This post is part of a series based on the research report Mastering Talent Planning by the National Center for the Middle Market in partnership with Vistage. Download the full report here.

When it comes to talent planning, it’s not enough for your business to recognize and reward those employees who are at the top of their games right now. It’s equally important to identify and develop those with the greatest potential to lead your business in the future. These individuals are known as a firm’s “high-potential” employees or “HIPOs.” According to the National Center for the Middle Market’s latest research, the practice of identifying HIPOs is strongly associated with both overall talent planning effectiveness as well as faster revenue growth.

The survey shows that 58% of middle market companies currently identify HIPOs primarily by means of a committee or talent review meeting. But just 37% of companies say they have specific processes in place for identifying and developing these employees. Given the importance to overall company performance, it behooves companies to take a closer look at how they are managing their high-potentials.

It starts with a clear definition.

In many cases, companies first need to clearly define what high-potential means for their organization. Potential is different than performance, and this distinction can be a tough one to make. Keep in mind that high-potential is an indicator of likely future value to the organization. So even if a person is not seen as performing at a particularly high level in their current position—maybe because they’re relatively new to the post—they can still be viewed as high-potential. In other words, they may be seen as a candidate to take over a department, but they might not be ready for a few more years.

Next, set some criteria.

Often times, executives and managers have a gut feeling about a specific employee’s future potential. While those feelings shouldn’t be ignored, having some criteria to gauge them against can help ensure your business is singling out the right employees as HIPOs.

Consider these guidelines when developing your list of HIPOs:

  1. Only include associates who have been on board for at least a year, since everyone is seen as having potential when they are first hired.
  2. Consider whether or not the employee has at least a two-level stretch within a three-to-five year timeframe.
  3. Identify a specific target position for the employee to fill (i.e. VP of Human Resources) so leaders can better consider and asses the employee’s potential for that specific role.
  4. Gain consensus about the employee’s potential from the second level manager and other leaders in the organization.
  5. Be at least 90% confident that the employee has the potential to fill the target position within the three-to-five year timeframe.

Put your HIPOs on the right path.

When you have your list of high-potentials ready, now you need to give them every chance to accomplish all that you envision for them. The Center’s research shows that having a process in place to develop high potentials is one of the most important things companies can do to improve their talent planning efforts, but few middle market firms believe they are currently doing this well.

Those businesses that do excel at developing their HIPOs make an effort to openly communicate with these associates. They also tend to have a consistent and structured process in place for identifying HIPOs early in their careers, which includes frequent meetings to review skills and greater involvement from employees in the evaluation process.

Incentives are structured differently for HIPOs as well, and HIPOs often have access to job and career opportunities that may not be available to their peers. This may include more access to the company’s top brass, an accelerated career path, and the opportunity to work with an assigned mentor.

Clearly, organizations benefit tremendously from having the best and the brightest in key leadership roles. By identifying your HIPOs now, your company will be much better prepared to continue growing and succeeding in the years ahead.

For more details about HIPO identification and development and other essential talent planning activities, see the Center’s full research report, Mastering Talent Planning: A Framework for Success.

Next in this series
Post 4: Who's next in line: Does your organization have a well-defined succession plan?

Others in this series
Post 1: What is Talent Planning? And Why Does it Matter?
Post 2: The ABLE Framework: An Approach for Upping Your Talent Planning Game

This post is part of a larger research project by the National Center for the Middle Market. Get the full picture through the resources below: