How to Identify and Keep a High-Potential Employee

What are high-potential employees, and why should companies hold on to them? Implement these strategies to find, develop, and retain HIPO workers.

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How to Identify and Keep a High-Potential Employee

Here's what you need to know:

  • High-potential employees (HIPOs) are the most talented, capable, and motivated employees in the company, and they have the potential to assume senior management positions
  • The more valuable the employee, the more expensive and time-consuming it is to replace them, so it's essential to retain them
  • There are 5 essential skills that distinguish HIPOs from other employees
  • Studies show that many employees will jump ship if their employers do not offer growth opportunities
  • To retain HIPOs, offer a clear path to advancement, maintain a strong rapport and feedback system, and provide remote work options, if possible
  • Offer hard-to-refuse compensation packages and provide HIPOs with professional development tools

Employees today place significant value on career development. Studies show that many employees will jump ship if their employers do not offer growth opportunities. In the case of high-potential (HIPO) employees, the departures can be extremely costly for employers.

Read on to learn about high-potential employees, why you should hold on to them, and how to identify, develop, and retain them.

What is the definition of a high-potential employee?

“A high-potential employee (HIPO) is someone with the ability, engagement, and aspiration to rise to and succeed in more senior, critical positions.” — Gartner

“A HiPo employee is a person who has been identified as possessing the ability and the potential to not merely be promoted, but to ultimately ascend to the most senior levels of the organization. This is a distinction usually reserved for the top 5 percent of employees.” — Society for Human Resource Management (SHRM)

Although these 2 sources abbreviate “high-potential employee” differently, their definitions are fundamentally similar. Note that in this article, we abbreviate “high-potential employee” as “HIPO.”

Based on the definitions, HIPOs are major organizational assets. They have the potential to assume senior positions, typically in upper management. Moreover, they will likely end up in the top 5% of all employees in the organization.

In short, HIPOs are the most talented, capable, and motivated employees in the company. They possess unique, in-demand skills, knowledge, and abilities — including technical knowledge, intellectual capacity, and leadership chops.

Why should you hold on to your high-potential employees?

HIPOs know their strengths, but also know there’s always room for improvement. Therefore, they welcome opportunities to improve their knowledge, skills, and abilities. Because they have specific career goals, they likely won’t stay with an employer who doesn’t invest in their growth. This is especially true in the wake of the Great Resignation.

HIPOs welcome opportunities to improve their knowledge, skills, and abilities.

Since the Great Resignation began, employers have been prioritizing workplace planning more vigorously than ever. According to a 2021 survey, over 40% of U.S. workers were actively looking for a new job or planned to soon — that’s double the amount in 2019. Lack of career advancement opportunities is one of the main reasons they gave for jumping ship.

An SHRM article states, “Organizations are struggling to find and develop future-ready leaders.” In addition:

  • Employees are 12 times more likely to leave if they feel they are not growing at a company.
  • 94% of employees said they would remain with their employer longer if they offered more career development opportunities.
  • It can cost 150% or more of a worker’s annual salary to replace them.

The more valuable the employee, the more expensive and time-consuming it is to replace them. And since HIPOs are highly valuable, it’s critical to identify, develop, and retain them.

How can managers identify high-potential employees?

A Harvard Business Review (HBR) article says, “more than 40% of individuals in HIPO programs may not belong there.” The article concludes that many employers do a poor job of identifying high-potential employees.

Knowing the essential traits of a high-potential employee increases the odds of choosing the right fit. Per SHRM, the following 5 skills distinguish HIPOs from other employees:

Situation sensing

They have the ability to sense their boss’ priorities. Their boss will be the person evaluating their potential. So, if they damage the relationship with their boss, they will lose out on the HIPO designation. Situation sensing enables HIPOs to adapt to their boss’ priorities as needed.

Talent accelerating

The ability to assess, motivate, and guide the teams they lead over the course of their career. Ultimately, the team’s results will show whether the HIPO deserves the designation. Because their success rides on the team, they must know who to hire, develop, promote, fire, and retain.

Career piloting

This is the ability to quickly adapt to new work-related situations. HIPOs must adopt the appropriate leadership style, adjust their mindset, engage their team, and do their part in maintaining a healthy relationship with their boss.

