Executive search: Balancing science and art
Jenny Roper, February 20, 2017
Executive search processes lack rigour, often resulting in sub-par costly appointments. A combination of art and science is needed for C-suite hires
Imagine filling out a job application and being asked for your star sign. Not to sell the kookiness of the company or put you at ease with a joke, but as a genuine way of finding out whether you were up to the role. Or imagine being asked for a handwriting sample. With the same seriousness of intent.
They’re laughable requests. And ones that would doubtless have most candidates seriously questioning the integrity of the recruitment process.
And yet, according to studies, this is exactly the lack of rigour present where selecting candidates is based entirely, in the words of head of HR and OD at Warwickshire County Council Sue Evans, on “the classic interview”.
“My favourite diagram in the work I’ve done around assessment centres shows the predictive validity scores for various methods,” she relates. “When you come down the scale to the classic interview – which a lot of people still rely on – you only get just above 0.1, which is marginally above graphology and a squeak above astrology. So it’s only marginally better than a handwriting test.”
And what worries Evans and others most about this reality is its ramifications for executive search. Whereas much good work is being done lower down the food chain, executive hiring remains something of a dark art.
“As you’re moving up through the ranks you might assume that the depth and engineering of a recruitment process should increase. From my 20 years in HR I’d say often it’s the opposite,” believes Richard Summerfield, global HRD at financial services firm Ocorian.
“There’s often a far more rigorous process for contact centre people and sales managers than for a chief financial officer,” he continues. “So many decisions are just done on interviews at the senior level – and not very structured interviews at that. It’s a bit of word of mouth, some interviews, a bit of psychometrics, not very detailed referencing, or if it is it’s via a couple of people the candidate has asked you to call.”
While all this might be fine if it was achieving results, research by the Center for Executive Succession at the University of South Carolina’s Darla Moore School of Business, suggests it’s not. Its research found that most CHROs reported C-suite succession failure rates from 10% to 50%, with the direct cost of failed internal promotions ranging between $2 million and $5 million, and the cost of external failures a staggering $20 million-plus.
Another – undoubtedly interrelated – issue is diversity. The 2016 The Female FTSE Board Report by Cranfield University revealed that only 9.7% of FTSE 100 executive directorships are held by women, and this falls to 5.6% in the FTSE 250. Other characteristics have failed to make even this headway; 53 companies don’t have a single BAME board director, and only 8% of director positions in the FTSE 100 are held by people from a BAME background.
“Much executive search is still happening via cosy conversations in private members’ clubs over a huge glass of whisky,” believes Elisabeth Kelan, professor of leadership and director of the global centre for gender and leadership at Cranfield School of Management. This, she says, is why diversity is still so overlooked.
The problem, explains Patrick Wright, Thomas C Vandiver bicentennial chair at the Darla Moore School of Business, is that executive search is hard to apply complete scientific rigour to. “What you want to do for a formal validation is look across, say, 150 CEOs doing the same job and figure out which measures are the best predictors of performance,” he says. “The problem is that’s impossible because every CEO job is different. You can’t really bring pure scientific data in the way you would in a normal selection context.”
“What makes a leader successful is a bit more art than science,” agrees Tomas Chamorro-Premuzic, professor of business psychology at University College London (UCL). He adds, however, that this doesn’t mean companies should simply throw their hands up, as many currently do. “People often say ‘if it isn’t an exact science I shouldn’t even try to do it in an organised way’. But there is a big universe between those two extremes, and we should keep pushing so our mistakes are reviewed and we de-risk the future hiring process.”
But just what might such a de-risked, more scientific approach look like? And, in a technologically-driven age where the executive search firm’s little black book of contacts looks increasingly obsolete, what role should these third party providers play in adding greater rigour?
A false science
The first step sounds simple, but experts say it is all too often missed out. It’s deciding what kind of person is needed to fill the role. Wright explains that the temptation is to shortcut this step by presuming the next CEO, CIO or CFO should be as close as possible to the last.
“One of the big obstacles is trying to get people out of the mindset of what the current CEO looks like and instead focus on what the next CEO has to look like,” he says. “It’s about asking: what do we think are going to be the major strategic challenges the CEO will face, and given that what are the characteristics they will need?”
This is where discomfort with the unknown, and a rapidly changing leadership context, leads many to cling to something of a false science, Wright explains. The temptation is to replicate the technical expertise and sector experience of the previous incumbent. Or rather: the temptation is to assume the same technical and sector experience will be needed each time.
Instead this initial brief should also entail the less scientific-seeming assessment of what soft qualities someone might need to fit the culture of the business. For this to work the company’s culture will need to be profiled in the first place, points out Chamorro-Premuzic. “Where people fail is having a thorough assessment of what the culture of the organisation is,” he explains. “Typically execs are somewhat deluded about what their culture is. You have to profile both sides.”
