Pricing - Terawatt

Mon, Jun 10, 2024

by Francie Jain

NextGen HiPo

By: Francie Jain, Terawatt and Dr. Steve Long

How to make high potential employee development programs fair, valuable, and sustainable

In the world of learning and development (L&D), there’s a decades-old concept of developing an employer’s most promising workers distinctly from their peers, and it’s known as High Potential Employee Development–HiPo for short. Ironically, the promise of HiPo programs has yet to be realized.

In theory, HiPo programs should work. Social science research supports the following statements:

Top performers shift expectations higher for all employees (source)
Well-done employee development programs increase employee retention rates (source)
Growing talent from within is associated with greater company success than hiring talent from the outside (source)
Effective succession planning is correlated to positive company performance (source)

Yet even though most can agree on HiPo’s parallel benefits to individuals and companies, the programs haven’t provided a competitive advantage or return on investment (ROI) to organizations. The average employer-sponsored HiPo program spends $3mm (source), yet 73% of high-potential programs fail to deliver desired business outcomes or ROI (Gartner, 2016), only 25% of company leaders deem them successful, and 82% HR leaders are dissatisfied with the results (source).

And what about the HiPos themselves? It’s not much better on the individual side. Forty percent of internal job moves made by high potential employees fail, and 46% of high potentials fail to accomplish business results in their new roles (Gartner, 2014). A study by Willis Towers Watson showed that over 70% of “high-retention-risk” employees leave due to a lack of future advancement in their current job (source). Harvard Business Review published a study showing that 75% of HiPos look for another job during their first year of employment and then typically leave the employer after 28 months due to a lack of both career development and access to mentoring and coaching (source).

Why are we writing about HiPo programs?

This article’s authors are professionally focused on creating impactful human development solutions. We’ve both been considered HiPos at various points in our academic and professional careers, and we’ve both benefited and suffered from flawed HiPo processes. As a result, we believe that bringing the most insightful research to bear on HiPo program design will help the programs fulfill their promise as valuable change-makers for individuals and organizations.

Steve holds a PhD in Applied Performance Psychology, is the Founder of Long Training+Research, the developer of the Prosperity Trait(c), and is a consultant to the U.S. Air Force Academy’s pilot program. For the past forty years, Dr. Long has helped leaders reduce the variability between their performance and their potential by using behavioral psychology and scientifically valid psychometrics.

Francie is the Founder of Terawatt, an online marketplace for group coaching. Terawatt works within the Human Capital space, connecting vetted experts to employers looking to solve specific problems and achieve company-level results. The marketplace’s big insight: experts are more affordable when their cost is split by a group.

The History of HiPo

The first and most famous HiPo program began in 1956 when General Electric (GE), under Chief Executive Officer (CEO) Philip Reed, built the Crotonville Conference Center, a 60-acre employee development campus in Ossining, NY. In the 1980s, GE’s CEO Jack Welch used Crotonville as the centerpiece for his revamp of what had been a bureaucratic conglomerate into a stock market darling. Fast forward forty years later: in 2024 GE sold the Crotonville conference center, citing strategic changes in talent development, and the company split itself into three distinct businesses: GE Aerospace, GE Healthcare, and GE Vernova.

In many ways, the current state of HiPo programs mirrors the lifecycle of Crotonville. The underpinnings have true merit, and several leading 20th century companies, including 3M, Arthur Anderson, Boeing, and Deloitte, used them to achieve company goals. But the HiPo programs that were once the envy of the world are no longer cutting edge.

Why don’t our fathers’ HiPo programs work for us? A few reasons: Technology and its relationship to the economy are part of it, but mostly, we’ve learned so much in the past 40 years about people, teams, and workplaces. The new data, combined with some of the seminal psychological research, disproves much of the conventional wisdom regarding employees and the relationship of employee development to company results.

Steve and Francie, this article’s authors, believe we can realize the promise of HiPo programs by building on Crotonville’s key insights with the best social science insights on people and team dynamics. Let us walk you through our thinking and framework for fair, valuable, and sustainable HiPo programs.

Let’s dig in.

GE’s Crotonville

Around 1984 GE’s HiPo program at Crotonville solidified into an annual 3-week course offered only to GE’s highest potential managers, somewhere between 25 and 50 people. The curriculum used case studies based on actual GE problems, and the course covered the themes of excellence, ownership, quality, and facing reality. Crotonville’s rigid admissions process involved sign-off from multiple internal stakeholders, including CEO Jack Welch.

