Surprising Triths About Managing Top Talent

FROM RISING STARS TO SUCCESSFUL LEADERS

2010 The Corporate Executive Board Company. All Rights Reserved.CLC6613410SYN

www.executiveboard.comClient Site: www.clc.executiveboard.com

CORPORATE LEADERSHIP COUNCIL

CORPORATE EXECUTIVE BOARD

From Rising Stars to Successful LeadersIdentifyanddevelopyourtoptalentwithrigorousprogrammanagementbasedonprovenbestpractices.

Executive Summary

Most companies have some type of program designed to nurture their rising starsthe high-achieving individuals who will drive the business forward. However, few organizations have a rigorous, technology-based process for managing these high-potential (HIPO) employees and developing them into the next generation of leaders.

Its no wonder. Nothing like that existed in the marketplace. Most companies still manage their most valuable people with a hybrid of niche software, desktop tools, and manual processeswith little visibility across functional areas of the program or the enterprise.

CLCPro-High Potential from the Corporate Leadership Council changes all that. This hosted solution provides an integrated technology platform for:

Accurately identifying the best HIPO candidates; Creating and managing high-value development plans that improve performance and retention; and

Measuring and benchmarking program outcomes against internal targets and world-class organizations.

At a time when HIPO employees are disengaging from their employers in record numbers, organizations need to reassess their current approaches for managing these people. CLCPro-High Potential provides the foundation for a consistent, proven process based on years of research into HIPO program best practices.

The right program management platform can accelerate the performance and trajectory of top talent and generate the right types of workforce outcomes, while focusing budget dollars on the right people and the most high-value development experiences.

CLC HUMAN RESOURCES




Contents

The Surprising Truths About Managing Top Talent 1

The Challenges Facing Todays HIPO Programs 2

ItCanBeDifficulttoAccuratelyIdentify HIPOEmployees 2

ItHasBeenDifficulttoKnowWhich ProgramDirectivesAreEffective 2

FewOrganizationsHavetheTechnologyFramework toSupportanEffectiveHIPOProgram 3

An Integrated Technology Platform for Managing HIPO Programs 4

SoftwareandServices 4

A Guided Tour of CLCPro-High Potential 5

IdentifyYourHIPOEmployees 5

NominateHIPOCandidates 6

CalibratetheHIPOCohort 7

FinalizetheHIPOCohort 8

DevelopYourHIPOEmployees 8

AssessCompetencies 9

AssignExperiences 9

MonitorProgress 10

TheHIPOProfile 1 1

EvaluatetheEffectivenessoftheHIPOProgram 12

AConfigurableSystemtoMirror YourHIPOStrategyandGoals 14

Closing Thoughts 15

About the Corporate Leadership Council 15




1

From Rising Stars to Successful LeadersHowtoIdentifyandDevelopYourTopTalent

The Surprising Truths About Managing Top TalentThere are employees in your organization who are capable of rising to and succeeding at a more senior, critical role. These are the ones who go above and beyond what is expected of them. They have what it takes to advance the organization. Business leaders naturally view these individuals as more valuable than the average employee. In the words of an HR leader at a technology firm, These are the people who will launch new businesses, find new ways to strip out costs, build better customer relationships, and drive innovation. The future of our organization is in their hands.

High-quality leaders drive future growth and opportunity. Organizations that successfully identify and develop their HIPO talent will enjoy direct financial performance advantages over their peers.

These rising stars and emerging leaders are critical to the organization. However, only a small segment of employeesroughly one in 10truly has the potential to succeed at the next level.

Who are these select individuals? What programs will have the most impact on retaining and developing this next-generation cadre of leaders? How can you determine whether your investments in HIPO programs are producing the expected results and value?

Since 2004, the Corporate Leadership Council has been asking those questions. Working directly with human resources (HR) officers, we examined current practices in the management of top talent to identify what works and what does not. The study included more than 20,000 employees indentifed as emerging stars in more than 100 organizations worldwide, exploring how they viewed their employers, how they were managed, and how they responded to changes in the economy.

