A different lens on leadership potential

Leadership development costs approximately $60 billion per year globally, and between 40% and 70% of new leadership hires fail within the first 18 months. In the context of the money spent on leadership development and the times that leadership potential fails, CEOs and Boards are concerned with identifying and securing the leaders of the future.

In 2023, the Global Leadership Forecast from DDI surveyed a broad cross section of organisations from around the world involving over 13k leaders from 1,500+ organisations around the world. Amongst the CEO’s top concerns were attracting and retaining talent and developing the next generation of leaders. The survey reported that only 12% of companies have confidence in their leadership bench strength, so there is a shortage of leaders to fulfil critical roles. 

The pressing questions therefore are, do we have enough high potentials for the future? And how can we effectively identify and develop leadership potential?

What is leadership potential?

Numerous frameworks exist about what leadership potential is and is not, with many consulting and assessment companies claiming they have the solution for identifying leadership potential. Organisations continue to devote significant resources to defining what it means in their environment and culture and invest heavily in developing individuals identified as ‘HiPo’. But there is little focus on how to most effectively measure leadership potential, and often times a reluctance to apply a psychometric approach.

This is despite what we know: that the traits that shape leadership – intelligence and personality – are relatively easy to evaluate. And, in today’s unrelentingly complex work environment, it has never been more important to get leadership decisions right and avoid the cost of getting them wrong. 

Performance is often confused with potential, or they are treated as the same thing. Past behaviour has historically often been considered as a predictor of future performance in similar situations, but now the leadership situation is different today and that past behaviour no longer works well as the only predictor of future leadership success. 

Performance is so important to short-term success in talent management efforts that it has been termed as the ‘performance potential paradox’. This refers to a weak relationship between performance indicators and performance itself. Performance might be better thought of as a gatekeeper measure over time that allows an individual to continue to progress. Many other factors play into a given performance that it’s potentially harmful and misleading to link it to future leadership potential. 

The result of all of this is difficulty in determining the right model of potential and not measuring it effectively.

One approach is to take a practical blueprint as a framework for identifying potential with respect to the high potentials. What follows in this article is an outline of how psychometric rigour can be used to measure what potential these individuals have. 

A leadership potential blueprint

Silzer and Church (2009) provide a unified and comprehensive framework that seeks to remedy the situation and help guide future efforts in the assessment and development area[1]. This is a well-practiced and respected framework and so an adaptation of this model is proposed to help identify leadership potential. 

Why this approach? It is based on a comprehensive review and synthesis of psychological and management theory, practice-based research, and multiple models, tools and frameworks from consulting firms as well as a number of internal corporate talent management processes. 

The most basic assumption of the model is that potential is a multidimensional construct. There is no single all-encompassing measure of high potential. What is required for assessing and developing potential is a multi-trait, multi-method approach.

Potential is best thought of as a mixture of both individual characteristics or traits, and specific capabilities, knowledge, and skills that each contribute in some way individually and collectively to long-term success in leadership positions in organisations.

There are three core elements: foundational, growth and career dimensions. These are layered in progression in the model from more stable traits (Foundational dimensions) to more developable skills and capabilities in leaders.

In the Foundational dimensions there are two core building blocks: cognitive capabilities and personality characteristics. 

Cognitive capabilities provide us with an overview of an individual’s general intelligence, their ability to think strategically, breadth of thinking, and ability to handle complex and ambiguous issues. While personality characteristics directly impact their success in dealing with and influencing other people. 

These are seen as the two most fundamental and stable building blocks of leadership potential and are core variables underlying individual differences in psychology. They can directly impact an individual’s potential for leadership. They are considered relatively stable across situations, experiences and time, and hard to change in an individual without an extraordinary intervention and influence from others. However, it is possible to help an individual (a) develop workaround strategies that can mitigate some deficiencies or derailers, and (b) create complementary work teams that can help to balance out deficiencies and strengths across different people. 

The Growth dimensions are intervening variables to individual learning and can facilitate or hinder an individual’s leadership growth and development. They consist of two building blocks: learning skills and motivation skills. 

Learning skills have been recognised as being key to an individual’s ability to effectively lead in changing issues, situations and business markets. They are central to learning and development efforts in other areas of potential as well. Other related learning concepts include ‘having a growth mindset’, depending on their openness to learning and change. 

