‘Let’s promote Suraj!’ said the Sales Head.

The HR Head looks concerned, ‘Let’s give Suraj one more year. He is not ready yet.’

Sales Head: ‘Ready? Look at his numbers. He has got the highest customer satisfaction scores. He has consistently met the targets set for him. His senior stake holders like him. He works well with his peers. What do you mean by he is not ready?’

This is a classic discussion that happens in talent panels all the time. A great performer…. But is he ready for that promotion. Does he have the potential? Back and forth the conversations go.

To understand the answer, let’s look at two key concepts called performance and potential.

Performance is what drives the business much like fuel drives the car.  Performance is an individual’s ability to execute their tasks effectively and deliver results based on their current responsibilities. High performers consistently meet or exceed their targets, contributing significantly to ongoing business success.

Performance is assessed based on what has already happened, either in the past or happening currently in the present. It is measurable and objective.

Performance comprises of two key elements: the ‘what’ and the ‘how’

• The ‘what’ of performance answers the question: What was done? It is about the task achieved, the results delivered or the goal met. Example: Suraj achieved 110% of the target.
• The ‘how’ of performance answers the question: How was it done? It is about the behaviors demonstrated and competencies exhibited while achieving the task, result or goal. Example: Suraj collaborated with stakeholders, worked as a team player, engaged his team, displayed a customer-oriented approach.

Meet Sam………Sam is a partner at a prestigious Law Firm. He has achieved 120% of his business targets for the year. He is very influential in business circles and is considered as an expert in his domain. His business is the most profitable in the firm. But Sam never collaborates with other partners. He considers them as competition to his business. He is unwilling to support internal stakeholders in any way. He openly flouts company norms and policies and is vocal about the fact that no one can touch him due to his immense influence in business circles. While Sam exceeds the ‘what’ of performance, he is clearly lacking in the ‘how.’ If unaddressed, his behavior and attitude will cause rifts in the internal teams, lead to attrition, derail the culture and negatively impact overall business performance. Can we say he is a high performer? Certainly not!

Meet Jay………. Jay is the Regional Sales Manager for Western Region for a pharmaceutical company. He has achieved 100% of the sales target for this year. He also introduced 12 new customers.  He is very customer centric. He works collaboratively with internal teams to resolve customer issues. He is also a good team leader. His team engagement scores were high indicating that his team is very engaged while also achieving their targets. Jay meets both the what and how of performance. So, he can truly be said to be a high performer.  

Both the ‘what’ and ‘how’ of performance are equally important. Often times, greater importance is given to the ‘what’ is getting achieved by overlooking or turning a blind eye to the ‘how’ it is getting achieved. This sends out a wrong message to people and negatively impacts culture. We often see this play out in corporates. Employees who far exceed their targets and goals get away with bad behavior and/or flouting rules.  This creates a toxic culture and impacts the system.   

We have heard of instances where managers shout and scream in meetings demanding their teams achieve the target at any cost. While we love to villainize these managers, it is worth a while to stop and think: is the culture rewarding just the ‘what’ or is the ‘how’ being given importance too. Is the culture latently encouraging these toxic behaviors?

A few examples of good performances:

• Ashish is a sales executive who consistently meets and exceeds his sales goals, builds strong client relationships, and contributes to revenue growth.
• Payal is a customer service agent who consistently meets all her KPIs, receives positive feedback from customers and reduces service resolution time.
• Amar is a project manager who successfully oversees multiple projects, meets deadlines, and ensures efficient resource allocation while also being a great team leader.

So, if this is performance, what is potential?  

Potential is a completely different ball game. Potential refers to the likely future performance of a person in a higher or more complex role or situation.  It is the ability of an individual to grow beyond their current role. Employees who show high potential are often referred to as hipos.

At its worst, potential is just a guess or a gamble.  At its best, when done right, using science and tools like data analysis, personality assessments, stakeholder inputs, past and present performance data, competency assessments and so on and so forth potential can be predicted with a great amount of certainty. But, like with all things ‘future,’ potential too remains a most-likely-to-happen scenario. And when dealing with us humans, there are no 100% guarantees. The great reveal or the true test: will only be when the event actually occurs or in our case when our employee who was identified as hipo actually takes on and excels at their new role.

Hipos demonstrate qualities such as ability, drive, adaptability, problem-solving, ownership, leadership, the ability to handle complexity etc.  These are all great to have and will be trade marks of a hipo, but it is certainly not all!

Many a times, we forget to check the crucial aspect of the employee’s own aspiration, intent and engagement. A hipo employee must have the aspiration to grow into a bigger and more complex role. They must be willing to work towards that aspiration. They must be engaged with the organization, showing an intent to stay and grow within the organization.

Last, but not the least, and in fact a very important aspect: An employee identified as a hipo must always demonstrate solid strong performance in their current role. This is Condition number 1 of being a hipo. If this condition is not met, we wait. We wait for performance to actually happen, even when the person in question clearly has great potential. Alternatively, we may choose to shift them into another role to test their performance before we consider them as a hipo.  Performance is a necessary condition for potential and, in that sense, a non- negotiable.  

In our earlier example, Jay is a good performer for sure. But does he have the potential to take on a higher much more complex role? The answer is not clear and needs a further deep dive and assessment. Many a times, like with Jay, we look at high performers and assess them to have high potential but this may not always be true.

Usually, the immediate managers are asked to identify employee potential. A big mistake! Just an assessment by one person, may at best, be an opinion. One opinion is not equal to a valid outcome on potential assessment.

Best practice dictates the use of science and data to predict potential. Define potential for your organization, ask for inputs from multiple stakeholders, conduct assessment centres, analyze past performance data and trends, understand the persons own aspiration etc. before deciding on potential. In this way the probability of correctly predicting potential significantly goes up.  

In the corporate world, there is a great need to predict potential:

Firstly, succession planning is important and even more so important for critical roles. People tend to leave organizations or move to new roles and other people must be ready to jump into vacant roles quickly and hit the road running. Hitting the road running needs prior training and development, it means being assigned to challenging projects or real time stints for learning critical skills, getting mentored etc. among many others.   Just like time and tide wait for no man, business too waits for no one.  So, if you are not ready with the right set of ‘ready’ people at the right time, you lose out to competition.  

Secondly, resources being limited, companies want to put their money and invest in their most promising individuals. That’s another reason assessing potential becomes important. You need to know ‘who are the hipos?’ for your organization.   

Thirdly, high potential employees are very likely to stay if they know they are being groomed and developed or getting opportunities to learn. They are likely to stay longer and be more engaged at work.

A few examples of employees who demonstrate potential:

Cheri is an individual contributor who takes the lead in team projects, is a mentor to other team members, and leads discussions. (Displays leadership qualities)

Preeti is a staff member who thrives in uncertain scenarios, quickly adapting and making sound decisions without detailed instructions. (Ability to deal with ambiguity)

Tina is a junior-level employee who not only performs well in her role but often suggests long-term improvements that align with business goals. (Ability to think strategically)

Conclusion:

So, to conclude, understanding the difference between performance and potential is essential for identifying talent in any environment. While performance reflects the current achievements, potential indicates the capacity of the individual to grow and take on greater responsibilities in the future.