Peter Drucker, often referred to as the “father of modern management”, claimed it is extremely difficult to measure potential. This is particularly true in the fast-changing world we now find ourselves in. However, there are numerous advantages to spotting and developing high potential leaders. Some of these include a stronger talent pipeline, filling more key positions with internal hires, better retention and improved progression of minorities and underrepresented groups.  So, what exactly is potential, and can it be accurately assessed? 

Leadership potential is the future performance a person is likely to achieve in a leadership role. It is a prediction of their future performance trajectory. And therein lies the major challenge – a person’s potential is dependent on a wide range of internal and external factors so measuring it is extremely difficult and prone to error. For example, factors such as career motivations, values, life changes, the presence of a mentor or sponsor, and culture fit can significantly impact a person’s potential to succeed in a leadership role. 

Most organizations use very crude and unscientific methods to spot and assess leadership potential. Some still place a disproportionally high emphasis on educational factors, favouring those from top universities or candidates with advanced business degrees when looking to hire new leaders or promote high potentials into leadership roles. In addition to the obvious biases that occur from such strategies, educational attainment and qualifications alone are generally unreliable predictors of leadership potential. They focus too narrowly on analytical intelligence and don’t consider other abilities that are better predictors of leadership success such as adaptability, perseverance, social and emotional intelligence and creative problem-solving. Other organizations promote their best technical and functional experts into leadership roles. However, there is a big difference between the abilities, behaviours, and motivations of technical and functional experts and those required to be an effective leader. As a result, this strategy often results in costly failures, including demoralised teams, unwanted turnover of talented individual contributors and performance shortfalls.   

Many organizations have adopted the well-known “9-Box Grid” to allocate talent into categories based on managers’ evaluations of performance and potential. However, many organizations never spend time defining what is meant by “potential” so measurement remains highly subjective and prone to all types of biases. Many companies also don’t stretch and develop people once they’ve been assigned a “high potential” rating. Therefore, this exercise never moves beyond a subjective rating process and does little to help the business spot, develop and retain talent. Another problem that often arises is that due to a lack of scrutiny and calibration of senior leaders’ ratings by Human Resources, the process does little to challenge old assumptions and stereotypes about what makes a good leader in the company. This can undermine opportunities to consider new and emerging leadership talents and qualities that are vital in the new world of work. It can also obstruct the progress of under-represented and minority groups into key leadership roles.     

Organizations can avoid some of these problems by putting in place a more scientific and objective process for assessing leadership potential based on the following 4 principles:

Measure their performance track record  

Many senior executives still favour traditional leadership traits like assertion, charisma and an outgoing style when looking for future leaders. However, there is little evidence that these characteristics are associated with good leadership, particularly in today’s fast-changing and complex world. In fact, they can lead to the appointment of narcissistic, self-serving and autocratic leaders who achieve short-term results at the expense of long-term sustainable growth and development of key talent. 

A far more effective approach is to measure the ability of high-potential managers and leaders to positively influence and coach others, their learning agility, and their skill in building high-performing teams that deliver great results. It is often the humble and curious grafters who show a real talent for building teams and getting the best out of others that are far more effective in leadership roles.  

To ensure a more objective measurement of current performance in these areas, companies should identify and regularly assess softer leadership behaviours as well as harder measures of performance. They should also provide opportunities for top leaders to come together at least twice a year to systematically evaluate the potential of high-potential candidates using a rigorous process to discuss and calibrate evaluations. To ensure this is a fair and objective process, we strongly recommend it is facilitated by a trained HR or external facilitator.

Apply work samples to supplement interviews and traditional tests

Despite exaggerated claims from many consultants and business psychologists, commonly used assessment methods (including personality and aptitude tests) are not a panacea as they are far less accurate in predicting future potential than in predicting performance in the short term. 

However, research provides promising findings that personality factors like high conscientiousness, openness to learning, resilience and emotional self-regulation do predict better leadership performance. Similarly, people who can think more analytically, creatively, and strategically often perform better as leaders. Therefore, well-established personality and aptitude tests should remain an important part of our toolkit to measure the potential of future leaders as they add incremental validity to objective, well-structured interviews. 

To strengthen measurement accuracy, companies should go beyond traditional tests and structured interviews, using well-designed work samples and simulations. As a result of advancements in technology (including machine learning and gamification) and behavioural sciences, the solutions on offer have never been greater. More commonly used work samples include situational judgement tests, role plays, analysis exercises, scenario challenges and strategy discussions. All these will provide you with additional insights on how future leaders are likely to handle the typical challenges and dilemmas of a leadership role.  

Give them stretch assignments 

This is one of the best ways to test potential as it provides a high potential leader/emerging leader with an opportunity to assume responsibility for challenging leadership tasks on a trial basis to see how they perform under pressure. Despite the benefits of this approach, it is often underutilized or poorly implemented. Common implementation problems include risk-averse cultures and lack of adequate delegation, inadequate coaching and mentoring and poor design and application of criteria to evaluate performance resulting in subjectivity and unconscious bias. 

Stretch projects can be team-based or individual. We typically recommend the former as these enable potential leaders to collaborate with team members and other stakeholders to overcome real business dilemmas and challenges. This enables HR and senior leaders to evaluate high potentials’ teamwork, joint problem solving, influencing and emotional intelligence, as well as their individual contribution. 

Peer feedback 

Although there is mixed evidence about the effectiveness of multi-rater feedback surveys, a robust peer feedback approach should be considered in the mix of approaches used by companies to assess potential for leadership roles. Such surveys also improve leaders’ self-awareness and self-improvement by providing valuable feedback about their strengths, potential weaker areas and ‘blind spots’ that might derail their progress. If you decide to use a multi-rater or 360-degree survey, we strongly recommend this is designed by behavioural scientists who can ensure it is well-constructed and measures behaviours that are relevant to success in leadership roles within your company. 

It is extremely tough to accurately measure the potential of future leaders and any consultant who claims otherwise is misleading you. However, this does not mean that it isn’t worth the investment to bring more rigour and science to the discovery and development of your future leaders. By combining some of the techniques outlined above, you can ensure you improve the accuracy and consistency of your assessments while at the same time providing leaders/future leaders with meaningful development opportunities. 

About the Author

James is a leadership and talent consultant, business psychologist, and executive coach. He has over 25 years’ experience working with leaders, teams, and organizations to optimize their talent, performance, and future success.

Before moving into consulting, James held corporate leadership roles in People and Talent Management in the UK and abroad with companies such as Yahoo! and Novo Nordisk Pharmaceuticals. Since moving into talent consulting and assessment design, he has supported leaders and teams globally across many sectors and geographies. Clients he has worked with include Allen & Overy, Commvault, Equinor, Graze, LVMH, Facebook, GSK, Hilton, John Lewis, Novartis Pharmaceuticals, NHS, Oracle, Sainsbury's, Swiss Re, Tesco, WSP and Yahoo! James has founded and run several ventures, including Strengthscope®, an international strengths assessment and development business, that he sold in 2018.

James has a Master’s in Organizational Psychology, an MBA, and an Advanced Diploma in Executive Coaching. He is a regular writer and speaker on talent assessment and development, leadership, and the future of work.