—Supervisors’ determinations of incentive awards are reviewed byupper-level managers and may be modified as necessary.

Incentive Levels—The incentive rewards for which managers are eligible are determinedby company, business unit, team and individual performance. First-line managers havethe opportunity to receive incentives of up to 30 percent of year-end base pay if they andthe company achieve “outstanding” levels of performance. Upper-level managers areeligible for larger rewards.


…while managers poor at developing company talentdo not receive the full rewards of incentive pay,despite strong individual business results

Managers who excel at employee developmentare explicitly rewarded for their efforts…

* Illustrative based on information provided by Monsanto Company.



Monsanto’s incentive pay system has focused the organization on individual and companydevelopment needs. This emphasis on development is anticipated to strengthen the company’sleadership capabilities.

Focusing the Organization“We consider the [performance pay] system to be a competitive advantage for Monsanto. It has helpedchange the company into a more outcome-focused culture.…One of the most important changes is thatmanagers now place a much stronger emphasis on developing their staff. This investment should yieldbenefits for the company, as our people increase their skills and leadership abilities as a result of theadditional developmental attention.”

Vice President of Human ResourcesMonsanto Company


Council Assessment:Managerial Incentives for HIPO Development


• Tying managerial compensation to employee development represents a significant departurefrom standard practice. Although many companies communicate the importance ofdevelopment, few provide explicit rewards—financial or otherwise—for managerialcontributions to employee development.

• Practice extends the strength of standard pay-for-performance systems. By financiallyrewarding managers’ developmental efforts, the practice increases managerial focus on thecritical organizational objective of employee development.

Implementation Tips

• Organizations must ensure that managers’ developmental goals are appropriate and provide anobjective means to evaluate their contribution to employee development. HR guidelines shouldprovide managers and superiors with clear objectives for goal creation and incentive decisions.

• Although the development of all employees should be an organizational imperative,companies may wish to place additional emphasis on the development of high-potentialemployees. Incentive pay systems can reward managers specifically for HIPO development,encouraging them to focus particularly on the company’s most valuable talent.

Caveats

• Practice efficacy requires significant organizational investment; rewards must be substantialin order to alter managerial behavior.

• Incentive pay systems represent just one method of increasing managerial accountability forHIPO development. Promotions and other organizational tools may also be utilized to focusmanagerial attention on employee development.

Applicability

• Familiarity with incentive pay—Although a potentially useful practice for all organizations,systems to financially reward managers for employee development are easier to implementat companies at ease with incentive pay. Rewarding developmental efforts incorporatesadditional variables into incentive pay systems, creating complexity that may proveburdensome for companies that do not already offer incentive pay.



Ensuring That HIPOs Assume Responsibility for TheirOwn Development

Efforts to increase individual accountability for HIPO development cannot be effective withoutarticulating explicit performance expectations to HIPOs themselves. Yet most organizations donot communicate HIPO status to their high-potential employees for fear of alienating non-HIPOs.In order to increase HIPO accountability and career self-reliance, Gamma Company developsguidelines that help line managers to convey HIPO value and communicate the importance ofHIPOs’ continued developmental growth.

HIPO Status Communication GuidelinesGamma Company1 is a North American–based financial services company.The company employs approximately 10,000 people and generatesapproximately $3 billion in annual revenues.

Situation

• A senior leadership review of the internal talent pipeline indicates that Gamma Companydoes not possess a sufficient supply of high-potential talent to drive its growth plans. Giventhe exigencies of the external labor market, the CEO and COO endorse the creation of aHIPO-development program.2

• Although the new program creates many developmental opportunities for high-potentialemployees, HIPOs seem unaware of these advantages, prompting concern that they are impedingtheir own development by failing to fully pursue the developmental benefits available to them.

• Research by a business unit HR consultant reveals that one cause of this problem is that linemanagers are failing to communicate HIPO status and opportunities to their subordinatesbecause of concern that employees not selected as high potential will be discouraged abouttheir personal development prospects.

Action

• A business unit HR consultant develops guidelines regarding communication of value anddevelopmental opportunities to HIPOs. The guidelines are distributed to line managers withinher unit.

• The document is eventually distributed across all business units, although each unit may decidewhether to use it on a case-by-case basis.

The document consists of two primary components:

– Component #1: Guidelines for communication with HIPOs and non-HIPOs

– Component #2: Instructions on the creation and implementation of HIPO career-development plans

Impact

• Line managers report that the communication guide has increased their confidence in conveyingdevelopmental objectives and value to HIPOs and non-HIPOs.