Across industries and countries, in both boom and bust times, the findings were consistent and disheartening. Although most organizations value their top talent and have some kind of HIPO program in place, these efforts have not delivered much in the way of results. Among the findings:

Fewer than one in three organizations reported reaping significant returns from investments in HIPO employees.

Nearly 40% of internal job moves made by people identified by their companies as high potentials end in failure.

More than half of organizations indicated that the failure of many executives after promotion posed a serious challenge to the success of the business.

Existing HIPO programs seem to be failing not only the companies, but their highest-value employees as well. In a recent survey conducted by The Corporate Executive Board, one in three emerging stars reported feeling disengaged from the company. That means they are not putting their best efforts into the job. Four out of 10 have little confidence in their coworkers and even less confidence in the senior management team.

Even more striking, 12% of all the HIPO employees in the companies we studied said they were actively searching for new jobs. One in four expects to leave within the next 12 months. Their skills make them more attractive on the open job market, and they know it. As the economy rebounds and the labor market warms up, organizations may see their most promising employees take flight in large numbers.

40% ofinternaljobmovesmadebypeopleidentifiedbytheircompaniesashighpotentialsendinfailure




2


The Challenges Facing Todays HIPO ProgramsSixty-eight percent of organizations have some sort of HIPO program in place. These programs are usually organized around an annual nomination process, coupled with leadership development activities that range from traditional training to rotations.

With such programs in place, why do companies continue to struggle with their pipelines of top talent? What distinguishes the organizations that have best prepared their rising stars for post-promotion success?

Corporate Leadership Council research shows that several strategic and operational challenges hinder organizations.

It Can Be Difficult to Accurately Identify HIPO Employees

Companies often assume that their HIPO employees are their highest performers, but that is not necessarily true.

In fact, only 29% of all high-performing employees have what it takes to excel at the next level of the organization. Other commonly used indicators of potential, such as experience as a people manager or tenure at the organization, are even less effective at predicting future success.

In actuality, what sets HIPO employees apart from high-performing ones is the presence of three key attributes:

AbilityThe intellectual, technical, and emotional skills (innate and learned) to handle increasingly complex challenges

EngagementThe level of personal connection and commitment the employee feels toward the firm and its mission

AspirationThe desire for recognition, advancement, and future rewards, and the degree to which the employees desires align with the companys plans for him or her

Without significant amounts of all three, employees are far more likely to fail in the next, more critical role. High performers with low levels of aspiration still have a 44% chance of success at the next level, but high performers with deficiencies in ability and engagement have almost no chance of being successful in the new position.

That means that a HIPO program that targets the companys current high performers could be throwing resources and false hopes at the wrong individuals.

It Has Been Difficult to Know Which Program Directives Are Effective

Of the more than 300 strategies, programs, and interventions the Council examined, fewer than 80 truly build employee potential. Some, such as frequent business unit rotations and frequent changes of manager, can actually undermine potential. That means that many HIPO programs are spending money on initiatives that have little or no return. Without systematic assessment and analysis of the HIPO program and population, it is hard to determine which activities drive value and which do not.

Ability

Engagement

Aspiration

CLC Human Resources Model of PotentialA high-potential employee is someone with the ability, engagement, and aspiration to rise to and succeed in more senior, critical positions.




3


Few Organizations Have the Technology Framework to Support an Effective HIPO Program

For many organizations, HIPO programs are managed with a mix of niche software solutions, renegade spreadsheets, and manual processes. HIPO data is captured in incompatible systems and inconsistent formats. One program manager describes a burdensome process of locking herself in her office with a bookshelf of binders, each as thick as a dictionary, spending days sifting through and updating data on the organizations HIPO pool.

This HR manager is hardly alone. Two-thirds of Corporate Executive Board members report that they have no targeted technology to support their HIPO program or population. Some 71% of members indicated that they need significant software support for this activity, and 81% said they expect to make new investments in HIPO programs and technology in the next 12 months.

