executive assessment Archives

One of the questions we as executive recruiters often get asked  is the trade-off between experience and aptitude.   Both sides of the equation are prone to asking it, clients and executive candidates alike.  Sometimes this teeter-totter is referred to as “domain expert versus best athlete.”

What do they mean when they ask?  There’s actually a lot of nuance in the question-when are skills and experience most important to success in the role versus pure talent and aptitude?

• •    Just because a CEO is moving from one industry to another, does s/he lose his ability to successfully lead?
• •    If a VP Sales has been successful at one stage of company growth, can s/he take that same sales toolbox and be successful in another stage company, say either emerging-stage or mature-stage?
• •    Can a VP Engineering be equally effective managing in large companies and small?
• •    Do companies look for the same types of leadership in good economic cycles as well as bad?
• •    How does an executive’s move out of their wheelhouse of skills and experience impact their compensation and/or level in a new industry and company?

These questions are only a few of the factors that impact the answer.    The following discussion is aimed at trying to lend some clarity and context to question.

Let’s take a look at the hour-glass graph below to lay down some of these factors against our “expert or athlete” question:

1)     Level of management: The first factor is where an employee sits in the organizational chart.   In general, skills and experience are most critical at the “waist” of the hour-glass graph-mid-to-upper level management, starting at manager, through director- and VP-level.  At the top and bottom of the hour-glass, aptitude often ends up as the greater emphasis in “hireability.”  This may be fairly intuitive for many.

a.     Entry-level: When you first get out of school, employers often hire for a combination of attitude and intelligence and look for those who exhibit room to grow or “headroom.”   In fact, at entry-level, skills and experience for those roles are often a liability.  Employers may feel someone is overqualified, or a “flight risk” if that employee finds another better-paying and/or higher level position at another company.

b.     CEO-level: When you achieve P&L/CEO status, employers often will place more emphasis on the track record a CEO has in leading a company versus a tenured career history in a specific industry area.  Can a CEO move from rust-belt manufacturer to biotech?  Likely not.  However, there isn’t the same granularity of fit applied at the CEO-level as at the middle-management layer.  If a CEO has been broadly successful in in a number of software companies, it often becomes less important what type of software, or what industry vertical that software was developed for.  Certainly some screening is applied to industry, with some of the below more general industry characteristics takingi precedence-

i.      Experience in selling to similar customer base, B2B vs. B2C or government

ii.      Experience raising equity capital from venture capital or private equity

iii.      Experience creating exits for investors that have generated good returns for those investors

iv.      Experience taking a company from one industry into other industries, popularly referred to as “crossing the chasm”

c.     Mid-to-upper management:   Mid and upper management are where skills and experience over mere aptitude are often most sought after by employers.  Those who are hiring at this level will often even emphasize industry skills and experience above managerial experience, giving the edge to a candidate with industry-relevant background and a lesser degree of leadership experience, assuming that management is a learned skill and can be taught or picked up on the job.  Is this right?  That’s not the focus of our discussion here.  Rather, our goal here is to describe corporate hiring  norms from our observations.

[click more button below for rest of post]

More…

Scott Kirsner recently penned an article in the Boston Globe on interviewing tips, what not to do.  Great compendium (our contributions excepted perhaps but for you to judge in the article sidebar on page 2) of what some might think intuitively as “faux pas”, but many simply may not think of at all, and are at risk of committing.

http://www.boston.com/business/articles/2010/01/10/you_have_your_foot_in_the_door_how_to_keep_it_there_1263010162/?page=1

A few months back in the New Yorker Magazine (May, 2009, http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell ), Malcolm Gladwell penned a really interesting article on the subject of how underdogs-when they change the rules of the game-can beat stronger, bigger rivals. This is a story told many times over, starting with the Biblical story of David beating Goliath, which Gladwell uses in his article as the first of two fulcrums to work the concept out. The other fulcrum he uses is a girls basketball team on the West Coast that had as its coach a successful entrepreneur, Vivek Ranadivé, accustomed to innovating the rulebook to a start-up’s advantage as founder, Chairman and CEO of TIBCO Software, $1+B enterprise value publicly traded start-up success.

In the case of Gladwell’s article, the girls basketball coach was not given any special “talent” as an asset to build around. In fact, kids’ teams at younger ages are most often randomly assembled, with no “draft picking” involved. So, Randivé had to play with the hand he was dealt. He ended up with no tall girls, nor good shooters, just moldable clay, where a winning strategy would have to prevail over a special selection of talent.