• Although the program is still in its early stages (and is not yet standard across the entirecompany), the manager of executive development predicts that proactive communication ofvalue and career expectations will encourage high-potential employees to actively steward theirown professional development.

1 Pseudonym.2 At Gamma Company, HIPOs are defined as non-frontline managers or senior

managers who have the potential to reach director-level positions within five years.HIPOs represent approximately 15 percent of the eligible managerial population.



Component #1—Guidelines for communication with HIPOs and non-HIPOs

In response to line manager concerns regarding communication of the Gamma CompanyHIPO program, a business unit HR consultant creates communication guidelines. Now usedby several other business units in the company, the guidelines prepare managers to discuss theHIPO program with their direct reports (both HIPOs and non-HIPOs).

Communication Guide: Instructions to Managers

Source: Gamma Company; Corporate Leadership Council research.

Talent Management Manager’s GuideKey Points for Managers Regarding the

Talent Management Process

Expected Results—Effectiveimplementation of the talentmanagement process should leadto internal promotions as well ascross-functional assignments andbroad career growth.

Ongoing Support—Managers ofHIPOs are the key to the TalentManagement process: Management-development consultants willprovide support and coach allmanagers as needed.

Definition of a HIPO at Gamma—A high-potential designation is basedon developmental readiness and is not apermanent classification or a predictionof overall long-term potential.

Clear, Thoughtful Communication—The Talent Management process willusually motivate HIPOs but oftendemotivates non-HIPOs; we wantto be honest but careful aboutcommunication (e.g., try not to be tooopen about classifying someone as aHIPO in front of their peers, don’t referto a “list” of HIPOs).

Program Overview

• The Talent Management program is our response to the growthof our business.

• The goal of the Talent Management program is to develop those whodemonstrate potential through 1) business results and 2) growth inlearning through competencies.

Guidelines for communication allowmanagers to discuss the HIPO programwithout discouraging non-HIPOs

Guide stresses the importance of directmanager involvement in thedevelopmental process and articulatesthe availability of HR support




The manager’s guide scripts communication between direct managers and newly designatedHIPOs. Guidelines are used in individual meetings with HIPOs to convey that they are valued bythe organization and to stress that development is crucial to maintaining the potential to advance.

Manager Guidelines for Communication with HIPOs

Communicating Employee Value to HIPOs

• Communicate that HIPOs are valuable to the organization and willreceive specific opportunities designed to facilitate their development.

• Inform HIPOs that they are perceived to be ready (soon) for careeradvancement; stress that this potential does not guarantee promotionor greater compensation.

Developmental Opportunities for HIPOs

• Inform HIPOs that you will establish a “contract” with them related tolearning, development and building executive leadership capability; theindividual development plan (IDP) is one key way that we plan andconduct our development activities. The development plan will includeboth stretch and support opportunities.

• Notify HIPOs that they will be placed in developmental roles that maymake them uncomfortable, but they will also be given support throughcoaching, feedback and other mechanisms.

• Ensure that HIPOs are aware that the Talent Management process doesnot mean that only HIPOs will get the best jobs or assignments.

• Inform HIPOs that they are expected to play a significant role indeveloping and coaching other employees.

Importance of Continued Performance for HIPOs

• Inform HIPOs that if they fall below expectations, they will be told theyare no longer considered to have the potential to advance to certainlevels; perceived developmental readiness can (and will) be reassessed.

Talent Management Manager’s GuideGuidelines for Communicating Value to HIPOs

Guidelines helpmanagers provideHIPOs withrealistic careerand developmentexpectations

HIPOs are informed that the receipt of certain developmentalopportunities is dependent on their continued developmentand performance




To prepare managers for non-HIPOs who ask about the HIPO program, the manager’s guidescripts communication about employee developmental opportunities. The guidelines are used tohelp assure non-HIPOs that they have strong developmental prospects within the organization.

Manager Guidelines for Communication with Non-HIPOs

Communicating Employee Value to Non-HIPOs

• Ensure that the employee understands that the company believes indevelopment and growth for all associates.

Developmental Opportunities for Non-HIPOs

• Communicate that all associates are involved in some aspects ofdevelopment (developmental plans, ongoing training, stretch roles,job rotations, etc.).

Importance of Continued Performance for Non-HIPOs

• Ensure that the employee understands that developmental investmentsare made on the basis of readiness, not competence; perceiveddevelopmental readiness can (and will) be reassessed.

• Communicate that improvements in performance results andcompetency development can increase their developmental readinessfor Talent Management initiatives.

