The future leadership of your organization matters. Think about it. Who would be ready to lead if your CEO were to leave?
Organizations naturally want their top employees in a high-potential program, but identification processes based on performance aren’t working. You’d think that close to 100% of participants in high-potential programs would be above-average leaders, but no. More than 40% of the participants are actually below-average leaders, with about 12% in the bottom quartile of effectiveness.1 Imagine what happens when one of these unsuitable leaders advances to the C-suite . . . and then flops. Consider that the CEO alone can influence as much as 55% of a firm's overall value.2 Any degree of executive derailment, or unmanaged behavior under stress and pressure, can easily cost millions,3 not to mention indirect losses in productivity, engagement, and reputation.
Smart organizations recognize that they need a robust pipeline of talented high-potential employees ready to take leadership roles. But most are relying on performance for high-potential identification when they should be assessing potential. No wonder an estimated half of new leaders fail in a new role.3 The success of your future leadership relies on the critical difference between high potentials who seem leaderlike and those who lead effectively. By evaluating high potentials for the right criteria using the right tools, you can stop promoting the wrong people and start developing the right ones.
The Difference Between Potential and Performance
The core problem with performance as a method for identifying potential is that performance is subjective. Performance reviews are more opinion than fact, interviews merely showcase charisma, and organizational politics operate under the influence of unconscious bias. According to Trish Kellett, executive advisor of strategic initiatives at Hogan, “Too often in identification, affinity bias is given too much weight: ‘I want somebody just like me.’”
Performance and potential are not the same, and conflating them is where organizations go wrong:
- Performance refers to how effective someone seems in their current role and context.
- Potential refers to how ready someone is for an expanded role and broader context based on their objective, measurable personality characteristics and values.
“High-potential programs over focus on current performance for program selection,” said Jackie Sahm, vice president of integrated solutions at Hogan. Performing well in their current role simply doesn’t show how someone will likely behave under new circumstances with new demands. The definition of leadership potential isn’t identical for every level at every organization. The first thing to determine is potential . . . for what, exactly?
Defining Leadership Potential
The definition of leadership potential depends entirely on the context of the organization and the role. The potential to take on the next role shouldn’t be linked only to performance in the current role. High-potential employees should also demonstrate future leadership capability according to what the organization will need. But taking a future focus doesn’t mean that leadership potential is subjective. It’s possible to determine which competencies are most likely to be important for a leader in a given context and assess for those qualities.
Whenever identification is subjective, organizations risk perpetuating unfair talent management systems. Sahm said that using performance reviews to judge who has potential can bias decisions with serious consequences. “The politics of potential is not just about money spent. Who do we give opportunities to lead, and who currently does not get those opportunities?” Sahm asked. “We might ignore someone who could make the world a much, much better place to live and work.”
Personality is the best way to measure potential across organizational levels because it provides fair, accurate, and precise information about how someone is likely to lead. No, personality data can’t forecast every single little decision a leader would make. But personality does predict whether a leader is likely to make decisions using spreadsheets or intuition.
While current performance can be a prerequisite for entry into a high-potential program, candidate identification should remain as objective as possible while keeping specific, contextual organizational needs in mind. “Personality assessment is one of the most bias-free methods we can use to gauge potential during the identification process and to help develop high-potential program participants,” said Sahm.
Emergence Versus Effectiveness
Knowing how to identify high-potential employees also relates to emergent leadership and effective leadership. Successful leaders accomplish their work indirectly, not by their own effort but through their team’s efforts. The Hogan view on leadership is that leaders succeed or fail according to the success or failure of their teams.4 The difference between emergence and effectiveness concerns leading teams.
Emergent Leadership
Emergent leadership concerns holding leadership titles, advancing in rank, and seeming leaderlike. Performance-based identification methods, such as supervisor nominations, tend to recognize emergent leaders. These people may appear confident and charismatic. They’re likely interpersonally savvy, great at forming alliances, and excellent self-promoters. However, emergent characteristics alone aren’t enough to succeed at the top.
Effective Leadership
Effective leadership is the ability to build and maintain a team that outperforms the competition. Effective leaders excel at leading people, motivating others to pursue shared goals. High-potential employees overwhelmingly say that their core challenge is leading teams.5
On average, managers spend only about 7% of their time managing people.6 (An above-average leader likely gives their team more than a mere 34 minutes out of their eight-hour workday.) But the best managers quickly discover that people-focused leadership makes a team successful, according to Erin Lazarus, senior director of business development at Hogan. “To work through others, you have to know what inspires and motivates your people,” Lazarus said. “You have to balance coaching and guidance with giving up control.”
Team orientation is an excellent natural inclination for a high-potential candidate. Scientifically valid personality assessments can measure not only someone’s social and communication styles but also their drive and energy, approach to learning and solving problems, and stress tolerance. Personality data can also help high potentials learn to adapt their behavior to increase their effectiveness relative to the competition, which Hogan calls strategic self-awareness. This capacity for growth is precisely why potential requires different tools and criteria than performance. This is also why measuring both demands a more nuanced approach.
Measuring Leadership Potential
Measuring leadership potential should be based on context across managerial levels. “Potential will look different going into each role that you’re slating,” Lazarus said.
Organizations should use a competency model to measure leaders from the front line to the boardroom. Entry-level leaders need to demonstrate the basics of managing others. Mid-level and senior leadership should be measured by an organizational framework of success. In addition to having a high-performing team, they’ll need alignment with organizational values and future direction. Executives should be measured by criteria curated to their individual roles. These might also reflect how well a candidate’s strengths and challenges complement those of the other executive team members.
