FirstHR

High Potential Employees: How to Identify and Develop

What makes an employee high potential? 6 criteria, tools to identify HiPos, the 9-box grid, development strategies, and what works at growing companies.

Nick Anisimov

Nick Anisimov

FirstHR Founder

Training•
•
24 min

High Potential Employees

How to identify them, develop them, and keep them

Your best performer and your future leader are not always the same person, and mixing them up can cost you twice: a promotion that fails, and an overlooked employee who leaves for a company that noticed. Here is how to identify high potential employees (HiPos), develop them, and keep them.

At a company I ran early in my career, I had an employee who was good at her job but not exceptional. She hit her numbers, completed her work on time, and caused no problems. I assumed she was a solid contributor and moved my attention to more urgent matters. A year later, she left for a competitor who gave her a team to manage, a broader scope, and a 40% raise. Within 18 months, she was running their operations department.

I had missed a high potential employee. She was not just performing well in her current role. She was capable of performing well in roles I never offered her. The difference between what she did and what she could do was enormous, and I never tested it because I was focused on current output rather than future capacity.

This guide is about seeing that gap in time. It walks through the six criteria for identification, the 9-box grid that enterprises use to map talent, the tools that work with or without formal assessment platforms, and what a growing business should do instead of building an enterprise-scale HiPo program.

TL;DR
A high potential employee has the ability, engagement, and aspiration to succeed in bigger, more complex roles. Harvard Business Review research found that more than 70% of top performers lack the attributes those roles require. Six criteria identify HiPos: ability, aspiration, engagement, learning agility, leadership capacity, and cultural multiplication. Growing companies do not need a 9-box grid.

What Is a High Potential Employee?

A high potential employee is someone who demonstrates the ability, aspiration, and engagement to rise to and succeed in more senior, more complex positions within the organization. According to Harvard Business Review research by Jean Martin and Conrad Schmidt (May 2010), three attributes best define rising stars: ability, engagement, and aspiration.

Each attribute carries a specific meaning in that research. Ability is the intellectual, technical, and emotional skill, innate and learned, to handle increasingly complex challenges. Engagement is the level of personal connection and commitment the employee feels toward the firm and its mission. Aspiration is the desire for recognition, advancement, and future rewards. Shortfalls in even one of the three sharply reduce the odds of success.

Definition
High Potential Employee (HiPo)
An employee who demonstrates the capacity and drive to succeed in roles of significantly greater scope, complexity, or leadership responsibility than their current position. High potential is assessed on three core dimensions: ability (can they do it?), aspiration (do they want it?), and engagement (will they stay to do it here?). Distinguished from high performers, who excel in their current role but may lack the capacity or desire for advancement. The designation is deliberately scarce, usually reserved for a small minority of the workforce.

You will see the term shortened to HiPo in talent reviews, succession plans, and development budgets. It means the same thing as the full phrase, and the shorthand is worth knowing because it marks a formal designation rather than a compliment. Calling someone a HiPo employee is a commitment to invest in them differently.

High potential is about future role success, not current role performance. A salesperson who consistently exceeds their quota is a high performer. A salesperson who exceeds their quota, mentors junior reps, proposes process improvements, and demonstrates the judgment and composure to lead a team is a high potential. The difference is between being excellent at what you do and being capable of excelling at something bigger.

Harvard Business Review puts high potentials at roughly the top 5% of an organization's employees. On a team of 25 people, that is one person, maybe two. On a team of 500, it is around 25.

Other research draws the line somewhat wider. In a 2024 article for SHRM's People + Strategy journal, Allan Church and Jay Conger report that across hundreds of organizations, typically only 10% to 15% of an organization's talent makes up the high potential pool.

Either figure describes a small minority of the workforce, and that scarcity is the point: if everyone is high potential, the designation is meaningless and differentiated investment is impossible.

High Potential vs High Performer: The Difference That Matters

The difference is present versus future: a high performer delivers in the job they hold today, while a high potential has the capacity to deliver in bigger jobs they have not held yet. Most managers mix the two up by assuming that their best performers are automatically their highest potential employees, and no distinction in this topic matters more.

DimensionHigh PerformerHigh Potential
DefinitionConsistently exceeds expectations in their current roleDemonstrates capacity to succeed in significantly more complex future roles
MeasuresOutput, quality, consistency, reliability in current jobLearning agility, leadership capacity, aspiration, adaptability to new situations
Percentage of workforceSet by where the performance bar sits, a wider group than the high potentials within itAbout 5% (Harvard Business Review) to 15% (SHRM) of a workforce, a subset of high performers who also show future growth capacity
OverlapAll high potentials should be high performersMore than 70% of top performers lack the attributes bigger roles require (Harvard Business Review, 2010)
Risk of misidentificationPromoting based on performance alone leads to the Peter Principle: rising to the level of incompetenceIgnoring high potentials leads to losing future leaders to competitors who recognize them
What they needRecognition, mastery opportunities, market-competitive compensationStretch assignments, mentoring, visibility, explicit career path, accelerated development
Retention riskModerate (may leave for higher pay)Very high (will leave for growth opportunities, not just money)

The cost of getting this wrong is measurable. The same Harvard Business Review research reports that nearly 40% of internal job moves involving people identified as high potentials end in failure.