Employees are informed that increasedperformance may lead to additionaldevelopmental opportunities

Talent Management Manager’s GuideGuidelines for Communicating Value to Non-HIPOs

Guidelines helpmanagers keepnon-HIPOs frombecomingdiscouraged abouttheir developmentalprospects withinthe company



Individual Development Plan


Component #2—Instruction on the creation and implementation of HIPO career-development plans

Following the HIPO identification process, managers meet with HIPOs to establish a developmentplan designed to build executive leadership capability. Guidelines for the manager ensure thatcompleted plans contain appropriate HIPO developmental objectives.

Creation of HIPO-Development Plan

HIPOs are required to construct a qualityindividual development plan. A quality planmeets all of the following criteria:

• Do the behavioral objectives relate to thecompetencies?

• Are the behavioral objectives clearlydefined?

• Does the plan contain at least one aggressivedevelopment tactic?

• Do the actions produce an opportunity tolearn and practice?

• Are the time frames clear and achievable?• Are appropriate resources identified and

realistic?

Employee: Jack ReltonManager: Sarah Burgen

Aggressive Development Tactic

Developmental job moveCross-functional teamIntensive learning experience

Manager HIPO

Goal

Visible Leadership

Increase ProjectManagement Skills

AvailableResources

• Coaching• 3-day company

leadership center• 360-degree

feedback

• Internal trainingclass

• Project mentors• Development

consultant

Action Items

• Present vision atteam meetings

• Meet withdirector of financefor guidance

• Establish projectreviews

• Publish summaryreports

Talent Management Manager’s GuideCriteria for HIPO-Development Plans

Stretch assignmentInternal mentorExternal coach

✘✘✘

HIPOs are required tocomplete at least oneaggressive developmenttactic each year

Managers convey that HIPOshave access to developmentresources unavailable to thegeneral employee population



Line managers at Gamma Company report that the communication guide has increased theirconfidence in conveying development objectives and value to high-potentials. By makinghigh-potentials aware of their valued status and of developmental opportunities within theorganization, the company expects to increase retention and leadership capability within thisvaluable group.

Communication Yields Benefits“As the company grows, we encounter new challenges in retaining talent. With our growth, weinevitably lose the small company feel that attracted many employees here in the first place. Withoutaddressing this issue, HIPOs can easily get lost within the company and not understand how much wevalue them. By letting HIPOs know that they are valued here and have a real opportunity for careergrowth, we hope to prevent defection of talent. This is a new program, but I believe that it will helpus hold on to our high-potentials.”

Manager of Executive DevelopmentGamma Company


Council Assessment:HIPO Status Communication Guidelines


• Explicit communication of value to high-potential employees represents a significantdeparture from standard practice; the Council’s membership survey indicates that just overone-third of surveyed companies make HIPOs aware of their potential future careertrajectory and wealth-creation opportunities.

• Companies often fail to communicate HIPO status because of concerns about discouragingthe general employee population. Guidelines for communication prepare managers for the(inevitable) suspicions of non-HIPOs that their development will be neglected or that theyare not valued by the company.

• Clear articulation of high-potential employees’ expectations and available resources facilitatestheir targeted development and increases HIPO accountability for continued developmentalprogress.

Implementation Tips

• Providing line managers with guidelines for discussions with non-HIPOs as well as HIPOs iscrucial for practice success. As employees are likely to learn of the HIPO program (regardlessof company communication practices), companies should be prepared for the concerns ofemployees not selected as high potential.

• Guidelines must be accompanied by clear action to ensure power of the practice. Followingcommunication of HIPO value with explicit career planning provides HIPOs with concretedevelopmental benefits and objectives, thereby helping to increase the likelihood of HIPOretention and development.

• Managers must clearly communicate to HIPOs that determinations of potential do notguarantee promotions, which are based on performance and corporate needs.

77


Requirement FourClear Understanding of the Efficacyof Talent Management Initiatives



Featured Practice

HIPO Management Metrics

Structured reporting system monitors HIPO management metrics (movement, promotions,average time in position, etc.) for each business unit. The key feature is that the corporatecenter actively monitors HIPO metrics and partners with individual business units toresolve identified talent issues.

Goal • To identify and address—at the appropriate organizational level—practices thatimpede the development of HIPOs

Profiled Practice: Bank of Montreal

Requirement Four Overview

Council Essay

• Few organizations track metrics for the HIPO population; even companies that do trackmetrics tend to track nothing beyond retention data.

• Moreover, those companies that do maintain more advanced measurements of the HIPOpopulation rarely track the performance of distinct organizational units at developingHIPO talent.

