Performance or Potential – How should you plan your hiring?

Published on 2013-09-23

Source: emilio labrador @ Flickr

ON PAPER ZHANG GU LOOKED GREAT. He had studied at a top Beijing university, had over five years of experience within the same industry, and had clearly shown promise given his rapid rise to management with his former employer. Why then had Zhang reached a plateau within six months with his new organisation?

Many organisations find themselves in this situation. Once the honeymoon of initial employment is over, the promising candidate, with many feathers in their cap, simply fails to live up to their resume. Doubt is cast. Did the candidate lie on their resume? Were promises broken on the employers’ side? Is HR out of touch with effective interview techniques? Such is the predicament when hiring based on a candidate’s accomplishments takes precedence over their future potential.

‘Potential’ is a word recruiting analysts use to describe job candidates who have the talent to become top performers, but who aren’t guaranteed to make full use of their abilities. [quote style=”boxed” float=”right”]Potential’ is a word recruiting analysts use to describe job candidates who have the talent to become top performers, but who aren’t guaranteed to make full use of their abilities.[/quote] The exact attributes that demonstrate potential will vary from company to company. Jessica Wang, HR Director for Grundfos China, says that for her, “Learning agility is the key concept” when assessing potential. “We look at how people deal with tasks when faced with them for the first time. We can gauge potential by examining their mental agility, interpersonal agility, result and change ability”, says Wang.

When looking to fill positions, companies are faced with a dilemma. Do they hire an unproven talent who might be the next Steve Jobs or Li Kai Fu, or select an impressive candidate whose potential is fulfilled and who is essentially risk-free? Surely a company would make the safest of hiring decisions and choose a proven performer. Or would it?

While recognising that the safe option may not always be the best option, Jessica Wang does believe that there are times when hiring staff with proven track records is the better choice. Jessica states that, “For positions which require in depth functional knowledge, skills or experience, then we may well place more importance on their credentials rather than their potential. However, when hiring trainees, we definitely focus more on their potential.”

Will an investment in potential pay off?

According to a 2012 study by researchers at Stanford University and the Harvard Business School, companies favour candidates who show potential over applicants who have already translated their potential into accomplishments.

In the study, a panel of evaluators was asked to predict who would perform better in a leadership role:

  •  a candidate with two years of relevant experience who scored well on a leadership achievement test, or
  • a candidate with no experience who scored well on a leadership potential exam. Most evaluators chose the second candidate.

The perception that potential is more valuable than past performance leads companies to hire candidates whose greatest attribute is an air of promise instead of candidates whose resumes read like a hiring and staffing manager’s wish list. This might sound risky, so the only question is whether the investment pays off.

For a company named Fishbowl, it certainly has.

The story of Fishbowl

Fishbowl is a provider of software solutions for manufacturing, distribution and asset tracking since 2001, and was recently highlighted in Forbes magazine. The company is a prime example of how basing hiring decisions on potential can pay off big time.

The initial goal of Fishbowl’s recruitment team was to hire top talent, but they soon discovered that it wasn’t easy to lure the best performers away from established companies. They then changed their tactics. Instead of wasting time hunting for perfect candidates, they began targeting candidates who showed potential; potential that could make the candidates the top performers of tomorrow. Essentially, the Fishbowl HR team believed that compelling personal qualities could make up for imperfect resumes.

[quote style=”boxed” float=”left”]Their success wasn’t the result of lucky hiring decisions, but rather the selection of certain traits…[/quote]

Their success wasn’t the result of lucky hiring decisions, but rather the selection of certain traits; traits that included loyalty, commitment, trust, respect, courage and gratitude, among others. So now rather than targeting candidates whose performance to date make them perfect for the job, the company continues to look for candidates who possess high potential and attractive traits. In this was employees are created, not hired.

Considering that Fishbowl has grown by 70% over the last three years and has won awards for project and management quality, it’s safe to say that this hiring solution turned out to be a winning strategy.