“People recruiting an executive hire often say ‘we want the best person for the job’,” adds Rob Briner, professor of organisational psychology at the Queen Mary University of London’s School of Management, explaining that many subconsciously presume some objective hierarchy of talent exists when it comes to their next executive superstar, rather than this being entirely context-dependent. “You have to stand back and consider whether you need the actual best person, which is a slippery concept, or someone who can do a really good job. Because they’re two completely different things.
“That pushes the responsibility back onto people to decide: what is it we actually want here? And that’s the bit people find hard,” he adds. “Partly because of this superstar distraction thing, but also because it means we really have to think about all roles, what the organisation needs, and where it’s heading.”
This deep dive evaluation of where the organisation is headed is where external firms can come in, feels consultant at Russell Reynolds Associates (RRA) Anna Penfold. It’s certainly no coincidence that the larger executive search firms have positioned themselves more as consultants over the last few years. Taking a partnership approach at the very first stage of devising a brief can be critical, says Penfold.
“There may not actually be an immediate need for a hire,” she explains. “I’ll often say to HRDs: ‘Actually you don’t need to hire’. You could argue that’s shooting myself in the foot but we’re not an exec search firm now, we’re a talent advisory firm.”
Wright agrees, adding that an impartial third party view is also invaluable for the stage of deciding what sort of person is needed. “The best thing we’ve heard of is having a third party interview each board member individually about their perceptions of the characteristics a person is going to need. It’s having the conversation individually and then feeding back to the board collectively,” he says. The incumbent HRD will probably not be distanced enough to do this, he says.
Art and science
So the initial stages should entail a balance between acceptance of the subtleties inherent in exec search and company culture, combined with a more rigorous approach to understanding and quantifying these. And so too should the second and third stages of devising a shortlist and selecting ‘a winner’.
The danger is leaning too heavily either way: on gut feel or on cold hard data, explains McCain Foods HRD Richard Smelt. “My view on interviewing is it’s about as bad a tool as you’ve got to hire somebody. But also just doing tests is about as bad a tool as you’ve got,” he says. “What you really need is a holistic view. I once hired a treasurer who failed his numerical reasoning test and was numerically dyslexic. You could say that’s a crazy thing to do. But he’d found ways of coping with it.
“Anything that helps you get to a more holistic view is bound to be better. You’ve got to realise that people find coping mechanisms provided they’re self-aware enough to do it.”
Kelan agrees that relying on so-called ‘objective’ measures such as numerical and verbal reasoning scores, without interrogating them, is just as dangerous as the informal gut-feel approach – certainly when it comes to diversity.
“Just assuming that because it’s a standardised test it will be fine is a fallacy,” she says. “Many organisations assess qualities like ‘challenging’. I was talking to an Asian woman who said she has no access culturally to a repertoire that would allow her to challenge colleagues in a way she would feel comfortable with. So her challenging will look very different from a white male peer. Even if you use technology, if you’re not careful it will play your subjectivities back to you.”
“There’s no one-size-fits-all and it’s not about a generic assessment centre. You need to design them quite specifically around what you’re looking for in the role,” adds Evans, agreeing with Smelt that the trusty interview is not inherently useless. Rather it’s the way it’s conducted and combined with other techniques.
“If you ask a question you need to have an idea of what the answer is and what you’re expecting in that answer,” she explains. “We need to move away from this idea that your interview is a technical interview because that’s not the best way of testing someone’s technical ability.”
The best way of seeing if someone has a certain skill is to watch them actually do it, adds Briner. But such simulations are often overlooked at this level, he says. “It sounds odd at a senior level talking about work samples and in-tray exercises… But if you’re saying it’s important someone can deal with a complex meeting, multiple demands and a complex inbox, why not just find out if they can?”
Too big to fail
The worry, explains executive director of HR at St Mungo’s Broadway Helen Giles, is causing offence. “Often failure can be because people don’t have the cognitive ability to do the job,” she says. “That is so common. I’ve seen people say: ‘You’re going to make me, an FD, do an Excel spreadsheet test? How dare you!’ But if you did make them do it you would avoid a very poor appointment.”
Which is where, once more, having a third party dedicated to managing the relationship can come in. “You’re calling a CEO and you’re trying to convince them to be open to having a conversation. Just being open takes incredible persuasion and that happens throughout the entire process,” explains president and CEO of The Association of Executive Search and Leadership Consultants (AESC) Karen Greenbaum. Her association’s latest report found that more than half of executive candidates were dissatisfied with assessment processes because they distrusted and were intimidated by tests, and felt “they’d reached a point where this wasn’t needed”.
HRDs must realise how much time this relationship management takes, agrees Smelt, particularly when considering doing exec search in-house. “There is a deconstruction of the search process where you pay someone to research the market for you, you then take on the candidate contact, the candidate management and the assessment. I think that can work but you have to realise how much time it takes to get hold of people, talk them through [the role] and understand their needs,” he says.