The world cared about Crotonville because of GE’s business success. With Welch as CEO, GE’s market capitalization rose from $13 bn to $600 bn, making GE the most valuable publicly traded company in the world in 2000 and turning Welch into a business superstar.

At the time, and even now, there’s no consensus on Welch’s tenure. Subsequent analysis of Welch’s time as CEO shows that GE’s increase in market capitalization was much higher than the increase in its revenue or profit and that the company’s margin decreased during his tenure (source). This data suggests that some of Welch’s legend can be attributed to the psyche of stock market investors rather than his insights into company management. In addition, many Welch critics charge that his only achievement was deep cost cutting. However you feel about Jack Welch and GE’s heyday, it's important to understand how Welch connected Crotontonville to GE’s goals and success.

In his book, Jack, Welch enumerates the value Crotonville brought to GE, and the benefits of the HiPo program continue to ring true today. Crotonville’s activities helped GE to:

Hire and retain the best people
Treat the best people well
Pay people well
Balance short term results with long term results
Clarify company initiatives
Develop soft skills to balance efficiency & accountability
Function as one company, but allow diversity of styles
Support non-employee stakeholders such as the communities in which the company operated
Act as a “Bureaucracy buster” where people who are closest to the problem figure it out
Increase the efficiency of GE’s operations, also known as asking fewer people to do more
Create a modern company with a single focus on high margin
Support GE to become the world’s #1 lowest cost provider

21st Century Insights

As we reflect on Crotonville, let’s keep in mind how different our world is today from the 1980s. GE was a leading 20th Century manufacturing company in an era when manufacturing was America’s growth engine. Managers of business units and industrial manufacturing plants were the employees winning the coveted spots at Crotonville. GE’s HiPos faced challenges managing assembly line workers, minimizing waste, and developing high margin industrial products as the lowest cost provider.

As of March 31, 2024, the five largest companies by market capitalization are Microsoft, Apple, Nvidia, Alphabet, and Amazon (source). All are United States-headquartered technology businesses and derive their market value from knowledge workers’ output, otherwise known as human capital, an insight made by the SEC in 2020 (source). This means that today’s stock market places the highest value on companies where innovation and human output thrive.

In order to create a 21st Century HiPo program, we need to draw on the best research regarding human experience. This article relies on data regarding what works best for knowledge workers from the following authors: Karen Arnold, Robert Rosenthal, Lenore Jacobson, Google, McKinsey, Captain, L. David Marquet, and our own proprietary research.

Research on High IQ & Education

In their book Noise, Daniel Kahneman, Olivier Sibony, and Cass Sunstein report that General Mental Ability (GMA), organizational and industrial psychology’s preferred intelligence measurement, is required for highly complex jobs. The correlations between standardized test scores and job performance are in the .50 range, indicating a strong predictive value by social science standards. There are high-GMA people in lower-level occupations, but almost no people with below-average GMA among lawyers, chemists, or engineers. It should come as no surprise that high mental acuity is necessary for highly complex professions.

Karen Arnold’s Illinois Valedictorian study in 1993 followed 81 high-achieving high school valedictorians for 10 years following their high school graduation, and found that only 25% of the valedictorians were ranked at the top professional levels for their age after ten years. The remaining 75% fell back into the middle of the bell curve and some slid even further behind.

Further, research shows that expectations are just as accurate a predictor of success as ability rating and classification. Robert Rosenthal and Lenore Jacobson’s Pygmalion in the Classroom studied six grades of students that were randomly and secretly assigned to “fast,” “medium,” and “slow” reading ability classifications.

The researchers show that teachers’ perceptions created a Halo Effect where expectations affected student performance on report cards and IQ development.

A few examples:

After both one year and two years, high potential boys who were expected to prosper academically showed greater gains in verbal IQ, while high potential girls who were expected to prosper showed greater gains in reasoning IQ. According to their teachers, the high potential students showed greater advances in reading ability. As with IQ gains, the younger high potential students exhibited a greater expectation benefit in reading scores.
The high potential students who were rated as more intellectually curious, happier, and, especially in the lower grades, were less in need of social approval.
The more the high potential students gained in IQ, the more favorably their teachers rated them.
The more the lower-track children in the control group gained in IQ, the more unfavorably their teachers viewed them. As these students became more intellectually competent, their teachers viewed them more negatively.
Through the teacher’s words, timing, facial expressions, posture, and even touch, teachers communicated to the high potential students that they expected improved academic performance.

