Searching for Success: Re-imagining Senior Recruitment

This note explores the ongoing problem of ensuring predictability of successful and happy landings for new hires and how the search and selection process can change to support it better. We are proud to be pioneering new ways of engaging with our clients to ensure we provide a bespoke, market-leading offer to secure and embed the best talent for you that we can.

Regretted Turnover

The trend of C-suite tenures remains downward since the pandemic and this is a global phenomenon. The median tenure of CEOs at S&P 500 companies has been on the decline, falling from six years in 2013 to 4.8 years in 2022, a 20% decrease over the period according to executive consultancy Equilar. Latest data from the UK suggests that over 2023, the amount of FTSE350 CEOs leaving their posts has risen by over half compared to 2021.  It is hard to think of a more challenging backdrop yet the numbers suggest the ability to retain leaders and their teams over the lifetime of a strategic plan has diminished to historical lows.

In addition to the cost of rehiring beyond direct recruitment, less visible costs can include poor cultures, absenteeism, presenteeism and higher employee turnover. There are also significant onboarding costs for a senior executive - think of the time spent interviewing, managing internal communication, briefing meetings to get the new hire up-to-speed, flying them around the world and so on. And it would not be unusual for a new executive to spend the first couple of months acclimatising to the new role.

The domino effects of a departure can be multiple too - others following them out and sometimes they recruit former colleagues as trusted allies in their new organisations, or see an executive’s departure as a reason to question their own career. External partnerships and alliances are often crucially dependent on senior relationships and whether with investors, clients, delivery partners or suppliers, these relationships are often more binding than legal partnership agreements. So a senior departure brings significant disruption that may be hard to quantify but is also very real.

This all represents a big cost when you add it up. Some research we saw recently suggested value destruction in S&P companies due to poor hiring and integration could be in excess of $112bn over a single year.

More than ever, the clarion call remains for connected, high quality leadership teams operating as fellowships of complimentary talent but comes at a time when investing in the formation and development of them is getting harder to justify financially. Yet in such a tough environment the risks and consequences of making poor succession or recruitment decisions rise further. So the question becomes: what should we be measuring to predict hiring success, how and why?

Integrating assessment into the search process from the beginning

Assessment is mostly used at the short list stage of a process, which stands to reason as it is most cost effective to go deeper only on those candidates you are taking forward. However, when search and assessment professionals work together on client briefs and have a shared understanding of the hiring company’s goals, hiring context, recent history and the landscape the candidate will encounter on joining, a far richer picture will emerge which will help the search firm identify good candidates in terms of both eligibility and suitability.

The importance of getting it right

Many search firms have built internal assessment capability over the past decade but the two departments seem to be separate, almost with a Chinese wall philosophy, to head off any claims that the commercial ambitions of search unduly bias assessment.

Assessment also still relies heavily on self-reporting tools, which can suffer from a lack of candidate self-awareness and interpretation bias. Meta studies tend to give psychometric tools around a 30% predictive value, which is not much when you’re trying to mitigate the risks of getting it wrong.

Some search firms are trying to find more predictive, business-based tools and others use deep-dive competency interviewing or “top grading”. Some prefer the use of archetypes (what does a great CEO/CFO/CMO look like) and others believe in a strengths-based approach (if you can surface individual talent sets and gain collective awareness of how they play together, everyone wins).

Whilst each of these has merit, we believe there is more we can do to make the hiring process more certain and help our clients hire the best people they can. After all, switching out is always disruptive and very expensive as we have seen. What follows are some thoughts on where else to look to improve the search process and get the right people in the right seats from day one.

Be tool agnostic

Large search firms have invested considerable time and effort into developing in-house tools to assess executives, so naturally they will wish to push these as superior to others. Third party test publishers will equally argue that their tools are more predictive, despite research to the contrary – they’re all pretty much the same at around 30%.

So an argument between tools doesn’t help predictability. Triangulating data from more than one tool and examining how the data sets interact can improve predictability. Any tools used, if more than one, should be easy to use and administer, quick, minimally invasive and ask different questions of the candidate and client.

Combining data and wisdom

We believe most gains are found through embedding a more joined up process. We interpret the data through the context of candidate experience and how they have navigated challenges in their lives to date. We will always use the tool that is best suited to the hiring client’s needs or one they are familiar with to ease understanding. We also understand instinctively that it is in the candidate interaction, where we combine data with the wisdom of experienced assessment and search professionals, that a truer picture will emerge as the data helps us to formulate the right questions.