Motivation skills vary considerably across individuals but often distinguish successful leaders. Most successful leaders in organisations are highly motivated and driven to accomplish work and career goals. The focus here is on demonstrated behaviour and not just stated views. Someone who demonstrates a high level of motivation skills can substantially change their career path and success. They are key indicators of whether a person will further develop and learn new skills and behaviours, whether those are to be gained from new experiences, coaching and feedback or formal training. These building blocks are likely to be reasonably consistent and stable in an individual, until there is a significant situational change.

The Career dimensions, at the top of the model, which can predict potential are leadership skills and functional capabilities. 

Leadership skills are actually very common across organisations but go by different names. This is mainly concerned with ‘how will they lead?’. These leadership skills can be taught and modified, provided the individual has acceptable levels of skills on the foundation and growth dimensions.

Functional skills involve having the technical/functional skills in a given area of expertise and the business knowledge (both company and industry-specific as well as broader knowledge). Skills in these areas are often specific to a particular career so the question we are trying to answer here is ‘potential for what?’ For example, what are the technical skills and knowledge we should look for early in the career of someone who aspires to be a CFO?

Most talent management, learning and organisation development professionals have focused significant efforts in these areas, particularly in developing leadership competencies, programmes and models for organisations.  There is general agreement that these specific skills (such as leadership and functional skills) are important to being successful in a designated career path, such as a C-suite functional leader, or region or business unit general manager. These skills are the most developable of all the predictors of potential. Usually, a focused and extensive individual feedback, learning and development effort is required to enhance skills in these areas. 

Our proposed approach

Following Silzer and Church’s work and combining this with our own more recent observations and practice across the Hogrefe Group, we propose that we focus on four characteristics that will identify the ‘vital few’ organisational stars of the future; and that each of these four requires a psychometric approach and fit-for-purpose tools to ensure an accurate, comprehensive assessment. 

Certain elements are trait-based (e.g., general cognitive and personality attributes) and others are behaviours or skills that can be developed and enhanced over time.

In some contexts, it might be most strategic to focus on a subset of dimensions of potential from the model (e.g., personality, learning, leadership skills) while in other situations where the focus is on broader talent selection or on identifying ‘diamonds in the rough’, a more broadly based leadership potential assessment approach might be most appropriate. 

What is most important is taking a multi-trait, multi-method approach to leadership potential, which we believe will improve an organisation’s ability to more accurately manage their talent pipeline. These methods should be formal and valid assessment measures.

Can they lead?

Going back to the psychometric approach then the Foundational dimensions outlined in the Silzer and Church model are the two core building blocks – cognitive capabilities and personality characteristics. These measure whether or not an individual can lead.

Cognitive ability is often shown as one of the best, single predictors of job performance and is linked to perceptions of leadership effectiveness. But it doesn’t mean that the strength of the ability-job performance relationship is constant across all settings, for example the validity of cognitive ability tests increases with job complexity. Examples of how cognitive capabilities might be assessed are given in the model below and include the Power and Performance Measures (PPM-R) which looks at verbal, numerical and spatial reasoning. Or the DESIGMA-A which measures general level of cognitive ability. 

Personality characteristics directly impact an individual’s success in dealing with and influencing other people. Personality, particularly the Big Five approach, is the best approach for predicting leadership. Particular elements of all the traits, Conscientiousness, Agreeableness, Neuroticism, Openness and Extraversion are useful predictors for leadership. Conscientiousness is also linked to leadership emergence and overall job performance. Examples of how the Big Five personality traits might be assessed are the NEO Personality Inventory – Third Edition UK  (NEO-PI-3 UK), the Business-focused Inventory of Personality – 6 Factors (BIP-6F) Second Edition etc.

From a practitioner perspective, it is vital to be able to pinpoint not only an employee's 'bright side' but also the potential derailers that can impact performance and lead to serious financial and personal implications for employees and the organisation. The Dark Triad of Personality at Work (TOP) looks at the dark side of personality in a workplace context.

