The best companies don't simply live in the moment. They look one year, two years, five or 10 years down the road for business opportunities, both for the shorter term and the longer. They have a strategy for more than just the here and now.
Moreover, better-performing firms apply that same long-term thinking to people management. A report released in August by the Boston Consulting Group and the World Federation of People Management Associations stated that high-performing companies are twice as likely as low-performing companies to make future leadership planning an integral part of people planning. They also do more to attract and develop talented people, including having a higher likelihood of maintaining programs for "emerging" as well as "high" potential employees.
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"They systematically define development requirements for high-potential employees; for example, they maintain a list of critical assignments appropriate for the development of high potentials much more often than low-performing companies do," state the authors of the report "From Capability to Profitability." Those high-performing companies, by the way, are "highly skilled in core HR practices" and experience both higher revenue growth and profit margins than their less-capable brethren.
In short, if you aren't nurturing your high-potential employees, you're missing out on an opportunity to help boost your bottom line. You're also in danger of drying up your leadership pipeline.
Beneficial Yet Challenging
Many manufacturers have recognized the benefits of investing in their high-potential employees. General Electric (IW 500/5), for example, has multiple programs that fit this definition. And comprehensive talent-development opportunities at MAG IAS include an accelerated leadership program. Candidates for the leadership program have been identified as employees who have the potential to assume executive-level leadership positions within MAG.
"We assign a general manager or a top-level executive to that person as a mentor. They get structured and challenging assignments to stretch them as a leader," as well as leadership training, explains Bill Horwarth, president, MAG Americas. "We give them feedback and coaching as they go, and we offer them graduate-level training."
Last year, Jason Inc. launched a program to better identify and groom high-potential employees, with the aim of meeting changing business needs and improving competitiveness. Acquisitions and organic growth are spurring potential leadership opportunities the company wants assurances it can meet.
Still, 27% of large companies make little or no effort to identify their high-potential employees, reports a survey conducted in 2011 by AMA Enterprise, a division of the American Management Association. It's ironic, an AMA Enterprise executive noted at the time, that so many companies are "ineffective at the first step, which is finding the most promising employees" while struggling to build their leadership pipeline. From that same survey, one in four firms also said they are ineffective in retaining such workers.
See Companion Story: 7 Keys To Success in Developing High-Potential Employees
Klein Steel Service falls into neither of the previously mentioned categories. Its talent management program includes the identification and development of high-potential employees, and the Rochester, N.Y.-based company also has had success retaining those employees. (Klein Steel's Rochester location is a 2011 IndustryWeek's Best Plants winner.)
Klein Steel's high-potential employee-development program complements a robust hiring process and is another component of the organization's efforts "to grow this business to where we want it to go," explains Patrick DiLaura, the company's chief talent officer.
Executives determined several year ago that such growth required attracting a higher caliber of talent, which prompted efforts by the company to raise the profile of Klein Steel as a great place to work. Additionally, the company developed a hiring mechanism to identify and recruit better talent.
That said, hiring better talent is simply step one; you'd better have means to keep them, the CTO said. "These high-potential individuals, once you have them on board, that's only the beginning. In a very purposeful way you need to be able to invest in and develop that top talent so they are ready to step into key positions when they become available," DiLaura says. "That is where talent planning comes into play at Klein Steel."
The company aims to be two people deep in succession for each senior staff member or key management position, he added.
Executive-Level Involvement is Significant
"High potential" is one of five talent designations Klein Steel applies to its exempt, salaried workforce. High-potential employees are defined as promotable by two or more levels within five years, and the designations are assigned based on: past demonstrated performance in the form of the previous two or more performance ratings; potential, based on an evaluation of skills using Klein Steel's leadership competencies as a baseline; and a factor called "learning agility." Learning agility measures how quickly employees learn and adopt new ideas, how quickly they adapt to change and how creative they are in coming up with new ways of thinking.
About 10% of Klein Steel salaried employees are identified as high-potential employees.
Executive engagement with high-potential employees is significant. Not only does Klein Steel's senior management team determine the talent designations of the exempt employees during twice-yearly talent-planning meetings, but high-potential employees, once identified, "become an asset of the executive team," explains DiLaura. The employee's manager and group executive remain as the employee's champions, but the high-potential worker becomes an asset to more than just his department.
Once employees are designated as high potential, they "become an asset of the executive team."
-Klein Steel Service Chief Talent Officer Patrick DiLaura
Klein Steel's senior management is also heavily engaged in building the development plans for the high-potential employees. It seems a logical pairing, given that senior leadership, as part of annual strategic planning, determines the human-capital needs that will be required to execute the strategic plan.
The high-potential employees have both formal and informal opportunities to provide input into their development plans as well. As DiLaura notes, "it's got to be in the mutual interest of the team member and the organization to work."
The development plans have specific goals and timelines assigned to them, although they are highly customized to the individual, DiLaura says. The plans may include formal education if an advanced degree is required, assignments in different functional areas of the business, additional technology training, placement on a special project, or other opportunities.
Measures of Success
One goal of the high-potential employee-development program is to retain top talent. To date, DiLaura says the company has not lost a single employee who was designated as a high potential.
Additionally, "we have promoted multiple people who have been part of this exercise, and they are now working in some pretty key roles. Before we started doing this exercise, we didn't know what we didn't know in terms of lack of depth on our management bench," he says. "We have made significant strides in terms of identifying and closing those gaps. I think we feel a whole lot more confident today in terms of our readiness to execute our mission."
However, he provides words of caution to companies that may be considering implementing a program for high-potential employees. For high-potential employee-development programs to work, it is important that everyone buys into it, DiLaura says. "If it is just another thing you are asking senior leadership to do, and you're not following through on establishing development plans, on communicating with those high- potential team members, on moving them in a deliberate fashion from one role to another; if you are not doing those things and it becomes just another administrative exercise, you might as well not do it at all.
"Because the whole idea here is to position the company for success," he concludes.