What worked for me
The high performer vs high potential distinction saved me from a bad promotion. I had a technical specialist who was brilliant at her craft. When her manager left, the obvious move was to promote her. But when I tested for high potential (asked about her goals, gave her a management scenario, observed how she handled peer conflicts), the picture was clear: she wanted to go deeper into her specialty, not manage people. Promoting her would have lost a great specialist and gained a mediocre manager. Instead, I created a senior specialist track and hired externally for the management role. Both decisions worked.
Still Using Spreadsheets for Onboarding?
Automate documents, training assignments, task management, and track onboarding progress in real time.
See How It Works

6 Criteria for Identifying High Potential Employees

The first three criteria (ability, aspiration, engagement) come from the Martin and Schmidt research and represent the minimum for high potential identification. The next three (learning agility, leadership capacity, cultural multiplication) add depth and are especially useful for growing businesses where formal assessment tools are not available.

AbilityCurrent performance and demonstrated competence, the part of ability you can already see. Can they do the job they have now at a high level? This is the baseline: high potential starts with high performance, but high performance alone is not enough.
AspirationThe desire to grow, take on more responsibility, and advance. Do they want bigger challenges, or are they content where they are? Both answers are valid, but only the first indicates high potential for future roles.
EngagementEmotional commitment to the organization and its mission. Are they invested in the company's success, or performing well while looking for their next opportunity elsewhere? High potential without engagement means you are developing someone for your competitor.
Learning AgilityThe ability to learn from experience and apply those lessons to new, unfamiliar situations. This is the criterion that speaks directly to roles the person has never held. Can they figure things out they have never been taught?
Leadership CapacityThe ability to influence, motivate, and develop others. This shows up early: the person other employees go to for help, the one who raises the performance of people around them, the natural coordinator in group projects.
Cultural MultiplicationDoes this person make the culture stronger? Do they exemplify and reinforce the values, standards, and behaviors that define how your team operates at its best? A high potential employee who undermines culture is a high-risk employee.

Not every high potential employee will score high on all six criteria. The minimum combination is ability, aspiration, and engagement, the three attributes the Harvard Business Review research isolates.

Learning agility is what tells you whether someone can operate outside the work they already know. Leadership capacity matters if the growth path involves managing people. Cultural multiplication matters most at growing companies where a few people disproportionately shape how the team operates.

Keep the Pool Small
If a third of your team seems "high potential," your criteria are too loose. Harvard Business Review puts the group at roughly the top 5% of employees. On a team of 20, that is one person, maybe two. Being selective is not harsh. It is honest. Differentiated development only works when the pool is small enough to genuinely differentiate.

The 9-Box Grid Explained

The 9-box grid is a framework for mapping talent on two axes at once. It plots employees on current performance (low, medium, high) and future potential (low, medium, high), creating nine cells that categorize employees and guide development decisions.

Low PerformanceMedium PerformanceHigh Performance
High PotentialRough diamond: has growth capacity but underperforming now. Diagnose why.High potential: strong trajectory, not yet at full performance. Invest in development.Star: top performer with growth capacity. Your future leaders. Retain at all costs.
Medium PotentialUnderperformer: address performance gaps directly. May need role change.Core contributor: solid, reliable, valuable. Not everyone needs to be high potential.High performer: excellent in current role. May not want or be suited for advancement.
Low PotentialMisfit: wrong role, wrong environment, or wrong hire. Act quickly.Specialist: competent in a narrow area. Valuable but limited growth trajectory.Workhorse: reliable high output in current role. Recognize and retain, do not force growth.

The grid was borrowed rather than invented for HR. According to Harvard's Division of Continuing Education, the underlying matrix was developed by McKinsey in the 1970s to help General Electric prioritize investment across its business units, scoring each on industry attractiveness and competitive strength. Talent reviews kept the nine cells and swapped in people.

The 9-box grid is valuable at enterprise organizations where formal talent reviews help calibrate across managers and departments. A small business rarely needs the formal exercise, because you know your team well enough to identify potential through direct observation and conversation. At that size, the grid earns its place as a mental model (performance and potential are separate axes) rather than as a formal tool.