What has been missing is a solution that supports rigorous HIPO program management across the three key functional areasidentification, development, and evaluationin an easy-to-use, HIPOspecific framework. That is why the Corporate Leadership Council developed CLCPro-High Potential, a hosted software solution that empowers organizations to design and manage effective HIPO programs.

While some organizations have multimillion-dollar software solutions with advanced analytics and reporting capabilities, they cannot perform simple reporting on the HIPO cohort. These systems do not know how to accurately identify them nor record the most relevant information about them.

Trouble is, technology options in the marketplace have been limited. Most human capital management systems are targeted for the workforce at large and do not recognize the special considerations of the HIPO population. Other software options have been stand-alone niche or add-on products that address discrete aspects of a HIPO program but do not integrate with each other. For example, the organization may have a tool to manage learning and development activities but little visibility into how these programs map to previously identified skills gaps or whether they contribute to future success.

Manual and disparate processes in use in most organizations today make it difficult to properly identify HIPO employees, monitor their development activities, and measure the overall effectiveness of the HIPO program.

71% ofCorporateExecutiveBoardmemberssurveyedrequiredasoftwaresolutiontomanagetheirHIPOprogram




4


An Integrated Technology Platform for Managing HIPO ProgramsSince 2004, the Corporate Leadership Council has been accumulating millions of data points from surveys with thousands of HIPO employees and managers in hundreds of organizations. This research helped confirm the need for a robust technology framework for HIPO programs and helped define a best practice framework for program management.

In designing the software application, the Council then surveyed more than 11,000 employees from 59 organizations in 29 countries and 15 industries and interviewed more than 300 heads of HR about their strategies for managing HIPO employees.

The result is an application that does not simply automate data entry and existing processes but provides the framework for new and more holistic program management. It does not merely support the day-to-day tasks of HIPO program managers; it embeds best practices and resources gained from years of research. It does not just provide the interface and repository for a better business process; it actively educates users, building their skills in this important aspect of human capital management. This is an important and unique aspect of the software. Business units with leaders who have strong HIPO management skills are 45% more likely to substantially outperform revenue targets than those with leaders with poor HIPO management skills.

Software and Services

Software: CLCPro-High Potential consolidates all essential HIPO data and program activities in one location for unified management of all three aspects of a HIPO program:

Identifying and differentiating HIPO versus high-performing employees Creating and managing high-value development plans that improve performance and retention

Measuring and benchmarking program outcomes against internal targets and world-class organizations

Application Hosting: As a hosted, software-as-a-service (SaaS) offering, CLCPro-High Potential puts these capabilities to work for your organization without the IT investment associated with in-house solutions. Data center facilities, servers, storage capacity, redundancy, security, disaster recovery provisions, software upgradesall these IT concerns are handled by the hosting provider. You configure the software to match your unique needs and get secure access on demand.

Services: The total solution package also includes access to Corporate Leadership Council subject-matter advisors, survey and assessment experts, and dedicated technical support teams, as well as real-time updates to HIPO research, tactics, and benchmarks. Advisor specialists can be particularly useful for program audits, program design recommendations, assessment reviews, and program performance analysis.

An End-To-End Tool for Managing HIPO Programs Powered by CLC best practices

More accurately identify HIPO, their capabilities, and skills requirements. Establish development programs linked to employee needs and desired outcomes. Make evidence-based, data-driven decisions about HIPO program design and implementation.




5


A Guided Tour of CLCPro-High PotentialCLCPro-High Potential was designed to be used by executives, supervising managers, and HIPO employeesnot IT gurusso the interface is friendly, intuitive, and self-documenting. Functions are logically grouped under three work streams:

The identification work stream provides guides and tools to measure an employees ability, aspiration, and engagementthe hallmarks of HIPO.

The development work stream enables you to assess skill gaps in the talent pipeline based on your leadership competency model, design development opportunities, and monitor progress for these activities.

The evaluation work stream provides a detailed dashboard of workforce outcomes, as well as metrics that indicate the value of the program and specific development activities to the targeted employees.

