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Making Better Talent Decisions

Authored by: Managing Partners Roger Pearman and Robert Eichinger

Every year organizations engage in talent management processes that are intended to help them make better talent decisions. They interview multiple pools of candidates to make great hires, they evaluate performance through annual reviews and they distribute merit increases, bonuses and identify those with potential. Each underlying process is designed to make better talent decisions yet a key ingredient is often missing, relativity.

What’s the highEST mountain of the top ten on earth?  Mount Everest – 8,848.86m

What’s the least highEST or the lowEST of the top ten? Mount Annapurna I – 8,091m

Mount Annapurna, the lowEST of the top ten, is also the highEST compared to the rest of the mountains in the world.  

It’s all relative. Highest or lowest compared to what?

Who is the highEST rated quarterback in the NFL of the top 10 playing on December 16th of the 2022 season?  Patrick Mahomes of the KC Chiefs. The lowEST?  Kyler Murray of the Arizona Cardinals. Of the remaining 22 quarterbacks, Kyler Murray is the highEST. It’s all relative. 

We rate everything!  Best restaurants. Best phone plans. Best SUVs. Best places to retire. Best Medicare Plans. Best doctors.  It all guides decision making and the choices consumers make.

Every year, in most sizable companies, the question is asked: “who among the current employees are our highEST Potentials?”  Essentially, “who has the potential to reach top management and leadership levels and perform better than all who have served before?”  It’s part of the annual talent review and succession planning process.  Aside from performing today, all organizations want to continue to prosper into the future. That takes replacement talent to back-up current senior talent. It takes some number of -ESTs.

The Two Steps for Talent Identification

The first step is binary – Candidate X is or is not a High Potential.  Why is that important to know?  Because it takes 20-30 years for a career to start with an internship to end up landing in one of the top jobs in sizable companies and organizations. The per person investment of resources to develop top talent is materially larger for High Potentials than for all others. Verifying High Potentials ensures your investments of time and energy produce the desired returns. True High Potentials allow for predictable success as complexity and the stakes increase.

As part of Step 1 you also have to know if you have enough High Potentials. You have to have enough talent on the bench to fill open jobs and you have to have talent in accelerated development or “in waiting” right behind them. And, to complicate your plan along the way, identified High Potentials will leave—they are impatient, eager to learn and ascend, and they are just as (or more) attractive to other companies. High Potentials cost more to retain than others. They need more attention.  

The second step is the addition of the EST. Among the ten High Potentials in the “yes” box, who is the highEST.  Why would we need to know that?  To make developmental decisions and allocate developmental resources. The CEO might agree to mentor one person. Who should it be?  There is one open seat on the plane to accompany the CEO making a speech at an industry conference.  Who should get that exposure?  There are important VIP customers coming for a tour of the plant. Who should be invited to lunch?  

EST is rank ordering, a task resisted by many managers and leaders. They don’t like to rank people though they may rank everything else and even make decisions based upon other people doing the ranking—for wines, cars, jets, financial planners, books to read and a whole host of things. They even resist Step 1 (is or isn’t a High Potential) as it is a 2-point ranking system. 

Talent goals would be best served – more leaders and excellent top managers would emerge from the process – if we would all rank order people on their potential to grow and advance and perform.

Rating, Ranking and Little White Lies 

There is a human tendency for leniency when rating on a 5-point scale and to not differentiate by much (we use lots of 3s and 4s, but less of 1s, 2s and 5s). So, ratings on a five-point scale tend to be higher than the truth and the low degree of spread is less than the truth. From there we are left to rationalize. People are left with the impression they are better than the truth and that they are more like everyone else than the truth. Rationalizing is akin to telling little white lies to employees. Therefore they have less valuable information than they need to optimize effectiveness and growth in their careers.  

Rank-order rating is better for everyone but more stressful for the raters. But that’s one reason managers are paid more, and they should earn it.  Informed and educated raters, equipped with the criteria of spotting potential, would contribute the most value by getting more comfortable with this relative rating approach

Don’t fear the EST. 

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