How to Identify High Potential Employees

To identify high potential employees, set your criteria first, then look for evidence of them in everyday work. Enterprise organizations formalize that with annual talent reviews, 360-degree assessments, psychometric testing (learning-agility inventories, leadership trait indicators), calibration sessions across managers, and structured evaluation against defined criteria.

These processes are effective but require HR infrastructure, budget, and scale that most growing businesses do not have. For companies of any size, four signals reliably indicate high potential without formal assessment tools.

SignalWhat to Look ForWhy It Indicates Potential
Unsolicited problem-solvingEmployee identifies and addresses problems without being asked. Proposes solutions, not just complaints.Shows initiative, ownership, and the ability to see beyond their immediate responsibilities. These are leadership behaviors appearing before a leadership role.
Learning velocityHow fast do they go from 'never done this' to 'doing it independently'? During onboarding, some people ramp far faster than the rest of the cohort.Learning agility is what a bigger role draws on most, because the work there is unfamiliar by definition. Fast learners adapt to complexity.
Informal influenceOther employees go to this person for help, advice, or direction. They coordinate without formal authority.Leadership capacity showing up before a leadership title. People follow them because they choose to.
Response to stretch assignmentsWhen given an unfamiliar challenge, they ask smart questions, learn from early mistakes, and improve. They treat it as an opportunity, not a burden.Reveals how they handle the ambiguity and complexity of bigger roles. Future roles are always less defined than current roles.

Developing people is its own profession, and an expanding one. According to the Bureau of Labor Statistics Occupational Outlook Handbook, employment of training and development managers is projected to grow 6% from 2025 to 2035, faster than the average for all occupations.

Whether you use formal assessments or direct observation, the principle is the same: look for the gap between what someone does and what they could do.

Tools to Identify High Potential Employees

The tools for identifying high potential employees range from a structured manager evaluation that costs nothing to psychometric assessments built for large talent functions, and the right one depends almost entirely on company size. At small scale, the most powerful tool is also the cheapest.

The four signals above are what to look for. The tools below are how to look for them systematically, so that identification is a repeatable process rather than a manager's hunch.

Tool or methodWhere it fitsHow it worksWhat to know
Structured manager evaluationAny size, including the smallest teamsDefine the six criteria in advance, then rate each candidate against them in writing. Replaces 'people the manager likes' with a consistent, reviewable standard applied to everyone.The single highest-leverage tool at small scale. Costs nothing, removes most bias, and forces the manager to separate performance from potential.
The 9-box gridBest at enterprise scale; a mental model below thatPlot each person on performance and potential axes to visualize where development investment should go. Useful for calibrating across multiple managers.At a small business the grid is usually overkill as a formal tool, but the two-axis thinking behind it is valuable at any size.
Stretch-assignment trialsAny sizeGive an unfamiliar challenge and observe the approach: smart questions, learning from early mistakes, seeking help when stuck. Behavior under ambiguity predicts readiness for bigger roles.In my experience, three weeks on a stretch assignment reveal more about potential than two years of performance reviews. The closest thing to a real-world test.
Structured growth conversationAny sizeA deliberate discussion of where the person wants to be in two years, what skills they want to build, and what growth means to them. Separates aspiration from contentment.The tool most often skipped and most often decisive. Some strong performers want mastery, not advancement; only the conversation surfaces which.
Psychometric and learning-agility assessmentsEnterprise; rarely needed at a small businessValidated instruments (learning-agility inventories, leadership trait indicators, cognitive assessments) score potential objectively at scale, across managers who do not know the candidates personally.Built for large talent functions where managers cannot observe everyone directly. At small scale, direct observation is more accurate and free; the assessment overhead is hard to justify.
360-degree feedbackMid-size and up, where anonymity holdsAggregated input from manager, peers, and direct reports surfaces the informal-influence and leadership signals that a single manager cannot see alone.Powerful for the leadership-capacity criterion specifically, but requires enough raters to protect anonymity, which small teams often cannot meet.

The single most important tool at any size is the one that costs nothing: a written set of criteria applied consistently to everyone. Without it, "high potential" quietly becomes "people the manager likes," and every bias in the book (similarity, recency, visibility) creeps into the list. With it, the identification becomes reviewable: you can look at the ratings, check them against the six criteria, and audit the final list for patterns that suggest bias rather than potential. Everything else, from stretch-assignment trials to psychometric assessments, is a way of gathering better evidence to feed into that consistent standard.

