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Executive Assessment Should Be Mandatory

Bruce Sevy

Accountability and human error have changed the corporate landscape in recent history. The actions of Enron and Worldcom lead to a legislative shake-up, the effects of which are now really starting to hit businesses. The bottom line is very much king, and those who fall foul of investors or other stakeholders are paying a high price. Organizations are finding that their outspoken CEO could be more of a liability than an asset, and the executive board is under close scrutiny – not just from the city, but increasingly from shareholders and consumers alike.

Demands for corporate openness, accountability, responsibility and transparency are putting pressure on traditional business behavior and forcing companies to question the way they operate. To thrive in this environment new skills and behaviors are required from companies, and in particular their top-teams and leaders.

Now, more than ever, senior level appointments are perhaps the most critical decisions an organization makes. The cost of hire can be high and getting it wrong could prove disastrous. Recent research by SHL reveals that 66 per cent of businesses need to improve their leadership efficiency or risk commercial failure.

Objective assessment techniques are widely used by businesses for recruitment and ongoing assessment of employees across the board - from graduates to middle managers. But, until now, objective assessment has not had the same penetration amongst the executive management. However, in the current climate companies can no longer rely on the traditional methods of recruitment via word of mouth or the ‘old boys network’ at this level.

The recent appointment of James Murdoch as CEO of BSkyB brought psychometric assessment at the highest level under the spotlight - BSkyB had to show stakeholders that it had a credible selection process - even if some would say the end result was a foregone conclusion.

Research carried out by SHL Group* shows that HR professionals worldwide are now demanding that psychometric assessment is mandatory at the highest levels, with a staggering 68 per cent believing that CEOs should go through objective assessment as a matter of course. Interestingly, more people believe that company leaders should be tested than country leaders - 60 per cent of respondents think that their President should undergo the same level of scrutiny.

Three in five of those questioned believe that finance directors and non-exec directors should also face mandatory objective assessments. Unsurprisingly, close to 70 per cent of HR professionals believe that HR directors should undergo assessment. Sixty four per cent also think that Marketing and Sales Directors should be tested, whereas IT Directors and Operations Directors are thought to be least in need, with just over half believing that objective assessment should be compulsory for these roles.

I believe the only way to get the right person for the right job is by analysing what is required and then objectively assessing the candidates in light of that. This is not only scientific and accountable, but it reduces the kind of selection bias that companies must be seen to avoid.

Organizations need to know exactly what they need from an executive. Not just whether they have worked in similar industries or get on well with the chairman, but also if they can do the job in hand. Does your organization need a “leader” - someone who can transform a business, a more transactional CEO to maintain the status quo, or a “politician”, to satisfy large shareholders?

When should executive level assessment be used?

1. Appointment of a New Board Member

The Board’s performance is largely dependent on the capability of its members. Clear job descriptions should be written for all board members based on a thorough position analysis. This should lead to a person specification which defines the personal competencies required for the job. The definition of these competencies should take into account, for example, the required background knowledge and experience, appropriate decision-making style, fit to the board culture etc.

The process of assessing a candidate for appointment to the executive board typically requires the completion of interviews, tests and simulation exercises relevant to the person specification. Detailed reports should be written against the agreed person specification before the best-matched candidate is selected.

2. The Ongoing Appraisal of Individual Board Members

Performance reviews should focus on the behavioral performance of the individual director. It’s important to distinguish between factors which may be beyond the director’s control, and the measurable behaviour of the director against the agreed criteria.

3. The Ongoing Appraisal of the Board as a Total Entity

The appraisal of the board as a total team entity is difficult to assign to any single member of that team. On the face of it, this looks like an area of responsibility for the Chairman, but raises the question of the objective evaluation of the Chairman’s own contribution.

Truly objective reviews can only be achieved with the help of a specialist external third party, which would work closely with the Chairman in evaluating the board’s process of governance and which would have credible impartiality.

Of course, the process of assessment, evaluation and appraisal can provoke anxiety, fear and resentment. However, much depends on how it is done. If the process is relevant, fair and diplomatically handled, then participants come to value the process even where it may reflect developmental issues for themselves.

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