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J of an elite MBA
program, takes
a job in the
finance division of a
Fortune500company.
ing. In fact, 84 percent of firms in a study by
Derr, Jones, and Toomey (1988) reported job
rotation as the primary strategy used to develop
HIPOs. Specifically, job rotation attempts to pro-
vide these fast-trackers with a “macro-view” of
Anxious to progress in the firm, its business environment, and its strat-
the corporation, John egy in preparation for top management positions.
is concerned about In the new business reality, the marketplace
career development. is characterized by hypercompetition and global-
The company assigns ization, making HIP0 programs more important
him to treasury for his now than ever. Upon consideration of the turbu-
first position. Twelve lent business climate, along with the nontrivial
months pass and John replacement costs of company-generated talent, a
is moved to a financial case can be made for efficiently identifying and
analyst assignment supporting the manufacturing grooming a firm’s high-potential employees so
area for one year. After this, management decides that those who best know the business, technol-
John should gain experience in another func- ogy, and operations are making the critical deci-
tional area of the company. So he moves again, sions.
this time to a sales assignment for four months. Designing and managing a program for high-
Upon return from his sales territory, John is as- potential employees, however, is a complex pro-
signed for ten months as a personnel associate in cess with few guidelines to follow. The objective
research and development at the corporate head- here is to: (1) discuss the use of HIP0 programs
quarters. With exemplary performance in all of in today’s business environment, (2) introduce
these assignments, and after about three years key decision points in assessing the need for,
with the firm, John is promoted to manager of design of, and management of a program to de-
strategic financial planning. velop HIPOs, and (3) identify what we know
John represents what has been defined as a about the consequences of these decisions.
high-potential employee (HIPO), someone who
is characterized by a fast rate of lateral movement THE USE OF HIP0 PROGRAMS IN TODAY’S
through various roles in the firm, a carefully BUSINESS ENVIRONMENT
monitored career, and an elite but usually secre-
A
tive status. As future leaders of their firms, HIPOs straightforward case can be made that
move quickly into new positions, receive special today’s businesses actively need to
coaching and mentoring, and are expected to select and prepare high-potential em-
deliver superior performance. As illustrated by ployees to manage in complex environments.
John’s experience, firms prefer to manage HIP0 The efficiency of sponsored mobility systems in
career development through on-the-job experi- meeting this need is apparent: Decisions about
T
firms such as Greyhound Financial Corporation, he first step depicted in the Figure is
IBM, Hewlett-Packard, Marriott, and AT&T, to relatively straightforward, yet often over-
name just a few. looked. The organization must determine
Nevertheless, such approaches are not with- the extent to which a business need exists for
out their share of criticism. It may be difficult to creating and managing a HIP0 program, and it
determine whether an employee actually merits must specifically identify how the program will
HIP0 status or fulfills higher expectations simply meet that need. Again, when considering the
because of a self-fulfilling prophecy effect. HIP0 importance of promotion-from-within strategies
programs can also encourage firms to produce and succession planning efforts in creating top
clones of current top management members who management talent, the business case for a HIP0
are not necessarily well-equipped to handle fu- program may be fairly apparent. Nevertheless,
ture business issues. And when HIP0 programs the company needs to be very explicit in defining
are not designed appropriately, such problems as the program’s objectives, because they may differ
non-participant resentment and participant dissat- from the firm’s specific business strategy, its ex-
isfaction have been found to result. perience with using sophisticated HR practices,
Unfortunately, there is little guidance avail- and the goals of senior management.
able in how better to meet these and a multitude Specifically, managers must respond to the
of other challenges when designing and manag- following line of questioning: Why do we need a
ing HIP0 programs. Based on the principal is- HIP0 program? How will it support our business
sues identified in prior research, the Figure pre- strategy and improve our competitive advantage?
sents the key decision points in adopting a HIP0 How will it help us fulfill our leadership needs
program. The points are outlined in three steps: for the future? How will it benefit the organiza-
(1) needs assessment, (2) design, and (3) man- tion, the HIPOs, and the rest of our employees?