Arnold’s findings combined, with Rosenthal and Jacobson’s data, teach us that while IQ or GMA matters for performance complexity, high performance isn’t an inherent trait, and expectations also matter a great deal. What would happen if high expectations were applied to everyone? The conclusion is that something other than IQ or GMA must account for “real world” success.

Google’s "Project Aristotle"

In 2016, Google allowed the New York Times to write about one of its key trade secrets. For years, the $2 trillion market cap company and internet pioneer had been searching for a throughline that connected its “best teams.” The piece does not define the phrase “best teams,” but we see two possible definitions: groups that created Google’s most profitable businesses, AdWords, Gmail, Google Maps, YouTube, and Google Play, and/or teams that demonstrated over time high productivity and low churn.

After four years of researching the connection, Google’s researchers identified a single attribute held by Google’s best teams: “psychological safety.” In other words, the company’s best performing teams didn’t share a physical location, an alma mater, or any of the other conventional wisdom attributes that typically function as short hard for “best.” The best performing teams allowed team members the freedom to explore, experiment, and ultimately fail without repercussions. Failure not only allows HiPos to develop their potential more fully but also activates their curiosity. This leads to further innovations and discoveries.

Google’s discovery is revolutionary because, up to this point, conventional wisdom had been that top performing companies resulted from the smartest people working together. This assumption is rampant within the literature on HiPo programs. It’s also connected to the now-debunked assumption that hiring individual star workers drive company level results (source, source and source).

McKinsey’s People + Performance

McKinsey published a March 2023 report called “Performance Through People: Transforming human capital into competitive advantage” showing that of the 1,800 largest global companies, the best performers from the ten year period of 2010-2019 both developed their employees and demanded accountability. This top tier of the best performers achieved the highest return on capital, economic profit, upward mobility for employees, and revenue growth during the Covid pandemic.

McKinsey’s insight is that developing people, in concert with accountability, is linked to company results and financial success. This is important for the earlier generation, as it used to be conventional wisdom that developing people didn’t yield quantifiable company level results.

L. David Marquet

A Navy nuclear submarine captain, David Marquet, wrote an extraordinary book called Turn the Ship Around, where he discusses his success in flipping the traditional military command structure. In leading the USS Santa Fe for a year, Marquet replaced the typical “leader-follower” leadership structure with his innovation, the “leader-leader” structure.

Marquet found that giving employees closest to the problem more decision-making authority led to long term superior ship performance. Instead of giving orders, he writes at length about giving control. For example, he changed the reporting style so that officers would state their intentions with, “I intend to…” and his affirmative response would be, “Very well.”

Marquet cites the following metrics to demonstrate the Santa Fe’s results after one year of “leader-leader”:

The submarine’s tactical effectiveness evaluation re-rated from “below average to average” to “above average to excellent.”
Enlisted personnel selected for officer programs tripled from 1 to 3.
The ship’s rate of re-enlistment was twelve times higher than the previous year, with 100% retention.
Two junior officers withdrew resignation requests.
Santa Fe received the Arleigh Burke Fleet Trophy, an award given to the Naval ship or squadron that achieved the greatest improvement in battle efficiency in the calendar year.

Marquet’s results echo the findings of Google’s Rosenthal and Jacobson’s Pygmalion research: The individual and collective excel when individuals master a subject, become subject matter experts, and gain decision-making authority. The below quote strikes us as an apropos juxtaposition to GE and Crotonville:

“In our modern world, the most important work we do is cognitive; so, it’s not surprising that a structure developed for physical work isn’t optimal for intellectual work. People who are treated as followers have the expectations of followers and act like followers.”

Our key takeaway from Marquet’s book is that the leader-follower method of leadership, even though revered as the pinnacle of military efficiency, isn’t the only way to achieve success, and it wasn’t the winning strategy for the USS Santa Fe submarine in 1999. Combining the above research tells us that long term, quantifiable results do indeed come from trust, respect, expertise, and individual actualization.

