The Difficulty of Identifying Potential

As I cast a weary eye over the organisational landscape, I notice an insatiable obsession with what might be termed corporate alchemy: the pursuit of potential. This is not the kind of potential associated with, say, nuclear fusion or the stock market (though both can explode in unexpected ways). Rather, this is the kind that lives in performance reviews, talent pipelines, and the hopeful expressions of executives betting their bonuses on the next generation of leaders. Note: this latter type of potential also has explosive capabilities if not properly handled.

This begs three key questions:

What is potential?
How do we recognise it?
Why is it so hard to get right?

These are not trivial questions. Yet, for all their importance the corporate world has, for the most part, taken to this task with the same precision as medieval alchemists—perhaps with less success.

A key reason for this lack of success is that performance is—counterintuitive though this may sound to some—a poor predictor of future success. Let me say that again: performance is a poor predictor of future success. As a result, bias often distorts our ability to recognise talent, and serendipity—rather than systematisation—often plays the deciding role in who gets ahead. A very bad approach to building high(er) performing organisations.

The Perils of Performance as a Predictor

It seems obvious to assume that high performers in their current roles will naturally become high performers in future roles. This assumption is about as reliable as the notion that a great racehorse would make a fine jockey. It also explains why the Peter principle often holds true.

Rob Silzer and Allan Church dismantle this fallacy in their seminal work on talent identification, The Pearls and Perils of Identifying Potential, and demonstrate that high performance in a given context is often the result of environment-specific factors: a supportive team, a well-defined job scope, or simply having the right boss. Strip those away, and a once brilliant performer may struggle.

This builds on the earlier work by Robert Hogan, of Hogan Assessment fame, in which rewardingness—the ability to be agreeable, interesting, and promote the other person's agenda—is more strongly correlated with a person's rise to a position of authority than is their effectiveness in a leadership role. This is particularly concerning in the corporate world, where charisma and political savvy often eclipse competence. The nine-box talent grid, a staple of HR departments, exacerbates the problem by relying on subjective assessments of potential that are, at best, arbitrary and, at worst, deeply flawed.

In short, the idea that today's high performers are tomorrow's leaders is akin to believing that because a child enjoys finger-painting, they are destined for a career in fine art. Possible? Yes. Probable? Not particularly.

The nine-box talent grid is a framework in talent management and succession planning that evaluates employees based on two dimensions: performance (how well they currently execute their role) and potential (their ability to take on more complex responsibilities in the future). The grid consists of nine boxes, categorising employees into groups such as "High Potential, High Performance" (future leaders), "Low Potential, High Performance" (solid contributors), and "High Potential, Low Performance" (untapped talent). While it provides a structured approach to talent assessment, it relies heavily on subjective judgments, can reinforce biases (in-group/out-group), and oversimplifies the complexities of human potential and career growth.

The Bias Minefield

A key learning from the history of organisational behaviour is that in general people are spectacularly bad at objective decision-making. In talent identification, this takes the form of like-me bias, halo effect, and overconfidence. This reality manifests in executives disproportionately selecting protégés who remind them of themselves, leading to a homogeneity that stifles innovation.

Plato's allegory of the cave serves as an apt metaphor: those selecting talent often perceive mere shadows of potential rather than its full reality. Candidates who are deemed to 'fit the culture' (read not rock their boss' boat) tend to be favoured, even when their actual abilities may be lacklustre. This leads to the sad reality that individuals who tend toward group-think are more likely to be rated as high potential despite no actual correlation with job performance.

Organisational leaders also have a disturbing tendency to mistake decisiveness for competence. As Daniel Kahneman demonstrated, people who exude confidence are more likely to be believed, even when their accuracy is no better than chance. This explains why corporate history is littered with the remains of over-promoted individuals whose primary skill was looking like they knew what they were doing.

The solution? A rigorous, structured approach to talent identification that prioritises behavioural evidence over gut feeling. However, as we shall see, even the best frameworks are undermined by the unpredictability of human development.

The Role of Context and Serendipity

If identifying potential were purely a matter of data-driven assessment, the task of identifying top performers versus laggards would be straightforward. But the real world is messy, and career trajectories are shaped as much by chance as by skill.

The emergence of disruptive technologies, economic shifts, and the whims of office politics where the arrival or departure of a CEO can shift who is moving up, who is moving down, and who is moving out, disproportionately determines whether someone is perceived as having potential. Opportunity structures within organisations also play a significant role in shaping career success. That is, those who are given stretch assignments, mentorship, and sponsorship are far more likely to fulfil their potential than those who are left to languish. In short, more people than you think can competently do a specific job, but only a select few are ever given the opportunity—particularly at more senior levels.

Thus, what is often describe as potential is less about ability and more about being in the right place at the right time (think someone who becomes a VP at a billion dollar company simply because they got the gig when it was a start up). This raises uncomfortable questions about the fairness of talent assessments and suggests that organisations should place greater emphasis on creating equitable opportunities rather than trying to predict future greatness based on prevailing assumptions about an individual's capabilities. The perennial "that's too big a step for them".

A Humble Approach to Potential

The difficulty of identifying potential is not merely a technical problem; it is a philosophical and practical one. Given performance is a poor predictor of future success, that biases warp our judgment, and serendipity plays an outsized role in who rises to the top, it is critical that managers move beyond being fixated with identifying 'high performers'. Instead, organisations would do better to focus on creating environments that allow a broad range of employees to develop and prove themselves. To paraphrase Aristotle: we are what we repeatedly do. Thus, the real key to unlocking potential lies not in identifying it, but in providing the conditions in which it can flourish.

Until then, most managers will continue to sift through resumes, stare at leadership competency matrices, and hope against hope they have backed the right horse—despite knowing that some of the best racehorses were once dismissed as pit ponies.

Good night, and good luck.