Identifying, assessing and developing future leaders is one of the most important actions managers can take to drive business growth.  When done well, finding the best and brightest talent yields significant benefits for the employee, the manager and the organization. When done poorly, it can be demotivating for employees, damaging for the corporate reputation and even disastrous for performance.

Focusing on leadership potential sounds great in theory, and most managers (and even training professionals) have an implicit model in their head as to what a high-potential employee looks like. Unfortunately, determining leadership potential can be challenging.

First, those implicit models can be fraught with biases. For example, some managers might think that a high potential is “someone who looks like me.” Or even, “someone who looks like our current leaders.”  Second, implicit models can be based on personal biases and/or incorrect beliefs and assumptions about what it takes to be a future leader.

Why Is Determining Potential So Difficult?

As much as managers and leaders would like to believe that leadership potential is a simple concept, years of theory, research and best practices in organizations have indicated otherwise. Understanding leadership potential is complex. It reflects a combination of knowledge, skills and abilities (KSAs) that are not universally present in every employee, nor always observable without a strong working knowledge of what to look for in others.

Fortunately, researchers and practitioners in the field of Industrial-Organizational (I-O) psychology have focused considerably over the past decade on answering these important questions. There is now a clear way to understand, measure and develop the components of leadership potential: The key is knowing what to look for and how to do it well.

What Is Leadership Potential?

One of the reasons managers and leaders get confused when discussing leadership potential is because they confuse it with more common ideas regarding human potential. It’s best to think of potential in three flavors: general potential, leadership potential and destination potential.

General potential is for everyone. All employees have the potential to grow at some level. This definition reflects an organization development (OD) and learning and development (L&D) mindset. It’s why providing training for all employees is critical. Managers often confuse this with the other categories of potential as it’s a nice concept overall and not exclusive.

Destination potential is specifically tied to talent management and succession planning efforts. It reflects a preparedness for a targeted senior leadership role or destination. It’s a higher-level idea meant for targeted planning. Managers probably won’t be using this daily, unless their role is in talent or they operate at senior levels in their company.

Leadership potential is the most important one for most managers. Basically, these are the clear indicators or predictors of future leadership effectiveness at higher levels in the company. Not everyone has leadership potential for more senior roles. Often, this translates to the common definition of a high-potential employee as having “two-level jump” which is a great classification approach. But managers should be asking themselves what is that judgment based on today, and what should it be based on going forward?

What Should Managers Be Looking for To Identify Leadership-Potential?

Leadership potential can be best framed in terms of a core model called the “Leadership Potential BluePrint.” Based on 50 years of science, research and best practices in I-O psychology, it synthesizes leadership potential into a simple set of dimensions that can be applied across organizations.

By using this model, managers can determine which employees are likely to have the highest leadership potential. Managers should be looking for behaviors (via observation, one-on-one interactions and in team settings) for employees that regularly demonstrate the following:

• Effective interpersonal skills to effectively manage and work with others (Foundational). This can clearly be seen across a variety of exchanges and meetings but can also be informed via personality tests and measured via behavioral measures such as 360-degree feedback.
• The ability to “connect the dots” and think broadly and strategically about the business, as well as the external world around them (Foundational). Often, this is easy to spot in meetings, presentations and ideation sessions. Ask yourself: Do the employees think beyond their current focus? Do they only have tactical, tunnel vision when approaching work, or do they show reflective thinking? Cognitive tests and business simulations can help you measure these components.
• Ability to learn from experiences and apply those learnings to new situations (Growth). This set of skills is straightforward and easy to observe in action in daily work, presentations, operations and meetings. Ask yourself: Do employees demonstrate their capability to seek new knowledge, adapt to changes, overcome obstacles and learn from prior events and experiences? If they have worked on a special project, solved a strategic problem, or been through formal learning or leadership programs, do they show their ability to apply their new knowledge? This can also be measured via a variety of tools both broadly and focused on learning agility specifically.
• Ambition, motivation and drive to deliver great results and have an impact at more senior levels (Growth). This is demonstrated by taking on work above and beyond their current role and/or of those more senior to them. This facet comes out because they ask for it or by necessity during times of crisis or changes in team composition/staffing. If an employee takes on another person’s role on top of their own job, or picks up their boss’ role for a time period during a change, and they do it well, they are demonstrating leadership potential. Too much ambition, however, can be a challenge and an indicator of potential derailer behavior in the future (e.g., getting ahead at all costs). Look for a balance.
• Core leadership capabilities for success in your organization (Career). This includes standard competencies such as influence skills, developing others, collaboration, self-awareness, team building, coaching and giving feedback. If your organization has a formal leadership model, these would be the competencies and behaviors to incorporate into your observations here. This can be seen broadly or via more behaviorally-based tools such as 360-degree feedback measures and employee surveys.
• Key functional skills needed for future success in your organization (Career). These skills may be highly strategic in nature, such as having a digital mindset or having deep analytics skills. Other, more traditional approaches to functional capability are also common, such as having a background across multiple functions or subfunctions to develop strong general managerial talent (e.g., in sales, marketing, operations, finance, HR, etc.). These skills can be measured by reviewing the employee’s experiences and testing for learnings via competency measures and structured interview techniques.

How to Formally Assess for Leadership Potential?

Generally speaking, the best-in-class approach to identifying leadership potential is done through what is called the “multi-trait, multi-method” approach. This involves using the science of leadership potential to measure the different facets of potential cited above via different types of tools that help to minimize biases in the collective. By combining self-assessments (e.g., personality; simulations) with behavioral ratings from direct reports, peers and managers (e.g., 360-degree feedback), and interpersonal techniques (e.g., structured interviews; assessment centers) the manager and organization can obtain a true balanced picture of an employee’s future potential.

This is why many organizations with leading edge talent management functions are using a suite of assessments for their high-potential identification and development efforts. A recent benchmark survey I conducted in 2022 indicated that even with the pressures of the global pandemic, 86% of large companies with strong HR and talent management functions are currently using assessments (up from 70% in a similar survey in 2012)”PepsiCo, for example, has been using this approach with their assessments and the BluePrint as part of their award-winning LeAD program for over a decade.

High Performers Are Not Necessarily High Potentials

Now that the critical dimensions of what to look for in observing the indicators of leadership potential have been covered, it only leaves one question. Where is employee performance in this mix? Despite the popularity of the 9-box Talent Model in practice, managers need to keep one important point in mind: Past performance does not equal future leadership potential. Performance is not synonymous with leadership potential, nor should it be used as a measure or indicator of leadership potential.

Performance is best thought of as a “gatekeeper” role to leadership potential and not an indicator or predictor.  Just because someone is really effective in their current roles does not mean they will be successful in future roles at more senior levels with greater responsibility and accountability. There are more effective ways to compare organizational designated potential (what the manager/HR thinks) with data-based potential (based on actual 360 feedback, formal assessment results, etc.). Compare the perceptions of potential with actual predictive measures of potential. Leave performance out of the potential discussion.

In Closing

The bottom line is everyone has potential — but not everyone has leadership potential. Managers who are looking to add rigor to their process can look for key foundational, growth and career dimensions in their day-to-day interactions and meetings with their employees. For those who want to be more data-driven and have the resources available, building a more formal assessment process is the way to go.