In professional sports as well as business, however, coaches/CEOs get to pick their teams. And for business, there is no more crucial time to think about executive team-building than now. According to most analyst reports, markets are preparing for growth. The strongest competitors in each industry were the first to streamline operations at the beginning of the downturn and make sure their financial houses were in order. Now these leaner and meaner companies are looking to leapfrog their competition as recovery sets in. If a rising tide floats all boats, the top companies in each industry sector are looking for a way to rise at a faster rate than their weaker rivals. A recent McKinsey report framed this competitive dynamic, saying:

Roughly one in three industry leaders was toppled during the previous recession as attackers used the downturn to their advantage. Recent big acquisitions in sectors such as pharmaceuticals and information technology suggest that the current slump will be no different.

Our research shows that while all companies in an industry typically suffer during a recession, the performance gap between strong and weak rivals tends to widen. This gives strong players more opportunities to reshape their competitive environment. [http://blogs.harvardbusiness.org/hbr/hbr-now/2009/07/trend-to-watch-industries-taki.html]

But, how should these companies go about accelerating around the executive curve into the straight-away of economic expansion?

Sticking with basketball as a parallel for what one business can do to accelerate their rise over their peers, is it possible to consider hiring a superstar in a key area of the business?  A Michael Jordan of the Bulls, or Kevin Garnett of the Boston Celtics, or L.A. Lakers’ Kobe Bryant?  However, what should the latest definition of “superstar” be in light of all the change the recession has wrought in the business landscape?  McKinsey’s article went on to chronicle 10 key changes in the global competitive topography that are “must-be- aware-of’s” when re-engaging in strategic planning for the recovery in 2009 and beyond.  In July’s issue of Harvard Business Review, one answer is to bring on an executive with what Ron Heifetz and Marty Linsky call “adaptive leadership” ability-

The current economic crisis is not just another rough spell. Today’s mix of urgency, high stakes, and uncertainty will continue even after the recession ends….

Instead of hunkering down and relying on their familiar expertise to deal with the sustained crisis, people in positions of authority-whether they are CEOs or managers heading up a company initiative-must practice what the authors call adaptive leadership. They must, of course, tackle the underlying causes of the crisis, but they must also simultaneously make the changes that will allow their organizations to thrive in turbulent environments.

Adaptive leadership is an improvisational and experimental art, requiring some new practices.

[http://hbr.harvardbusiness.org/2009/07/leadership-in-a-permanent-crisis/ar/1 ]

The adaptive leader has a greater agility than other leadership types. The adaptive-leader type also allows for optimal breakthrough performance coming out of a down cycle.  Generic adaptive leadership is not enough, however.  You still need to figure out where you topgrade your executive team to best capitalize on the upside afforded in an executive change.  Do you seek this new “adaptive leader” for marketing, strategy, operations, sales? General management of one business unit that’s high growth versus another that’s slower growth but lower risk? Or is it in new product development, R&D, or international/global specialization?  At the risk of overplaying a metaphor, coming back to basketball for a moment, it’s interesting to note that each successful professional team has often been built around one “superstar” player, but not always playing the same position.   There are 3 traditional positions in basketball-guard (2), forwards (2), and a center.  Magic Johnson was a guard (point guard to be specific) and he took the Lakers to several championships.  A current L.A. Lakers superstar, Koby Bryant, as well as the Boston Celtics Paul Pierce are also guards.  However, Larry Bird and Julius “Dr. J” Irving were forwards.  And not to leave out the third successful superstar permutation, Shaquille O’Neal, Wilt Chamberlain, Kareem Abdul-Jabbar, and Patrick Ewing were all “superstar” centers who repeatedly drove their teams to pennant victories.

Once you identify where the biggest impact can be made via topgrading your current executive team, and you pre-select for a leader with proven adaptive leadership skills and experience, the final question presents itself-where are adaptive leaders most frequently bred?  Where should you look for them, what ecosystem have they been building there leadership toolbox within?

Our experience indicates that a disproportionate  number of adaptive leaders come from professional backgrounds they’ve honed in two specific stages of the company lifecycle-

At our firm, where we specialize in recruiting adaptive leaders, we’ve broadly referred to the executives who are best equipped at leading the green-highlighted columns above of emerging and growth-stage as “Builder-Leaders.” However, whether we refer to them as “builder-leaders” or “adaptive leaders,” their experiences creating and growing companies in these stages are the foundational criteria for success for those companies looking to outpace their competitors as we come out of a down cycle and head into the next growth phase.

The winning formula for extra-ordinary company performance in this next economic expansion is a combination of good internal executive assessment as to which role(s) will give you the biggest step-function impact if you topgrade them, and a key attribute of “adaptive leadership” in the new executive you bring. This is the very same leadership characteristic Malcolm Gladwell’s Vivek Ranadivé demonstrated when he was coaching his daughter’s basketball team to compete and win against the rest of their basketball league.