• Unfortunately, without informative measures of HIPO advancement or granulardata on HIPOs, companies cannot identify obstacles to HIPO development. Forexample, aggregate retention rates or employee satisfaction survey results may not revealthe causes of HIPO departure, which may differ from—and be obscured by—overallcompany results.

• To increase understanding of company talent initiatives, metrics must go beyondmeasuring HIPO turnover to reflect the advancement and development of high-potentialtalent. Effective metrics should also offer the ability to “drill down” to the unit, function,project or team level.

79Clear Understanding of the Efficacy of Talent Management Initiatives


Efficient and cost-effective development of junior HIPOs requires the ability to identify successfulcompany developmental practices as well as obstacles to HIPO development. In order to monitorthe development of its high-potential talent, Bank of Montreal maintains a database of key metrics.The corporate center actively reviews these HIPO management metrics to identify possibleHIPO-related talent issues, which are addressed by the corporate center or the line.

HIPO Management MetricsBank of Montreal, Canada’s third-largest bank, generates approximately$11 billion in annual revenues and has over 32,000 permanent employees.

Situation

• As part of the HIPO* review process, individuals are assessed against a common set ofmanagerial leadership competencies. These, and other key measures, are maintained ina centrally managed database used for analysis and reporting purposes.

• In the past, the absence of a commonly defined set of metrics and a centrally manageddatabase prevented the organization from using comparative measures across thebusiness. Accordingly, the Bank had difficulty identifying talent gaps and potentialdevelopmental obstacles using commonly held standards.

Action

• Corporate HR creates a database of uniform talent metrics to track the status of companytalent. Management metrics specific to HIPOs allow the company to explicitly monitorthe development of this talent group.

• The collection and analysis of HIPO management metrics occurs in three steps:

– Step #1: Business units identify HIPOs and provide HIPO information to corporate HR

– Step #2: HR compiles and analyzes HIPO metrics

– Step #3: Appropriate party (corporate center or business unit) addresses suggestedtalent issues and opportunities

Impact

• HIPO metrics have allowed Bank of Montreal to examine the developmental progress ofits high-potential talent. As a result, corporate and business unit interventions have beenable to identify and remove developmental obstacles, ensuring the sustaineddevelopment of a company leadership cadre.

* At Bank of Montreal, HIPOs are defined as employees who demonstrate significantleadership capabilities and performance results. These employees includehigh-potential managers and high-potential professional and technical employees.



Step #1: Business units identify HIPOs and provide HIPO information to corporate HR

Following a redefinition of organizational talent responsibilities, Bank of Montreal createsorganization-wide talent metrics. Business units assess employees and identify HIPO talentand provide HIPOs’ key information to HR.

Step #2: Corporate HR compiles and analyzes HIPO management metrics

In turn, HR compiles HIPO management metrics via corporate databases. HR rigorouslyanalyzes the talent metrics to better understand bench strength issues and opportunities.

Based on business unit information, the corporate center compilesHIPO management metrics…

…which are analyzed for indications of HIPO developmental problems

Bank of MontrealHIPO Management Metrics (Illustrative Only)

Metric

HIPO Promotion Rate

HIPO Turnover Rate0–18 months tenure18–36 months tenure

Bank Group 1

27%

15%8%

Bank Group 2

29%

13%6%

Bank Group 3

11%

19%14%


HIPO Success Indicators• Promotion rates1

• HIPO turnover• Performance ratings• Competency ratings• HIPO satisfaction

HIPO Nominations• Number of HIPO nominations2

• Number of HIPOs selected

Banking Group 1HIPOs

1 Corporate-level HIPOs only.2 Future corporate metric.

Development Needs


Development Needs


Development Needs

Talent Metrics Database

HIPO Metrics

HIPO Development• Number of key positions identified• Percentage of development plans completed• Average time in position

Demographic Data• Age bands• Grade bands• Average tenure• New hires• Diversity indicators

➤

➤

➤



Steps #3: The appropriate party (corporate center or business unit) addresses suggested talent issuesand opportunities

If the HIPO management metrics suggest evidence of an organization-wide talent issue, thecorporate center partners with the line to identify and facilitate the removal of the barrier to HIPOdevelopment. If the development issue is specific to a business unit, that business unit, withsupport from the corporate center, acts accordingly.

Metrics signal potential HIPO problems…

…prompting appropriate corporate or business unit intervention

* Illustrative example based on information provided by Bank of Montreal. Source: Bank of Montreal; Corporate Leadership Council research.

