Strong leadership is a crucial ingredient for a successful company. With highly qualified people at the top, the entire organization is more likely to outperform the competition and hold on to their most talented employees. Yet, many organizations lack a tried-and-true method for identifying and developing those employees who show leadership potential.

Current processes for identifying high-potential internal talent are often marred by bias and politics and rely on past performance as the main indicator of future performance. Such strategies reward bold, attention-grabbing behaviors that may be attractive in junior employees but become counterproductive at the upper levels.

As several recent high-profile stories suggest, companies don’t have much luck when hiring external C-level candidates either. Studies show that more than half of outside hires fail, many within the first 18 months on the job. As they are unfamiliar with the business, employees, culture, and unique challenges, it is no wonder why many external hires struggle to find success.

However, when hiring managers use the empirical data provided by personality assessment, rather than gut reactions influenced by politics or initial reactions in interviews, they can develop high-potential programs that ensure a stable of promising leaders. By using assessments, managers gain key insight into their high-potential employees in the following areas:

• Bright-side personality – the everyday personality that determines leadership style, judgment, and ability to get along and get ahead
• Dark-side personality – also called derailment personality, this consists of characteristics that under stress or boredom can become debilitating career derailers
• Values – the drivers, beliefs and interests that determine what candidates are willing to work for and in what type of job, position, and organizational culture they are likely to feel most satisfied
• Cognitive ability – a measure of candidates’ ability to think tactically and strategically

When personality assessments are at the center of a high-potential program, organizations have an empirical basis for identifying, selecting, and developing the next generation of leaders.

To learn more about how personality assessment can be used to identify, develop, and retain future leaders, download our complimentary white paper, From Potential to Performance.

At the recent Conference Board in Chicago, a number of talent management professionals and consulting experts gave presentations on next-generation leadership. These discussions included a variety of topics, from recruiting generation Y and Millennial employees to social networking and overcoming the talent management gap as Baby Boomers retire. The common thread in these topics there were three recurrent questions 1) how do we develop next generation high potentials for senior leadership roles, 2) do we tell them they are high potentials, and 3) how will this impact their ability to be authentic leaders?

The general consensus from the Conference Board attendees was that telling these individuals was important for a number of reasons. Mostly, formal identification of high potentials allows employees to opt out of these programs if they are not interested. For those who are interested, formal identification may increase commitment to such programs. One of the concerns with telling these individuals they have been identified as the future of the organization is that they may lose sight of what they need to do from a development perspective today to ensure success once appointed to these senior leadership roles. Additionally, there is a concern about the ability of these individuals to be authentic leaders.

Last week my colleague Jackie VanBroekhoven wrote about the shadows leaders cast. These shadows begin developing early in our careers, and without careful attention and behavior modification they may supersede our successful initiatives and bottom line results. When reflecting on the Conference Board dialogue about high potential identification, the importance of shadow management could not be truer. In addition to committing to development programs these high potentials also need to commit to self-development and shadow awareness.

The current political environment is a great place to observe the consequences of our shadows in action. As we prepare for the 2012 election year the speeches and promises for change are in full force. Regardless of your political views, you are likely to observe politicians leveraging their confidence, charisma, and innovative ideas to change the current economy to get your vote. The question of authenticity comes into play when it is time to put these plans into action. Take Rick Perry’s current proposal of a flat tax plan. Is this the new financial strategy to save the US from the current debt crisis or is it simply a political message to take interest off his poking fun of President Obama’s birth certificate situation? What sort of shadow does Governor Perry cast and will this shadow impact his success in the upcoming election?

These leadership shadows are much easier to identify when people are in the public eye. Politicians, CEOs, and other public figures likely have these shadows following them quite literally when paparazzi are lurking in the bushes and standing in their driveways.

Public figures aside, have you ever thought about the shadow you cast? If others were to describe you when you weren’t around what would they say? Are you confident engaging and charming or arrogant socially dominant and risk taking? In addition to self-awareness and behavior change we all need to be mindful of these looming success killers or shadows that may negatively impact our reputation.

