Employees are the engine of any company; without staff an organisation cannot function effectively. But it's that slice of the employee population known as high-potential employees that provides the engine's turbo booster. High-potential employees are an elite group of workers who are regarded as the future leaders of their firm. Variously called HIPOs or MVPs (most-valued employees), this small group of employees is characterised as well educated, flexible, adaptable, agile and resilient. They are hard workers, fast learners, good problem solvers and natural leaders.

In any organisation, about five to 10% of people in the workforce deliver extraordinary value to the organisation - in many cases, two to three times more value than their less-gifted colleagues, writes Margaret Butteris in her book, Coaching Corporate MVPs. High-potential employees are the people who constantly seek to improve their own performance and that of the organisation, who aren't afraid to challenge existing ways of thinking and acting, and who live by the values of the organisation and do all they can to achieve its vision. Characteristically they are team players who become talent magnets, attracting other high-potential individuals from the outside, writes Butteris, because everyone wants to work with a [HIPO].

HIPOs also like to be stretched and to help them achieve mastery in each new role, they are supported through company-sponsored training, mentoring and coaching; in return they're expected to deliver superior performance.

In most large organisations like ours, the matrix system is used to identify those people who are performing so well that they're hitting the ball straight of the park, says Karen Lonergan, executive manager, performance and culture at Australian airline, Qantas. High-potential employees are the sort of people whose performance excels no matter how complex the project or how challenging the stakeholder relationships; they continually out-perform their peers. They have the ability to learn quickly and to take the lessons they've learned and apply them in other parts of the business. They also have the ability to be well connected through relationships throughout the business and have a reputation as being someone with whom people want to work again. In short, high-potential employees are the people we identify as being the right sort of people to be groomed for leadership roles in the company.

Identifying HIPOs

The 'x-factor' that makes one person a HIPO and another a technical specialist, a professional operative or a middle manager is often apparent at the recruitment stage. Companies such as Macquarie Group use exceptional educational achievements as one indicator of leadership potential. These employers make it clear that only job candidates who have achieved a high level in their secondary or tertiary education need apply for a position. A battery of psychometric tests and interviews further culls this highly specialised group of people into a shortlist of candidates with clear potential to lead.

Other companies, such as Australian airline Qantas - employer of 34,000-plus people - continually search their employee populations for high-potential candidates. Our managers are looking for performance over a period of time, says Lonergan. They seek out people who achieve success by fighting to meet the challenges of a situation or who have been able to garner results where others haven't before. This means the search is conducted company-wide. The easiest place to look for talent is in the corporate functions, but our focus on identifying emerging leaders is across the business, including functions where employees are working with customers, or in technical roles working in our aircraft.

Qantas also uses its graduate recruitment program as another pool for identifying high-potential employees. Historically, the graduates program has been fertile ground for identifying emerging talent, says Lonergan. A number of our senior people today came through that pipeline.

Multinational packaging company Amcor took a different approach to identifying and developing HIPOs. Instead of looking within, the company launched an internal commercial leadership development program to develop its sales and marketing functions. It then promptly hired 10 new people to form the first cohort. At the time that Amcor was focused on a transformation of our sales and marketing function, our talent pipeline was insufficient to provide the sales and marketing leaders we'd need in future years, says Jennifer Jones, group general manager organisation at Amcor.

Amcor operates in 32 countries with 80% of its revenue coming from outside Australia. She says the company was looking for multilingual people with experience working overseas and postgraduate qualifications. At one gathering of the cohort, Jones entered the room to find not one person was choosing to speak English. It was a somewhat confronting experience for someone like me who has never mastered another language, but also a very stimulating and exciting experience because the employees in that room are symbolic of what Amcor looks like now, she says. One of the recruits was Swedish, hired in London and immediately sent on an assignment to Singapore and China. Her next job was in Brussels. We are looking for high-potential people all the time because leadership development is continually situational and dynamic, says Jones.

Traditionally employees who have been identified as having the potential to be future leaders are developed through on-the-job training, especially through job or project rotation. According to one academic study 84% of firms reported job rotation as the primary strategy used to develop HIPOs. Even though a high-potential employee has a lot in common with like-minded employees in the same group, it's still very important to look at each person individually, says Qantas's Lonergan. Each individual person will have different development needs and so their development is either through formal training or education, or rotation through different projects, or mentoring and coaching.