Below is the final tally on top metrics for measuring executive success in the C-level and VP level team CEOs bring on board to help them executive on their businesses.  Thanks to the CEO input of more than 60 poll responses to this latest venture-backed company CEO survey.

The question we framed was phrased as follows:

“In evaluating the success of an executive hire after 12 months, what would be the top 3 criteria that you would use?”

The first choice from the poll results is somewhat self-evident– that the executive has exceeded performance expectations (goals, milestones, objectives, etc.) for the specific role from the CEO’s perspective.

However, the second most popular metric was “established internal and external reputation as functional expert.”   Essentially, this means that the executive has built his or her own political/social capital with internal peers and external influencers, customers, vendors, or other external relationships key to the success of the company.

The third most important metric was “culture fit.”   This was selected over the other 4 remaining metrics offered by a more than 2 -to-1 margin.

The question that pops up is how a CEO might best measure the  #2 and #3 metrics.  For both of these metrics perhaps a 360-degree review at the end of 12 months would be beneficial.  There are tools offered by the likes of the Hay Group and others that do an online version of this contextual employee review that can be quite useful to determine an objective read (see http://www.haygroup.com/tl/Questionnaires_Workbooks/Emotional_Competency_Inventory.aspx ).

Perhaps it would also be interesting if an executive search firm who brought a candidate to an organization also made this part of their fee structure.  And facilitated the process/offered the tools to make it happen.  Food for thought.  The goal of the executive recruiter would be to serve as that often mythical “trusted adviser” of executive talent, facilitating as much objectivity around executive team-building and talent assessment as possible.

Worthy of note is the fact that “integrity” ranked near the bottom of the list of success criteria.  No doubt CEOs assume perhaps that this is a given in any candidate.

We get hired to build early-stage executive teams by our clients every day. So we’ve seen our fair share of “team-building,” and much of what follows is likely intuitive to many.  It is a combination of our experience and the collective wisdom of more than two dozen early-stage venture capitalists in the North East who we asked the question, “What does a ‘bankable executive team’ mean to you?”

Consider these criteria common denominators, or universal norms for investability. They are by no means exhaustive or complete, as each investor has his or her own individual criteria he or she leverages in selecting portfolio companies.

First, some qualifiers.

¨      Different stages require bankable teams with different profiles: angel versus early stage versus later stage mezzanine/pre-IPO.

¨      Different value kernels drive greater emphasis on one part of the executive team or another.  For a deep science company in biotech, the chief scientist is going to carry greater scrutiny by investors.  This also holds true for a software or hardware company where the technology leader will carry a greater weight.

¨      Investors tend to look at where the risks lie-technology risk or market risk for example.  Something referred to as “execution risk” is all about the team being able to execute on the plan.

¨      Almost all VCs want to see a strong core team consisting of a serially successful CEO, a chief technologist with domain expertise in the area of the company’s product focus, and a veteran sales leader with a relevant rolodex and experience building a team that can score early customer wins.

¨      A strong board of directors, advisors, or scientific advisory board can help immeasurably, although won’t make up for significant lack of experience among the rest of the team.

However, the above is like describing human anatomy as two arms and legs, a head and a torso.  To drill down to more specific details, the grid below outlines the bankable team by function, team, and other characteristics.

The overwhelming preference by investors regarding “bankability” is an “experienced team.”  The majority of VCs we talked to cited their number one concern as experience; those deals that get a ‘hard look’ have this fact in common.  When asked what percentage of all business plans they receive have requisite experience on the team however, the number is well under half.   And we all know that deals get done with first-time teams, even in this difficult financing environment.

Some of the other characteristics-when combined in the right amount and order-that are considered important criteria when an investor looks at financing a start-up team are listed below.

One VC actually tried to capture the essence of a bankable team with a mnemonic-FIRVOC: More…

The last time I saw some confusion around why an executive was making a change in industry was back in 1997 to 2000.  This was the dawn of the “internet age.”   Executives were leaving traditional industries like financial services, management consulting, retail, and even manufacturing, because there was a new thing called the Internet that was going to “change the world.”  In the earliest of those  years of 1996 and 1997, there were the early adopters.  These executives were truly missionary.  Money hadn’t been made yet in the Internet sector, and trails hadn’t been blazed.  Those early pioneers had caught a glimmer of a powerful disruptive technology, and were keen on experimenting with it, with the aim of changing the world as we know it, and how things get done.