When measuring the “can they lead?” with instruments that have been linked to leadership outcomes, such as a cognitive measure and a Big Five questionnaire, we try to gain insight into whether an individual has what it takes to be perceived as and be an effective leader. However, there are plenty of people with the ‘right’ leadership traits who perform very well, but who do not have the potential to become leaders.

So, the question remains: why do some people, assuming favourable conditions, with equal cognitive abilities and similar personality characteristics, become leaders while others do not? 

Will they lead?

Even though organisations are changing, it does take effort and persistence to become a leader, and, in most cases, it is still linked to longer working hours and more pressure. Leadership becomes progressively more difficult at every level and the demands increase. If the work does not align with what drives a person, it is unlikely that they would have the energy and resilience needed to thrive. Being motivated to lead has an impact on a person’s willingness to invest that effort, be able to deliver and adapt to changing requirements etc.

The Growth Dimensions in the Church and Silver model are intervening variables to individual learning and can facilitate or hinder an individual’s leadership growth and development. They consist of two building blocks: learning skills and motivation skills. This addresses the question ‘will they lead?’…

In terms of motivation, basic motives and specific motives have been linked to leadership outcomes and which would help organisations to identify high potential employees who are perceived as leaders and perform effectively in leadership roles.

Motivation measures include projective methods (to measure implicit motives), and self-report questionnaires Leadership Motivation Inventory (LEAMO), Achievement Motivation Inventory (AMI) etc, and motivational interviews (to measure explicit motives). Standardised self-report questionnaires have the advantage that they enable an objective comparison with a relevant norm group and across individuals, which is very important for HR-purposes. 

How will they lead?

Then there is the third set of critical predictors of potential: the Career Dimensions. The two key building blocks here are leadership skills and functional capabilities. This will help to explore how an individual will lead.

Leadership skills are actually very common across organisations but go by different names. What is relevant here to identifying leadership potential is whether a person is able to use an appropriate leadership style in a given situation – are they able to respond appropriately to situational cues? This is an aspect that can be developed but including it into an assessment of potential helps with finding those who have clear predispositions and, in turn, makes sure that an organisation invests in the right people. 

These leadership skills can be taught and modified, provided the individual has acceptable levels of skills on the Foundation and Growth dimensions. Most talent management, learning and organisation development professionals have focussed significant efforts in these areas, particularly in developing leadership competencies, programmes and models for organisations. 

There is general agreement that leadership skills and functional and technical skills (the other aspect of the Career dimensions in the Church and Silver model) are important to being successful in a designated career path, such as a C-suite functional leader, or region or business unit general manager. These skills are the most developable of all the predictors of potential. Usually, a focused and extensive individual feedback, learning and development effort is required to enhance skills in these areas. 

Leadership skills, or leadership wisdom, are often measured through situational judgement tests or other simulations. One such assessment is the Leadership Judgement Indicator – 2^nd Edition (LJI-2) suite. They have the advantage of not relying on self-reports. Other methods include 360-degree feedback which has the advantage of also showing how an individual is perceived by others.

Overall, this what the model of identifying leadership potential looks like:

Conclusion

The key to getting leadership decisions right is measuring potential effectively. This should be a multi-method assessment approach which links variables to leadership outcomes and enables comparisons across individuals. Psychometrics can be the basis of this approach.

We know that the best approaches to assessing potential involve an objective, multi-method methodology that results in different data points that can be compared for each individual and between individuals. These can also provide useful benchmarks which provide reliable results over time. 

We should ensure we measure variables such as cognitive ability, Big Five personality, motivation to lead and leadership skills which are linked to leadership outcomes. 

What is shown here are options for assessing different elements of potential. Past research has established factors relevant for leadership potential and most models show quite a bit of overlap. So, this gives a clear direction on what constitutes potential and how to identify it. 

Highlighted here are effective, easy-to-use and cost-efficient assessments. While they should be combined with other methods like structured interviews or behavioural observations, psychometrics enable organisations to gather reliable data on which to base decisions. In this way, they can help to get leadership decisions right and avoid the cost of getting them wrong. 

For more information on the tests outlined above please visit our website  or contact us at customersupport@hogrefe.co.uk

References

[1] Silzer, R. F., & Church, A. H. (2009). The pearls and perils of identifying potential. Industrial and Organizational Psychology: Perspectives on Science and Practice, 2(4), 377–412.