IntroductionThe identification, development, and retention of high-potential employees is one of the most important areas of research in industrial-organizational (I-O) psychology. Whereas the vast majority of the workforce will perform in ways that do promote organizational goals, the top performers in any organization are those that provide the firm with its competitive advantage. On the contrary, organizations that do not actively seek to identify, develop, and retain high-potential employees stand to lose a lot as top talent may seek opportunities to maximize potential elsewhere—often a competitor. Moreover, the high potential employees are those with the greatest potential to lead the firm in the future, paving the way for effective succession training and management.

Research on the identification, development, and retention of high-potential employees is burgeoning, but there are significant gaps in the literature. Filling those gaps would help organizations create and implement evidence-based practices to ensure the success of the organization, future-proofing it via succession planning. Moreover, organizational practices have yet to keep up with I-O research on developing and retaining high-potential employees. Surveys show that current human resources processes “suffer from subjectivity, bias and disagreements,” (Palshikar, Sahu & Srivastava, 2016, p. 208). On the other hand, research has been increasingly pointing to the need for transparent, formalized processes and procedures that identify high-potential employees and openly cultivate those employees via mentoring, special assignments, and other methods (Zhu & Manjarrez, 2017). It is important to know how high-potential employees respond to specific types of incentives, mentoring methods, and formal approaches to employee training and development. Organizations that apply evidence-based practices to developing and retaining high-potential employees are more likely to receive returns on their investments.

Review of Literature

Somewhere between 40 and 60 percent of global organizations have formal high potential employee development programs, such as fast-tracking, in place (Dries & DeGieter, 2013). The reason these programs are being increasingly put into place in spite of their additional costs is that high-potential employees are known to be “twice as valuable to an organization” compared to the average employee, and are “75 percent more likely to succeed in a senior position,” (Downs, 2015, p. 349). The return on investment in high-potential employees is obvious, particularly when leadership stability and future proofing a company are taken into account as strategic advantages. Some of the most important factors influencing high-potential employees to remain in an organization relate to structural and organizational culture variables including leadership, cohesive organizational purpose, formal development opportunities, the perception of meaningful work, and collegiality in the workplace environment (Letchmiah & Thomas, 2017). Organizational supports play a crucial role in the decisions made by high-potential employees, whether they are formally identified as such or not.

Formal identification procedures are more common in organizations than...

To identify high-potential employees, human resources managers may use a variety of methods including performance appraisals, performance reviews, individual development plans or career mapping, and even anecdotal data (Downs, 2015). Among organizations that do have formal high-potential employee development programs, some also have active succession planning with transparent methods of communicating intent. For example, PepsiCo has a formal leadership development center, and admission to the leadership development center is based on performance on various HR metrics (Zhu & Manjarrez, 2017). Empirical research has been demonstrating the advantages of formal identification and employee training for high-potential personnel.
Research has also been increasingly focusing on the organizational culture and formal practices of high-potential employee identification, training, and retention. The most important theme in the literature is related to transparency and communication. Zhu & Manjarrez (2017) found that informally recognized high-potential employees are 19% more likely to actively seek employment elsewhere versus those who have been formally identified and who are being actively and openly cultivated for leadership. In spite of the potential benefits of transparency in high-potential employee development, many organizations remain committed more to a policy of “strategic ambiguity,” whereby the company retains the power of information, sometimes with the goal of reducing the potential for interpersonal conflicts between group members (Dries & DeGieter, 2013, p. 137). Strategic ambiguity can have some ironic benefits, such as promoting greater flexibility in leadership decisions, and even occasionally increasing employees’ motivation to work harder (Dries & DeGieter, 2013). However, lowered morale, stress, burnout, and suspicion may erase all potential benefits of strategic ambiguity (Dries & DeGieter, 2013; Zhu & Manjarrez, 2017). On the other hand, work engagement through formal recognition and training programs causes high-potential employees to perform to the high expectations set for themselves, and to which their coworkers and colleagues also expect (Van Zalk, 2016). The goal of high-potential development programs is relational in nature: to encourage employees to envision themselves as having a career trajectory that most certainly depends on the fusion of personal and professional goals.

Strategic ambiguity is surprisingly common practice, in spite of the known benefits of openly cultivating top talent. Dries & DeGeiter (2013) note that only about a third of organizations surveyed disclose information about high potential employee development programs at all, and most organizations that do disclose do so selectively and informally. The informal disclosure of information can create problems for the organization, most notably in that ambiguity can lead to miscommunication, frustration, and ultimately the loss of the high-potential employee. A number of theoretical frameworks can be used to examine what organizational behaviors and practices work best, including motivation theories, symbolic interactionism, and signaling theories.

Theoretical Foundations

The primary theoretical…