That’s why it’s so important both assessment and search are involved in the assignment from the beginning and work in tandem to help meet the client requirement. We use blended interviews that input from multiple data sources - competencies, behaviours, personalities, values and deep dive career discussions, as well as 360 reports and market mapping to make recommendations to our clients.  A summary of our approach is shown here and we will now look at these 4 steps in more detail:

1.ELIGBILITY: Can they do it?

The building block of a search is candidate identification, but that is only the beginning. We work with the hiring client to get a deeper picture of what they really want at the first briefing call. We may offer to interview key stakeholders to get a razor-sharp focus on the experiences and capabilities required to do the job well, learning from past mistakes as well as imagining together what might be needed over the next 5 or even 10 years.

We can measure also offer a comprehensive cognitive assessment as a first filter for key C-suite hires, especially when the company is at a point of inflection, such as post-merger, under new ownership or branching out into different geographies or markets. We specifically measure a candidate’s capacity for complexity and whether it’s right for the role. If someone is too operationally-oriented in the context of growth or reinvention, for example, they will defer too much to committee decisions and slow down. Likewise, a strategically-oriented individual might get bored by a role that is execution focused (say within a 3-5 year PE context) and look elsewhere. We benchmark the role’s cognitive requirements with the client and then find people whose thinking naturally aligns.  The question we strive to answer here is where they will do their best work. This is done using an AI-driven computer simulation that measures thousands of mouse movements as they respond to an unfamiliar challenge presented to them. Unlike conventional self-report tests, this cannot be gamed and is highly revealing with validated predictability of 80-90%.

2.SUITABILITY: How will they do it?

Imagine bricks in a wall. Assessment has tended to focus on how shiny an individual brick is on the assumption that if you get a wall of shiny bricks, you have a wall. But if you don't pay attention to the bond or the mortar between the bricks, you have a weak wall that gets knocked over quickly. Once we have established eligibility we look at the attributes of individual bricks but also how they will bond together with other bricks to create strength. Tools and processes have emerged in recent years that co-opt the hiring client more deeply into the hiring process, whether through the creation of behavioural benchmarks (what will it take for excellence in this role right now) or tools reporting on the qualities, values, competencies and behaviours of the receiving team or key stakeholders the candidate will work with.

But going beyond surface-level characteristics to the underlying constructs of a candidate that determine suitability is hard. Our own biases can be difficult to spot. “I had a good feeling about her” does not mean she’s the best candidate. Getting to the foundations helps our clients understand the candidates they interview and how well they will bond with the team they will be running or part of.

A team made up exclusively of creative people may lack pragmatism and a methodical team may lack flexibility in generating ideas. Depending on goals and objectives, a diverse group may do better than one with high similarity in one trait. Knowing when diversity or fit is more important is a key part of hiring especially at the executive level. Data can help surface and visualise individual variability within a team and help make effective hiring decisions.

Suitability matters as much as eligibility

Competencies are the knowledge, skills and abilities required to perform a job successfully. Usually, there are a few core competencies that differentiate top performers. Systematically defining a job's critical competencies and evaluating candidates' competencies is the most objective way to shortlist candidates. Doing so brings clarity to the early stages of the hiring process, where the potential for ambiguity and bias is highest. In most cases it is useful to have a diverse range of competencies within a team, so it’s important to understand how a candidate’s competencies will interact with others to ensure all bases will be covered.

Secondly, using personality frameworks it is possible to get a clear, unbiased overview of an individual's traits and preferences without subjective judgements. Using objective methods to understand people results in accurate team-fit analyses. This, in turn, makes it easier to make lasting hiring decisions. Then there can be a more nuanced exploration of what levels of fit and diversity will be helpful to team dynamics.

Finally, values could be described as enduring dispositions and relate to goals and ideals that transcend specific actions and situations. Despite being universal, the degree to which individuals care about each value varies forming a unique hierarchical value system.

According to research, value-fit has been found to strengthen organisational culture, improve engagement, and help with employee retention. Schwartz defines values as the standards for judging behaviour both in ourselves and others and in a professional setting, they relate to the enduring goals and motivations of an individual. These value constructs have been supported across 80 countries since their publication in 1987. These are the hardest thing to access at interview so using tools that help measure people’s value systems and the degree to which they align with others in the team they will work with will increase the predictability of the hiring process. Again, this requires nuanced discussion and analysis looking at the whole team shape – compared to competency mapping where diversity is generally a good thing, in the case of values alignment is the goal.  