Bank of MontrealHIPO Management Metrics (Illustrative Only)

Metric

HIPO Promotion Rate

HIPO Turnover Rate0–18 months tenure18–36 months tenure

Business Unit HR Diagnostics

Business Unit Metrics—Metrics indicate that HIPOsin a specific bank group are not advancing at ratescomparable to other units’ HIPOs

Corporate Metrics—Metrics signal a turnover problemamong less-tenured HIPOs across the organization

ProblemSenior new-hire, high-potential talenthave identified inconsistencies in theavailability of information and supporton joining the organization.

Suggested Action• Creation of a two-part orientation

program, consisting of a Web siteand a face-to-face workshop

• Increased use of corporate center’sretention manager to developfurther retention strategies

Corporate HR Diagnostics Business Unit Intervention*—Business unit holdsstructured managementforums to discuss thedevelopment and careeropportunities for top talent.Potential opportunities arediscussed with the corporatecenter as appropriate.

Corporate Intervention—Corporate HR surveysHIPOs to identifypotentially “at risk” talentgroups. This survey, alongwith other informationsources, suggests possiblecauses of HIPO turnover.Based on its findings,corporate HR recommendsremedies to the line.

Bank Group 1

27%

15%8%

Bank Group 2

29%

13%6%

Bank Group 3

11%

19%14%



Council Assessment: HIPO Management Metrics


• Although many firms track the retention of high-potential talent, few companies employrobust systems to monitor the advancement and developmental progress of HIPOs.Creating and developing HIPO-specific talent management metrics facilitates theidentification and diagnosis of obstacles to HIPO development.

• A structured reporting system monitors HIPO management metrics both companywideand at the business unit level, facilitating an appropriate business response to key issuesas they arise. Organization-wide problems indicate a need for a corporate response, whilebusiness units address unit-specific problems.

Implementation Tips

• The corporate center may wish to create explicit targets for metrics reflecting themanagement and development of HIPO employees. Targets allow objective evaluationof business unit performance and enable the corporation to allocate organizationalresources where they are best leveraged.

• In order to be beneficial to the organization, metric tracking systems require informationto be frequently updated by the line. The corporate center should create business unitreporting protocols and enabling technology solutions to ensure timeliness ofinformation and ease of reporting.



Potential HIPO Program MetricsBased on its research, the Council has compiled a broad list of HIPO-related talent managementmetrics. The metrics below provide basic indicators by which a company may evaluate the efficacyof its efforts to develop high-potential employees.


Notes on the Creation of HIPO Program Metrics

• Organizational Environment—The following pages reflect possible metrics and what thesemeasurements may reveal. Both the suitability and the implications of these genericmetrics, however, will vary among organizations. In order to add value, companies mustdetermine which metrics are appropriate within their organizational environment andset explicit targets or benchmarks for these measurements.

• Comparison Populations—HIPO metrics should be compared against measurements ofother employees within the company. Organizations must determine which populationsprovide a valid basis for comparison.

• Organizational Level—Metrics should be tracked to the lowest organizational levelpossible (e.g., business unit, department, team or individual manager). Granular dataregarding organizational practices allows the corporate center or the line to better isolateand correct talent problems.

HIPO Removals Percentage of HIPOs removedfrom the HIPO list

• A certain frequency of removals from the HIPO list indicates a healthyamount of churn in the high-potential pool and an effective ongoing reviewof HIPO status

• A high removal rate may, however, indicate that HIPOs are not accuratelyassessed or are not developing at an adequate rate

HIPO Selection

Metric

HIPO Nominations

Size of HIPO Pool

Selection Growth Rate

Description

Percentage of employeesnominated for HIPO status

Percentage of employeesselected for the HIPO pool

Growth rate of the HIPOpopulation

Comments

• High number of nominations indicates line-management knowledge of,and commitment to, the HIPO program

• An excessive number of nominations, however, may complicate theselection process; high nomination rates may indicate poorlycommunicated or vague HIPO criteria

• The size of the HIPO pool must strike a balance between ensuring arobust leadership pipeline and preserving developmental resources fortruly high-potential employees

• Growth of the HIPO list should accord with anticipated future companyleadership needs; if the company is undergoing dramatic growth, it maywish to select more employees for HIPO status

Diversity Indicators Percentage of HIPOs who arefemale or minority

• Measurement helps provide for future management diversity andrealization of corporate diversity goals




HIPO Advancement and Development

Time in Position Average time that HIPOs spendin each position

• HIPOs must remain within positions long enough to maximizedevelopmental opportunities and the company’s use of talent

• Conversely, it is imperative that companies move HIPOs frequentlyenough to continue providing developmental challenges and newbusiness experiences

