Focus on the individual
Choosing the right person for the job can save a company millions in lost revenue or litigation
Choosing the right person for a job is a formula for success. Everybody wins. The individual who is hired for the right job has begun a bright career and the company wins a motivated productive employee. It sounds simple - self-evident even - but, as author and headhunter Claudio Fernandez-Araoz said, theory is one thing and practice is quite another. He said that, in the real world, many attempts to hire talent failed simply because of the recruiter's blind spots.
He said executive talent was becoming increasingly scarce. Fast-growing emerging markets are competing for executives. Loyalty is no longer something that employers can take for granted. Executives will, rightly, go to companies that offer them the best package and career path. Globalisation means that money gravitates to the market where it can find the best return - and so does executive talent.
So why is it so hard to put a round peg in a round hole? And why do companies not take executive recruitment more seriously?
Fernandez-Araoz said most organisations were largely unaware of the huge impact of choosing the wrong person and their recruiting efforts were 'primitive' and often tainted by bad habits or practices and by bias.
A partner of executive search firm Egon Zehnder International (EZI), in his 21 years with the firm he has interviewed more than 20,000 executives worldwide. He was in Asia late last year to launch his new book Great People Decisions: Why They Matter So Much, Why They Are So Hard, and How You Can Master Them.
EZI had assessed tens of thousands of senior executives, including CEOs, vice-presidents and directors from every major industry around the world, he said.
'The results are consistently depressing. Even at companies with above-average performance and reputation, the wrong individuals are making it to the executive suite. Roughly a third of the executives we have appraised at these fine organisations are actually in the bottom half of the competence curve with respect to their peers at other firms in their industries,' Fernandez-Araoz said
He said organisations that hired or promoted mediocre executives would suffer for their executives incompetence. But companies that could make 'great people decisions' could achieve a strong competitive advantage.
He quoted a study which showed that picking the right leaders had a dramatic impact on company performance. In some cases the 'leader effect' accounted for up to 40 per cent of the variance in performance or value. In dollar value, he said that study showed the 'leader effect' could increase a medium-sized United States company's worth by US$1 billion. That is nothing to sneeze at so why do so many companies fail to put the right emphasis on human resources?
As if choosing the wrong people was not bad enough, he said 90 per cent of executives were bad at removing poor performers.
He said that some interviewers tended to disregard the specific requirements of a job and instead followed a prescribed set of questions. They used a sort of template such as 'What are your strengths and weaknesses?' and 'Where do you want to be five years from now?'
This is like ordering a pair of running shoes without trying them on or picking a microwave oven by applying the measurements used to select a DVD recorder. To pick the best person for the job, employers need to tailor questions to suit the specific position. The template approach is not an option. General or stereotyped questions like those mentioned above are usually pointless.
He said they were bad questions because they tended to make experiences abstract and theoretical - safely removed from reality and from the job requirements in question. They do not offer valuable insights into the candidate's previous working experience. The answers to questions like these came from what he described as an experiential vacuum.
'You need to evaluate a candidate on his or her own terms, in light of their context,' he said. That said, it was a shame to see so many employers asking 'risk-free' questions that would not get the employer into trouble but would also not offer any insights about the person in whom they planned to invest a sizeable salary and company resources.
Working in a company that makes frozen food requires different skills from those needed in a company that makes 500-seat aircraft. Employers have to drill down deep in an interview with specific, targeted questions or they will not learn anything useful about the candidates.
People often take more trouble and time, and ask harder questions when they are spending a couple of thousand dollars on buying shares than they do when they are hiring an executive whose remuneration could run into hundreds of thousands of dollars. A bad executive decision could cost a company millions in lost revenue or litigation. More companies are recognising that hiring decisions cannot all be pushed up to the top and they are empowering managers to build great teams to find and hire great talent.
Fernandez-Araoz said the fastest-growing companies were in biotech, life sciences, software, professional services and entertainment. The biggest assets in these companies were people - and picking the right talent was even more important.
This is a time of unprecedented change. Errors that would have been minor 50 years ago cannot be tolerated now. The marketplace is far more unforgiving than it was two generations ago. Picking someone who is incompetent or ill-suited to a position is not an option. Even if they do not make costly errors, their incompetence is likely to drive talented people away.
Psychological biases and emotional traps
Procrastination
Overrating capability
Snap judgments
Branding
Evaluating people in absolute terms
Seeking confirmatory information
Saving face
Sticking with the familiar
Emotional anchoring
Herding
Source: Great People Decisions: Why They Matter So Much, Why They Are So Hard, and How You Can Master Them