High Potential Evaluation Form
[Company Name]
HIGH POTENTIAL EVALUATION FORM

One form per person, and the same six criteria for everyone considered. Rate from what you
have observed and write the evidence next to each rating. A rating with no evidence is an
impression, not an assessment.
Employee:
Role, and time in that role:
Manager completing this form:
Period this covers:
Date:
RATING SCALE

3 = Clear and repeated evidence
2 = Some evidence, not yet consistent
1 = Little or no evidence yet
Not observed = Say why on the evidence line, and what would let you observe it
1. ABILITY

Performs the current role at a high level. This is the baseline, not the answer.
Rating: Evidence, with dates:
2. ASPIRATION

Wants more responsibility and a bigger role, and has said so out loud.
Rating: Evidence, with dates:
3. ENGAGEMENT

Committed to the organization, rather than performing well while looking elsewhere.
Rating: Evidence, with dates:
4. LEARNING AGILITY

Learns from experience and applies it to unfamiliar situations. Note how long this person
took to go from never having done something to doing it independently.
Rating: Evidence, with dates:
5. LEADERSHIP CAPACITY

Influences and lifts the people around them without holding any formal authority.
Rating: Evidence, with dates:
6. CULTURAL MULTIPLICATION

Makes the standards and behavior of the team stronger rather than weaker.
Rating: Evidence, with dates:
STRETCH ASSIGNMENT EVIDENCE

The unfamiliar task you gave, and how the person approached it rather than whether they
succeeded immediately.
Assignment given:
Given on: Reviewed on:
Questions asked, mistakes learned from, help sought:
GROWTH CONVERSATION

Asked directly, and recorded in the person's own words.
Where they want to be in two years:
Skills they want to build:
What growth means to them here:
Advancement, or mastery in the current craft:
CONCLUSION

Choose one. High performance alone is not high potential, and there is nothing wrong with a
strong performer who wants mastery rather than a bigger role.
[ ] High potential: invest differently, starting now
[ ] High performer, content in the role: recognize, retain, do not force growth
[ ] Too early to tell: name the missing evidence and when to look again
[ ] Not at this time
Reason, in one or two sentences:
WHAT CHANGES AS A RESULT

Identifying someone and then changing nothing is worse than not identifying them. Commit to
something specific and dated.
Stretch assignment or added scope:
Mentor or senior sponsor:
Exposure or visibility committed to:
Next career conversation date:
Manager who owns the follow-through:
BIAS CHECK BEFORE FILING

•The same six criteria were applied to everyone considered, not only to this person
•Every rating names an observed example rather than a general impression
•Performance in the current role was rated separately from capacity for a bigger one
•The finished list was reviewed for patterns that look like bias rather than potential
Reviewed by: Date:

DISCLAIMER: Sample form for general information only, not legal advice. Adapt it to your
business, apply it to everyone in the same way, and keep completed forms with your other
employee records.

For growing businesses specifically, the takeaway is to resist the pull toward enterprise tooling. Psychometric platforms, 360-degree assessment cycles, and formal talent-review software are built for organizations where managers are too far from the work to judge potential directly. A small business is in the reverse position: you see your team every day, so structured observation plus a written standard outperforms any purchased assessment, at zero cost.

Match the Tool to the Team Size
At a small business: structured manager evaluation, stretch-assignment trials, and growth conversations, all free, all based on direct observation. At mid-size and enterprise organizations with multiple layers of managers: add the 9-box grid for calibration, and consider psychometric or 360 assessments where managers cannot observe candidates directly. Buying enterprise assessment tools for a small team solves a problem you do not have.

Identifying High Potentials at a Growing Company

A growing company can identify high potentials in five practical steps, using nothing more than close observation, one stretch assignment, and a direct conversation. Enterprise HiPo identification requires talent review committees, assessment vendors, and calibration sessions, and a small business needs none of that.

Step 1: Watch for Unsolicited Problem-SolvingHigh potential employees do not wait for assignments. They identify problems and propose solutions without being asked. At a small business, this shows up clearly: the employee who notices the client onboarding process is broken and drafts a fix, the person who researches a better tool and presents options to the team, the new hire who asks 'why do we do it this way?' and has a better idea.
Step 2: Track Learning VelocityHow fast do they go from 'I have never done this' to 'I can do this independently'? This is learning agility in action. During onboarding, it is measurable: some people complete the same training and ramp-up period in half the time. Six months in, they are already handling tasks that took others a year to master. Speed of learning is the clearest signal of future growth potential.
Step 3: Observe How Others Respond to ThemHigh potential employees attract others. Colleagues go to them for help. They naturally coordinate without formal authority. In meetings, people listen when they speak. This is leadership capacity showing up informally. At a small business, you do not need a leadership assessment. You can see it in how the team interacts.
Step 4: Test with Stretch AssignmentsGive them something they have not done before and see how they respond. Not whether they succeed immediately, but how they approach it. Do they ask smart questions? Do they learn from early mistakes? Do they seek help when stuck? A high potential employee treats a stretch assignment as a development opportunity. An average performer treats it as extra work.
Step 5: Have the Growth ConversationAsk directly: where do you want to be in 2 years? What skills do you want to build? What does growth mean to you here? Some high-performing employees do not want advancement. They want mastery. That is valuable but different from high potential. The conversation separates high performers (content in their role) from high potentials (hungry for more).