 Psychology in perspective

 Heidi Grant Halvorson, a motivational psychologist and author of the book ‘Succeed: How We Can Reach Our Goals’, also agrees with the universities’ findings. She believes that individuals who possess potential are more attractive than individuals whose potential is already fulfilled.

“The potential for success, as opposed to actual success,” she says, “is more interesting because it is less certain.” In other words, as illogical as it may seem, uncertainty has a hidden value – and our brains recognize it. Still, as Halvorson says, candidates who possess potential must also have positive traits, otherwise they become less attractiveness to hiring and staffing managers.

Values-based recruitment helps companies target candidates who possess positive traits that predict success. According to the Manpower Group ‘2012 Talent Shortage Survey’ 50% of US companies struggle to find qualified candidates and so using values-based recruiting to target workers who have high potential makes perfect sense. If a company has difficulty finding ideal candidates, it should reevaluate its hiring decisions and consider targeting those who have the potential to become ideal.

The Nine Grid System

“In Grundfos”, says Jessica Wang, “we use the nine grid system to evaluate potential versus performance.” This grid (See table below) helps define definitions of limited, moderate and high potential, and poor, good and outstanding performance. Once the roles in an organisation have been agreed upon and benchmarked by all the relevant parties in the hiring process, this grid system is an effective assessment tool for HR professionals.

Potential and Performance

Bill Sun, an HR Director for a leading international high-tech engine component manufacturer in China, emphasises the importance of assessing the broad spectrum of a potential hire’s skill sets. Bill states that, “We must take care when clarifying the definition of ‘highly qualified’. Normally three elements make up a successful employee: technical skills, soft skills (communication and people management), and cultural adaptability. If a candidate lacks ability in one of these areas, it will be difficult for them to be very successful”.

Jessica Wang is quick to add that she uses this system in conjunction with a value assessment of potential promotion or hiring targets. “In Grundfos we will also look at a person’s motivational fit to make sure that these high agility people are also aligned with the company’s values and strategy”. It is equally useful to apply these tests to the ‘under-achievers’ who are assessed. Their lack of success may well be down to a company failing to identify the best motivational factors for these people. Steps to a better outcome In order to use the nine grid assessment system effectively, there are guidelines and advice to follow:

  • The grid is designed for comprehensive assessment of candidates and requires input from a team rather than just the opinion of one person. Ideally, a facilitator with experience of the process will be available to encourage dialogue and correlate the information gathered. Attempting to use the grid alone without experience will leave the assessment open to inaccuracy and a subjective view.
  •  Any exercise involving assessment will naturally create anxiety within a team. Therefore do not implement the grid assessment without first presenting it to your team. Ensure that they buy-in to the idea and establish ground rules before actually beginning the process.
  • Each manager should fill in a grid for all of their employees. These will then be collected by a facilitator and consolidated into an organizational grid by name and level.
  •  When discussing the results with other managers, begin with an easy choice and select a person from box 1A (high performance and potential). Ask the manager directly responsible for this person to explain why they placed him or her in this grid. The key word in these discussions in ‘why’. The points which come out during these discussions are the most beneficial section of the process.
  • Establish a benchmark early on which will then enable you to more easily place others. Make sure that agreement on the benchmark is unanimous.
  • Finally, in a follow-up meeting, development plans for the individuals can be discussed. When deciding on succession plans, the important boxes which you should focus on will be 1A, 1B and 2A as this makes up the ‘potential pool’.

So, while hiring based on potential rather than achievement may offer HR a few more uncertainties to deal with, the benefits of getting it right can be huge in terms of cost and future contributions to the company. The use of this relatively simple grid process will limit the uncertainty and enable you to identify both ideal talents and the areas to develop existing employees.   There is definitely a need for bringing in people with established credentials for certain positions. However, HR professionals should not fear to look beyond the ‘safe option’ and look at what candidates with less impressive resumes, but high potential, can offer the company.