Metric

Development Matches

Cross-FunctionalExperience

Description

Percentage of HIPOs placed indevelopmental positions

Average number of functionalroles assumed per HIPOover time

Comments

• Metric requires the designation of developmental positions, a useful stepfor identifying HIPO growth opportunities

• Metric indicates the degree to which the organization allocates itsdevelopmental resources to its high-potential talent

• Ideally all HIPOs will be placed in developmental (and value-added) roles

• Companies should provide sufficient cross-functional exposure to promotebreadth of knowledge and organizational perspective

Completion ofDevelopmental

Objectives

Percentage of HIPOdevelopmental objectivescompleted within a specifiedtime frame

• Developmental expectations may be obtained from HIPOdevelopment plans

• If development objectives are routinely not completed, this may indicatethat the program is too ambitious in its intent or does not provide HIPOswith sufficient developmental support

Promotion Rates Percentage of HIPOs promotedwithin a specified time frame

• Metric indicates whether investments indeed accelerate the developmentof a leadership cadre

• Company must ensure that this metric reflects, rather than dictates,HIPO movement; if HIPOs are advanced solely in order to achieve apredetermined target, the company risks HIPO derailment and poorreturn on its developmental investment

Performance Ratings Performance ratings of HIPOs

• Performance ratings can indicate the rate of HIPO development; if aHIPO is not performing well within her current position, this mayindicate a limited career trajectory

• HIPO underperformance may also indicate inaccurate HIPO selectionor inappropriate promotion

Performance Trends Performance ratings of HIPOsadvanced to senior positions

• Metric indicates HIPOs’ developmental readiness for promotion to upperlevels; underperformance suggests inadequate development orinappropriate selection techniques

• Tracking performance trends by position, mentor and manager allowsorganizations to understand the developmental contribution offeredby each

Potential HIPO Program Metrics (continued)



Potential HIPO Program Metrics (continued)


Development of Leadership Cadre

Talent Sourced Percentage of key positions filledby HIPO candidates

• Metric reflects utility of HIPO program in developing companyleadership pipeline

• If the failure to advance HIPOs to key positions results ina leadership shortage, this may indicate a need for a moreextensive HIPO program

Bench Strength Ratio

Description CommentsMetric

Number of HIPOs persenior-management position

• Proper ratio of HIPOs to upper-level positions facilitateseffective succession management, helping to provide a sufficientnumber of candidates for key positions

• Companies must select an adequate number of HIPOs toaccount for derailment and departure of talent

• Companies must also forecast future leadership needs todetermine proper bench strength ratios

Internal/ExternalRecruitment

Percentage of key positions filled byinternal and external candidates

• If a HIPO program develops a robust pipeline of internal talent,it may help to provide qualified candidates knowledgeable ofcompany practices and culture

• Companies should not attempt to fill all key positions withinternal candidates, as external hires can provide freshperspective and skills

Developmental Costs Measurement of organizational resourcesdevoted to HIPO development

• An understanding of program costs enables a cost–benefitanalysis of the HIPO program

• Metric provides useful measurement to control costs and gaugeaccuracy of resources allocated to developmental activities

HIPO Retention

Percentage of HIPOs lost due tovoluntary turnover

HIPO Turnover

• Departure of talent severely hampers the development ofleadership ranks and return on developmental investments

• Sources of dissatisfaction with the company must be exploredand remedied to prevent further defections of talent

Description CommentsMetric

HIPO turnover in specified roles orby key characteristics

HIPO Turnover by KeyArea/Attribute

• Granular data allows diagnosis and resolution of specific causesof HIPO turnover

• Important areas of analysis include HIPO function, position,direct manager, tenure and background

87Appendix


Appendix—Selected Key Readings

Note to Our Members

The literature referenced in this section provides background reading regarding thedevelopment of high-potential talent. The Council does not endorse or recommendspecific authors and encourages readers to seek advice regarding further materials fromthe Council’s research team.

General Overview of HIPO Programs

• John Beeson. “Succession Planning: Building the Management Corps.” Business Horizons(1 September 1998): 61–66.

The author argues that changes in the current business environment demand more dynamic and cost-effectivedevelopment and succession-management systems. The article highlights the shortcomings of typical companydevelopment programs and provides best-practice strategies to build management depth within the organization.

• Lisa A. Burke. “Developing High Potentials in the New Business Reality.” Business Horizons(13 March 1997): 18+.

The author describes basic steps that companies may adopt to create effective HIPO programs and managethe development of high-potential employees. Particular attention is paid to the use of job rotations and otheron-the-job developmental experiences.