The advantage of being small is that you can see potential clearly without formal tools. You work closely enough with your team to observe these signals in real time. The disadvantage is that without intentional observation, you default to performance bias: promoting whoever produces the most output rather than whoever has the most growth capacity. These five steps make potential identification intentional rather than accidental.

What worked for me
Step 4 (stretch assignments) was the most revealing, and I used it because of the employee I had once missed. Years later, at another company, I gave a mid-level operations person the task of figuring out why our customer onboarding was taking twice as long as it should. She had never done process analysis, never led a cross-functional investigation, never presented findings to leadership. Within three weeks she had interviewed every team involved, mapped the bottlenecks, and proposed three specific changes. That project told me more about her potential than two years of performance reviews ever could. Within a year she was running our operations team.

What a High Potential Program Includes at Small Scale

A high potential program at a growing company is four commitments written down, not a platform and not a committee. The commitments are criteria that everyone is judged against, a review cadence, a development plan that differs person by person, and one named owner who makes sure the other three happen.

Set the criteria before you look at any names, then revisit the list twice a year instead of annually. At this size people change roles faster than a yearly cycle can track, and a list that is twelve months old describes a team you no longer have. Each person on it gets one stretch assignment, one mentor, and a dated next conversation.

Day-to-day HiPo management is mostly keeping the work slightly ahead of the person. Check that the assignment still stretches them, that the mentoring conversations are actually happening rather than being rescheduled, and that the growth conversation repeats instead of being treated as a one-time event. The moment those four commitments stop being kept, the program is just a list.

Examples of High Potential Programs

Published examples of high potential programs almost always describe the same thing: a corporate accelerator with a cohort, an outside faculty, and a capstone project. Four shapes are worth knowing, and what separates them is scale rather than ambition. Only the first two run without a talent function behind them.

Program shapeWhat it looks like in practiceWhere it fitsWhat it costs
Named-assignment programTwo or three people, each with one stretch assignment, one mentor, and a dated next conversation, with the list revisited twice a yearA small team, run by the owner or a single managerManager time. No budget line at all.
Understudy programEach person is paired to a specific role they could step into and takes a real piece of it now: the schedule, the largest account, the monthly closeAny size where one departure would hurt for monthsThe senior person's time to hand work over and review it
Cohort acceleratorSix to twelve people through a fixed curriculum over six to nine months, with a live business problem as the final projectLarger organizations, or a small company running one jointly with peer businessesFacilitator fees plus roughly a day a month per participant
Rotation programNine to twelve months owning work in another function, then a return with broader scope and a second network inside the businessCompanies with enough headcount to cover both seats during the moveCoverage for two roles while the rotation runs

The first two are the ones I would run at small scale, and the choice between them is a question of what you are protecting. A named-assignment program grows people inside the roles you already have. An understudy program protects the roles you cannot afford to have sitting empty, which is why it doubles as the first draft of a succession plan.

Companies Using FirstHR Onboard 3x Faster
Join hundreds of small businesses who transformed their new hire experience.
See It in Action

How to Develop High Potential Employees

Develop high potential employees differently from everyone else: more stretch, more senior exposure, and more explicit conversations about where they are headed. Singling people out and then developing them like everyone else does more harm than never singling them out. It creates expectations you do not fulfill, and high potentials are the employees most sensitive to unfulfilled expectations.

Development StrategyWhat It Looks LikeWhy It Works
Stretch assignmentsCross-functional project lead, customer-facing presentation, fixing a broken process, managing a temporary teamExposure to complexity, ambiguity, and responsibility beyond their current role. The Office of Personnel Management defines a development assignment as one designed to stretch a learner beyond existing skills.
Mentoring and sponsorshipPair with a senior leader for monthly conversations. Sponsor advocates for them in rooms they are not in.Perspective, guidance, and visibility that they cannot get from their direct manager alone.
Cross-functional exposureRotate through adjacent functions. Shadow colleagues in sales, operations, or finance for a week.Builds business acumen and organizational understanding. Future leaders need to understand the whole business, not just their department.
Increased visibilityPresent at company meetings. Represent the team in cross-company initiatives. Attend leadership discussions as an observer.Builds confidence, develops executive presence, and signals to the organization that this person is on a growth path.
Explicit career conversationsQuarterly discussion about career goals, skill gaps, timeline, and what the company will provide to help them get there.Removes ambiguity. The employee knows the plan. The manager knows the commitment. Both are accountable.

The Office of Personnel Management treats on-the-job experience as a development method in its own right. Its career development guidance lists rotational assignments, shadowing assignments, and on-the-job training alongside classroom and web-based courses.