There are some industries that have always been missionary, and have attracted a consistent flow of executive talent toward them.  The education industry attracts innovators who want to find a better way to sculpt and expand the minds of our children and young adults.  The  medical devices industry wants to help innovate tools and components that will allow us to repair our bodies, or extend their useful life.  The biotech industry wants to find new ways to pinpoint the reasons and sources of disease and develop novel ways to cure them, whether seeking the cure for cancer, cure for Alzheimer’s, or other terrible human disorders.  Cleantech is likely the newest addition here.

The reasons executives decide to change industries are many.  One popular reason is “I’ve done well, now I’d like to do good.”  You see this often in the investment banking industry, where wealth can be made, but “doing good” is rarely part of the equation.  Therefore, frequently these and other similar executives achieve doing well and doing good in a “serial” fashion, when Maslow’s hierarchy of needs kicks in (http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs ).

Back to our comparison of the Internet craze and today, and how this impacts why executives decide to change industries, during the Internet craze, we were in an economic upswing.  Yet, it wasn’t such a stark contrast as we see today in our current state of economic adversity.  Then, in the late ’90s, there was a much smaller difference between an ability to earn a good living versus create an insane “wealth creation event” via a dot-com IPO in less than 2 year’s work.  It’s wasn’t perceived as binary, “if I’m not in Internet, I’m at risk of being unemployed.”  In today’s market, this is often the reality.  Is the motivation, drive, or reason to look at the cleantech industry altruism, or self-interest in the executive’s value system?  Or, is it possible and desirable to have “enlightened self interest” in a leader who is changing from one industry into one more in vogue like cleantech?  One where the sheer proliferation of terms to alternately describe the industry is an indicator of its popularity–  greentech, renewables, sustainable energy, and other popular terms used interchangeably today.

Now, the vast majority of both growth-stage and mature-stage industry sectors are suffering.  As a result, it pushes our challenge as executive recruiters-or for anyone who’s assessing talent to add to their teams-to determine how much missionary versus mercenary is driving an executive’s decision to make a change.

This teeter-totter of altruism versus self-interest John Doerr popularized in the late 1990s as a Partner at well-known venture capital firm Kleiner Perkins.  For a good snippet from Doerr’s thinking, go to blog post http://constructiveventures.wordpress.com/2008/04/27/mercenaries-vs-missionaries-the-next-wave-of-entrepreneurs/ .  For a deeper dive, you can see Wharton article, http://knowledge.wharton.upenn.edu/article.cfm?articleid=170 .

Today’s executive assessment challenge is to first determine what the mix of mercenary (M1) and missionary (M2) is in the executive’s motivation to change career focus from their current industry to cleantech.  We need to make sure that there is a healthy enough balance, 5X% missionary, 4X% mercenary, and then make sure that this DNA matches that of the existing executive team to maximize the probability the executive will stay through good times and bad.

A derivative question arises at this point-Is it best to mix M1s and M2s together in a team, or select for homogeneity?  If you had a subset of executive team members who were missionary, and another faction who was mercenary, the cohesion of the entire team is likely doomed.  Offsetting too missionary a culture by counter-balancing with a few mercenaries is not a recipe for success.  Rather, there should be a balance within each individual.

The risk of missed assessment?  A fair-weather executive.  Someone who-when the going gets tough, or when a more lucrative, safer, or easier role pops up on the radar-will fledge the existing nest for what they perceive as a more attractive roost. What the next more attractive sandbox will be is hotly debated.  However, in this economy, other than government and eHealth/healthcare IT, cleantech is the new land of opportunity, and it will attract both missionary and mercenary entrepreneurs.   If you agree with any of the above, the challenge is to figure out how to tell them apart.

Footnote to assessing “motivation“: In assessing this decision to make a change, there is sometimes confusion around the use of the word “motivation.”  At times, executives are assessed for their “motivation,” which is referring to drive, not motive for seeking a new role.

How are retained executive search firms assessed?  And how should they be measured?

This is a funny question. And one that can be asked at two inflection points in the search process–

• BEFORE picking a search firm

•    And AFTER a search has been executed/completed

Focusing on the “before” part for now, for most companies the 3 most popular decision factors used to help pick a winner in the “shoot-out” or “bake-off” process today are typically:

• “Relevant Rolodex” or domain expertise. Has a search firm done a similar search in a similar sector recently?

•    Familiarity. Has a search firm worked with a client before?  The implicit assumption is “devil you know is better than the one you don’t.”
•    Price.  Depending upon economic conditions, search firms are as often as not considered “about the same,” and only price is the perceived differentiator.

However, I think there should be a shift in search firm selection criteria.

