Why Are You Playing Russian Roulette with the Leadership and Direction of Your Company?

By Brad Federman and Andrea Burleson

You need to bring in a strong executive…a heavy hitter, but you are worried. The last time you brought someone in they did not last and created a great deal of damage before they left.

A position opened up in your company, but it will be filled by an internal promotion. Multiple people are vying for the promotion and each of them have their sponsors. How do you promote the right person?

When hiring for a senior leadership role, you must take a comprehensive look at an individual before making an informed promotion and selection decision.

What is “Leadership Assessment” and why do companies use it?

“Leadership assessment” typically describes a process designed to measure people’s problem-solving skills and personality traits as these relate to leading and managing others. While there are many types of assessment “tools” or “instruments” on the market, most purport to do something similar: Provide information based on data given by the person being assessed, that increases the accuracy of making personnel decisions such as hiring the right candidates or targeting developmental efforts to the specific needs of individuals.

What’s the difference between leadership and executive assessment?

Both leadership and executive assessments share the goal of helping companies make decisions about the hiring and development of their leaders. Leadership assessment, which is the broader term, can be used for positions ranging from first-line supervisors through senior executives.

An executive assessment is a type of leadership assessment focused on identifying and developing a company’s top executives (often referred to as “C-Suite”). An executive assessment is usually a longer process comprised of multiple steps, with input from several stakeholders. The stakeholders provide insight into leaders’ business and functional expertise, learning agility, strategic thinking, organizational fit and the ability to motivate and inspire followership and adapt, change and evolve the company.

The key differentiator between the two is that an executive assessment is specifically designed to identify strengths and potential risks (or derailers) for an organization’s top leaders where the risk of success or failure has significant consequences for a company’s future. Well-developed executive assessment seeks to provide a comprehensive picture of a person’s capabilities so as to optimize the process’ predictive power and reduce the probability of making costly mistakes.

Tools used as part of a leadership assessment.

Any robust leadership assessment process will utilize a mix of instruments or “tools” that, when taken together, form an increasingly complete picture of an individual and his/her current capabilities and future potential. When deciding which tools to utilize, the process usually begins with a careful study of the position and its success factors. Other considerations include:

The number of applicants that typically apply for the position
Cost associated with purchasing, administering, and interpreting the tools
Costs/consequences associated with hiring the wrong people (turnover, theft, security and legal violations, potential damage to the company’s income or reputation, etc.)
Legal considerations including the instruments’ compliance with hiring laws
The utility or “Return on Investment” of the process and tools used
The instruments’ perceived fairness and job relevance by applicants (face validity)
The tool’s ability to accurately predict success (validity)

Most leadership assessments are comprised of at least two or more different and, preferably, unrelated tools and/or processes. Examples provided by U.S. Office of Personnel Management’s include:

Structured interviews based on a job analysis so that questions and the scoring of people’s responses link to job relevant criteria and success factors.
Mental abilities tests that evaluate reasoning and problem-solving capabilities.
Personality tests, which provide information about a person’s motivations, preferences, interests, emotional make-up, and style of interacting with people and situations.
Integrity tests, which evaluate applicants’ tendency to be honest, trustworthy, and dependable.
Job knowledge tests, which are designed to assess technical or professional expertise in specific knowledge areas. Job knowledge tests evaluate what a person knows at the time of taking the test but not what they are capable of learning in the future.
Work Sample tests, which requires applicants to perform tasks or work activities that mirror the tasks employees perform on the job.
Multi-rater assessments in which an individual’s manager, peers, company leaders, and customers evaluate that person on behaviors linked to leadership effectiveness.
Assessment centers, which employ multiple methods and exercises to evaluate a wide range of competencies used to make a variety of employment decisions (e.g., employee selection, career development, promotion). Assessment centers can be used to assess groups of people at relatively the same time. Many assessment center exercises resemble work sample tests designed to simulate the actual challenges found on the job.

A real business case can be made for using leadership assessment as part of pre-employment testing.

The cost of a bad hire depends on the job’s scope and level. In a recent survey by Career Builder, companies lost an average of $14,900 on every bad hire they had made in the past year…and this is a common mistake. Nearly 74% of employers say they’ve hired the wrong person for a position. A white paper published by the Center for American Progress indicated that the cost of a bad hire for positions paying $75,000 per year or less is about 20% of an employee’s annual salary. The cost of a bad hire for highly complex positions that require specialized training and/or education tend to have disproportionately high turnover costs as a percentage of salary (up to 213%).

While the cost of investing in a well-designed pre-employment assessment process may seem prohibitive at first, a legal, valid hiring process enables a company to make legally defensible and valid personnel decisions that save money, time, and potentially – reputation—in the long run. That said, no assessment process is ironclad. Even when using valid measures, administered by trained professionals, with multiple data points, potentially great hires get rejected while people who don’t work out get hired. A solid pre-hire assessment process won’t eliminate decision-making errors, but it can significantly reduce them.

Other uses for leadership and executive assessments.

Development
Training
Succession Planning
On-boarding
Pre-promotion testing

Effective leadership assessments are typically comprised of a mix of tools that evaluate thinking skills, personality, and motivations so that company leaders have objective, relevant, and legally defensible data for making personnel decisions. Multi-tool assessment processes create a data-rich picture of a candidate’s abilities across success factors that were previously identified, through job analysis, as important to success on the job. When used for selection, a properly-designed leadership assessment process provides not only legal defensibility, but also enables employers to make the best possible decisions about people. An assessment process could confirm a hiring manager or hiring team’s “gut” about a person, but add depth as to why the candidate is or is not a fit. In other cases, having multiple tools can surface red flags that any one tool alone can’t fully flesh out, giving decision-makers valuable data in determining a candidate’s viability for the role and/or company. When used for development, a leadership assessment allows companies to be thoughtful about their investments in interventions such as training, education, or coaching that remediate gaps and leverage strengths so as to increase peoples’ effectiveness in current roles and support their growth into higher level roles.