We were overwhelmed by interest in our webinar this week on Performance vs. Potential (http://www.psylutions.com.au/research.html#news). This topic came out of our Talent Management research where we found that when identifying key talent, organisations take into account their performance (performance reviews, key performance indicators) but don’t necessarily consider whether the employee has the potential to develop. Interestingly, when our webinar attendees were asked “What is more important when identifying talent?” 95% identified potential as more important, with only 5% indicating performance was more important. Given that the aim of identifying key talent was often to engage them in a talent initiative, whether it is a leadership program, mentoring, or exposure to senior leaders, not taking account of their potential can be a major factor that impacts upon the success of such initiatives.
But let’s take a step back. What is potential? Whilst there are lots of different terms that have been used to describe potential and how to measure it (learning agility, growth factors), it refers to ‘below the line’ motivations and preferences that are more difficult to observe and measure. People with high potential are capable of learning and ongoing development, and have the resilience and adaptability to cope with and thrive in changing environments. Having high potential is becoming even more important in the current economic climate of uncertainty. With an uncertain future, how can organisations possibly plan ahead and develop strategies to ensure success if they don’t know what is going to happen? How will they know what critical skills and roles they require to meet future demands? The constant here is change, and having a workforce that is flexible, resilient, and capable of learning and development is critical. Especially in light of the current skills shortage (that is only going to get worse as baby boomers start to retire), it’s getting more and more difficult to find the right candidates with the right experience. Instead, organisations will need to change their mindset and look for candidates that can learn and develop quickly, or in other words, that have high potential, in order to fill key roles.
Interestingly, in our research only a few organisations referred to potential when they defined talent, with most defining talent as current performance and technical expertise. Even if they did refer to potential, this didn’t necessarily translate to measuring potential when identifying talent. And if organisations did measure potential, it was most likely through manager nominations or talent committees, which are more subjective measures. In this way, measuring potential was actually measuring performance, as managers used their ‘gut feel’ to determine whether they thought someone had potential. Given that our ‘gut feel’ or instincts are informed by our experiences, in this case the managers are likely to have been informed by their experience of the employee and their performance when determining their level of potential.
A good way to conceptualise the difference between performance and potential is to think of a caterpillar. Imagine you have never seen a caterpillar before, and know nothing about this creature. Just by looking at it, and watching it move around (i.e., it’s performance), what would you predict about its future behaviour? Would you predict that it has the potential to be able to fly? Just like in people, the underlying potential of the caterpillar to become a butterfly is difficult to measure.
So how do you measure potential? In addition to more subjective measures such as manager nominations and talent committees, putting employees through assessment/development centres, psychometric assessment and behavioural interviews can all add more objective data to your understanding of their potential. By measuring their resilience, flexibility, motivation, learning preferences and capability, you can get a more holistic view of their potential, and be better placed to make decisions about who you engage in talent initiatives, and get the best return on your investment by ensuring that those on leadership programs, engaging in mentoring and being exposed to senior leaders are motivated to develop, and have the capacity to get the most out of it.