What Boards of Directors Should Know

Fours steps for directors to improve the accuracy of senior-level executive assessment

As boards have come to recognize that talent is the critical differentiator on what is often an otherwise level playing field, they have paid increasing attention to the issue of senior-level executive assessment. As a result, many boards are trying to develop profiles of executive excellence, establish processes for transparent succession planning, and adopt long-term approaches to talent management. All stakeholders should welcome the commitment to long-term strategy that these developments indicate.

Unfortunately, however, the quality of senior-level executive assessment and the board's involvement in it often leave a lot to be desired. When many of the present-day members of boards were rising in their careers they weren't exposed to good structures and processes for senior-level executive assessment. So while directors may feel they are on familiar ground when, for example, they're engaged with financials, they may be unfamiliar with best practices in senior-level assessment. They may even feel a bit uncomfortable with what can seem an amorphous subject. They needn't. These five principles can help them achieve the clarity that such critical discussions deserve:

1. Adopt a behavioral, as opposed to a psychological, approach.

Senior-level assessment can have several goals: identifying rising stars, matching people to specific positions, uncovering development opportunities, or planning CEO succession. Psychological assessment purports to tell you who the executive is. We see many clients wanting to use personality tests or employ psychologists to probe the psyches of potential CEOs or senior executives. The approach seeks to gauge such things as problem-solving style, maturity, emotional intelligence, and interpersonal style. By contrast, behavioral assessment seeks to predict what the executive will actually do. Will the executive take swift and decisive action in times of crisis? Will the executive get people on board with dramatic change? Will the executive develop capability within the organization? Although the behavioral approach might include a psychological element, it has the great advantage over purely psychological approaches of being applicable to the business and its results.

2. Use leadership competencies but don't overcomplicate them.

Assessment rightly focuses on leadership competencies—the abilities that are indispensable for leading people and organizations no matter the industry. These are important because they enable one to go beyond superficial assessments of whether someone is a "strong leader." However many companies unnecessarily overcomplicate the issue by developing lists of as many as 20 or more competencies they expect in a leader. In fact, far fewer competencies cover the issues of top leadership.

Based on 25,000 assessments over a five-year period, we have identified six core leadership competencies: results orientation, strategic orientation, collaboration, team leadership, change leadership and developing organizational capability, which includes developing individuals as well as driving talent management overall.

Those six things are what business leaders do, unlike people in functional roles where competencies might be more discipline-specific. Beyond these six leadership competencies, lists can become repetitious, unnecessarily detailed, and unfocused. They're also unwieldy—board members have a hard time keeping them all in their heads and arriving at a clear picture of an individual assessment.

3. Develop a clear sense of what you're looking for.

Job specifications should be developed in terms of the strategy of the organization going forward. In a time of retrenchment or recession, for example, the role may call for someone with superior operations skills or the ability to do more with less. A growth strategy in global markets may call for someone with international experience and a demonstrated ability to work across cultures. A language of assessment that is behavioral enables you to measure an executive against the results envisioned by the strategy.

4. Develop a common language.

Clear job specifications, a manageable list of leadership competencies, and assessments couched in behavioral terms provide board members with a common language through which they can engage the issues. Tied to action and business results, this language enables them to talk in concrete terms rather than engage in psychological speculation or vague, unfocused discussions. Further, the more they use this language, the more adept they become, continually improving the quality of their participation in senior-level executive assessment.

5. Leverage third-party assessments.

In putting together rosters, top sports teams don't evaluate only their own players. Neither should companies. They should benchmark internal talent against external talent, continually assessing them against company-specific challenges and behavioral leadership competencies.

Companies that conduct assessment in a vacuum determine only who is the best they have, not the best that they can get, or what "best" looks like from a global perspective. Third-party partners who track talent and are experienced in senior-level executive assessment can bring that wider perspective. Further, third parties that are free of the biases that can inhibit discussion offer a way of surfacing issues that might otherwise go unspoken. And with a behavioral approach, third parties can bring real business discipline to the conversation.

A number of everyday maxims affirm our sense that what people do is more important than who we, or they, think they are: "Actions speak louder than words." "Walk the talk." "Lead by example." A behavioral approach to assessment reflects not only those common-sense sayings, but also the growing empirical evidence that how a person does something predicts success better than his or her qualifications or psychological traits.

In skilled hands, competency-based interviewing probes for competency-related situations and behaviors that are relevant to the job and the company. Instead of simply retracing a person's achievements, the interviewer focuses on the "how" questions that open windows into the individual's behavioral characteristics, enabling clear judgment of the candidate's ability to perform as a leader. Board members who insist on this approach will not only help improve the organization's capability in assessment but also the board's ability to oversee it.
- Directorship July 10, 2009