Navigate within and among work streams by clicking on tabs, filling in online forms, selecting from menus, and clicking hyperlinks to online tools and resources. The software requires little or no trainingonly an orientation to its capabilities. Here is a high-level walk-through of the three work streams.

Identify Your HIPO Employees

Early identification of top talent is critical to building a bench of high-quality senior executives who can execute on future strategy. CLCPro-High Potential provides a flexible, automated process for nominating the most likely candidates, validating the candidate pool by looking deeper into their qualifications and potential, and gaining consensus on the final HIPO pool.

Workflow tools streamline the process and help executives and managers implement enterprise-wide standards for identifying and assessing top talent.

A well-defined process for identifying HIPO candidates allows for calibrations and consistency across an organization.

Figure 1. The landing page for each module educates users on best practices and provides intuitive links to key steps, activities, and resources.




6


Nominate HIPO Candidates

The nomination process quickly generates a short list of candidates that management believes to have HIPO. This process can start with a simple communication deployed from the software to managers soliciting nomination based on the Corporate Leadership Council model of potential (based on ability, aspiration, and engagement). Alternatively, you can import names from your own nominee list, some other leadership model, or software application.

The solution provides configurable educational materials to assist with this process step. A nomination results dashboard helps organizations view the nominee list and all associated demographics to aid in setting up calibration discussions with other organizations or segments of the business.

Figure 2. Nominations can be captured via an included survey process or imported from another process.

Using the organizations definition of high potential, CLCPro-High Potential guides users through the process of identifying top talent. The configurable process can include deploying nomination surveys to managers, collecting data for talent calibration settings, and using built-in support resources at every turn.




7


Calibrate the HIPO Cohort

The calibration phase validates the initial short list of nominees. More rigorous assessments are conducted using configurable assessment surveys to managers and/or imported from some other, existing data source of the organization.

Once nominee data is collected, an interactive grid displays candidates rankings relative to each other on various dimensions. For instance, does the nominee score high in performance but low on engagement? High in ability but low in aspiration? High in multiple attributes? The initial location of each candidate on the grid makes it easy to spot HIPO employees at a glance and, when highlighted, see their scores.

The grid can be organized into simple rankings for each dimension (such as low, medium, or high) or more detailed rankings (such as a score of 112). The X and Y axes can reflect any management competencies deemed relevant to the organizations definition of HIPO. Multiple grids can be created, so business unit recommendations can be saved and rolled up to an organizational view.

The grid visualization clarifies the relative merits of the entire HIPO candidate pool and facilitates discussions in broader context. For instance, a direct manager may feel his or her candidate shows superior performance and potential, but another manager may say, I saw his rsum on a job search Web site. As the discussions unfold, you can physically move nominees around on the grid, click on an icon to drill down to individual details, and ultimately, come to consensus on the best candidates to bring into the HIPO program.

The calibration workflow facilitates discussions among key stakeholders and others to ensure that HIPO assessment criteria have been applied appropriately across all nominees.

Figure 3. The calibration component facilitates discussions to convince senior leaders to approve the HIPO pool list and to communicate program decisions to employees.




8


Finalize the HIPO Cohort

The finalization stage enables organizations to effectively manage a multipart, multistage calibration and finalization process even in a distributed or global environment.

Online, real-time program management simplifies updating and tracking. Demographic summary information helps ensure a well-balanced HIPO class. (The evaluate component of the software provides tools to analyze and report on HIPO class views over time.) Online resources streamline the process of communicating program decisions to managers and employees.

Develop Your HIPO Employees

Having identified the HIPO employees, organizations must keep them on track with development opportunities that address those leadership skills and competencies most important to the growth and success of the company as well as the individual. The right development programs will:

Be tailored to match the individuals experiences, skills, and aspirations; Have employees stretch out of their comfort zones by taking on high-risk and highly visible tasks;

Focus on key leadership challenges, such as staff development, managing change, or using business analytics; and

Be achievable, taken seriously, and followed up on.