• Corporate Leadership Council. Challenges in Managing High-Potential Employees: Results of theCouncil’s Membership Survey. Washington: Corporate Executive Board, April 2000.

The first volume of the Managing High-Potential Employees Series reports on the state of talent management practicesat 252 member institutions. The central areas of focus include the extent of the leadership shortage and organizationalpractices used to identify and develop high-potential talent.

• Henrik Holt Larsen, et al. “High-Flyer Management Development Programs.” International Studiesof Management and Organization (Spring 1998): 64–90.

This article provides an overview of standard practices in HIPO programs, including typical HIPO criteria andprogram structure. Research also presents the organizational correlates (e.g., firm size, company growth) ofcompanies maintaining HIPO programs.

• Judith Oliver. “The New-Look Fast Track.” Management Today (March 1997): 86+.

This article addresses the historical progression of HIPO programs, noting that development programs of the pastwere hampered by over-investment in the top leadership cadre. The author notes that within today’s flattenedorganizations, successful developmental practices focus on a broader group of emerging talent.



Appendix—Selected Key Readings (continued)

HIPO Selection

• Faye Cope. “Current Issues in Selecting High Potentials.” Human Resource Planning (September 1998):15+.

• Karen J. Gritzmacher. “Staying Competitive Through Strategic Management of Fast-TrackEmployees.” National Productivity Review (22 September 1989): 421+.

• Ruth L. Williams and Joseph P. Cothrel. “Building Tomorrow’s Leaders Today.” Strategy & Leadership(19 September 1997): 16+.

These articles address the processes and criteria used to select emerging talent for developmental opportunities. Thearticles note that most companies rely on leadership competencies that are strikingly similar to each other.

• Maxine Dalton. “Are Competency Models a Waste?” Training & Development(1 October 1997): 46+.

The author explores the utility of leadership competency models, arguing that organizations should adopt realisticgoals for competencies and avoid expending significant resources developing company-specific models.

On-the-Job Development

• Morgan W. McCall Jr. High Flyers: Developing the Next Generation of Leaders. Harvard Business SchoolPress: Boston, 1998.

The author argues that leadership excellence is a product of appropriate developmental experiences. A reliance ongeneric leadership competencies for talent selection, without providing structured developmental experiences, ispresented as a common reason for derailment among high-potential talent.

• Morgan W. McCall Jr., Michael M. Lombardo and Ann M. Morrison. The Lessons of Experience: HowSuccessful Executives Develop on the Job. New York: The Free Press, 1988.

This influential book argues that on-the-job experiences are the most effective means of developing leadership ability.The authors present key events that facilitate the development of critical leadership skills.

• Cynthia D. McCauley and Stéphane Brutus. Management Development Through Job Experiences: AnAnnotated Bibliography. Greensboro: Center for Creative Leadership, 1998.

This resource summarizes nearly 70 books and journal articles regarding developmental roles and corporatedevelopment practices, providing key findings and the implications of reviewed research.

• Sherman Stratford. “How Tomorrow’s Best Leaders Are Learning Their Stuff.” Fortune (27 November1995): 90–102.

This article addresses how leading organizations create developmental challenges in order to grow leadership talent.Case studies of a number of firms are described, including examples from General Electric, Hewlett-Packard andMcKinsey & Company.

• Jean Woodall. “Corporate Support for Work-Based Management Development.” Human ResourceManagement Journal (1 January 2000): 18–32.

The author reviews academic literature regarding the growing emphasis on development in the workplace. Interviewswith senior HR managers reveal that although HR professionals are aware of the developmental benefits of on-the-jobchallenges, they are often unable to identify appropriate stretch opportunities.

89Appendix



Development of Senior-Level High-Potential Talent

• Robert W. Barner. Executive Resource Management: Building and Retaining an Exceptional LeadershipTeam. Palo Alto: Davies-Black Publishing, 2000.

The author presents a comprehensive executive resource-planning process designed to develop high-performingexecutive teams. Emphasis is placed on providing an organizational context for the long-term development ofleadership talent.

• Jay A. Conger and Katherine Xin. “Executive Education in the 21st Century.” Journal of ManagementEducation (1 February 2000): 73+.

Examining trends in executive education, the authors note that leadership programs are increasingly designed toprepare executives to deal with strategic issues relevant to immediate company interests.

• Corporate Leadership Council. The Next Generation: Accelerating the Development of Rising Leaders.Washington: Corporate Executive Board, 1997.

