In an increasingly globalized and volatile economy, a Boston Consulting Group survey indicated that 56% of executives see “critical gaps” in their ability to fill senior management roles in coming years. Many employers, therefore, are now putting the focus on candidates who can make a positive, long-term contribution to the company. They are hiring for potential.
Hiring for potential means playing the long game. You’re looking for candidates who can grow and develop into more complex and challenging roles. According to Harvard Business Review, five key hallmarks of high-potential candidates are: motivation, curiosity, insight, determination, and engagement. The trouble is that it’s not always easy to spot and gauge these traits (judging years of experience or technical competence can be a much simpler exercise). The additional effort, though, can result in significant benefits to your company.
Here’s why hiring for potential is a good idea.
Past performance does not indicate future success
A study on the impact of prior CEO experience on firm performance, which tracked S&P 500 corporations, suggests that experience is negatively correlated with better outcomes. This is called the “experience trap,” and it’s evidenced by the vast majority of job postings that prioritize experience over other less tangible metrics, such as coachability and motivation.
While it may seem counterintuitive that experience be negatively correlated with success, there are many reasons for this. For example, the lessons and assumptions from previous jobs may not be transferrable to new situations. Bad habits acquired over the course of years, even decades, may have to be unlearned. In addition, ingrained ways of doing things can result in inflexibility and slowness to adapt to company-specific practices. A good compromise? Provide your preferred candidate with adequate training and onboarding to ensure that their experience can be applied appropriately to the culture of your company.
Add employees who can anticipate and adapt to future challenges
Technological developments have impacted all levels of operations from top-level business strategies to day-to-day operations. Likewise, new industries and competitors have developed, taking advantage of new technologies to solve consumer needs. In the face of a rapidly-changing economy, how do you ensure that your employees are motivated to keep learning and stay relevant?
Curiosity, determination, and a willingness to learn are crucial to anticipating and tackling the challenges that are presented by industry disruption. Instead of becoming intimidated or resisting change, these employees are open to acquiring new skills over the course of their career, provide new perspectives, and embrace new challenges. For example, imagine how different Blockbuster Movies would be if senior management had responded to Netflix by modifying its own user experience and adapting to on-demand digital video services. Instead of leveraging its massive customer base, it doubled down on its existing business model and ended up shuttering most of its stores worldwide.
Avoid high employee turnover rates
While it may be tempting to hire a candidate on the basis of their stellar technical or professional credentials, you shouldn’t overlook a possible personality or attitude clash. After all, specific technical skills can always be taught on the job, but the same cannot be said for motivation or work ethic. You might be willing to take a chance on someone based on their experience, but keep in mind that high turnover rates can cost your company a significant amount in recruiting, training, and lost productivity.
According to a study by Leadership IQ, which tracked the turnover rate of 20,000 new hires, 46% of them failed within 18 months. However, out of those who had failed, only 11% were fired due to a lack of technical skills. The over 89% were unsuccessful due to lack of coachability, emotional intelligence, motivation, and other indicators of low potential, which are often overlooked during the recruiting and interview phases. In hindsight, over 80% of hiring managers reported noticing “red flags” during the interview process, but did not heed the warning signs.
Experience can only go so far in determining the value that an employee will contribute. By getting to know your candidates during the recruitment process and hiring for potential, you are taking the first step in making a long-term investment in your company’s success.