Why Performance Does Not Equal Potential

Welcome to the third stop on our journey in the cloudy country of Potential. As pointed out in previous posts, this has become a real key concept in HR in general and talent management in particular. With disruptive change being the new constant for organizations, HR has shifted a significant part of its focus from assessing what employees have accomplished in the past, to what they could accomplish in the future.

Or, so it is said. Reality is somewhat less flattering, which is not so strange if we take a step back to look at the concept of potential. In a nutshell, potential denotes something that has yet to realize. This something is, by definition, not observable in the here and now. Instead, you have to use some kind of indicator to assess its probability. In short, you have to make a prediction. Now, if you were a manager charged with assessing the potential of your subordinates, which would be your most readily available indicator of how someone will perform in the future? Probably, their past performance.

This amounts to one of the most common fallacies in talent management. Research has shown that managers, when assessing employees’ future potential, keep sliding back into past performance (Hewitt, 2008; Rogers & Smith, 2007). There are, however, several important reasons for why current or past performance does not equal potential. Here are some of the core ones.

Potential is about doing something new. Anyone who has taken Psychology 101 is familiar with the motto “the best predictor of future behavior is past behavior”. That can very well be true, but only if situations remain relatively constant. When you are assessing potential, you are assessing the person’s ability to take on different tasks and roles than today – usually more complex and demanding ones. Walter Mischel, nowadays more famous for The Marshmallow Test, showed several decades ago that past behavior is a pretty lousy predictor of future behavior if that future involves significantly different situations (Mischel & Shoda, 1995). Of course, past performance is not unrelated to potential, but it is far from sufficient.

Not everyone has equal opportunities to perform. As pointed out in a vast literature, performance is not only about ability and motivation – it is also about opportunity. A person could have immense potential, but be held back by e.g. the wrong manager, a non-supportive environment, or a bad-fitting role. A sharp and fair assessment of potential must be able to take this into account. For instance, if a certain employee has many of the foundational factors for potential in place – such as personality and general mental ability – consider moving that person to another unit, role, or team, that you think would be a better fit (see e.g. Silzer & Church, 2009).

Development needs reveal themselves when the bar goes up. This is a classical case when it comes to the group usually referred to as “junior top talent”. In their first one or two jobs, they often live well off their intelligence, drive, and general social skills. This usually also earns them a reputation as “stars”, that managers are swift to promote. Potential weaknesses, e.g. perfectionism, sensitivity to criticism, or narcissism, are often overlooked because they are not critical at this level. However, things may change once these individuals get into a role that is in some way qualitatively different – for instance, moving into a people leader position, or moving from the operational to the strategic level. This has been identified as one of the main reasons for why so many promotions decisions fail (some estimates say over 50 percent; e.g. Burke, 2006; Hogan & Hogan, 2001).

As the above argument shows, confusing performance for potential is as risky as it is common. This of course begs the question: If not past performance, then what? Next week, we will delve deeper into that question.

 

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Potential for What?

Welcome back to the series on potential, this enigmatic concept that is nowadays so central to organizations’ talent management. As promised, we will spend today’s post on the logical follow-up question “potential for what?” When we say someone has potential, do we mean to become the next CEO? Or to take a little more responsibility in his or her department?

Let us first state one thing loud and clear: In the broadest sense, of course everyone has some kind of potential. All of us can develop, learn new things, and stretch ourselves to master something we did not master yesterday.

The question is, then, why should it be important for organizations to highlight some people as having “more” potential than others? One answer might be that companies should talk less about high and (particularly) low potential, and more about different kinds of potential. It is certainly useful for organizations to try to forecast who is likely to develop into what, but that also calls for a well thought out answer to the question “potential for what?”. Most organizations that have a mature talent management have realized this, and employ a multifaceted definition of potential.

To begin with, potential can be more or less generic. Decades of research have shown that there are indeed some stable inner characteristics that tend to predispose a person to a very broad range of tasks and roles. The most important ones are general mental ability and some personality factors, such as conscientiousness from the Big Five. Silzer and Church (2009) called them “foundational dimensions” of potential, and argued that it is they that should be at the center when evaluating potential among junior employees. Since the specific roles that will be available ten years down the line are extremely hard to predict, it makes more sense to keep the evaluation of junior’s potential as broad as possible.

