Only 14% of CEOs feel confident they have the talent to drive growth (DDI Global Leadership Forecast). That gap is not from hiring too little. It is from missing what is already inside the business.
In service-based SMBs, the leadership pipeline will not build itself. The companies that scale without stalling are led by CEOs who know how to identify high-potential employees before anyone else does. Note, this is not an HR task. It is a leadership skill. Potential does not show up with a résumé. It surfaces under pressure, in moments of complexity, and during everyday friction. If you are not watching closely, you will miss it.
Knowing how to identify high-potential employees is not about better management. It is how leaders multiply their impact and scale with confidence.
These next five tactics will help you spot your future leaders early and develop them before someone else does.
High Potential Is Not the Same as High Performance
One of the most common mistakes leaders make is equating top performers with future leaders. The two are not the same. A great executor may consistently deliver results, follow process, and stay focused. That does not always translate to leadership capability.
You are looking for something else. People who see patterns. People who act without permission when a problem arises. People who influence across functions. They may not be the loudest. They may not even ask for more responsibility. Often, high-potential employees are quietly fixing things others do not notice are broken.
The key is to stop thinking about roles and start watching for traits. When you know how to identify high-potential employees, you stop building around titles and start building around capability.
Look Where Others Don’t
In SMBs, the biggest leadership potential is usually hidden in plain sight. Operations managers who make cross-department projects smoother. Account coordinators who catch issues before they reach the client. Junior developers who offer process improvements before they are even asked.
These moments matter more than annual reviews. You will not find them in a dashboard. They show up during live projects, real deadlines, and team friction. That is why the CEO has to stay close enough to see it.
You do not need to micromanage. You need to stay in the loop where complex handoffs, missed expectations, and client escalations happen. These are the moments where leadership ability reveals itself without a title.
Knowing how to identify high-potential employees means looking beyond KPIs and into behavior. Ask yourself: who do others naturally defer to? Who fixes problems they did not cause? Who sees what is coming next?
Create Controlled Pressure
Potential needs a proving ground. If you suspect someone has what it takes, give them a lightweight, high-context responsibility. Assign a process redesign. Let them lead a client debrief. Have them present performance data to your leadership team. Then watch.
This is not about testing loyalty or forcing overwork. It is about giving them room to stretch without putting the business at risk. Service-based businesses have limited margin for failure, but they also provide rich opportunities for exposure and growth. Use that.
You will quickly learn who adapts under pressure, who seeks help strategically, and who defaults to excuses when things go sideways. These patterns tell you more than any 9-box matrix ever will.
When you know how to identify high-potential employees, you stop relying on titles or time served. You start developing people who are already acting like owners.
Visibility Is Leadership Currency
If you find someone worth betting on, make sure the rest of your leadership team sees it too. This does not mean public praise or fast promotions. It means exposure. Put that person in the room where strategy is discussed. Ask them to lead a presentation. Include them in a cross-functional project.
The goal is not to reward them. The goal is to build their confidence and your bench at the same time. You cannot build succession in the dark. Growth requires visible, active development. Your team should not be surprised when someone steps into a bigger role. They should already trust them.
You will find that as soon as one person starts to rise, others follow. That ripple effect drives momentum inside teams. It signals that advancement is possible. More importantly, it signals that leadership is earned through contribution, not politics.
The Hidden Risk of Doing Nothing
If you do not know how to identify high-potential employees, someone else will. They will get recruited, promoted somewhere else, or lose motivation and stall out. You lose not just a future leader, but the continuity and trust that come with internal promotion.
Worse, you leave the business exposed. If your number two is not ready, and your department heads are not being shaped into future executives, every change at the top becomes a fire drill. Clients feel the chaos. Teams stall. Growth halts.
In service-based SMBs, trust and experience are hard to replace. Developing leadership from within is not optional. It is the only way to protect momentum.
Leadership Is an Investment Strategy
Treating leadership development like a reactive task puts your business at risk. Real leaders build leaders. That starts with learning how to identify high-potential employees, assigning challenges that reveal readiness, and creating environments where growth is visible and supported.
The return is measured in retention, speed, and scalability. When your best people grow into your next leaders, transitions become smooth. Teams stay aligned. The business grows with less friction.
If your leadership bench is shallow, the problem is not hiring. The problem is your attention.
Proxxy works with SMB CEOs to design leadership systems that scale with the business. If your team lacks depth or your number twos are not ready, we can help you build the structure to change that. Reach out to us today to get started.
