As our industry evolves and business models become more sophisticated, the pressure to leverage the value of human capital and better understand talent management is growing. The best-managed firms realize that understanding their staff members' skills, knowledge and experience is increasingly important as they seek to improve top- and bottom-line performance while aggressively managing costs in a competitive business environment. But can we truly measure human potential, or even find it?
TALENT AND POTENTIAL
There are several definitions of talent and potential but, as I see it, talent is the ability to engage successfully in an assigned role, meeting all responsibilities and delivering above-average performance using an agreed-upon measurement system. Potential indicates whether someone will likely succeed in a larger role, and whether he or she will be able to grow and handle job responsibilities of greater scope and scale.
Knowing what these traits are and measuring them are two different things. Assessing your staff's potential is quite difficult. Most managers, including planners, are lousy at predicting future potential accurately. But some experts have figured it out.
MAKING AN ASSESSMENT
The Harvard Business School, in conjunction with executive search firm Egon Zehnder International, have identified activities that can help select and develop high potential talent. The process of selecting those with high potential starts with a basic framework consists of five elements:
* Knowledge - what a person knows.
* Skills - what a person can do.
* Senior manager/executive identity - a person emotionally accepts the costs of the management position, seeing himself or herself as a senior manager/executive.
* Leadership assets - a person derives insight, engages others, demonstrates resolve and seeks understanding.
* Motives - a person desires to have an impact on others.
These elements range from highly teachable (knowledge), to difficult to change (motives). At the core are a person's motives, which predict long-term patterns of behavior. Motives tend to be stable and are highly related to what energizes an individual.
For example, does a person demonstrate a passion for a company's success over personal reward? Does he or she enjoy seeing others succeed? Harvard Business School research on social motives has shown the desire for socializing influence - having a positive impact on others for the good of the organization - is a key predictor of senior management/executive potential.
At the next level are leadership assets. These are four key abilities that predict how far and fast a professional can rise within an organization.
A high potential individual can derive insight by making sense of a vast amount of information, and develop and apply new ideas that change old ways of doing things or introduce entirely new ways to operate. This individual effectively engages others logically and emotionally, and is a highly persuasive communicator. He or she demonstrates resolve by driving toward a goal in spite of challenges. This high potential person also seeks understanding by constantly looking for new ideas, knowledge and experiences; asks for feedback; and adjusts his or her behavior accordingly.
Next comes self-identity, how a person sees himself or herself on stage. For high potentials, this means seeing themselves as senior managers or executives, but not just for fame and glory. Rather, they want to develop a team and make things happen. Alternatively, some people may be motivated by their own contribution and don't care about leading companywide change. These people are not high potentials.
High potential attributes are difficult to teach or change in a person. It's easier to find a person with these traits than to try to train someone to have them. You may be wondering whether you can assess your staff using a personality test. The answer is yes and no.
By themselves, personality profile tests are poor predictors of high potential. State-of-the-art evaluation comes from a combination of workplace assessments by supervisors in which an employee has shown exceptional performance in a variety of tasks, combined with periodic assessments by outside professional firms. Our firm retains an industrial psychologist to help coach and assess a number of our professionals, and helps us to determine who may have a high potential for greater responsibility in the future.
To make sure your high potential employees evolve into leaders, a combination of mentoring, outside coaching, formal education and varied job experience is necessary. Remember, it's very hard to change underlying motives or traits, but the more pronounced your program is, the higher your retention and success will be with your high potential employees.
At our firm, in addition to the outside coaching, we require each of our relationship managers to have or pursue a graduate degree; engage in writing and research with the goal of contributing to the Journal of Financial Planning; develop a practice specialty and become a recognized expert in one area of planning; assume a leadership role in our local professional FPA chapter; learn new job skills, including business development; train, manage and mentor younger professionals; and lead projects within the firm.
Requiring this of each relationship manager provides solo and team experiences inside and outside the firm; this stretches each professional in some way. It also allows us to evaluate all areas of the talent assessment elements: knowledge, technical skills, senior management identity, leadership assets and motives. Combining our company assessments with those of the outside coach, over the course of five-plus years, we are able to assess the potential of each professional to move into higher areas of responsibility and authority.
AVOID THE PETER PRINCIPLE
You've likely heard of The Peter Principle, the iconic book by Laurence J. Peter and Raymond Hull. Peter suggested that most people rise in an organization to a level of incompetence because they are promoted until they reach a job they cannot perform.
It's true more than we might believe, especially in growing companies. Here's what you often hear: an employee doing quite well in one job is given additional responsibilities and fails miserably. This can happen in your firm. Managing employee expectations with realistic assessments may prevent the loss of staff members because they think they deserve to be promoted. As important, they won't be promoted to a level where they are seriously underperforming, with negative consequences for the entire firm.
Here are some steps you can take to guard against this:
* Develop a formal program to assess your staff and locate the high potential performers, using a combination of inside and outside assessments.
* Develop a wide range of job assignments and work-related goals, both inside and outside the firm, that stretch and test your people in the five elements of high potential assessment.
* For your high potential workers, continue to formally mentor, coach, professionally challenge and reward, both financially and with additional recognition and responsibility. Motivate them.
* Be cautious not to promote someone into a job that he or she cannot handle. Use realistic assessments. If you're not sure, engage an outside professional to help you.
Remember, being a successful talent scout is all about identifying your high potential employees and developing their talent. Start scouting now!
Glenn G. Kautt,CFP, EA, AIFA, is a Financial Planning columnist and chairman of the Monitor Group in McLean, Va.