Leadership Development ROI: Why High Potentials Matter Most

Measuring ROI for leadership development has always been a challenge. Organizations want proof that their investment in leaders pays off, but too often, development resources are spread thin across too many people or allocated without a clear strategy. The result: wasted budgets and leaders who aren’t fully prepared for the future.

In conversations with our clients, we’ve uncovered two barriers to maximizing leadership development ROI: (1) failing to accurately identify those who will benefit the most from it (i.e., high potentials), and (2) failing to strategically allocate resources and support based on potential.

Why leadership development ROI is a persistent problem

The Talent Strategy Group’s 2025 Potential Report confirms our anecdotal data. Results of this study show that while 84% of organizations surveyed have a process for identifying high-potential employees, far fewer are making smart investment decisions based on it. We’ve pulled a few charts from this study to illustrate three reasons why.

1. Ineffective High-Potential Identification Process

To maximize your leadership development ROI, it is imperative that you accurately identify potential. Mis-identification of potential results in two types of errors. The most common is Type 1 error – when people are identified as high potential but they aren’t. Type 2 errors are harder to detect. This is when there are high potentials in the organization who are not being identified as such.

The below statistics show that most companies are likely experiencing both types of errors because they are not using two of the best predictors of potential.

While research clearly shows that cognitive ability is the best predictor of success in complex roles, most companies do not include aptitude tests in their hi-po identification process. Since cognitive ability is more or less “fixed,” there is no training or development that will help the person be able to handle higher levels of complexity.

Additionally, even though research shows that personality predicts many work-related outcomes, less than 1/3 of companies use validated surveys to measure it. While it’s not easy, people can make changes to their personality, but only if they know what they need to change to succeed as a leader. So, if you don’t use a good personality survey, you can’t target your leadership development efforts to the individual leader’s needs.

2. Not Matching Leadership Development Support to Potential

Few organizations align their leadership development strategies in ways that maximize ROI. As shown in the graph below, coaching is the most common type of developmental support reserved for high potential leaders. That’s likely because coaching has a direct cost, which is often high. Still, it’s surprising that more companies don’t reserve this for their high potentials. Even more surprising, nearly half of companies don’t make decisions about exposure to executives, special project assignments, and educational opportunities based on potential.

Most people would agree that if an individual has both the ability to learn new things and the motivation to continuously improve themselves, they will get more out of leadership development support than those who don’t. So, if resources aren’t being allocated strategically, your ROI for leadership development is going to suffer.

3. Failure to Create Development Plans for High Potentials

Only 8% of companies surveyed have a solid development plan in place for all of their high potentials. This might be the most startling of all the stats, as this is not a complex or time consuming process to execute.

Goal setting research is clear. When people set a specific, challenging goal and have a plan for what they will do to reach it, they are more likely to accomplish that goal. So, there’s a huge opportunity loss when processes aren’t in place to ensure high potentials have a written development plan.

5 Steps to Maximize Leadership Development ROI

Step 1 – Use the 9-box grid strategically

All employees should receive some type of professional development, and there should be a standard way to decide what type of support they get. While the 9-box has sparked debate over the years, it’s still the most widely used tool, and for good reason – it makes common sense. One example of how to label the boxes is shown below.

You can come up with your own labels or choose not to use labels. The wording is less important than the process. Before you even begin to talk about your talent, you should map developmental opportunities to each cell in the grid. Put high-cost, low-availability activities in the upper right corner. Below are some ideas to get you started.

Development Support for High Potentials Might Include:

• Participate in an accelerated leader cohort program
• International assignment
• Present at a conference
• Lead a cross-functional project
• External executive coaching
• Funding or reimbursement to obtain MBA
• Lateral move that builds organizational understanding
• Increase scope of responsibility within role
• Be assigned an internal mentor
• Participate in a leadership retreat
• Access to CEO
• Access to The Board
• External executive education
• Case Studies and Roundtables with C-suite

Development Support for Moderate Potentials Might Include:

• 360 feedback with debrief
• Lead an internal committee
• Funding or reimbursement for certifications/licenses
• Lead an Employee Resource Group (ERG)
• Attend a conference
• Stretch assignments within function
• Be assigned a peer coach
• Be a peer coach
• Job shadowing for possible lateral moves

Development Support for Low Potentials Might Include:

• If low performing:
  • Internal training on job duties
  • Increased 1-on-1s, feedback, and coaching from supervisor
  • Counseling from HR
  • Performance Improvement Plan
• If high performing:
  • Consideration for lateral moves
  • Internal training for skill building
  • Serve as a peer coach or trainer
  • Presenting to leadership on well-understood topic
  • Facilitating team meetings

Step 2 – Leverage objective assessments

Use objective, reliable tools to measure potential, not just past performance and their manager’s impressions. To learn more about how to accurately identify people who have what it takes to advance, check out our high-potential assessments page.

Step 3 – Run formal talent reviews

At least once a year, bring together leaders with diverse experiences and perspectives to discuss your talent. Talk about both performance and potential data and agree upon each leader’s placement in the 9-box. Spend less time in these meetings talking about low performers. Those should be separate conversations with HR and the person’s manager to get to the root cause and decide how to address it.

Step 4 – Document SMART development plans

This is low-hanging fruit that will improve your leadership development ROI. First, train managers and employees on a standard process and tools for writing SMART (specific, measurable, achievable, relevant, and time-bound) goals. If possible, leverage technology to house action plans. Then, it’s important not to let this become a check-the-box activity. HR should review plans periodically, ensure that high potentials are given access to the right opportunities, and provide coaching to managers who aren’t using the process correctly. Learn more about the value of SMART goals and how to implement them at SHRM.

Step 5 – Integrate with performance management

Use progress toward development goals as an input into the performance review process. This adds a layer of accountability. Those who take full advantage of the opportunities and reach their goals should continue to receive additional developmental support to keep them engaged.

Conclusion

By directing more resources toward high-potential employees, organizations can maximize the ROI of leadership development, reduce wasted efforts, and strengthen their succession pipelines. Learn more about our succession planning services.

For a summary of more related research, see our article developing high potentials.