Terawatt’s research on employee development

Terawatt published a series of surveys comparing and contrasting the opinions of employee development stakeholders regarding professional development. One of the most interesting insights came from the 2022 report. It found that people who identified as Latino viewed their employers’ professional development programs as unfair at a much higher rate than their white peers.

This is valuable because it reminds us that the allocation of professional development still suffers from selection bias. Who gets selected to receive employer-sponsored support, and who is in charge of selecting participants? Anyone running a program to develop employees must actively work to avoid bias. The data also speak to the fact that seniority at a workplace is not necessarily correlated to ambition or drive, reminding us of the aphorism: “Talent is equally distributed, but opportunity is not.”

Steve Long’s research on Prosperity

Dr. Stephen Long’s life’s work has been developing a response to Martin Seligman’s learned helplessness construct. Seligman demonstrated that clinical depression and related mental illnesses are a result of ineffective belief systems relating to the individual’s real or perceived control over situational outcomes. In other words, people with a high degree of learned helplessness don’t believe that change and growth are achievable for them, and that leads them to waste their inherent potential (Source). Curious about how athletes like basketball’s Michael Jordan and football’s Tom Brady, who had a notable lack of athletic success in high school, but improbably went on to be considered the greatest of all time in their respective sports, Steve sought to explain and re-create human performance.

Steve discovered how individuals can acquire a belief system to create consistent outcomes and prosperity. Building on Maslow’s Hierarchy of Needs and Walter Mischel’s Marshmallow Study, Steve created a psychological test called the Prosperity Trait Index© (PTi) that led to the discovery of a character trait found to be the human attribute responsible for value creation – The Prosperity Trait®. The PTi measures people’s belief systems that either lead to variability or consistency between their performance and their inherent potential, and it serves as an objective measurement for individuals to quantify their thinking. The lower the variability an individual can achieve, the greater the change in behavior and results.

Another way to understand the PTi is to think about Growth Mindsets and Fixed Mindsets (source). People who hold fixed mindsets are threatened by the Unknown Unknowns (also known as Inattentional Blindness), dismiss feedback, and are subsequently destined to continue to stagnate and exhibit variable performance. These people exhibit the same Learned Helplessness characteristics that Seligman described, wasting much of their potential.

Francie took Steve’s PTi assessment and received a score of 9 out of a possible 100 points. After working with Steve on her thinking patterns for six months, Francie scored a 99. Six months later, she scored a 97. Francie felt the PTi helped her seek out detailed feedback on her process, accept what she couldn’t control, focus on what she could control, and enjoy the reward of a job well done rather than look for outside validation.

PTi’s insight is that excellence can be taught, and the adoption of a growth-oriented mindset is available to everyone. All people, regardless of their starting point, can grow beyond what they and others believe is their limit.

What are the Ethics of HiPo Programs?

Is it ethical to rank employees or offer some employees what others don’t get? Yes, as long as the differentiation is quantifiable and auditable. In other words, pattern-matching for candidates that fit the culture and other gut-driven criteria isn’t appropriate for NextGen HiPo.

Who are HiPo Programs Intended For?

Employees who work with their hands to produce physical items are typically referred to as “blue collar,” and employees who work with their minds to produce ideas or new products are typically referred to as “white collar” or “knowledge workers.”

In this article, we’re focused on HiPo programs for knowledge workers. We define knowledge workers as employees whose job requires them to spend at least 25% of their time using a computer and whose work product is not something that can be weighed on a scale. HiPo programs may be employed for a subset or all of an organization’s workers.

The authors believe there is an interesting case for blue collar HiPo programs, but that’s not the focus of this article.

Our Proposal

Combining all of the above, we’ve developed a template to create an ROI-generating Nextgen HiPo program.