This study presents practices for accelerating the development of organizations’ senior-management cadre. Thesepractices represent a new approach to executive development characterized by individualized planning and theaccelerated movement of future talent.

• Helen Handfield-Jones. “How Executives Grow.” The McKinsey Quarterly (1 January 2000).

This article highlights the organizational practices required to develop executive talent and presents the results of theMcKinsey leadership survey. The survey reflects widespread concern among top executives regarding the availabilityof talent and the inadequacy of current developmental practices.

• Valerie I. Sessa and Richard J. Campbell. Selection at the Top: An Annotated Bibliography. Greensboro:Center for Creative Leadership, 1997.

This book reviews literature on methods used to select executive candidates and predict executive success. Over 100books and articles are summarized and major research findings are presented.

• Valerie I. Sessa and Jodi J. Taylor. Executive Selection: A Systematic Approach for Success. San Francisco:Jossey-Bass, 2000.

The authors present criteria for executive selection and systems for matching talent to executive positions.




General Leadership Development Literature

• Jay A. Conger and Beth Benjamin. Building Leaders: How Successful Companies Develop the NextGeneration. San Francisco: Jossey-Bass, 1999.

The authors focus on formal in-house leadership development and training programs designed to develop leadershiptalent at all levels of the organization. The book presents three roles of leadership training and development,providing case examples for each: individual skill development, socialization of corporate leadership values andstrategic, organization-wide leadership initiatives.

• Robert M. Fulmer. “The Evolving Paradigm of Leadership Development.” Organizational Dynamics(1 March 1997): 59.

• Jack Zenger, Dave Ulrich and Norm Smallwood. “The New Leadership Development.” Training &Development (1 March 2000): 22.

These articles address the changing nature of company leadership development programs. The authors note that theparadigm of university-based curricula focused on the development of senior-most leaders has failed to returndemonstrable results. The authors argue that the most effective development programs occur within the organizationand focus on concrete results.

• Robert M. Fulmer and Stacey Wagner. “Leadership: Lessons from the Best.” Training & Development(1 March 1999).

The article summarizes the findings of a benchmarking study of best practices in leadership development. Among thefindings of the study is that effective leadership development programs are closely aligned to business objectives andrely on real-time business issues as the basis for development.

• Hay Group. “What Makes Great Leaders: Rethinking the Route to Effective Leadership.”http://www.haygroup.com/whatsnew.asp (1 September 2000).

This report summarizes the leadership practices of Fortune’s “Most Admired Companies.” The report concludes that,compared to their peers, these companies place a stronger emphasis on ongoing development efforts that aresupported by formal reward programs.

• Noel M. Tichy with Eli Cohen. The Leadership Engine: How Winning Companies Build Leaders at EveryLevel. New York: HarperBusiness, 1997.

The authors examine the characteristics of “teaching organizations”—organizations in which leaders are activelyinvolved in the development of future talent. The book addresses General Electric’s executive development centerand includes descriptions of other corporate leadership development practices.

91Selected Bibliography


Selected Bibliography

Beeson, John. “Succession Planning: Building the Management Corps.” Business Horizons (1 September1998): 61–66.

Burke, Lisa A. “Developing High Potentials in the New Business Reality.” Business Horizons (13 March1997): 18+.

Chambers, Elizabeth G., et al. “The War for Talent.” McKinsey Quarterly (Number 3, 1998).

Cope, Faye. “Current Issues in Selecting High Potentials.” Human Resource Planning (September1998):15+.

Corporate Leadership Council. Challenges in Managing High-Potential Employees: Results of the Council’sMembership Survey. Washington: Corporate Executive Board, April 2000.

Fulmer, Robert M. “The Evolving Paradigm of Leadership Development.” Organizational Dynamics(1 March 1997): 59.

Johnson, Mike. “Building and Retaining Global Talent: Towards 2002.” Economist Intelligence UnitPublications (1998).

Larsen, Henrik Holt, et al. “High-Flyer Management Development Programs.” International Studiesof Management and Organization (Spring 1998): 64–90.

Leslie, Jean Brittain, and Ellen Van Velsor. A Look at Derailment Today: North America and Europe.Greensboro: Center for Creative Leadership, 1996.

McCall, Morgan W., Jr. High Flyers: Developing the Next Generation of Leaders. Harvard Business SchoolPress: Boston, 1998.

Oliver, Judith. “The New-Look Fast Track.” Management Today (March 1997):86+.

Zenger, Jack, Dave Ulrich and Norm Smallwood. “The New Leadership Development.” Training &Development (1 March 2000): 22.

toward effective management of high-potential employees

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