Coming Clean to High-Performers Should You Tell Them of Their Potential

October 19, 2001
Should you -- or shouldn't you -- tell top performers that they've been designatedas high-potentials? "It's the most famous question in succession planning,"says William Rothwell, a Pennsylvania State University professor who has madea career of studying and advising corporate clients on the topic.

    Answers are decidedly mixed. Among the companies takingpart in a benchmarking study of succession management and planning -- cosponsoredby the Center for Organizational Research (CFOR), a division of Linkage, Inc.,and Development Dimensions International (DDI) -- seven do not tell high-potentialemployees that they've been labeled as such. Six do.

    In follow-up interviews, participants came up witha litany of reasons for not telling the employees. But other organizations thattook part in the study -- including such highly regarded ones as TRW and Honeywell-- emphatically embrace a do-tell policy. "It used to be that companiesguarded their succession plans like state secrets," says CFOR directorLinda Murray. "But new technology is opening the way to greater information-sharingwithin the organization."

Why some companies stay mum
    Allstate is typical of firms that routinely don't tellcandidates they're in line for a promotion.

    Nancy Lovendosk, who manages succession and performancemanagement for the insurance company, sketches out a worst-case scenario: ManagerA tells an employee that he is a candidate for a promotion, a conversation thatthe employee interprets as a promise or, in legal terms, an oral contract. ThenManager A leaves. Her replacement, Manager B, sizes up the same employee butfails to see as much potential as her predecessor did. The so-called promise"evaporates," says Lovendosk. That leaves the former up-and-comersomewhere between disappointed and hopping mad.

    What can the employee do about it? One option is togo to a company that seems more appreciative of his talents, a move that islikely to be a loss for his current employer. Or he might retaliate by suingthe company for breach of an oral contract.

    That's the risk that many companies raise when askedwhy they don't share high-potential status with candidates. Yet none of thefirms we interviewed had ever actually been sued in such a situation, nor didthey know of any other companies that had been.

    But even if such risk exposure is, in fact, corporatefolklore, there are other downsides to setting expectations that you, the employer,may not be able to keep. Things change, says Lovendosk. This year's most-valuedcompetencies or skill sets may become less important next year if business needsabruptly change. It's risky, therefore, to leave a candidate with the impressionthat there's any such thing as permanent high-potential status, or thathe or she is definitely next in line for fill-in-the-blank position.

    Professor Rothwell describes other ways in which tellingan employee that she or he has been designated a high-potential candidate could,conceivably, come back and bite the manager.

    Call it greenmail: the candidate who uses his statusas a high-denomination bargaining chip. Perhaps he receives a job offer fromanother company and, emboldened by his elevated status, demands that his currentemployer gin up. Or perhaps a headhunter calls -- in that friendly, just-staying-in-touchkind of way -- and the employee mentions his special standing in the companylineup. Absent a non-compete agreement, what's to keep the recruiter from callingthat company's competitor with a brash proposal? Hire away a top recruit andyou can accomplish two things: bring in top talent and, at the same time, inflictmajor damage on your rival.

    Or take this scenario. Rothwell calls it the CrownPrince(ess) Syndrome: When a high-potential employee hears she's under considerationfor a higher position, she kicks back and starts taking it easy on the job."I've got it in the bag," she thinks. "No matter what I do, I'mguaranteed that promotion."

    At issue in each of these situations is not whethera manager should tell the person, says Rothwell, but how. What gets companiesin trouble is the perception of a promise or guarantee. And managers have tobe coached on how to avoid creating such false impressions (keep reading, we'llget to that).

The benefits of telling
    Overall, Rothwell sides with the companies that believemanagers should come clean to top employees about their prospects. "Inthe war for talent, telling candidates can be a retention strategy," hesays. "Even if they're just told they're being considered, it's a majormotivation to stick around when a headhunter calls and offers them extra bucks"to go someplace else.

    Not only does telling employees encourage them to stayput, but it can also clear the way to having frank discussions about the areasin which they need to develop further, according to Michael Thiel, who headsup organization and professional development for TRW's 8,500-employee Spaceand Electronics unit. "If you're more up-front about their potential, itcreates a better context for assessment and development," he says.

    Once the cards are on the table, a manager can say,"That's why these three or four flat spots are worth paying attention to."It's a far more motivating conversation than if a manager simply says, "Whydo you need to work on these developmental areas? Because you do."

    Other companies in the study leave it up to managersto decide whether to tell employees that they've been tagged as high-potentials.CFOR research suggests that as more HR processes -- including succession planning-- move online, and as responsibility for those processes shifts back to thebusiness unit, companies may lose their ability to keep succession tightly underwraps.

The impact of technology
    Take Allstate. Within the next year, the company expectsto roll out new proprietary software called Manager's Desktop, which "empowersmanagers to do more and HR to do less," says Lovendosk.

    "Right now, succession is still fairly tightlyheld," she explains, describing a process that involves a limited numberof people poring over large binders of information compiled by HR. With thenew software, "individual managers will be able, on their own, to go inand make changes to their succession plan. You give that many people access,"she predicts, "and it's going to change the complexity of the way we dosuccession." For example, managers may be more likely to decide for themselveswhether to inform promising candidates that they're being targeted for biggerthings.

    Even TRW, which already embraces a do-tell policy,sees its succession process becoming "more transparent" as it reliesmore on technology. The company is now implementing a new Web-based tool, calledthe Management Resources Review (MRR), that collects information from selectedemployees for a variety of planning purposes, including succession.

    Before MRR, a manager could change her mind about acandidate's skills and competencies and quietly update her notes or the successionchart. Now such changes can't be entered into the system without both the manager'sand the employee's approval. As a result, more employees are becoming awareof succession-planning, says Thiel. "Our bias is to be open rather thanclosed." And the new system will make TRW more open, "even comparedto two or three years earlier," says Thiel. "We pretty much don'thave a choice anymore."

Advice for managers
    To avoid the pitfalls and capture the benefits of sharinginformation with high-potential employees, consider the following recommendations,gleaned from the companies in these studies:

  1. Make conversations about employees' career potential part of their annualperformance review and development-planning process.

  2. Teach managers how to communicate information regarding high-potentialstatus to their direct reports.

  3. Emphasize that the needs of the business change, often in unpredictableways, which is why companies review and change their talent plans at leastonce a year.

  4. Focus on potential rather than promises. Even replacement charts, if shared,should be viewed as hypothetical situations with no guarantee.