This article was originally published in Talent Culture here.
With 6 million job openings and about half of U.S. employees contemplating a job change, the hiring market seems straightforward. But before launching a broad search for candidates, take an objective look to evaluate how well your company leverages its internal talent pool.
Promoting from within has obvious advantages. For one thing, internal candidates know the organization and have a proven performance record. This means they can hit the ground running because of their familiarity with the company culture and the relationships they’ve built.
Filling a job with a high-potential internal candidate is also typically faster and more cost-effective. Beyond the efficiencies related to onboarding and training, there’s an overall cost consideration. A study by the University of Pennsylvania’s Wharton School says external hires in the investment banking industry earned up to 20 percent more than employees who were promoted to a comparable position. However, the performance of the promoted candidates significantly outpaced that of external hires in their first 24 months on the job.
Even though this is widely accepted as a best practice, it’s harder to implement on the ground. The reality is that many companies put more emphasis on managing attrition than on improving retention. As a consequence, your ambitious high-potential employees may look elsewhere for their next challenge. In fact, research by the Corporate Executive Board found that 1 in 4 high-potential employees plan to leave their company within a year. By actively cultivating these valuable employees and accelerating their development, you will enhance employee motivation and engagement.
A culture of cultivation
Creating a high-potential talent pool is not a one-and-done event. Rather, it’s an ongoing endeavor that requires a strong partnership between executives and HR. A successful high-potential program operates both cyclically and periodically as an integrated part of company culture, with internal mobility, mentorship and development at its core.
If your company already has an established program, build in regular opportunities to revisit and refresh the high-potential employee success profile. Organizational goals evolve quickly in a dynamic marketplace, and high-potential talent profiles must stay current to remain valuable.
When mobility is woven into the culture, companies establish clear paths for employees and recruiters alike. Along with strategic identification and development of high-potential employees, some organizations go a step further to discover capabilities and build crossover skills. Other companies offer programs to help employees broaden their experience through job rotations across different departments.
5 steps to build your program
Establishing a culture of hiring from within requires a strategic commitment to nurture your high-potential employees. These five considerations will help you successfully cultivate your talent pipeline.
- Develop a forward-looking profile
Before you develop assessments to identify high-potential employees, step back and refine your definitions. What are the critical roles within the company today? How will those roles change in the years ahead? What skills and capabilities will be required? The answers to these questions set the foundation for developing a profile of the capabilities required for future success.Build on this profile by looking beyond your company’s current needs. What you need are employees who will meet and exceed the skills the company needs in the future through a combination of leadership development programs, focused mentoring and coaching, and stretch assignments. - Establish meaningful metrics
Once you have a profile of the necessary capabilities, build an assessment process to objectively evaluate and identify talent.Consider assessing drive, people skills and abilities. Your profile will serve as the guide on what to measure. Just be certain to do it in an objective, reliable and contextually relevant manner that reflects the organization’s needs. Most importantly, keep it data-driven by utilizing analytic tools to minimize bias and document your findings for later use. - Narrow the field
It’s easy to get excited and identify as many high-potential employees as you can, but trying to cultivate too many employees at once is a mistake. Instead of casting the widest net possible, use a two-level screening process to home in on a small, critical group of employees who are truly differentiated from the rest.While the exact number will vary by the organization’s needs, aim for 2 to 10 percent of employees. In many cases a smaller number makes sense. This way, talent leaders, mentors and sponsors will have more time and energy to spend accelerating the development of the best of the best. - Map a leadership development journey
Nurturing high-potential employees starts with identifying individual needs and potential sponsors. Align each person with a sponsor who can help her navigate the organization and challenge her along her developmental journey. In effect, the sponsor becomes a champion for the individual, ensuring the person is part of the right projects, builds relationships with a range of people and takes on stretch assignments.Secondly, identify developmental needs and goals for each high-potential employee and support each of them in building his or her own development plan. The plan most likely will include very individualized experiences as well as more systemic or cohort-based opportunities.The primary objective of customized leadership development journeys is to prepare employees to take on their next roles. But no two people’s experiences and career paths are the same. Recognize this by getting creative when it comes to development. Help employees take full advantage of training options, and identify lateral or atypical skill-building career moves. - Take a cyclical approach
The essential element for establishing a successful high-potential employee program is ongoing attention, not annual reviews. Build in multiple checkpoints throughout the year to track both employee and program progress. In addition, keep refreshing the high-potential pool by repeating the screening and evaluation process regularly.
When you nurture high-potential employees in these ways, the company gains more than just a valuable resource for filling open positions. You’re also giving your best and brightest employees a chance to see their futures with you.