agement of a HIP0 program. What follows is an In short, the central concern is with the stra-
initial attempt to identify, consolidate, and exam- tegic benefit of implementing a HIP0 program.
ine these key decision points when implementing As with other human resource interventions
an effective HIP0 program in the new business (such as training and development programs), if
reality. there is no clear sense of how the program will
A
fter identifying the need for a HIP0 ity, confusion, and frustration associated with
program and enumerating the high-level concealed company practices.
objectives, the corporation enters into Harris and Feild (1992) found in one com-
the more complex step of program design. This pany that a lack of understanding of program
step is composed of five key decision points: objectives was the major barrier to the line man-
identifying the criteria for HIP0 selection, deter- agers’ ownership of their HIP0 program. No
mining a communication strategy, deciding effort had been made to explain the rationale for
whether to disclose HIP0 status, determining the an MBA selection criterion, so many executives
timing of HIP0 identification, and creating a pro- perceived it as an indictment against their own
gram evaluation mechanism. Each is discussed in qualifications, with resulting controversy. The
turn. organization should instead have announced the
objectives of the program and explained the cri-
Identify HIP0 Selection criteria teria and procedures to its line management.
In communicating the goals of a HIP0 pro-
The ultimate selection criteria to be used in deter- gram, a firm should make it clear that all em-
mining HIP0 status should be chosen with the ployees will be involved in the selection of high-
program’s goals in mind and should be clearly potential candidates. A team-based atmosphere
defined. There are numerous sources from which might be created in which other employees par-
such assessments of HIP0 talent could be gath- ticipate in identifying high-performing individuals
ered. Organizations have considered: through peer and subordinate input in the evalu-
l level of education, university where ad- ation process. Employees should be told of the
vanced degree(s) were obtained, and grades; potential benefits of creating a highly competent
l previous work experience (industry, mana- top management team in terms of profit-sharing
gerial); initiatives, formulation of business strategy, and,
l assessment center performance; ultimately, job security. The potential down sides
l performance in the organization (using of the program should be discussed as well. By
standard performance evaluations by supervisors, providing a candid exchange of information, the
peers, or subordinates); program will gain increased credibility.
l supervisory assessment of leadership po-
tential (qualitative or quantitative assessments>. Decide Whether To Disclose HIP0 Status
Most companies rely heavily on the use of
direct supervisors to identify HIP0 talent based Informing HIPOs of their status has been a diffi-
on actual job performance, rather than using a cult issue for firms to handle, and no easy solu-
list of attributes or assessments of future poten- tions are readily apparent. Most firms report that
tial, Such a performance-based approach, which they prefer to maintain a secretive status for
incorporates several objective sources in the HIPOs. This allows more flexibility in taking indi-
evaluation, should help generate valid assess- viduals on and off “the list” according to their
ments and enhance employee perceptions of judged potential. It can also alleviate the “Crown
fairness. This approach, in turn, should increase Prince Syndrome,” whereby HIPOs perceive they
the company’s confidence in the HIP0 candi- have been anointed as the chosen few. And it
dates who are selected and avoid the self-fulfill- helps avoid the Hawthorne effect, in which the
ing prophecy explanation for HIP0 status. increased attention accounts for good perfor-
mance.
Determine A Communication Strategy However, most firms using a HIP0 program
have found that protecting a secret list is difficult.
The next key decision point in program design Employees often discover who is on the list by
deals with the communication of program goals the opportunities given to certain employees. Or
been provided in this area, but some examples evaluate program effectiveness in terms of ben-
include what specific job the person is targeted efits for the firm (productivity, employee reten-
for, the level and type of the job (general man- tion) and for HIPOs and other employees (job/
ager, functional head), and the size of the HIP0 career satisfaction, organizational commitment,
pool. Process-oriented issues to be shared could productivity, turnover, absenteeism);
include how HIPOs are selected and de-selected, l how often the HIP0 program will be
what role the firm will play in their career man- evaluated;
agement, and what role they should play in their l who (or what group) will oversee the on-
own career planning. Again, the degree to which going implementation, evaluation, and modifica-
these types of information are shared with HIPOs tion of the HIP0 program.