Hire a bunch of A-players and hope for the best?  

From our years of advising firms in this area, we have found too many rely almost exclusively on top-grading senior talent with A players and aligning their monetary incentives with that of the general partner or shareholders. Their belief is that those should be enough to push the strategy forward. Unfortunately, they often do not. In the worst cases, they result in a new top management team that isn’t fully aligned on the growth strategy, that operates in silos, and thus doesn’t work productively enough to solve cross-functional challenges.

These are often the sources of the greatest opportunities to accelerate economic value. The new team of A players work diligently in their silos, however they don’t work together strongly enough on opportunities to increase demand and create efficient supply that requires truly unified efforts. Therefore, although there is plenty of activity there is little actual progress toward value creation. This in turn can amplify conflicts and dysfunctions that slow down or derail the growth strategy.

We believe the key leadership team challenge for today’s companies is no longer just about hiring new talent at the top and giving them strong financial incentives to execute a strategy. That will always be crucial. With today’s demands for more aggressive growth strategies to generate sufficient returns, they need something more. PE firms also needs to “get” the leadership of the companies they buy – both new and existing management teams – to understand the growth strategy deeply, support it wholeheartedly and work effectively to refine it if necessary and execute with passion and excellence.

But creating such a great top team requires not just a growth strategy for the business, it also demands a strategy to align and engage its people. We refer to this as a human capital strategy. To greatly increase the odds of getting the returns they expect, PE firms and companies must devise human capital strategies at the onset of their acquisitions.

3.CREDIBILITY: Will they do it?

The art of getting search right is integrating all the data sets we obtain from both candidates and hiring client and calibrate them to surface a recommendation. At interview, our search and assessment professionals will derive the most incisive questions that will determine likely fit.

The question we are really asking is around credibility – do we believe them? Is how they respond to speak and act in the room congruent with what we have learned about them? If the data suggests the role requires poise under pressure when reporting to a PE Board, for example, and other data suggests they can and have done it successfully, do we feel they are demonstrating that in the room? We may throw a curve-ball at them to see how they think on their feet. We may ask them to give a concise mini-presentation on something and assess how cope with the unfamiliar.

We then use weighted scorecards to blend all data sets and information to make decision-making less objective. Remember, having a good feeling about someone is an important signal but it has to be backed up with hard data. The results will rank candidates with weighted scores across all dimensions and can be used to inform, not dictate, recommendations and discussions regarding final selection with clients.    

4.INTEGRABILITY: How will they land?

The journey doesn’t stop once the hire is made.

How someone lands can affect the success of a hiring decision as much as the work done to get to that point. Remember the candidate is a brick in the wall but it needs good mortar around it for the wall to be strong.  

We offer structured integration coaching for all successful candidates for the first 6 to 12 months of their new roles, focusing on identifying key strategic relationships, stakeholder mapping, mentoring and executive coaching. 

We can also work developing the receiving team in a number of ways. Increasingly we use AI-based tools to map connectivity within their organisations to understand relationship capital, another hugely important predictor of success.  Like an MRI of an organisation, the data can reveal the extent to which departments, teams, functions or geographies are siloed, how quickly information passes through the system, who are the influencers, blockers and real change agents owners must become aware of to push through new initiatives and projects.

Our assessment and development methodologies have also successfully assessed and developed thousands of leaders across varied organisations in a developmental, strengths-focused way. This allows organisations to adopt a common framework for understanding who they’ve got, how good they are and how to make them even better.

Without the data, it is hard to help leaders become the leaders that are needed now. It short-cuts the time to discovery and accurately pinpoints selection criteria as well as development areas that are strategically critical. Not every leader needs to be a visionary or operational ninja but they all need to understand their unique strengths and where they can harness the complementary talent sets of others. All we do is designed to make that happen as quickly, transparently, accurately and outcome-focused as possible.

The world might feel in some ways like it’s spinning out of control, but leaders have faced similar levels of volatility before - it’s just that the time to success/failure is much shorter. Leadership excellence remains a strategic imperative and without reliable data and methodologies, the consequences of getting it wrong are felt almost instantly.