Increasingly, companies such as Qantas, Amcor, insurance group IAG, the ANZ Bank and the Australian Broadcasting Corporation send their high-potential employees back to school. All five have engaged the Australian School of Business to provide tailored, high-level and intensive programs designed for small cohorts of 15 senior employees who have been earmarked for key leadership roles. Programs such as those offered through the Accelerated Learning Laboratory effectively 'hothouse' these select employee groups over a period of two years of part-time study. The program combines theoretical and practical components with mentoring and self-directed learning. The students come from a diverse range of business units and functions within the company - it's never a homogenous group of people, says Accelerated Learning Laboratory research director Professor Jens Beckmann. By keeping the students to their own company group, their employers can expose them to different insights within their own company.

The students are taught systems thinking, project management, change management and how to form, manage and motivate teams, as well as intensive personal development. The main objective of the program is to accelerate their leadership capabilities and to accelerate their development in order for them to become an expert in their field, says Beckmann. We don't employ a one-size-fits-all approach because we can afford the luxury of accommodating individual differences. We teach students to understand certain drivers of performance and what are the reasons not only for failure, but also for success, and the conceptual relationships between the two. 

What Happens to the Other 90%?

It goes without saying that talented leaders cannot operate without followers. In any organisation, high-potential employees will account for only a small proportion of the population - so what about the rest?

A well-designed, employee development program will provide opportunities for all staff to maximise their potential, says Amcor's Jones. Your people are everything - they are your value proposition and your competitive advantage. So there is an obligation to develop everyone. Nevertheless, when we introduced the program and hired outside for the first cohort, we were concerned about how our other employees would feel. But we've now just had the third cohort complete their program and because of the success, the program is seen broadly within the company as a real opportunity and something to aspire to.

At Qantas, one of the company's values, professionalism underlines all of its development programs. Our biggest and most important group of leaders are our staff who work on the frontline with our customers, says Lonergan. One of the reasons why we opened our Qantas Centre of Service Excellence was because it's important that our in-flight crews continue to be able to develop their existing skills and to acquire new ones. One initiative is Sommelier training for cabin crew in order to understand wine and to converse intelligently and informatively with passengers.

This egalitarian approach to employee development is supported by the findings of a World Bank policy research paper, 'Do better schools lead to more growth' by Eric Hanushek and Ludger Woessmann, recently presented at an Australian School of Business conference. Our data ... allows us ... to illuminate one important issue: whether to concentrate attention at the lowest or at the highest achievers.Some argue in favour of elitist school systems that focus on the top performers as potential future managers of the economy and drivers of innovation. Others favour more egalitarian school systems to ensure well-educated masses that will be capable of implementing established technologies. In other words, should education policy focus on forming a small group of 'rocket scientists' or are approaches such as the Education for All initiative (UNESCO 2005) more promising in spurring growth?

The paper raises the point that focusing solely on gifted and talented students and employees is important, but not organisationally sustainable unless coupled with a development focus on the whole employee population.Many countries have focused on either basic skills or engineers and scientists. In terms of growth, our estimates suggest that developing basic skills and highly talented people reinforce each other. Moreover, achieving basic literacy for all may well be a precondition for identifying those who can reach 'rocket scientist' status. In other words, tournaments among a large pool of students with basic skills may be an efficient way to obtain a large share of high-performers.

Adopting a more open approach to staff development - and one that allows for the unexpected to occur - is often witnessed in microcosm in the Accelerated Learning Laboratory. We've had occasions when some people who have been sent here by their company were not expected to be quite up to the challenge but have instead excelled, says Beckmann. It's not uncommon for us to find, to use an analogy, a 'diamond in the rough'. But in the main the people who gain the most from development programs for high-potential employees are the high-potential employees themselves.

Which raises that old chestnut: is past performance a predictor of future performance? The trend in organisations today tends to be to take a bet each way; to continue to identify and develop HIPOs while simultaneously searching for the unexpected. I think it's a dangerous thing to limit yourself only to those people who have performed well in the past, says Beckmann. What you should also look for is consistencies and inconsistencies in performance over time. It's important to find a balance.