Let me digress for a moment and talk about the traditional value proposition of retained executive search.  Historically, there have been 4 pieces of value that the search firm delivers on:

1)    Finding or “hunting” the candidate.  In the industry, we refer to it as “candidate identification.”
2)    Selling the client opportunity to the “hunted” candidate
3)    Assessing the candidate for hard skills and soft skills “fit” for the search
4)    Closing the final candidate once s/he has been selected by the client company-the end game, including compensation negotiation etc.

Now, back to how search firms are selected.  The above criteria emphasize and value things like candidate identification.   At one point, this was a very important selection criterion to make sure the right search firm was picked for a search.  At one point in the history of executive search, headhunters would spend decades amassing a proprietary Rolodex, mapping the industry and what talent was harbored where.  This was hard-to-come-by information, usually only amassed via “gumshoe” work, calling and talking to the industry on a constant basis.  However, in the last 10 years, and 5 in particular, there has been a huge shift at the executive levels.  There has evolved a set of technology tools that has allowed unprecedented transparency into who is where at any given point, tech tools like ZoomInfo and LinkedIn to name just a few.  So, with access to these tools and the modicum level of investigative interest and time, finding as a value proposition for executive search selection has become commoditized.  The “black book” that recruiters worked hard to build and protect has effectively been published on the Internet for each and every executive level in virtually every industry.

So if “finding” is no longer the lynchpin for search firm selection, what does that leave? There are still the other three values a search firm brings-ability to sell the opportunity, assess the candidate, and ultimately procure the candidate of choice the company selects via the final interview processes and endgame negotiating.

It would be really interesting to see a search firm selection process be shifted to an evaluation of two of these three areas, plus an addition of three new metrics:

• #1: How does a search firm “sell” the search to prospective candidates? What is the search firm’s “pitch,” how well does the executive recruiter present the opportunity, its nuances, and a compelling story. Good talent is usually not looking to move. And good talent is usually fairly happy where they are, and valued where they are. So, a good headhunter needs to present an even more compelling reason to persuade an executive to look at a new opportunity. A prospective client could ask the search firm for the marketing documents the executive recruiter has written and used from past searches and evaluate them as to their compelling nature. A client could even ask for samples of emails or voicemail “pitches” that have been used in the past, and what tools a search firm uses that uniquely differentiate a company’s executive need.
• #2: How does a search firm “assess” candidates? We feel that assessment is the new “black book” value proposition of executive search. Prospective client companies could ask search firms for how they assess candidates? What tools do they use, what key success factors does the search firm interview for in all executives, and what unique success characteristics would they interview for specific to a given position and company profile. What assessment information is passed along to the company? What does a candidate interview summary “write up” look like? And how much assessment is really delivered in the write-up, versus a simple repackaging of resume and background information? Also, how are references done, and samples of references completed to get a sense for what the search firm is looking for in its referencing process. A really interesting article written about how search firms work, and in particular, how search firms assess candidates, can be found in the PhD research of Monica Hamori, PhD candidate at Wharton. It’s a very interesting read — http://www.allbusiness.com/specialty-businesses/332669-1.html. Unfortunately, Ms. Hamori’s conclusion is that candidate assessment is done very differently from search firm to search firm. Most notably, she identified that candidate assessment is done differently from partner to partner inside large search firms, with no assessment standards or processes.

As for the three new search firm selection criteria, I’d suggest clients add these three to the two above:
•    #3: Pre-search “discovery” process.  What does the search firm do to uncover all there is to know about the company, the culture, the position, the internal and exogenous factors, and most importantly, the chemistry success equation with the hiring authority within the company to whom the position with report.

• #4: Post-search onboarding and “stick rate.” What does the search firm do to ensure success of the candidate in their new role? And what is a search firm’s “stick rate,” or success rate in placing executives in new companies who then stayed for some period of time rather than bouncing off, suffering organ rejection from the host organism company who hired them? This could even include a redistribution of the executive search fee structure. Wouldn’t it be far better alignment between client company and search firm if both were incented to nurture a new executive’s success in the role? Perhaps a deferment of part of the fee for service if onboarding coaching were employed, with a delayed “final payment” at the end of a year of service, on actual bonus paid “above targeted compensation,” rewarding the search firm for above expected performance achieved by that executive.
• #5: References. Client companies should do a better job referencing the search firm. So much can be learned from how a search firm performs references. Who they check references with, how references are performed, what questions are asked, are references aggregated or attributed to specific reference givers, or? How many references are performed? Are any references performed with those who were not provided by the candidate? Are background and credentials checks performed on the finalist candidate(s)?
  Somehow, if these 5 selection criteria were used to evaluate potential search firms, my hunch is, as often as not, a different firm would be selected. And a better ultimate executive candidate for the retained search in question.