Complexity translating

This is the ability to orchestrate disparate data/information into strategic and useful insights, plus communicate that information in a way that’s beneficial to the organization. This information runs the gamut, from goals, trends, and ideas to outcomes and more.

Catalytic learning

This is the ability to accomplish factors that support the above-stated 4 skills. Catalytic learning means learning with a purpose — specifically, being able to transform what is being learned into performance.

Another article provides the following 3 markers for predicting leadership potential:

  1. Cognitive quotient (CQ) — how they make use of their intellect
  2. Drive quotient (DQ) — what motivates them and how they utilize their energy
  3. Emotional quotient (EQ) — how they interact with others

It’s very important to avoid designating problematic employees as HIPOs, such as those who are:

  • Unreliable
  • Resistant to change
  • Micromanagers
  • Have volatile personalities

Unsuitable HIPO designations can cause you to promote and invest money in the wrong people.

How can employers develop high-potential employees?

Once you’ve identified and selected your HIPOs, it’s time to develop them. Below are suggestions based on cognitive quotient, drive quotient, and emotional quotient.

  • Train managers on what to focus on when recruiting and screening candidates, performing evaluations, managing performance, and choosing candidates for growth opportunities. Managers should understand that performance by itself does not equal potential. Also important is knowing how to spot CQ, DQ, and EQ in different individuals.
  • Establish “potential profiles” and integrate them in your talent development and performance management processes. Essentially, it’s about speeding up professional growth by teaching HIPOs how to hone their CQ, DQ, and EQ skills.
  • Develop cognitive quotient skills by having HIPOs shadow organizational leaders to gain deeper insight into the business. Additionally, encourage HIPOs to attend conferences and events where they can learn industry trends plus gain perspective on broader issues outside of the organization.
  • Develop drive quotient skills by providing “stretch opportunities” that test people beyond their current skills and knowledge level. You can test HIPOs by placing them in different areas of the organization, and then see how they manage. For instance, if you give them a larger team to lead, examine how proactive they are in managing that team.
  • Develop emotional quotient skills by helping HIPOs to improve their emotional intelligence. The basics — such as self-awareness and having good relationships with others — are vital. However, HIPOs must go deeper than that. For example, they must know how to arrive at optimal outcomes when negotiating with stakeholders.

How can employers retain high-potential employees?

Below are some tips for holding on to your most promising talent:

Make retention part of your recruitment strategy

This helps you to hire people with the most potential from the start. Look for people who share your organization’s vision and are likely to stay the course.

Offer a clear path to advancement

Let your HIPOs know upfront that you would like to help them achieve their career goals. Offer development opportunities, based on where they are now and where they need to be. To deliver the appropriate growth opportunities, you need a solid understanding of the employee’s strengths, risk factors, and inherent motivators.

Maintain a strong rapport and feedback system with your HIPOs

Communication is everything with these employees, so make sure you check in with them frequently. This way, you can stay current on their satisfaction level and course-correct if things aren’t going well for them.

Provide remote work options, if possible

Study after study reveals that remote work isn’t going anywhere, and is likely to grow by leaps and bounds. Many employees, including HIPOs, value the flexibility and autonomy of remote work.

Remote work is also a known strategy for retaining top talent. Note that remote work arrangements may include hybrid work options.

Offer hard-to-refuse compensation packages

This means competitive salaries and benefits that make it difficult for your competitors to lure your HIPOs away. Try to offer the benefits that matter the most to your HIPOs, beyond core offerings like health insurance and retirement plans.

Provide professional development tools

Arm your HIPOs with the tools to keep developing their knowledge, skills, and abilities. This includes ongoing coaching, education, training, and access to high-performing technology.

What’s your biggest 2022 HR challenge that you’d like to resolve

Answer to see the results

Your business will benefit from keeping HIPOs on your team

High-potential employees bring nothing but their best to the organizational table. As mentioned, they are the most talented and motivated employees, with the potential to rank in the top 5% of all employees. In other words, they are keepers. To hold on to them, you must develop them strategically. Otherwise, they are likely to leave for greener pastures.

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