Evidence suggests that organisations’ leadership pipelines are weaker than ever. A worrying 58 per cent of organisations report a significant shortage of leaders for key positions (PWC, 2013) and almost a third are unsure that their leaders have the skills required to take the business forward (Kiddy & Partners, 2020).
HR directors are well aware that poor succession planning is bad for business. Unplanned changes in executive leadership can cause a significant drop in share price and detrimentally affect organisational performance. Moreover, given the increased risks associated with making external appointments into senior positions, organisations expect to rely more on internal promotions for key positions in future.
Clearly, there’s work to be done to bolster internal talent pipelines if they’re going to deliver. Identifying who has the potential to be a future leader of your business is one of the biggest challenges facing HR and talent practitioners.
Understanding and identifying leadership potential is critical to this, yet many myths pervade this complex area. We reviewed the academic literature and interviewed 18 practicing business psychologists to identify what works, what doesn’t, and what needs to change.
This article explores four key myths and associated pitfalls which all talent practitioners should be aware of, and address within their talent management practices when it comes to identifying future leaders.
- Determining your future leaders based on past performance: Equating current (or past) performance with future capability is a mistake. Only 30 per cent of high performers are also high potentials (Martin & Schmidt, 2010), yet many organisations base their decisions regarding future leaders largely or solely on evidence of past performance. The future demands on leaders will be different, what worked in the past won’t necessarily be as effective in the future.
- Basing pipeline decisions on informal management views: Informal, unstructured assessments of an individual’s leadership potential allows biases, stereotypes and assumptions to determine high potential talent pools.
Often internal candidates get overlooked, pigeonholed due to others’ fixed assumptions about their capability, and biases such as the so-called ‘similar-to-me’ bias can lead to favouritism for candidates who are similar to existing leaders in terms of their values and habits, beliefs, demographic and cultural variables.
- Neglecting the impact of your organisational context: Many assessments of leadership potential overlook the importance of context. They assess characteristics of the individual, but fail to consider these in relation to the critical question: potential for what?
Performance is context-specific, so a leader who has succeeded in one context will not necessarily be the most effective leader in another. Assessment of leadership potential must consider how an organisation’s external environment – and the strategic, operational and organisational responses to it – will challenge their leaders in the future. Then, you must determine the mindsets and skillsets needed for leaders to adapt and succeed within each unique environment.
- Failing to support individuals to fulfil their potential: Once identified, potential is not automatically fulfilled. In fact, some studies claim that 40 per cent of high-potential promotions end in failure (Martin & Schmidt, 2010). Individuals need to be given the opportunities to stretch themselves, to learn and to develop, if they are to fulfil their potential. A leader’s potential will only be fulfilled if the right conditions are created, placing onus not only on individuals, but also on organisations to create the right conditions.
Dr Zara Whysall is research and impact director at Kiddy & Partners and associate professor at Nottingham Business School, Nottingham Trent University