Back

January 16, 2025 | by Dr. Jia Wang

How To Retain High Potential Employees

How to effectively manage employees has been a long-standing topic on the agenda for business leaders and HR professionals. With the drastically changed working modes and a redefined meaning of work, many companies today struggle more than ever to attract and retain talented people.

One of the strategies that is worth serious consideration and investment is building a talent pipeline from within. Based on ample research evidence, this approach is far more effective than outsourcing and would yield more fruitful outcomes for your company in the long run.

So, the question is: How do we do retain talent from within?

High Performance Or High Potential?

In an MSCI webinar on Dec. 12, I made a case for prioritizing the development of the high-performing and high-potential (HP) employees within your company. These employees  are typically identified through annual performance and talent reviews. While both groups are valuable contributors to the organization and deserve further development, it is the employees with high potential who will more likely help your company move the needle.

A common practice for many companies is to identify the top 15-20 percent of their employees as high performers and approximately 10 percent as high potential. High-performing employees provide consistent and exceptional work; however, they may or may not possess the desire or leadership/managerial skills needed to advance to the next level. Like high performers, high-potential employees have the ability to excel at work. In addition, they show aspiration and engagement that high-performing employees may not have. With aspiration, high-potential employees desire to take on more responsibilities and challenges and have intrinsic motivation to rise to higher-level positions. They are fully engaged in their work, emotionally committed to their organization, highly driven to go beyond expectations, and will persevere in times of challenges.

Therefore, investing in employees with high potential will likely lead to more return for both the company and the individuals.

Why Develop High-Potential Employees?

The potential contribution to the organization’s long-term success well justifies the need for developing high-potential employees; however, reality tells a different story. According to the 2024 High Performer & High Potential Development Report by the Talent Strategy Group, in general, only 18 percent of participating organizations acknowledge having and applying a formal philosophy for talent development; 45 percent have a philosophy that is not consistently applied, and 30 percent don’t have a philosophy. More specifically, only 37 percent of the identified high-potential employees receive a quality, written development plan.

In addition, the report revealed some interesting shifts of responsibility for high potential development including:

  • A big increase for executive teams from 14 percent today to 38 percent in the future
  • A slight increase for people managers from 34 percent to 36 percent
  • A big decrease for HR from 25 percent to 11 percent
  • A noticeable decrease for employees from 23 percent to 15 percent

These statistics have major implications for talent development within an organization and for different stakeholders involved in this process. In addition, they require more strategically designed developmental programs that will help companies turn their HP employees into future leaders they need.

How To Develop Your HPs

Having high-potential development programs in place is essential to building a pipeline of qualified candidates for pivotal roles and key positions, but it is not enough to ensure the desired outcomes. Strategies that are carefully crafted and aligned with the overall business goals are also needed.

Here a few of the many actions you can take to develop your high-potential employees into future leaders of your company.

Define success metrics upfront. Before designing and implementing any development program, HR and business unit leaders must work together to determine what effective leadership should look like as a direct result of participating in high-potential development activities. Metrics must be defined, ideally in concrete behavioral statements, so that the program outcomes can be measured later.

Define leadership competencies. Once the high-potential development program is aligned with your company’s business goals and strategy, it is time to identify the leadership competencies needed to achieve your current business goals and execute your strategy. At the same time, it is important to consider competencies needed for future business growth.

Determine leadership gaps. Diagnose the existing leadership capacity using the defined competencies as criteria. Make sure you collect 360-degree information to gain a balanced and accurate understanding of what is missing in your existing capability. Doing so will help you pinpoint who may need what development opportunity for what positions.

Categorize potential leaders. Who will be included in the development programs? What level of leadership responsibilities will they be able to assume? At what career stage are they? Answers to questions like these will help you differentiate your future leaders and later customize development plan for each group, for example, emerging leaders, frontline leaders, mid-level leaders, senior leaders, and executives.

Share development plans. Communicating development plans with potential participants is crucial. It allows future leaders to understand the program goals, expectations, and desired outcomes. The more information you share upfront, the more engaged they will be.

Design competency-based solutions. What is required for effective leadership today is different from what was useful yesterday, and, of course, what will be relevant tomorrow. To prepare leaders for future challenges, development programs must target anticipated competencies to narrow or close performance gaps.

Incorporate diverse methods. Leaders are different, and competences for different roles and positions also vary. You must incorporate a variety of development methods to meet diverse needs. Research shows high-performing companies invest significantly more in cultivating their high-potentials by providing coaching and mentoring services, customized career development, job shadowing opportunities, cross-functional training, special action-learning projects, and challenging assignments.

Customize development programs. Because there is a recognized need for developing leaders for key positions at all levels, programs customized for each leadership level are beneficial, if not necessary. Make sure the programs are designed in a way that allows for continuous and progressive leader development in each of the critical competencies. By the same token, leaders at the same level have different developmental needs, depending on their personal traits, prior experiences, job characteristics, and future role requirements. To make development programs meaningful for different high-potential individuals, they need to be aligned with personal development goals, rather than focusing on generic leadership competencies.

Measure the impact. What gets measured gets done. This important action step is often overlooked for various reasons such as lack of evaluation expertise and time constraints. It is critical that HR, leadership, and management take time to first determine the type of outcomes they desire to achieve through developmental programs and then the appropriate methods to use to measure those outcomes. Depending on your company needs and strategic priority, different outcomes can be measured, for example, individual behavioral change, performance and productivity, goal attainment, turnover rate, operational process efficiency and effectiveness, and the company’s financial gains.

Successful companies understand that high-performing employees do not just emerge — they start as high-potential employees. Similarly, high-potential employees do not automatically become future leaders of the company; they are developed through carefully designed activities. To turn high potential at the individual level into high performance at the organizational level requires not only significant financial and emotional investments over time, but also concerted efforts and firm commitment from executives, managers, and HR. By accelerating the development of these leaders of tomorrow, companies will gain distinctive advantages for building thriving businesses with sustainable success.

Jia Wang is a professor in the Department of Educational Administration and Human Resource Development at Texas A&M University. Her research focuses on international and national human resource development, organization crisis management, and learning within organizations.

To search, type what you're looking for and results will appear automatically