should be congruent with the nature of the com- A regular feedback mechanism will help
munication strategy the firm chooses to adopt. ensure that the desired outcomes of the HIP0
program outlined in the needs assessment phase
Determine The Timing Of HIP0 Identification are achieved. It will also ensure that any neces-
sary modifications to program design are pursued
An egalitarian approach to determining when to regularly. Finally, employees responsible for sup-
identify HIPOs would be to allow all employees porting and managing the HIP0 program should
an unlimited amount of time in which to demon- be held accountable for program outcomes and
strate they should advance in the firm. However, appropriately rewarded throughout the company.
the new business reality calls for a more active
and aggressive approach for HIP0 identification. MANAGING HIP0 DEVELOPMENT
Derr, Jones, and Toomey (1988) found that
T
most companies identify HIP0 talent after three he third step in the Figure addresses how
to eight years. Evans (1986) claims that identifica- firms can use job rotation strategies as
tion should be done as soon as possible and after the primary mechanism for managing
no more than five to six years of actual work HIP0 development. In this step, a company must
G
iven today’s new reality and the stormy
The length of lateral assignments must be man- future promised in the business world,
aged carefully so that HIPOs maximize their de- companies must actively pursue the
velopment and contribution in each assignment identification and development of high-potential
yet continue to progress in their fast-paced ca- talent. By preparing a select group of employees
reers. If rotated too quickly, accountability be- to ultimately fill its top-tier jobs, a company can
comes a problem and the HIPO’s credibility may build a strong management team with the skills
be questioned. Clearly, shorter-term assignments needed to maneuver in a hypercompetitive mar-
may benefit HIPOs but not necessarily the orga- ket.
nization. Therefore, a balance must be struck But a HIP0 program can be controversial
between expediting HIP0 development and and tricky to implement and maintain. The key
achieving organizational productivity. decision points identified and examined here can
At McDonnell-Douglas (at least prior to the increase understanding of how to assess the need
recent merger with Boeing), HIPOs change re- for, design, and manage a HIP0 program in such
sponsibilities every three years; at PepsiCo, it is a tough business environment. A clear business
about every year. However, research has yet to case must exist for incorporating the program
examine and/or recommend a specific length of into the company’s succession planning efforts.
time HIPOs should spend in their rotational as- Criteria for identifying and selecting HIPOs, justi-
signments. According to Campion, Cheraskin, and lying and explaining the program to employees,
Stevens, rotation rates should be managed ac- timing and evaluation mechanisms-all must be
cording to the time required to achieve develop- weighed and considered carefully.
mental needs. In other words, firms should ulti- Broad-based lateral moves throughout the
mately focus on the quality of the HIPOs’ work firm, along with just the right mix of functional
experiences, not just the quantity of assignments and international experiences, are crucial for
they rotate through. learning the knowledge and skills essential for
Although rotation should not be implemented future leadership talent. Mentors and other sup-
as a lockstep system, companies may want to port mechanisms should be established to help
establish some “window” of time-say, two to HIPOs cope with demanding assignments. And
three years-as a guide in determining the length perhaps most important, managers must work to
of lateral assignments. That way, it is hoped, they strike a balance between meeting the individuals’
can avoid shortchanging both HIP0 development career needs and achieving long-term corporate
and organizational effectiveness. objectives.
J.B. Forbes and SE. Wertheim, “Promotion, Succession, M. Settle, “Up Through The Ranks At McDonnell-
And Career Systems,” in G.R. Ferris, S.D. Rosen, and Douglas,” Personnel, December 1989, pp. 17-22.
D.T. Barnum, eds., Handbook Of Human Resource
Management (Cambridge, MA: Blackwell, 1995), pp. P.G. Smith and D.G. Reinertsen, Developing Products
494-510. In HalfEbe Time (New York: Van Nostrand Reinhold,
1991).
T. Fresina and Associates, 7&e Identification And De-
velopment Of High Potential Managers (Palatine, IL: J. Weber, “Farewell Fast Track,” Business Week, Decem-
Anthony J. Fresina and Associates, Inc., 1987). ber 1990, pp. 192-200