Identifying High Potential Employees Hurts Businesses

This article is an excerpt from the Shortform book guide to "Nine Lies About Work" by Marcus Buckingham and Ashley Goodall. Shortform has the world's best summaries and analyses of books you should be reading.

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What is deemed a “high-potential employee”? How does classifying your employees into high- or low- potential hurt your organization?

Companies use performance appraisal systems for identifying high-potential employees. When an employee is “high potential,” it usually means they have promise for promotion because of their skillset and work ethic. However, “high-potential” people don’t matter in the long run.

Here’s why you shouldn’t segregate your employees based on high or low potential.

Performance Appraisals Are Flawed

Companies use performance appraisal systems to gauge employees’ competencies, identifying high potential employees. From there, well-rounded team members—those who are proficient at more skills—are classified as high potential, while team members who exhibit weaknesses are classified as low potential.

In their book Nine Lies About Work, Marcus Buckingham and Ashley Goodall explain that companies use this segregation as a shortcut to gauge which employees to invest in. The authors reason that high-potential employees, who make up about 15% of employees, will give the highest returns, so they should be rewarded with more opportunities such as training, promotions, and pay increases compared to their low-potential peers.

However, the authors argue that since performance appraisals are flawed, then the practice of classifying employees as high potential and low potential based on those appraisals is also flawed. To Buckingham and Goodall, “potential” is an abstract concept that means nothing more than the ability to learn and grow, which means that everyone has potential. Furthermore, each individual learns and grows in different areas, at different speeds—nuances that the high potential/low potential labels completely ignore. As a result, companies miss out on the unique strengths and possibilities that the so-called low-potential individuals have to offer.

(Shortform note: Classifying people as high potential and low potential not only keeps the majority of employees from learning, growing, and advancing their careers, but it may also promote unhealthy competition. In Leadership and Self-Deception, the Arbinger Institute explains that employees who are pressured to prioritize their own results may sabotage others, take satisfaction in other people’s failure, and resent other people’s success. This ultimately derails an organization’s success.)

Everyone Has Something to Contribute

The authors say that you should stop identifying high potential employees and segregating your team members based on potential, and instead look at their “momentum”—their inherent strengths, what they’ve learned, and how they’ve been using these to propel them forward. By paying attention to each team member and understanding where they’re picking up speed, you can then find a way to maximize all your team members instead of just a chosen few.

Doing this requires that you throw out the appraisal form and have regular conversations with your staff to help them identify what they’re good at and what else they want to learn. From there, find ways to make those skills part of their job, so that you help them become the best professionals they can be and build a stronger team in the process.

(Shortform note: To get even more out of your team members, become a multiplier, or someone who uses their intelligence to bring out the intelligence and abilities of the people around them. In Multipliers, Liz Wiseman and Greg McKeown write that such leaders are able to tap into 70-100% of their team members’ capabilities because they assume that everyone is talented (versus assuming only some employees are highly competent), full of good ideas, knowledgeable, capable of making decisions, and smart enough to work on their own. In contrast, leaders who are diminishers assume most people can’t get things done and thus end up accessing only 20-50% of their teams’ capabilities.)

Identifying High Potential Employees Hurts Businesses