“When I receive a business plan, I always read the résumé section first. Not because the people part of the new venture is the most important, but because without the right team, none of the other parts really matter.” – William Sahlman (Professor Emeritus at the Harvard Business School)
Hiring is not easy. It gets doubly difficult for a leadership role. Studies show 50% of new hires fail.
It is June. The sun’s blazing in through the striking windows of your corner office. You watch your team settle in to start their day.
Looks like no mid-year stress this time around…hard work and good strategizing are showing results.
Then, an email pops up on your screen. Your HR manager wants to talk to you about a senior executive. This has set off alarm bells in your head!
Half a day later, you’ve let another the person go. This is the third senior executive in the last year.
Now, you are wondering where you are going to find a leader who is a good fit, knows how to motivate the team, gets results, and stays.
How do you break this pattern of bad hires for senior roles?
How to recruit quality senior executive candidates
Shorter and more volatile incumbencies define exits in recent years. Ill health, death, or retirement are no longer the top causes of CXO roles becoming vacant. Barring a poor economic environment, studies show that top-level managers are now often ‘fired’ for non-performance.
- The Corporate Leadership Council, nearly 40% of CEOs fail outright in the first 18 months
- Harvard Business Review, between 40 and 60% of management new-hires fail within 18 months
- Gallup, 82% miss the mark on high managerial talent
The first step to reducing this high failure rate would be to design the right recruitment strategy to help make confident, accurate hiring decisions. Senior candidates have to be perfect for the company and for the job.
On being asked about the best way to hire senior candidates, Prof. Joe Carella, Dean Academics, Arizona University, says, “There is no one best way. Normally filling a senior position requires thoughtful consideration on both the candidate’s and the recruiting companies part. Usually, a trusted executive search firm or the company’s board of directors can be a great source of new talent. It is also worth considering having a leadership assessment center inside the organization once a year so that high potentials can be objectively assessed and nurtured.”
LeadershipIQ.com surveyed 1,087 board members from 286 public, private, business and healthcare organizations where the CEO was terminated or made to leave. The following are the findings of the “behind-closed-doors” four-year study:
Here’s are a few things to keep in mind to land a good executive-level hire:
Understand your hiring criteria clearly
A process that has a huge impact, executive hiring is a challenge in today’s complex and competitive business landscape. These roles have lasting effects as they do much for the culture, market value, and profitability of an organization. To prevent a downward trend resulting from a wrong hire, recruiters need to outline the job role and the non-negotiable skills.
What do you need this hire for? To expand the team, leverage innovative technologies, or enable growth by acquisition? Identify what you need and see what you can live with. (Read about Marco Zappacosta talking about his top two tips for hiring a great leadership team.)
For instance, defining your criteria can be something as simple as listing down all the traits that you want, classifying them into technical and soft skills, prioritizing them, picking the top 5 from each, and coming up with scenario-based questions that will give you answers for just that trait.
Companies are increasingly announcing departures of executives for seemingly nebulous reasons. Although only stories of sexual misconduct or fraud seem to take the media by storm, there are several cases of “dazzling” employees who reel you in with their spiel. For instance, one of the VPs at a leading manufacturing firm was let go after just 16 months of promising to triple the sales. The management rued the day it hired based on charisma and not on actually proven abilities.
In 2016, The Economic Times Magazine “did a quick poll with India’s leading executive search firms to understand how MNCs from different countries vetted some key attributes for top-level hiring.” They checked the thrust on pedigree, speed of hiring, focus on packaging, willingness to experiment, and the highest paymasters. The results were quite interesting! Depending on the culture of the six countries in the poll (Japan, US, India, Korea, Germany, and China), the requirements also varied.
Don’t underestimate the importance of emotional intelligence
Even if the candidates topped the class, come with the requisite industry and functional experience, and be labeled excellent problem solvers, they are likely to fail if they have no people skills. Check for how well they play with others, how accountable and responsible they are, and how much they favor a collaborative style of working. Self-management and self- and social awareness have a significant role in deciding the success of senior management.
Apart from ethical lapses, attitudinal issues are often the reason CXOs are ousted. For example, in 2015, HTC (a leading Taiwanese smartphone maker) CEO Pete Chou was replaced by Cher Wang due to his “abrasive managerial style.”
There are so many examples where people in top roles have been dismissed because of their leadership styles. Remember Times Inc. CEO, Jack Griffin? He was forced out in just six months. Parent company Times Warner CEO Jeffrey L. Bewkes said in a letter to his employees, “Although Jack is an extremely accomplished executive, I concluded that his leadership style and approach did not mesh with Time Inc. and Time Warner.”
Emotional intelligence can be extremely hard to measure in interviews. People mostly come prepared for interviews and a lot of their answers can be scripted. The best way to evaluate people on emotional intelligence is to ask them questions about the toughest times in their lives. If the candidate is comfortable, you could also talk about personal situations. The idea is to have a conversation about the most difficult time candidates have had, how they dealt with it, and so on.