Succession planning throughout the talent management cycle depends on accurate, objective high-potential measurement. “Done right, personality assessment can help challenge organizational leadership’s thinking about who the leaders in their organization are,” Sahm said.
The Hogan Leadership Framework
At Hogan, we predict potential using objective data about someone’s personality and core values, which reveal how likely they are to perform well in their next role. The Hogan Leadership Framework is the theoretical underpinning of how we view leadership potential. The framework has four domains: (1) Intrapersonal, or managing the self; (2) Interpersonal, or managing relationships; (3) Operational, or working in the business; and (4) Strategic, or working on the business. Every leader takes an individual approach to each of the domains, and context determines if the approach is effective.
Leadership potential is not whether someone leads but how effectively they lead in context. “The Hogan Leadership Framework accepts the fact that leadership takes a different approach in different scenarios,” Sahm observed.
An effective leader needs to be flexible, coachable, and responsive to feedback; there’s a reason that learning agility is a criterion for high-potential identification in more than half of talent companies.3 Sahm drew a connection between coachability and humility: “Leadership requires a willingness to learn and self-correct, a tendency to focus on other people’s needs instead of your own career.”
Arguably, the most important skill for high potentials to develop is managing others. Kellett suggests that high potentials hold a project manager role to experience multiple aspects of the business. Leading a team or project also helps differentiate top performers from those who can work through others.
Engagement and Effectiveness
“For high potentials, the ability to lead a team is going to be more important than ever,” Kellett said. Why? Managing others well has a direct effect on engagement, and engagement has a direct effect on practically every organizational outcome. Between business units in the top and bottom quartiles of engagement, there is a difference in customer loyalty (10%), sales productivity (18%), profitability (23%), quality (32%), safety (63%), well-being (70%), and absenteeism (78%).6
What managers most want employees to do is drive for results.1 In other words, they want their teams to be productive. Well, productivity and engagement are connected by a straight line. Employees’ relationship with their manager has a 70% influence on how they feel at work.6
The leaders of high-performing teams tend to be highly engaged themselves. Such leaders are eager for development opportunities. More than three-fourths of job candidates said they highly valued skill development.7 “Leaders who feel personally committed are inspirational. They bring passion and fire to their work, and that motivates others,” Lazarus said.
Next Steps
The state of leadership is one of the biggest challenges in our world right now. Global CEO turnover remains high.8 Worse, more than half of early-career professionals are actively avoiding management roles.9 Current leaders are leaving the C-suite and their potential successors aren’t interested in those seats. Foresighted organizations are scrambling to address this impending leadership drought. The others don’t yet see it coming.
Developing a high-potential program that provides a steady pipeline of talented employees who are ready to lead is critical to your organization’s survival. “We as a society, given all of the technological transformation, need to emphasize leaders as team builders rather than as individual personalities,” said Kellett.
Validated personality assessments help identify and develop high-potential leaders with the strategic self-awareness to engage teams successfully. But so many organizations don’t recognize the difference between potential and performance, facing a talent management crisis as a result. “It takes better leaders to create better leaders,” Lazarus said. “That’s why we have Hogan.”
Check out Your Guide to a Comprehensive Succession Planning Strategy to build a strong succession bench.
Expert Contributors
- Trish Kellett, executive advisor, strategic initiatives at Hogan Assessments
- Erin Lazarus, MS, senior director, business development at Hogan Assessments
- Jackie Sahm, MA, vice president, integrated solutions at Hogan Assessments
References
- Zenger, J., & Folkman, J. (2017, February 20). Companies Are Bad at Identifying High-Potential Employees. Harvard Business Review. https://hbr.org/2017/02/companies-are-bad-at-identifying-high-potential-employees
- Bolinger, A., Brookman, J., & Thistle, P. (2019). CEO Effects on Firm Value and its Components. Mountain Plains Journal of Business and Economics, 20(1). https://openspaces.unk.edu/mpjbt/vol20/iss1/3
- Buckner, M., & Marberry, M. (2024, February 22). How to Identify and Grow High Potentials: A CEO’s Perspective with Proven Results. SHRM Executive Network. https://www.shrm.org/executive-network/insights/people-strategy/how-to-identify-grow-high-potentials-ceos-perspective-proven-results
- Hogan, R., & Kaiser, R. B. (2005). What We Know About Leadership. Review of General Psychology, 9(2), 169-180. https://doi.org/10.1037/1089-2680.9.2.169
- Mayo, A. J. (2023, March 8). How to Help Superstar Employees Fulfill Their Potential. Harvard Business Review. https://hbr.org/2023/03/how-to-help-superstar-employees-fulfill-their-potential
- Dennison, K. (2024, July 16). Gallup Says $8.8 Trillion Is the True Cost of Low Employee Engagement. Forbes. https://www.forbes.com/sites/karadennison/2024/07/16/gallup-says-88-trillion-is-the-true-cost-of-low-employee-engagement/
- Jeong, S. (2024, October 16). 4 Ways That Scaling Leadership Development Powers Engagement, Retention, and ROI. Center for Creative Leadership. https://www.ccl.org/articles/white-papers/leadership-development-powers-engagement-retention/
- Russell Reynolds Associates. (2025). Global CEO Turnover Index. Russell Reynolds. https://www.russellreynolds.com/en/insights/reports-surveys/global-ceo-turnover-index
- Pontefract, D. (2024, September 28). Conscious Unbossing: Why Gen Z Is Steering Clear of Middle Management. Forbes. https://www.forbes.com/sites/danpontefract/2024/09/28/conscious-unbossing-why-gen-z-is-steering-clear-of-middle-management/