great people decisions
great people decisions
Executive MBA - Class of 2016 Egon Zehnder Workshop: Pre-reading Pack
5 August 2016
Great People Decisions • Matter • Are hard • Can be mastered
© 2016 Egon Zehnder
2
The Key for Company Value
Year Effect
Industry Effect
Company value Company Effect
Leader Effect In some markets, the leader effect accounts for up to 40% of the variance in value Source: “When Does Leadership Matter?”, Wasserman, Nohria and Anand, Harvard Business School working paper no. 01-063, April 2001 © 2016 Egon Zehnder
3
The Key for Career Success! 100% 90%
People and Organisational Competencies
80% 70% 60%
Thinking Competencies
50% 40% 30% 20%
Results and Functional Competencies
10% 0%
Seniority
© 2016 Egon Zehnder
4
Hiring Gets a Failing Grade • Most companies react to hiring as emergencies • Hiring practices lack a model of best practice • Executives have widely differing views about - Desirable attributes of new hires - Whether it is best to hire insiders or outsiders - Who should be involved in the recruiting process - What assessment tools work best - What are the keys to successful hiring and retention
© 2016 Egon Zehnder
5
People decision traps 1. Overrating capability 2. Snap judgements 3. Over emphasis on branding 4. Seeking confirmatory information and buy-in 5. Saving face 6. Sticking with the familiar 7. Failure to engage all the key stakeholders 8. “He’s a good guy. I like him.” 9. “The people before me in the process have done the due diligence.”
© 2016 Egon Zehnder
6
Consultant Introduction
David Campbell Melbourne MBA with Distinction, Melbourne Business School, Australia; B. Engineering (Honours), Monash University, Australia; B. Science, Monash University, Australia. Formerly General Manager Outerwear, Pacific Brands Limited, Australia; Group General Manager Juice and Beverages, General Manager Corporate Strategy and Strategic Programs, Senior Brand Manager, National Foods Limited, Australia; Business Systems Manager, Linfox Pty Ltd, Australia; Analyst, Andersen Consulting, Australia.
© 2016 Egon Zehnder
7
Our agenda for the session 1.
Introduction
10 mins
2.
Defining the need
30 mins
3.
Finding the talent
20 mins
4..
Assessing candidates
45 mins*
5.
Integrating the executive
15 mins
6.
Synthesis
30 mins
7.
Q&A
30 mins
*Including 15 minute break
© 2016 Egon Zehnder
8
our approach to great people decisions Executive MBA - Class of 2016 Egon Zehnder Workshop
31 May 2016
In order to make Great People Decisions consistently… • Make sure that only high-caliber individuals appraise people • Train those who will frequently play assessment roles • Before making any senior hiring or promotion decision, formally review: - The way the assessments have been conducted - The evidence for each key competency • Review the assessments one or two years down the road - Useful feedback for the assessors - Helps assess your organization’s appraisal skills - Helps you select the best assessors in the future • Objectively assess your results, and be willing to undo a bad decision
© 2016 Egon Zehnder
10
Assessing candidates Performance, Readiness and Potential determine Career Trajectory Past
Present
Future
Performance
Readiness
Potential
Past Outcomes; How abilities have been applied to get results
Fit between role requirements and current state
Traits that predict development of executive ability and the speed of that development
Value Creation
Critical Skills and Experience
Curiosity
Competencies
Insight
Identity
Engagement
Culture Fit
Determination
© 2016 Egon Zehnder
11
Assessment methodologies: research findings Approach
Valid r
Multi-criteria, multi-method, multi-observer
0.68-0.73
Competency-based interviews
0.62
References not employee-named
0.57
Case studies and simulations
0.55
Ability tests
0.54
Personality tests
0.38
Unstructured interviews
0.31
Employee-named references
0.13
Graphology/astrology
0.00
Egon Zehnder Approach
Competency-based assessment is also the least biased form of assessment Anderson, Neil & Shackleton, Vivian (1993). Successful Selection Interviewing McClelland, David C. (1998). Identifying Competencies with Behavioral-Event Interviews. Psychological Science, 9, 5 Spencer, Lyle M., Jr. (2004, personal communication)
© 2016 Egon Zehnder
12
Competencies are scaled to give absolute scores of executive capability Positive and responsive behaviours
Typical average executive behaviours
Reactive
