One of the most powerful ways companies can grow is by promoting from within. Employees with a strong knowledge of an organization can rise up and enact change, keeping an organization modern and ahead of the times.

However, not all employees are leadership material, and not all leaders are high-performers. Keep reading to learn how you can identify and reward high-performers, while also identifying potential future leaders in your organization.

Managers Need to Identify Performance and Potential

An important role of senior leadership is to identify potential in employees and create room for them to grow. Without this development and promotion, employees are more likely to leave, taking their skills and internal knowledge of the company with them.

One leader who is doing talent management right is Andy Newsom, senior vice president at CSL Behring. Newsom told CIO that he dedicates 15 percent of his time to identifying and growing top talent. He meets with his managers and asks them to identify which team members have high potential. This way he knows how his teams are balanced (which ones have more high performers) and which employees should be placed on track for advancement.

Newsom is involved not only in the future of his staff, but the balance of performers across the company.

“Being a leader is much more than being in charge,” David Tweedt, President of Win Enterprises, says. “It is having the ability to find the best in people by truly caring for others. When your employees see you truly care they will follow you through the breakthrough changes knowing you have their best interest at heart.”

High-Performers Are Good for Your Organization

Identifying top-performers and employees with potential can have multiple benefits to your organization. Your company can take steps open doors for these employees and reap the rewards.

In an article for Needles Software, Emily Janosko highlights some reasons why high performers are important for your organization, which include:

High performers care: They are invested in your company and desire the best possible project results.
High performers improve company culture: They work to motivate others and enact the change they want to see in the organization.
High performers voice their opinions: They have ideas and want to share them with your company to make improvements.
High performers contribute: They are always willing to step into a new role or offer help where they can.

When your employees feel valued and recognized by leadership, they’re more likely to spread their engagement and positive attitude throughout the company. Hard work and caring is contagious, and leadership can foster it by helping top-performers.

Not All High Performing Employees Have Potential

Interestingly, there’s a significant difference between employees who have potential and those who are high performers. Knowing this difference can prepare your company to identify employees for advancement.

Sabrina Son explained the difference in an article at TINYPulse:

High performers are good at what they do and are reliable. They will always do what is expected and might have career advancement goals.
High potentials go above and beyond what is expected of them. They have the qualities of High Performers, but try to find new ways to do things, new work they can take on, and new ways to lead in their roles.

By highlighting the high potentials in your organization, you can select those employees most likely to succeed for the leadership path and set them up for growth training.

“[High potential employees] can be present in any area of your business, and can be identified via three characteristics: ability, aspiration, and engagement,” the team at Unicorn HRO writes. “HR managers tend to use a grid scale to measure an employee’s potential, with the X axis of the grid representing employee performance while the Y axis represents potential.”

This grid system can help identify top candidates for additional training or advancement.

Most Companies Can’t Spot High-Potential Team Members

While identifying top-performers by a grid system might seem easy, it’s actually not. The fact is, 75 percent of organizations don’t have an employee engagement plan or strategy, Stuart Kotchie, director at workplace consultancy Harmsen Tilney Shane, explains.

“Forward-thinking employers are using [young professionals’] expectations as architectural drawings – drawings for how to build productive, people-centred businesses with collaborative, socially engaged, and productive workplaces that benefit everyone in them,” he writes.

One way to identify top-performing employees is to see what they do when they don’t know you’re looking. “Much of the success that high-performing employees have stems from the fact that they have cultivated the right habits,” Kathy Irish at elearning platform ej4, writes. “Any employee can guess what ‘the right thing to do’ is when the boss is looking, but only your high performers will have turned those instincts into repeatable everyday behaviors.”

High performers will also take steps to increase their training, solve problems and streamline systems when left to their own devices. These are people who you want to reward and promote within your company.

Not All High-Performing Employees Are Cut Out for Leadership

Along with identifying potential, companies also need a set of criteria to identify employees with leadership skills. As a whole, most organizations aren’t good at identifying employees with high levels of leadership potential.

