Getting Even Smarter About Hiring CEOs and CFOs

  • Whether some or all of the information they currently collect about CEO/CFO candidates in fact statistically predicts their performance outcomes.
  • How the firms can make their hiring processes more efficient and more accurate in predicting success.
  • The hiring process predicted success vs. failure of the hired candidates; that is, people who did better in the process in fact did better on the job, and
  • Hired candidates were more highly rated/scored in the process; that is, hired candidates tended to do better in the process than candidates who were not hired.

WHAT CAN YOU DO IF YOU ARE NOT SURE YOUR HIRING PROCESS WORKS VERY WELL

You can choose from at least three strategies. You can:

Duplicate the Research with your Own Data

Duplicating the research with your own data is possible if you have adequate data, and not too expensive if the data is accessible and complete. The data used is all the information you have on a set of candidates — scores, interview ratings, and other evaluations, plus the performance ratings of the CEOs and CFOs you ultimately hired. The research involves standard statistical analysis steps — such as getting the data in one place, cleaning the data, coding the data into discrete categories where required, and then running and interpreting the statistical results.

Take “No Regrets” Actions to Improve your Process

In the absence of data, you can still do some “good practices” that might be useful and that have minimal costs. These include:

  • Understand, specifically for your firm, the competencies required of portfolio executives and how the operating and deal team can recognise, in an interview or assessment situation, that a manager either has or does not have the competency. In this process
  • Focus on the competencies that you believes are most critical to success
  • Use “behavioral anchors” (descriptions of the behaviors that demonstrate a competency) to consistently measure the competencies.
  • Train interviewers in the firm to correctly execute the interview process so they efficiently get at what you are looking to understand
  • Calibrate across interviewers to ensure that competencies are rated consistently across interviewers
  • Consider using some kind of test (e.g., of cognitive ability) to screen out candidates before you spend too much time or money evaluating them. For example, if you do not want to hire a CEO who isn’t smart no matter how good they are on other dimensions, then give candidates a quick cognitive ability test upfront and you’ll probably eliminate quite a few.

Add the Right Kind of “Statistically Valid” Methods

You might want to add statistically valid measures, properly defined. There are many methods that describe themselves as “statistically valid”, but that term is used ambiguously.

About the Author

Leslie S. Pratch

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Leslie S. Pratch

Leslie S. Pratch

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President and CEO of Pratch & Company, Leslie Pratch draws on 20 years of experience advising private equity investors and executives.