The best search firms will therefore also add value in persuading candidates less amenable to being headhunted, adds Kelan. “I’ve been told that women are more hesitant to take the call of a headhunter, and you have to develop a relationship with them over a much longer period of time,” she says.
Who does what
What people don’t agree on is how involved search firms should be in carrying out assessments, and at what stage testing should be conducted.
“It’s important where the assessment actually happens,” says Alastair Paton, managing partner of Signium UK. “If that shortlist isn’t the best one all you’re doing is finding the best of a bad bunch. That means you don’t get the best people and you don’t get the diversity. The ex-European HRD of Mars recently told me the best exec search relationship he had was where the search company presented just one candidate.”
Paton caveats this won’t suit everybody, however. Evans agrees: “Search has a real place, but my view is you want to keep this process quite close to you,” she says. “It’s important who we bring into the organisation and that they have our ethos, and the right attitudes.”
Giles sounds a note of caution too. While many executive search firms will have moved enough into the consultancy space to carry out assessments effectively, the danger for her is that the onus for introducing rigour is taken away from the organisation itself – which could mean the final decision between shortlisted candidates becomes subjective once again. “The problem is that the board, when the search firm says ‘here are two or three to choose from’, will then go back to deciding on the basis of whether they like them or not. So I would say there’s no substitute for developing in-house capability,” she says.
For former Produce World HRD David Frost, however, a best of both worlds solution exists. He agrees with Paton that some level of testing is needed to arrive at a shortlist. He believes the best approach is external experts feeding back the data in a way his team and board can analyse to make the final decision. But this may require some upskilling on the part of HR, he points out. “Unless the HR person has a good understanding of this, they’re very much reliant on the feedback they’re getting from the psychologist or the search firm. I think it’s very valuable for HR professionals to go through the training themselves.”
“When we hand over we’re not giving them a load of psychometric stuff they’re not able to understand,” adds Paton of how this partnership can work. “We’re giving them information that is normal day-to-day language; it’s a structured framework.”
Penfold says that the best processes involve different tests carefully rolled out at different stages according to the individual search. “When we sit down with individuals right at the start we’re asking them competency questions. Then towards the end of the process we’re really going in very deep,” she says. This ensures candidates aren’t put off, she explains.
No evidence-based practice would make sense without measuring the outcomes. But this element is currently particularly lacking. AESC’s most recent report found a 50/50 split between those that do and don’t metric exec search success, citing this as an area search firms could offer more help with.
“The only problem is if the data doesn’t reflect well on them they’re not going to publish it,” Wright points out. “And not all hires will be external, a lot will be internal and the search firm may not even be involved.”
To this point, Penfold reiterates the importance of search firms moving from a transactional to a more holistic and consultative space. “If we’re positioned as an advisory firm [relaying any bad post-hire results is] absolutely what we have to do. It’s a partnership so we have to serve our client much longer term,” she says. “We benchmark internal and external candidates in exactly the same way. Our fee structure is not based on how we got that person.”
Looking at the right things is critical, says AESC’s Greenbaum: “A lot of people look at tenure but that’s not a perfect measure. Just because they’re still there doesn’t mean they’ve been successful.” “Speed of promotion is a good measure, engagement of them and the people around them, 360-degree feedback, revenue and profitability of the business units they’re leading, shareholder value... It’s a complex matrix,” advises Penfold.
“The space more firms need to be moving into is onboarding and I think it’s a very important role we can play,” adds Greenbaum. “Best practice is where the person that’s been in charge of all the references and feedback becomes their coach,” agrees Frost, explaining this can help persuade reluctant candidates of the value of assessment. “But rarely do you see that done well. That’s a huge opportunity for exec search firms.”
The opportunity to improve the objective rigour of the whole exec search process is clearly present. And yet there is still much headway to be made, not least in persuading candidates. “The longer-term solution is to create a culture of assessment where every year or two years anyone in a senior position has some kind of assessment,” says Wright, adding: “Gamification can play a huge role. Sitting down with a shrink and going through a behavioural interview might be a bit anxiety-provoking. Whereas going through simulations on a computer may make it more fun.”
Executive search firms will also have to move with the times, and HRDs be careful about who they enlist, adds Richard MacKinnon, insight director at the Future Work Centre. “There’s huge variation in the quality of search firms at the moment,” he says. “There’s some terrible practice in that space, effectively recycling the same faces again and again and not really taking an accurate brief.”
However, many search firms are moving, or have moved, in the encouraging direction of turning headhunting into a more strategic, holistic and rigorous process. Which parts of the search they should be tasked with is up for debate, and up to individual organisations to decide.
Either way, turning exec search from dark art to judiciously applied science is a huge opportunity for HR, says Frost, who believes the function can play a crucial role here. “Perhaps it needs the HR profession to take a bit of a lead with a pragmatic approach people understand, rather than it being seen as one or the other [either scientific or intuition-based],” he says. “We need to get the message across that it’s about a balanced approach but each element can complement the other. It’s a huge investment, so why wouldn’t you apply a bit of science?”