Stretch assignments and mentoring develop high potentials faster than courses alone because they create the real-world complexity that builds judgment. A course teaches a framework. A stretch assignment forces a decision with incomplete information and a real consequence attached.

High Potentials and Succession Planning

Succession planning is where high potential identification stops being an exercise and starts protecting the business. Identification tells you who could grow. The succession plan tells you which specific roles they would grow into, and roughly when.

At a growing company, that fits on a single page. List the two or three roles that would hurt most if the person in them left tomorrow. Next to each, name who could cover it within a month and who could hold it permanently inside a year. Every gap you find is a development assignment waiting to be handed out.

The common failure is running the two processes apart: a talent review that produces a list of high potentials, and a succession plan built from org-chart seniority. When they are one conversation, the stretch assignment you hand someone this quarter is the one that prepares them for the role you expect to open next.

How to Retain High Potential Employees

High potential employees are your highest retention risk because they have the most options. They know they are good. Recruiters know they are good. The Harvard Business Review research puts a number on the exposure: one quarter of the highest potential people in a company intend to jump ship within the year.

Retention DriverWhat HiPos NeedWhat Happens Without It
Growth velocityDevelopment that moves faster than average. New challenges every 6-12 months, not every 2-3 years.They feel stagnant and start looking. A bored high potential takes the recruiter call even when the pay is competitive.
TransparencyClear communication that they are valued, that the company sees their potential, and that a growth path exists.They assume the company does not notice or care. They accept the offer from a company that explicitly values them.
Challenging workProblems that stretch their abilities. Complexity that requires growth. Assignments that matter.They are underutilized. Their best capabilities go unused. They disengage internally before leaving physically.
Manager investmentA manager who coaches, advocates, provides honest feedback, and invests time in their development.They feel unsupported. Harvard Business Review research counts confidence in their managers among the strongest factors in a top employee's engagement.

Compensation is not a side issue here. The same Harvard Business Review research names recognition, primarily through pay, as one of the most important factors determining a rising star's engagement, and warns that an across-the-board pay freeze that looks fair to everyone else erodes the engagement of exactly this group. Its recommendation is significantly differentiated compensation and recognition for star employees.

Growth still does work that money alone cannot: a raise will not hold someone stuck in a role with no development path. Treat differentiated pay and differentiated work as two halves of the same answer rather than as alternatives.

Should You Tell Employees They Are High Potential?

The answer is yes, with conditions. It is also one of the most debated questions in talent management, because each approach trades one risk for another.

ApproachProsCons
Tell them explicitlyEmployee knows they are valued. They understand why they get stretch assignments. Engagement increases. They can actively participate in their development.Others may feel overlooked. Creates pressure to deliver on the growth promise. If the company cannot follow through, transparency backfires.
Do not tell themAvoids potentially demoralizing those not identified. Allows flexibility to adjust the list. No explicit promises to break.Employee does not know the company is investing in them. May leave for a competitor who is more transparent. Cannot actively participate in development they do not know about.
Tell through actions, not labelsSomewhat transparent without the formality: stretch assignments, mentoring, and visibility show the investment without a 'high potential' label. Works well at small companies where the investment is obvious.May lack clarity at larger scale, where the signal is easier to miss.

At growing businesses, the "tell through actions" approach works best. You do not need to announce "you are on our high potential list." You need to say: "I see growth capacity in you, and I want to create opportunities that develop it. Here is what I am thinking. What do you want?" That conversation achieves the goal (engagement, transparency, participation) without the formality that a small business does not need.

The Research on Transparency
One of the six errors named in the Harvard Business Review research is keeping young leaders in the dark. The same research recommends sharing future strategy with emerging leaders directly, replacing broadcast company messaging with individualized messages about how their development fits the plan, and holding regular open dialogues to monitor their development and satisfaction. The fear that non-identified employees will be demoralized is real but manageable: most people understand that different colleagues are on different trajectories. The bigger risk is leaving high potentials guessing and losing them to an organization that tells them plainly where they stand.

Common Mistakes in High Potential Identification

Six mistakes consistently undermine high potential programs at both enterprise and growing companies.

