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Identifying high-potential employees -- the very people who will lead a business to success -- is an area of increasing concern in human capital management. These are people who may be picked to lead a company, a business unit or department. Choosing leaders wisely is difficult to do.
Research and advisory firm CEB, which is now part of Gartner, found that many people identified as high-potential employees come up short. Nearly "half of all leaders who move into new roles fail to meet their objectives," and consequently, "confidence in rising leaders has gone from bad to worse."
This assessment is in a new research study of 9,000 people at 85 companies, from CEOs and managers to direct reports. The study, titled "The Power of Context in Driving Leader Success," found that leadership selection improves significantly if done within the context of the job.
Matching personality to the job
CEB used an occupational psychometric test, which has been used for several decades now in businesses, to assess workers. What's different is that CEB matched the personality profile to the specific challenges in the role.
Leadership isn't a generic quality that is ready to rise to any challenge. Some high-potential employees may be very good at growing a business through innovation, while others through margin improvement, but their testing profiles are different, said Jean Martin, a CEB talent solutions architect.
Matching the best person with the job means defining "the specific challenges that the person is going to be asked to address within that role," Martin said. In its quantitative study, CEB identified 27 contextual challenges to consider, such as discovering people who can drive performance by leading geographically dispersed teams, lead change by designing and driving new strategies and grow a business by market share. This study was cited in a recent issue of Harvard Business Review.
CEB has a new product, Leader Edge, launched in September, which includes a dashboard with red, yellow and green rankings that show who is fit to handle the most critical leadership challenges. The rankings are completed by a statistical analysis.
Written reviews aren't as reliable as testing
The people are ranked from those most to least fitted for a particular role. The users see the results on a dashboard that broadly shows how people rank in various categories -- red, yellow and green.
The main competition to analytical methodologies for selecting candidates may be the managers themselves.
"Generally speaking, hiring managers are predisposed to trust their experience over test results," said Dr. Billie Blair, an organizational psychologist who heads Change Strategists, a consulting firm. But these tests can be more accurate and predictive, she said.
It's easy to imagine that these dashboards, based on an analysis of test data, are causing angst. Take someone who has done everything right, who has earned the degrees and performed well. Will their ultimate selection hinge on how they appear in the dashboard?
Computer successful at picking leaders
"You don't want to ever just have a computer decide who the leaders of the company should be," Martin said, but CEB found that "this is more reliable in predicting the leader's ultimate success/failure relative performance than anything else." CEB claims a 300% improvement recognizing the right talent.
The other information that people will consider in a leadership selection, such as manager feedback, reviews and performance information, "is useful, but it is not as reliable in predicting future performance," Martin said.
The CEB study claims that better prediction of high-performing leaders translates to an increase in business performance, which, it says, is associated with increases in revenue and net profit.
The use of psychological testing may be growing. Certainly, the demand for psychologists is growing. The U.S. Bureau of Labor Statistics expects 14% employment growth in this occupation through 2026. The average growth in all occupations is expected to be 7%.
What do talent management systems accomplish?
Don't lose your best talent
Employee metrics improve operations