Most organisations use employee performance as the main criteria for promotion.

However, according to research by executive advisory team CEB, companies are seriously hurting themselves by failing to differentiate between performance and potential. CEB's report says that just one in six high-performance employees also display the attributes that indicate potential. CEB says that 46 percent of employees brought into leadership development programs ultimately fail to meet their business objectives once they assume managerial roles and that more than 50 percent of misidentified employees - employees who display high performance but not high potential - ultimately drop out of leadership development programs before completion.

https://www.inc.com/adam-vaccaro/high-performance-vs-high-potential.html

Why is this?

Remember performance is measured against a current, not a future role. This is problematic, because Nthabi’s performance on say a middle management position only tells us about her performance against this role but tell us nothing about how she will perform against the requirements of say a senior management role. Her performance against this senior role is untested. Performance therefore does not tell us anything about a person’s future behaviour in a role with new, more advanced and more complex challenges. It only tells us about performance in a current role and therefore is not a predictive yardstick.

Capability however tells us about a person’s potential to perform against any role including one with a future requirement. An organization's pool of high performers (Performance Pool) therefore does not necessarily equate to its Capability/Talent Pool. What organizations should be doing is looking for Capability or Talent within their Performance Pool.

Psychometrics are a critical and valuable tool for doing this. As the only measure of Capability it is the only way in which an organisation can identify it’s high potential or high capability employees or job applicants. When past performance is used as the key indicator of a person’s potential for a job at the next level there is a very real danger of running into the Peter Principle.

The Peter Principle

The Peter Principle states that a person will be promoted to his highest level of incompetence. To illustrate, Henry is the best operator on a line. A vacancy for a team leader position opens up and being the best operator, Henry is promoted into the team leader role, where he excels. Some years later, a production manager position opens up and being the best team leader, Henry is promoted into this role. However, it soon becomes apparent that Henry is struggling. He is sent on training, coaching, development, further education to no avail. He just cannot meet the performance requirements of the job.

What happened here?

Henry was promoted on the basis of his performance in a job which was at a lower level than the one he was promoted into AND NOT on the basis of his capability. The first time around it worked, because Henry had the capability (EQ and IQ) to function beyond operator level and at team leader level. The second time it did not work, because while Henry had the capability to function as a team leader, he did not have the capability to go to the next level of production manager where he proved to be incompetent. As a result he had been promoted to his highest level of incompetence and not to his level of capability.

Understanding a person’s capability, prevents the Peter Principle from kicking in, and clearly when this principle is in operation it is both to the detriment of the employee (who has been set up for failure) and the organisation which now has an underperforming employee.

Capability – EQ and IQ – assessed by means of psychometric tests - provide an objective picture of a person’s capability and potential to perform. For example, if Henry in the example above had been psychometrically assessed, and that assessment showed that his cognitive capability compared favourably with people in first line management positions, but compared UNFAVOURABLY to people in middle management positions, it would weaken the case for promoting him into a middle management position.

Similarly, if Nolu was employed as an engineering technician with specialist job demands, and was now being considered for a management role that would place leadership demands on her, a psychometric assessment would be able to indicate how well suited her personality is to a leadership role.

At EQ – IQ we use our battery of psychometric tests to place people into a talent matrix. This is very useful for understanding where talent resides within your organisation and will be illustrated in the following case study.