The develop work stream provides a structured framework and process to address all these needs:

Assess competencies. Build or import a HIPO competency model to assess development gaps at aggregate and individual levels and monitor progress on developing key leadership attributes.

Assign experiences. Select from a portfolio of development opportunities or add your own to build a targeted HIPO curriculum at the cohort or individual level; use built-in resources to improve the effectiveness of development conversations.

Monitor progress. Inform and notify managers or employees of critical program events, activities, and information; record the impact and results of development initiatives.




9


Assess Competencies

An organizations performance review system typically assesses an employees competencies in the present position, including capabilities that will be peripheral or even irrelevant in a future, more senior position. In contrast, the competency assessment survey built into CLCPro-High Potential focuses on critical leadership qualities. This configurable process identifies the strengths and weaknesses of each HIPO employee as well as the HIPO cohort as a whole, so you can target development opportunities where they will be most effective and needed.

Assign Experiences

Action learning, mentoring special projects, and development opportunities that have proven to be effective are embedded into the software. Organizations can customize this portfolio of development experiences and add their own.

You can easily assign development experiences to everyone or specific individuals. Quick links make it easy to communicate the assignment or view what has been assigned. Benchmarks in the system help assess and refine development experiences, so the program is continuously improving.

Figure 4. Assign experiences based on needs analysis or other priorities and track the impact of these assignments over time.




10


Monitor Progress

CLCPro-High Potential provides real-time information on the development of your key talent, enabling program managers to view progress at each key step of an individuals development experience. The solution also provides a milestone view, enabling program managers to see progress at each key step of the development experience, and drill down further into detail if needed.

This visibility improves program management, reduces the time required to follow up on outstanding activities, and ensures that HIPO employees are making progress toward the organizations objectives for them.

This component of the software can auto-generate e-mails about the development program, such as alerts to an employee or an experience owner about the need to complete a milestone.

Figure 5. View summary or detail progress on development milestones at a glance.




11


The HIPO Profile Pertinent Information About an Employee in One Convenient Location

Throughout the program, HIPO information is stored and visible in a HIPO profile. Think of it as a secure LinkedIn profile for each of your most promising employees.

The profile shows milestones, activities, and more, making it easy to closely monitor progress of each program participant. Are they on track or drifting off course? Have succession decisions been appropriate?

The organization defines rights access to this profile. Access can be only for HR, or for managers, or can be configured for HIPO access. When employees have access to a development journal section of the HIPO profile, they can indicate their aspirations with the company and take an active ownership in their own development. This portal enables employees to find all relevant information about their development program in one place, keep track of their progress, and provide feedback at key milestones.

Figure 6. A custom Web portal reduces the time and effort to communicate with program participants and gather their feedback.

IsaacLui




12


Evaluate the Effectiveness of the HIPO Program

Are development experiences producing the desired outcomes? Are HIPO employees being well served by the program? Have program investments been made in the right areas, delivering tangible returns? You can answer those questions with confidence.

Throughout all stages of the HIPO program, CLCPro-High Potential collects program data for analysis and reporting. Data can be viewed at a program- or segment-wide level, or displayed for each individual. Dashboards show progress on such measures as leadership competencies, promotion rates, participant demographics, and manager satisfaction with the program.

Program measurescost, effectiveness, satisfaction Development measuresrelevance, completion, impact Workforce outcomesretention, competency improvement

Development experiences and program outcomes can be evaluated along objective and subjective measures:

Objective MeasuresWhat were the enrollment and completion rates for a given development activity? What was the impact on HIPO employee performance? On other employees who are not in the program? What resources were applied to the activity, at what cost? What has been the effect on time-to-promotion, retention, and success rates? How do these metrics compare to other employees generally, to a target cohort group, and to external benchmarks? Objective costbenefit analysis leads to better program decisions and higher returns on investment.

Subjective MeasuresWas the experience satisfactory to participants? To stakeholders? Was it applicable to the job? Relevant? Did it contribute to a greater emotional commitment from the employee? Through a structured process and customized evaluation surveys, managers and employees can assess development experiences at the conclusion of the activity, a year later, and/or three years later. Subjective feedback from HIPO participants, managers and key stakeholders sheds insight on the perceived value of the program.