Regarding the common pitfalls while hiring senior executives Prof. Joe Carella says, “What’s a common pitfall when hiring senior executives? Cultural alignment and fit – far too frequently organizations rely on hunches or the candidate’s past track record to select their executives. Cultural fit trumps past successes or a good feeling about someone. If you have identified a great candidate, it is worth asking yourself “Do they share my values? And if so, how does that show in their work and personal life?”
Avoid even a hint of corporate cronyism or groupthink
Just like detectives are taken off cases citing conflict of interest, hiring managers or CXOs should recuse themselves from instances where friends in the running could cloud their decision making. Treating buddy candidates like every other hire will ensure impartiality and picking the right person for the job. You don’t need friends who will stroke your ego, pander to your requests, or make you a target for accusations of bias in the organization. It’s obvious that challenging the status quo is the way to grow. You need people who can do that.
Also, firing your friends can’t be fun, can it?
Rich Kahn, Co-Founder, and CEO, eZanga, says, “When we first started eZanga, we hired some of our best friends because we knew we could trust them and we knew we already worked well together. It’s fun at first, but when you need to step up and be the boss to your friend, it drives a stake in your friendship pretty quickly. I, too, learned the hard way — never mix business with friendship. My wife and I both lost some really great friends over the years because of those early hiring decisions.”
Try to hire for diversity, be it in terms of skills or perspectives. This will help ensure that you will avoid repeating “the same old mistakes” that perpetuated because of like-mindedness and attempts to avoid dissent.
Go beyond traditional sourcing, screening, and interviewing
Networking (perhaps your most valuable business asset) with people you know or sourcing them through LinkedIn helps you nurture professional relationships and do background or reference checks easily. Through media profiles, you can check out their endorsements and testimonials as well.
When interviewing senior candidates, ask open-ended questions to get a holistic picture. Ask for presentations, role play to deal with challenging situations, arrange friendly meetings with colleagues for different perspectives, etc. Think beyond set practices. You need to be able to gauge their approach to work and fit through formal and informal interviews.
The same ET article also discusses how hiring CXOs in India has changed in the last 25 years. The rise of social media has opened up a huge network of possible candidates. Age is no longer a criterion with people now looking for younger CEOs. Willingness to experiment and the ability to cleverly navigate the VUCA world are now viewed in a favorable light. These changing trends indicate that traditional recruitment processes are unlikely to work.
Typically, companies want to get senior hires with backgrounds that are closely related to what they are doing. However, you should be open to getting someone from a different background but who is willing to understand the new industry. That doesn’t mean the person should be from the completely different background but if you are able to integrate a senior person from a different culture in the company, it can do a world of good because that person can teach so many things that your organization could benefit from.
Inside versus outside senior hires
Hiring complete strangers may not work as the importance of a diverse workforce is now apparent. Looking internally has proven to be a better option for many companies. In 2004, Nike Co-founder Phil Knight asked then CEO William Perez, an outsider, to step down after just a year in the job. Veteran insider Mark G. Parker who replaced him is still going strong and will continue till 2020.
With insiders, you know their track record. At the turn of the decade, an A.T. Kearney study showed that promoting from within the ranks has turned out favorably for many companies such as FedEx, Intel, DuPont, Colgate, and Microsoft, whereas a Booz Allen study showed that outsider CEOs have two times the failure rate. Perhaps, Yahoo is a good example for the latter—Carol Bartz, Scott Thompson, Marissa Mayer.
Of course, nothing is set in stone. Your goal is to hire the best person for the job.
How do you decide?
- If you are looking for a fresh pair of eyes for your fast-growing company, then an outsider might be what you need. No myopic vision here. Again, make sure your shiny new hire has proven abilities. This is an issue that startups, in particular, have to care about when hiring.
- People who have worked hard and risen through the ranks need to be valued and retained. Promotions are great for team morale. Hiring internally is usually cheaper and quicker as well. If you are unable to find the expertise or leadership you are looking for from within, you also know that you need to have some training programs in place for the future. Advertise internally first and then see how it goes.
Why does this process of hiring senior candidates still seem undependable? A reasonable conclusion would be that the evaluation and selection processes are flawed in terms of validity and reliability. With technological advancements, global competition, changing business partnerships, and hiring pressures that stem from stakeholders’ agendas, the process just becomes more complex.
In The Emotionally Intelligent Workplace, Claudio Fernández-Aráoz (p.182) writes, “Hiring the right executive is the most important challenge because of its impact, its lasting consequences, its irreversibility, its growing complexity, and its increased criticality.”
CXO hiring is hard and CXOs making good senior appointments is harder. Aráoz argues that just checking for work experience or a high IQ is not enough. “A series of relevant emotional intelligence (EI) competencies” is a valid predictor of performance — a dimension that is typically ignored by traditional hiring processes.
Sketching the role clearly and knowing how the senior candidate can expect to progress in the role are key to an effective strategy. A reactive hiring process is unlikely to maintain the necessary integrity during decision making. You have to court your candidates (while maintaining confidentiality and not burning bridges), understand what drives them, and be smart about putting together the right compensation. Have informal chats over some pasta and see where open, honest conversations take you.