Define what success looks like: Before beginning, define company and individual measurements, metrics, and goals. Tweak once a year based on participant feedback.
Tracking cadence: Tracking metrics and goals monthly, making the results easy for participants to find to monitor their progress or points of friction.
HiPo selection process: Our experience tells us that development programs are most successful when employees opt in. Plus, if a person is good enough to be hired by the company, then they should qualify to opt into the HiPo program. We recommend admitting applicants throughout the organization and ranking them equally on two key areas: 1) Quantification of time and value helping others within the organization, i.e. through ERGs or mentoring programs, and 2) Quantification of employee’s work impact onto the organization.
Transparency: Communicate to all company employees how involvement in the HiPo program works and make the selection process auditable.
When: HiPo professional development should happen virtually or in-person during the workday. Terawatt found that group professional development can happen seamlessly in the workday, first thing in the morning or midday at lunch time. We’ve also had good success when longer-length, in-person meetings begin at lunch and finish in the evening.
Assessment tools: Use at least two assessment tools to measure starting points and track change. We recommend two key types of tools:
- Assessment of one’s nature: Enneagram, Disc, ILS, Opposite Strengths, or the Big Five. These tools are helpful for individuals to understand themselves, their patterns, and their drivers.
- Valid psychometric testing: Use valid tracking assessment tools that meet scientific standards and meet the following criteria:
  - Valid, meaning the tests measure what they say they measure and predict what they intend to predict
  - Reliable, meaning test scores are stable over time
  - Face Validity, meaning the test appears effective in terms of its stated aims
  - An acceptable level of error, meaning that the results occurred more by a valid process and less by chance. A score below 0.05 level is the usual standard that most valid tests adhere to.
  - Fair, where it’s proven no demographic classification is advantaged or disadvantaged. In employment settings, large differences in average scale scores across demographic groups can result in lower rates of selection of ethnic minorities, women, or older applicants, which is termed Adverse Impact.
Team psychological safety: Measure, practice, and measure again with 360 degree testing to understand how this person contributes to a team dynamic.
Feedback: Make feedback honest, accurate, and timely, coming from a wide variety of stakeholders. Feedback should come from a variety of sources: assessments, mentors, KPIs/OKRs, and peers.
HiPo Discussion groups: One of the key pedagogical principles in adult learning is review and discussion. We recommend a peer discussion group to hash out progress, successes, questions, etc., as HiPos experience the highs and lows of personal growth. It’s likely to work best when the group itself defines the cadence and method for reflection.
Leadership involvement: We love how involved Jack Welch was with Crotonville, and his involvement surely heightened its influence within GE. We’d like to see more company leaders get actively involved in their HiPo programs.

Key Resources

Well-done employee development programs increase retention rates (source)
Top performers shift expectations higher for all employees (source)
How to keep your top talent, link here.
Growing talent from within is associated with more [company success] than hiring talent from the outside (source)
Developing a deep bench of leaders is associated with resilient and innovative organizations (source)
U.S. Annual HiPo spend, link here.
High retention risk employees, link here.
Dissatisfied C-Suite & HR leaders with HiPo programs, link here
Jack Welch, Jack, link here.
Google Project Aristotle, link here
David Marquet Turn the Ship Around, link here.
Terawatt Group Coaching, link here.
Karen Arnold’s Illinois Valedictorian Study, link here
Robert Rosenthal and Lenore Jacobson’s Pygmalion in the Classroom, link here
Adaptive intelligence, link
Pygmalion in the Classroom, link.
Dr. Stephen Long: Long Training+Research, link here.

About the Authors

Steve holds a PhD in Applied Performance Psychology, is the Founder of Long Training+Research, the developer of the Prosperity Trait(c), and a consultant to the U.S. Air Force Academy’s pilot program. For the past forty years, Dr. Long has helped leaders reduce the variability between their performance and their potential by using behavioral psychology and scientifically valid psychometrics.

Francie is the Founder of Terawatt, an online marketplace for group coaching. Terawatt connects vetted experts to companies looking to solve specific problems and achieve company-level results. The marketplace’s big insight: experts are more affordable when their cost is split by a group.

How to make high potential employee development programs fair, valuable, and sustainable

Why are we writing about HiPo programs?

The History of HiPo

GE’s Crotonville

21st Century Insights

Research on High IQ & Education

Google’s "Project Aristotle"

McKinsey’s People + Performance

L. David Marquet

Terawatt’s research on employee development

Steve Long’s research on Prosperity

What are the Ethics of HiPo Programs?

Who are HiPo Programs Intended For?

Our Proposal

Key Resources

About the Authors

How does Terawatt’s Pricing Work?

Number of Team Members

Consulting Plans

Ala-cart

$0

Bronze

$5,000 / yr

Silver

$30,000 / yr

Gold

$150,000 / yr