For short-range purposes, HIPO program metrics feed into quick reports for stakeholder meetings and presentations. For the longer term, these insights guide ongoing program improvements and help justify program investments.

Objective costbenefit analysis leads to better program decisions and higher returns on investment. Subjective feedback from HIPO participants, managers, and key stakeholders sheds insight on the perceived value of the program.




13


Figure 7. Higher returns on investment can be achieved by analyzing the costbenefit benchmarks for common development experiences.

View and configure reports of critical program- and employee-level metrics; benchmark measures of promotion, retention, competencies, and cost for individuals or HIPO classes against world-class organizations and over time.

Figure 8. The evaluate work stream enables organizations to gauge the effectiveness of the program as a whole as well as the usefulness of individual components.




14


A Configurable System to Mirror Your HIPO Strategy and Goals

The Corporate Leadership Council recognized that for the solution to be truly effective, it would have to reflect the unique environment of each organization. So this is no black-box system; it can be configured to match your organizations competency assessment models, development priorities, and desired outcomes.

Best practices gleaned from extensive research are built into the software, but you are not constrained to the Corporate Leadership Councils definition of HIPO, list of competencies, or the set of development activities.

For instance, you could start with the built-in best practices for identifying HIPO candidates and layer in your own suite of attributes, such as communication, tenure, and management experience. You can adapt the software to your process and refine it as you go, learning from each new HIPO activity and cohort along the way.

Figure 9. In the setup process, define how the organization wants to identify and develop its HIPO employees or use the best practices already embedded in the system.




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Closing ThoughtsThe Corporate Leadership Council has been tracking data on employee engagement for 10 years and on HIPO employees specifically for six years. The decade has been marked by a rising tide of disengagement across the workforce in general, a trend that has intensified in recent years. From 2007 to 2010, the percentage of employees who are highly disengaged has more than doubled, from 8% to more than 20%.

HIPO employees have not been immune from this trend. In fact, our data shows that rising stars have been particularly affected by the economic downturn. One in three HIPO employees admitted that they do not put full effort into their jobs daily, compared to an average of one in five employees overall. One in three is ready to jump ship. Fully 20% believe their aspirations are different from what the organization has in mind for them.

These data points alone should cause leadership teams to take a hard look at how they manage top talent or risk losing them as the economy rebounds.

CLCPro-High Potential fills the need for rigorous, technology-based HIPO program management based on proven best practices and integrated perspectives. As a complement to your existing human capital management and performance management systems, CLCPro-High Potential:

Supports a flexible and consistent process for identifying HIPO program participants Links development experiences to needs and key outcomes to drive high levels of program effectiveness; and

Provides comprehensive reporting and benchmarking to help organizations achieve desired results and make data-driven decisions on HIPO program design and implementation.

For HIPO program managers, the solution streamlines, automates, and enhances what has been a patchwork and largely manual process today. More importantly, the solution enables the organization to create a HIPO program that accelerates the performance and trajectory of top talent and generates the right types of workforce outcomes, while focusing budget dollars on the right people and the right initiatives.

About the Corporate Leadership CouncilThe Corporate Leadership Council is the human resources practice of The Corporate Executive Board Company. Founded in 1983, The Corporate Executive Board provides authoritative data and tools, best practice research, and peer insight to senior executives.

The companys 4,800+ member organizations include more than 90% of the Fortune 100 and 85% of the Fortune 500. Through this network, more than 200,000 senior executives have access to more than 300,000 corporate best practices, 1,500 benchmarking datasets, and 11,500 analytical tools to drive faster, more effective decision making across all major disciplines and business areas.

For more information, visit us on the Web at www.executiveboard.com.

Read the Corporate Leadership Council article in the May 2010 Harvard Business Review, How to Keep Your Top Talent. http://events.executiveboard.com/forms/HowToKeepYourTopTalent

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Surprising Triths About Managing Top Talent