Here is an excerpt from an article written by Tomas Chamorro-Premuzic, Seymour Adler, and Robert B. Kaiser for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.
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How inclusive or exclusive should organizations be when developing their employees’ talents? In a world of unlimited resources, organizations would surely invest in everyone. After all, as Henry Ford is credited as saying, “the only thing worse than training your employees and having them leave is not training them and having them stay.” In the real world, however, limited budgets force organizations to be much more selective, which explains the growing interest in high potential (HiPo) identification. An employee’s potential sets the upper limits of his or her development range — the more potential they have, the quicker and cheaper it is to develop them.
Scientific studies have long suggested that investing in the right people will maximize organizations’ returns. In line with Pareto’s principle, these studies show that across a wide range of tasks, industries, and organizations, a small proportion of the workforce tends to drive a large proportion of organizational results, such that:
o the top 1% accounts for 10% of organizational output
o the top 5% accounts for 25%, of organizational output
o the top 20% accounts for 80% of organizational output
Careful research over many jobs and across many organizations in multiple industries highlights a clear pattern: the payoff from employing top talent — defined as the vital few who account for the biggest chunk of organizational output — increases as a function of job complexity. For less complex jobs, like manufacturing, top employees outperform average employees by a median margin of about 50%. However, for medium complexity jobs, such as trainers or first line sales managers, that difference grows to 85-100%, and for highly complex jobs, such as senior leadership roles, the contribution of top performers is more than double that of the average performer.
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Here is a direct link to the complete article.
Tomas Chamorro-Premuzic is the CEO of Hogan Assessments, a professor of business psychology at University College London and at Columbia University, and an associate at Harvard’s Entrepreneurial Finance Lab. His latest book is The Talent Delusion: Why Data, Not Intuition, Is the Key to Unlocking Human Potential. Find him on Twitter or here.
Seymour Adler, Ph.D., is Professor of Industrial/Organizational Psychology at Hofstra University and a Partner in the Performance, Talent, and Rewards practice at Aon Hewitt. He is the coauthor of Technology-Enhanced Assessment of Talent (Jossey-Bass, 2011) as well many academic and professional publications.
Robert B. Kaiser is the President of Kaiser Leadership Solutions, based in Greensboro, NC. His latest book is Fear Your Strengths: What You are Best at Could be Your Biggest Problem. You can find him online at kaiserleadership.com or e-mail him at email@example.com.