As employees progress through their careers, it becomes motivated to narrow the scope. Quite often, however, that tends to translate into a one-eyed focus on vertical climbing. According to a recent report from Corporate Leadership Council, about half of all companies define high potential as the ability to advance one to four levels within the organization. Research is now starting to criticize this “advancement only” conceptualization for being too narrow. The old pyramidal organizational structure is becoming increasingly more rare. With flatter, more team- and project-based organizations, “potential” might just as well entail the ability to take on a wider scope in one’s work, or to bridge different domains. It is far from obvious that a fulfilling career today and in the future necessarily goes upwards (Yost & Chang, 2009). Thus, as pointed out by Henson (2009), organizations should utilize the potential concept to address their various strategic needs. In many organizations, this might take the form of having multiple “potential pools”, for instance:

• Executive potential; entailing those that are judged to have the capacity and motivation to take on a role in the c-suite or just below.
• Management/leadership potential; comprising of employees that are viewed as having the capacity and motivation to take on leadership- and managerial roles.
• Functional potential; for those employees that have spent most of their career deepening their knowledge of a certain domain and are predicted to be able to take on more complex tasks and/or roles within that function.
• Highly valued; for those employees that are deemed to have a good fit with their role in terms of skill level but are viewed as highly motivated to learn and dedicate themselves to the job and organization – and should thus be afforded development opportunities within their specific setting.

These are of course only examples, but provide an illustration of how a more diversified view can often provide a better answer to the question “potential for what”? Junior talent might be best seen as more generic, but further along in people’s careers, a more “high-resolution image” is usually more useful.

As evident from this list, potential entails a motivational aspect as well as a skills-and-ability aspect. We will discuss this aspect more in the next blog post.

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Feeling High-Potential?

Would you say that you have high potential? If so, is that potential general, or related to a specific job role? Would you further say that you have “untapped” potential? How do you know?

My guess is that you find the above questions rather difficult to answer. Potential for what? Potential as in motivation and drive, or as in skills and ability? It might seem odd that such an unclear term plays a central role in organizations, but nowadays it does: Potential is a key concept in talent management and succession planning. The most common way in which organizations define talent today is “high performance combined with high potential”. If you are in the HR business, or if you are a line manager for that matter, you are already well familiar with the matrix often used when identifying talents: One axis consists of performance and the other one of potential, and only employees plotted in the upper-right corner are considered to be talents. But with or without such an explicit rating, the view that organizations and managers hold about different employees’ potential will affect these employees’ career development and working life.

So what is potential, really? In a basic sense, potential refers to “the possibility that individuals can become something more than what they currently are” (Silzer & Church, 2009). It does not equal current performance, but rather implies that a person’s traits, drives, skills, and abilities can be honed in such a way that he or she might take on a different – usually more complex – role in the future. In other words, it is a forward-looking term. When used in organizations, it usually refers to a time horizon of somewhere between three and ten years. However, that is more or less where the clarity ends. Karaevli and Hall (2003) found that among 13 companies known for their advanced people management, there were 13 different definitions of potential.

For those of you who followed the series on performance management, you already know my mantra when it comes to evaluating performance: It is notoriously difficult. However, when evaluating something that happened in the past, at least we have quite a lot of data. But imagine judging something that has yet to realize in the future. It should come as no surprise, then, that companies usually have very elaborate criteria for evaluating performance – and very few and rudimentary ones for evaluating potential. Actually, the most frequently used method seems to be managers’ intuitive impression.

As always, danger lurks in ill-defined terms. Those concepts often tend to become scenes for taken-for-granted assumptions, stereotypes, and ill-founded decisions. Still, in organizations, we cannot settle for the truism that potential is complex and difficult to define. Real, concrete decisions still have to be made about who to promote, who to send to that expensive training, and who to prepare for a senior leadership role. Thus, we have to draw on the knowledge that we have about potential to at least try and make these decisions as fair and accurate as possible. Therefore, we will spend the next few blog posts diving into three important questions about how to assess potential:

1. Potential for what? Is potential best seen as a generic or specific term? Should it be defined in relation to specific roles, or more as a general characteristic?
2. Disentangling performance and potential. A number of studies have shown that managers, when assessing employees’  potential, have a strong tendency to slide back into considering performance. We will consider how to separate the two.
3. Counteracting bias. Research shows that potential easily gets reserved for people who are similar to ourselves. But there are ways of countering this adverse impact.

Hopefully, we will walk out of this series somewhat wiser concerning the mysterious concept of potential.

 

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