Confusing high performance with high potentialHigh performance means someone excels in their current role. High potential means they can succeed in future, more complex roles. An outstanding customer service rep who has no interest in management and no ability to handle ambiguity is a high performer, not a high potential. Promoting them based on current performance sets them up to fail. The Harvard Business Review research puts it bluntly: more than 70% of top performers lack the attributes essential to success in future roles.
Keeping the list secretMany organizations identify high potentials but never tell them, to avoid demoralizing those not on the list. The people on the list are then left guessing: they cannot tell that the business is investing in them or why the stretch assignments keep coming, and they may take an offer from a competitor that lays out a clearer growth path. Harvard Business Review research names keeping emerging leaders in the dark as one of six errors.
Not investing differently in high potentialsIdentifying high potentials without differentiating their development is worse than not identifying them at all. If everyone gets the same training, the same assignments, and the same conversations regardless of potential, the identification was a paperwork exercise. High potentials need stretch assignments, mentoring, exposure to senior leadership, and explicit career conversations that others do not.
Using gut feel instead of criteriaWhen there are no defined criteria, the list drifts toward whoever the manager already likes, and three familiar biases take over: similarity bias (people like me), recency bias (whoever did well last month), and visibility bias (whoever is loudest in meetings). Define criteria before identifying candidates. Apply the same criteria to everyone. Review the list for patterns that suggest bias.
Ignoring retention riskHigh potentials are the employees most likely to leave if they feel stagnant. They have options. They know it. If you identify someone as high potential and then offer them nothing different, nothing faster, nothing more challenging, you have communicated that their growth does not matter to you. They will find an organization where it does.
Over-formalizing the process at small scaleA small business does not need a 9-box grid, a formal succession plan, or an annual talent review. You need to know which 2-3 people on your team have growth potential, have explicit conversations with them about that potential, and create opportunities (stretch assignments, new responsibilities, mentoring) that develop them. The tool is the conversation, not the framework.

The gut-feel mistake also carries legal weight. According to the EEOC, the tests and procedures an employer uses to screen employees for promotion fall under the same rules as hiring tests. A procedure that disproportionately excludes people because of race, color, religion, sex, national origin, or disability has to be shown job related and consistent with business necessity. In plain terms, it must measure the skills the job in question actually requires.

A high potential list becomes exactly that kind of procedure once it starts routing people toward promotions. If anyone later asks why one person made the list and another did not, written criteria applied identically to everyone, with the evidence recorded next to each rating, are what let you answer. An undocumented hunch is not an answer.

Key Takeaways
A high potential employee has the ability, aspiration, and engagement to succeed in significantly more complex roles, and Harvard Business Review research found that more than 70% of top performers lack the attributes those roles require.
Six criteria help identify HiPos: ability (handling more complex work, with current performance as the baseline), aspiration (desire to grow), engagement (commitment to stay), learning agility (speed of learning from experience), leadership capacity (informal influence), and cultural multiplication (making the culture stronger).
The best identification tool at small scale is free: a written set of criteria applied consistently to everyone, which removes the bias that turns 'high potential' into 'people the manager likes.'
At growing companies, identify high potentials through five practical steps: unsolicited problem-solving, learning velocity, informal influence, response to stretch assignments, and the growth conversation.
Develop high potentials through stretch assignments, mentoring, cross-functional exposure, increased visibility, and explicit career conversations. Development must be differentiated from what average performers receive.
High potentials are your highest retention risk: Harvard Business Review research found that one quarter of them intend to leave within the year, and its remedy is to share future strategy with them, keep the growth coming, and pay them differently from average performers.

Frequently Asked Questions

What is a high potential employee?

A high potential employee, or HiPo, is a person with the capacity and the drive to grow into larger, more complex roles inside the company, not just to do the current job well. Three attributes define the group: ability, aspiration, and engagement. Strong results today do not settle the question. In Harvard Business Review research, over 70% of top performers lack attributes that bigger roles demand, and close to 40% of internal moves made by people labeled high potential fail, so current output on its own is a weak forecast. The group is small by design: Harvard Business Review sizes it at about the top 5% of a workforce, while research published by SHRM puts it at 10% to 15%.

What is the difference between high potential and high performer?

High performance is about results now, while high potential is about capacity later. A high performer reliably meets or beats expectations in the job they already hold. A high potential shows the learning agility, leadership ability, appetite for growth, and cognitive and emotional resources to take on markedly more complex work in the future. Every high potential ought to be a high performer as well, but the reverse does not follow: most high performers are not high potentials, which is why promoting on output alone is risky.

How do you identify high potential employees?

Six approaches: (1) Define criteria before looking for candidates (ability, aspiration, engagement, learning agility, leadership capacity, cultural multiplication). (2) Use manager observations of how employees handle stretch assignments and unfamiliar challenges. (3) Track learning velocity during onboarding and skill development. (4) Observe informal leadership: notice who the rest of the team turns to for help. (5) Conduct growth conversations to assess aspiration. (6) Review performance data alongside potential indicators, using tools like the 9-box grid to distinguish performance from potential.

What tools can you use to identify high potential employees?

