Hiring for Success

Getting the right people on management teams is a high priority and significant challenge for CEOs. Research suggests a hiring failure rate of close to 50% (1) with the cost of hiring mistakes adding up to 15 times (2) an employee's annual compensation. Even if your track record is better than this average, every CEO has felt the pain and disappointment of hiring the wrong person.

ghSMART, a consulting firm focused on executive assessment, explores common reasons for hiring mistakes and offers practical advice and tools for CEOs to increase their success rate in hiring the best individuals for the role. In their recent New York Times bestseller Who: A Method for Hiring (3) based on 10,000+ executive assessments for hundreds of CEOs and investors, ghSMART offers four key pillars to successful hiring: Scorecard; Source; Select; and Sell, two of which we explore here. Scorecard and Select are the two areas in which many companies rely too often on gut feel or outdated processes. Yet these areas can fuel the largest improvement in their success rate.

THE SCORECARD: KNOW WHAT SUCCESS LOOKS LIKE

The first step to hiring the right person is to clearly define what an A Player looks like for this specific role at your company - BEFORE you launch the search. As Nick Chabraja, CEO of General Dynamics puts it: "Success comes from having the right person in the right job at the right time with the right skill set for the business problem that exists" (3). The scorecard goes far beyond a typical job spec by clearly laying out the definition of success for a specific role. It consists of the following three components:

1) Mission: Clearly articulate the core of what the role is and how it addresses a business problem. For example: Drive the Animal Health business back to #1 market share within 2 years through new product launches and strategic alliances.

2) Business Outcomes: Define five to seven measurable business results expected from the role in order to achieve the mission. An example Business Outcome for the mission above: Grow net sales to €1B for FYE 2009 and €1.3B for FYE 2010 through market share capture and new product launches. When defined well, Business Outcomes are SMART: Specific, Measurable, Achievable, Relevant, and Timebound.

3) Competencies: Skills, aptitudes, and behaviors required to deliver the Business Outcomes in a way that fits the needs of this role and company culture. Key categories of competencies often include: leadership (e.g., holding people accountable); personal (e.g., integrity); intellectual (e.g., strategic mindset); motivational (e.g., achievement orientation); interpersonal (e.g., influencing); technical functional (e.g., product development). Whereas Mission and Business Outcomes are always designed specifically for a given role, competencies will often apply across many roles at a company with a few targeted adjustments.

The scorecard is designed by the hiring manager (e.g., CEO for a CEO direct report role) with input from key stakeholders. Once created, this is used in every step of the interview process to score and prioritize candidates. Once a candidate is hired, the scorecard can be used for onboarding and ongoing performance management. While it takes some time and effort to learn how to create robust scorecards, you are guaranteed a high ROI on your investment.

SELECT: RELY ON DATA RATHER THAN GUT FEEL

How many times have you brought in a new hire only to find out that this person interviews much better than he/she performs in a job? Even successful CEOs, who are rational and fact based when making decisions in other aspects of business, fall into the trap of following "gut feel" when assessing candidates, which often leads to choosing a candidate who "sells" well or who reminds them of themselves in some way.

The following four techniques will enable you to get reliable data for your selection decision.

• Past performance: Many interviewers ask hypothetical questions. Unfortunately psychology and marketing research proves that people are very poor predictors of their own behavior, especially when they are intentionally "selling" a potential employer on the fact that they are the right candidate for the role. Instead, specific data on actual behaviors and performance in the past is a reliable indicator of future behavior. Focus 90% of your interview on past performance in jobs/situations relevant to the role at hand to get reliable data.

• Relevant to the scorecard: To be efficient in gathering data most relevant for your selection decision, focus on past experiences relevant to the scorecard.

• Open-ended questions: The best interview questions are simple open-ended questions that start with: what, when, how, tell me more. The power of these questions is that they invite the candidate to share what they actually did - without revealing "the right answer" you expect. Most interviewers ask many leading or yes/no questions that don't reveal high quality data nearly as well as open-ended questions do.

• Weaknesses: To accurately assess a candidate you want to understand both what made them successful and where they have failed and why. However, candidates dread questions about their weaknesses and prepare for them, and most interviewers are uncomfortable asking about mistakes/weaknesses. Spend equal time in an interview understanding a candidate's mistakes /weaknesses as you do understanding their strengths.

Whether you are launching a new search or are already deep in the process, make sure you create an action list for a successful hire and that you stick with it until making the final decision. Remember that while emotional or "gut feel" assessments may have landed a few strong hires for you in the past, a more vigilant and analytical approach will greatly increase the overall success rate. And lastly, any selection process is incomplete without rigorous reference checking . If you have any questions or would like more information, please contact your GA team.

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1. Research includes Peter Drucker and Corporate Executive Board

2. Estimates based on research by ghSMART www.ghsmart.com

3. Who: The A Method For Hiring, by Geoff Smart, CEO and founder of ghSMART and Randall Street, President of ghSMART Executive Learning

"[Great leaders] first got the right people on the bus, the wrong people off the bus, and the right people in the right seats. And then they figured out where to drive it."

- Jim Collins: From Good to Great