This topic of shadow awareness is particularly salient in the current workforce. Although organizations may not be identifying the next CEO or United States President in their current high potential programs, they are indentifying the next generation of leaders who may be tasked with ascending the ranks of the organization faster than their predecessors. That being said, these programs need to focus on developing the skills and behaviors for leadership, but also challenging these individuals to think about the legacy they want to leave behind and figuring out whether you’re afraid of your shadow is a great place to start!

I’m a big movie buff. Since I have young children I rarely get a chance to go the movie theaters anymore to see a film that doesn’t star Woody, Buzz, Lightning McQueen, or a princess of some type. In my 5+ years of fatherhood, Netflix has become a savior in terms of feeding my movie addiction. For me and 20 million other subscribers, seeing that a new movie is available for streaming online or getting that red envelope in the mail is one of life’s simple joys.

The joy of being a Netflix customer was mightily shaken last July when customers received a brisk, impersonal email informing them that the video subscription service pricing would be increased by as much as 60% per month unless subscribers decided to substantially limit the services they were receiving. In essence, customers were abruptly told that they would no longer be able to enjoy both the streaming movies and DVD-by-mail features. They would be required to choose one type of service otherwise incur the price hike to retain both options.

Netflix customers were outraged by this imposed price increase and/or elimination of service options. This outrage was not only communicated via blogs and Facebook posts. Many customers have truly put their money where their mouth is by canceling their subscriptions. The company’s stock price is now 42% lower than it was in July before the price hike announcement. An organization that by all accounts changed the video rental industry and was experiencing a fantastic upward trajectory envied by the business world has taken a serious turn for the worse. How did this happen?

The recent events at Netflix appear to be yet another unfortunate example of leadership derailment. The company’s decision to increase prices and the manner in which they communicated the changes to customers has been perceived by many as a bold and arrogant move. In September, Netflix CEO Reed Hastings issued a statement apologizing to customers. However, it is possible that some may view his apology as too little, too late. Even after the initial customer backlash, Netflix at first confidently defended their decision and even announced in August that they expected to gain 400,000 subscribers by the end of September. Recently, Netflix has projected that it will have actually lost 600,000 customers by the end of September. In other bad news, Starz, a key movie content partner for Netflix, ended its partnership with the organization. The company has decided to rebrand their DVD-by-mail service as a separate company called Qwikster. The effectiveness of this strategy is being questioned by many and could further stoke the flames of the fire started earlier this summer.

Two months after the initial controversy, Reed Hastings’ blog post apology stated that the July announcement “lacked respect and humility” and indicated that he should have personally communicated in more detail the reasons for the changes. He went on to say, “In hindsight, I slid into arrogance based upon past success.” Hastings ends his statement by saying that he and his team will work hard to regain customers’ trust. Interestingly enough, his actions and choice of terminology strongly parallel the leadership derailment research findings of Hogan Assessment Systems.

High potential leaders assessed by Hogan tend to be seen as confident, assertive, ambitious, and visionary. Some of these very characteristics are likely present in the senior leadership team at Netflix and surely contributed significantly to the company’s hugely successful rise. However, during stress or heavy workloads, when leaders aren’t paying attention, or during times of change, this confident style may emerge as counterproductive behaviors viewed by others as arrogant, lacking humility, setting unrealistic expectations, and ignoring negative feedback. In his own words, Hastings acknowledged a very similar behavioral pattern. Furthermore, derailing behaviors related to arrogance often lead to the inability of leaders to be seen as trustworthy and sincere, hence Hastings’ comment that Netflix is now committed to regaining customer trust.

Leaders that allow their natural confidence to descend into arrogance rarely admit when they are wrong, learn from mistakes, or take responsibility when things go wrong. This recent statement by the CEO appears to potentially demonstrate a realization that a mistake was made and a willingness to take ownership of the misstep…however the pricing increase was not rescinded and only the poor communication of the policy change was addressed. Will the apology and Qwikster rebranding strategy be effective in retaining customers and attracting new subscribers? Can Netflix and its leaders get back on track after derailing so drastically? Stay tuned!