It depends on the size of the company. Four methods cost nothing and work anywhere: a structured manager evaluation that rates every candidate against the same predefined criteria instead of relying on informal nominations, a stretch-assignment trial that shows how someone behaves when the path is unclear, a structured growth conversation that tells ambition apart from contentment, and the 9-box grid used as a quick two-axis way of thinking. Bigger employers layer formal instruments on top. Psychometric and learning-agility assessments give an objective read on potential when the people doing the rating have never worked closely with the candidates, and 360-degree feedback picks up informal influence that one manager would miss. For a small team those instruments seldom justify their overhead, because watching people work directly costs nothing and is more accurate. The tool that matters most at that size is written criteria, applied the same way to every person, which strips out most of the bias that otherwise turns a high potential list into a list of the manager's favorites.

What is the 9-box grid for talent management?

The 9-box grid is a talent assessment framework that rates each employee twice, once for how they perform today and once for how far they could grow, with each rating set at low, medium, or high. Crossing the two ratings produces nine cells, running from 'star' (high performance and high potential) down to 'misfit' (low on both). Organizations use the grid to decide where development investment goes: high potentials receive stretch assignments and mentoring, high performers receive recognition and room to deepen their mastery, and underperformers receive performance improvement plans.

What percentage of employees are high potential?

Between roughly 5% and 15%, depending on how tightly an organization defines the term. Harvard Business Review describes high potentials as usually the top 5% of employees, while research by Allan Church and Jay Conger, published by SHRM in 2024, puts the typical pool at 10% to 15% of an organization's talent. Meeting the full standard means clearing all three attributes at once (ability, aspiration, and engagement), and few people do. A loose list dilutes the concept and makes differentiated development impractical: if a third of the team is on the list, nobody on it receives anything the others do not. On a team of 25, the tighter figure means one person, sometimes two. On a team of 100, it is around five. The scarcity is also what makes the investment affordable. A short list lets you give each person a genuine stretch assignment, a named mentor, and a dated career conversation. A long list turns all three into a calendar invite nobody owns.

Should you tell employees they are high potential?

Yes, with conditions. Harvard Business Review research on high potentials counts leaving emerging leaders uninformed among the six errors it names, and its advice runs the other way: share future strategy with those people directly, and replace one-size-fits-all broadcasts with messages tailored to each person about where their development fits. Silence has a predictable cost: the employee cannot see a growth path, cannot make sense of why the hard assignments keep landing on their desk, and starts taking recruiter calls. The concern about demoralizing everyone else is valid but manageable. Frame the designation as fit for specific future roles rather than as a ranking of who is better, and be careful not to promise a timeline you cannot keep. At a small business you can get the whole benefit without the label: say out loud that you see growth capacity, and describe what you intend to do about it.

How do you develop high potential employees?

Five development strategies: (1) Stretch assignments that expose them to new challenges, functions, or complexity levels. (2) Mentoring from senior leaders who can provide perspective, guidance, and sponsorship. (3) Cross-functional projects that broaden their understanding of the business. (4) Increased visibility through presenting to leadership, leading initiatives, and representing the team externally. (5) Explicit career conversations about their growth path, timeline, and what they need to develop. Taken together, the plan should look noticeably different from the development average performers get.

Do small businesses need a high potential program?

Not a formal one. A small company can skip the 9-box grid, the talent review committee, and the succession planning process, because the people running it already see the team up close. What it should not skip is knowing which employees have room to grow and putting real development behind them. In practice that means regular growth conversations, stretch assignments, a mentor for each of them, and a written plan for the few people the business depends on most. The conversation and the opportunity do the work; the framework is optional.

What is learning agility and why does it matter for high potentials?

Learning agility is how well a person takes the lessons of one experience and uses them in a situation they have never faced. It is central for high potentials because a bigger role is unfamiliar by definition: what counts is not whether someone has done the work before but how quickly they can work out what nobody has taught them. You can see it in curiosity, comfort with ambiguity, a willingness to take risks, the habit of learning from failure, and fast skill acquisition. The Harvard Business Review framework has no separate learning agility attribute; the closest of its three is ability, which that research frames as the mix of intellectual, technical, and emotional skill needed for increasingly complex challenges. To gauge it in practice, compare elapsed time: how long did this person need to get from a first attempt to working on their own, next to others who started at the same point?

How do you retain high potential employees?

Four retention strategies: (1) Growth velocity: high potentials leave when they feel stagnant. Ensure their development is faster and more intentional than average. (2) Transparency: tell them they are valued and show them the path forward. (3) Challenging work: give them problems that stretch their abilities. Harvard Business Review research warns that emerging leaders who do not get stimulating work, recognition, and a chance to prosper can quickly become disenchanted. (4) Relationship with their manager: in a Gallup study of 7,272 U.S. adults (2015), one in two had left a job at some point in their career to get away from their manager. Ensure their manager invests time in their development, advocates for them, and provides honest feedback.

Ready to transform your onboarding?

7-day free trial No credit card required
Start Your Free Trial