Leadership development experts Joseph Folkman and Jack Zenger analyzed almost 2,000 employees selected for their organization’s high-potential (HIPO) programs, and who were supposed to be the top five percent of employees in the organization. However, Folkman and Zenger found that 12 percent were actually in the bottom quarter for leadership potential, and 42 percent were well below average. Great employees don’t always make good leaders.

A lack of understanding of leadership skills may be why so many managers fail to communicate with and oversee staff efficiently. Simply being good at your job doesn’t mean you’re management material.

Jon Windust, CEO at management software company Cognology, cites an Australian survey in which 83 percent of workers rated their managers at average or below average. He says high potential employees need training and experience before they can step into leadership roles. This might mean letting them manage an intern, remote contract worker or company project to develop their management skills in the short term, before tapping them to lead a team full-time.

You Can Reward Employees Without Promoting Them

Another reason leaders are often promoted to their roles is because promotions are one of the main tools to reward employees. Most companies think their employees value salary increases and promotions, when this isn’t always true.

Autumn Manning, CEO of YouEarnedIt, spoke to high performers to see what motivates them to do better. The answers varied, but the overwhelming theme relates to how company values its employees. This includes:

Giving team members opportunities to grow their skills based on past successes.
Making sure leadership listens to employee ideas.
Offering rewards other than cash bonuses such as paid health initiatives, live plants through the workspace, a relaxed dress code and flexible paid time off.
Investing in programs that support the local community and making your company a great place to work.

Additionally, verbal praise and recognition goes a long way, Thomas Bale writes at Investors in People. Managers should readily offer meaningful praise, and tailor it to the work that is being done. Not every project needs an awards ceremony, but a thank you and pat on the back is always appreciated.

Undervalued High Performers Will Leave

If your high performance employees aren’t being challenged or aren’t valued in their organizations, then they’re likely to go someplace where they will be. George Dickson at the recognition and rewards platform, Bonusly, lists reasons why great employees leave, and many focus on lack of career potential.

Employees leave because they have limited opportunities to grow.
Employees leave because they’re not able to use their creativity and problem solving skills.
Employees leave because they’re not working with other higher performers who challenge them.
Employees leave because they don’t have autonomy to work and think on their own.

High performing team members want to be pushed to do more and given the freedom to succeed (or fail) on their own merit.

High-Performing Employees Influence Their Peers

While the primary focus of most companies is on high performers, low performers also have a lot of potential.

“Rewarding high-performing employees is the easy choice–as well as the lazy choice,” Adam Miller, CEO of talent management software firm, Cornerstone OnDemand, writes. “It’s possible for employees to be low performing and high potential, or high performing and low potential–they aren’t necessarily correlated.”

Someone who is great at what they do might shrink in a leadership role, while another employee might rise to the challenge and succeed.

Top Employees Can Motivate Bottom Employees

In the right setting, high performers can encourage low performers to do better. Psychologist Tomas Chamorro-Premuzic and his colleagues Seymour Adler and Robert B. Kaiser shared some interesting insights highlighting the importance of community development in regard to star players.

Top employees outperform average employees by a median of about 50 percent for low complexity jobs, a number that increases to 85 percent for medium-complexity jobs.

Furthermore, simply adding one high performance employee to a team increased effectiveness of other team members by as much as 15 percent. The people your employees work with will either push them to do better or let them slack off.

Richard Santos Lalleman at Innovisor agrees. He cites a case study where a company with 7,000 employees tried to identify high performers. They discovered that high performers tend to congregate together, while middle-performers tried to work with high performers. Meanwhile, employees with the lowest performance scores in the company were closely connected to new employees.

Because high performers weren’t helping low performance coworkers, it was difficult for the company to make improvements in output and innovation as a whole.

How to Identify High-Performers and Prepare Them for Leadership