Transformational competence, highly leveraged impact, C-level and outstanding executive behaviours
Active
Proactive 7 6 5 4
3 2 1 Results Orientation
• Works
• Meets and beats goals
• Improves the way things are done
Strategic Orientation
• Aware of larger issues
• Plans and prioritises
• Creates significant strategic direction
• Goes along
• Supports teamwork
• Facilitates partnership
• Allows development
• Supports development
• Builds organisational capability
Team Leadership
• Tells
• Involves
• Empowers
Change Leadership
• Open to change
• Change agent
• Mobilises change
Market Insight
• Knows market basics
• Differentiates
• Sees the future
Inclusiveness
• Identifies differences
• Engages with other worlds
• Creates bridges
Collaboration and Influencing Building Organisational Capability
© 2016 Egon Zehnder
13
Scales reduce subjectivity and increase precision Consistency enables rigorous comparisons across people and roles
Relative Ratings
Scaled comparison
Strategic Decision Making Ratings
Strategic Decision Making Scale
Relative Role Fit
7 Exceeds
VP Strategy
6
Meets
5
Partly meets
VP Ops (exceeds)
4 3
Does not meet VP Strategy (partly meets)
2
VP Strategy Person 5 Target 6 Fit -1 VP Ops Person 3 Target 2 Fit +1
VP Ops
1
© 2016 Egon Zehnder
14
Different roles require different targets For example, Results Orientation
Resets industry performance Delivers best-in- benchmark class 7 Drives relentlessly performance for higher 6 performance Delivers beyond expectations Consistently delivers Strives to deliver consistently Fulfils assigned tasks
1
2
3
5
4 People demonstrating this competency drive for improvement of business results. • Low levels: They are dissatisfied with poor performance and drive to set goals • Moderate levels: They go beyond goals set for them and drive towards higher, world-class goals • High levels: They intelligently transform a business for significantly improved results
© 2016 Egon Zehnder
15
The targets depend on the role and the strategic context Example – Group CEO in different contexts 5
Results Orientation 6
6
Strategic Ability 4
5
Change Leadership 6
Growth CEO: Improves business practices for higher performance levels Turnaround CEO: Redesigns business practices to deliver breakthrough results
Growth CEO: Develops a new company strategy incorporating competition, industry, and market issues Turnaround CEO: Translates larger corporate objectives or strategy into an action plan for a specific part of the business
Growth CEO: Takes specific action to mobilize others to change Turnaround CEO: Introduces dramatic, high-impact actions such as redesigning organizations and processes
Growth CEO (sample profile) Turnaround CEO (sample profile)
© 2016 Egon Zehnder
16
Using the competencies to specify roles and assess candidates Using competency based assessment to specify the role… What OUTCOME / GOAL do you require?
WHAT will they need to do?
HOW will they do it?
Using competency based assessment to assess the candidates…
WHAT did you do?
HOW did you do it?
WHAT was the result?
© 2016 Egon Zehnder
17
how to interview
Executive MBA - Class of 2016 Egon Zehnder Workshop
5 August 2016
The complete evaluation process Review CV and career history
• Compare to role specification • Formulate your hypothesis
Take preliminary references
• Pre-screen – don’t waste time interviewing the whole world • Revisit your hypothesis
Pre-interview phone call
• Makes your interview more efficient • Ask for missing background information • Revisit your hypothesis
Interview candidate against targets for the role
• Use a competency-based approach to test your hypothesis and build the picture
Interact with retained candidates in a systematic way
• ‘Do unto others…
Take formal references
• Triangulate and compete the full picture
© 2016 Egon Zehnder
19
Some people are much better at making people decisions Range of Interviewer’s Validity (1)
Worst Interviewers
Best Interviewers +0.7
-0.1
0
Random Assessment
1
Best practice Assessment
The range of interviewer’s validity is huge: • Some are very good • Some are hopeless, even worse than a random assessment!
(1) Source: Pulakos, E.D., Schmitt, N., Whitney, D. & Smith , M. (1996). “Individual differences in interviewer ratings: The impact of standardization, consensus discussion, and sampling error on the validity of a structured interview.” Personnel Psychology, 49, 85-102 © 2016 Egon Zehnder
20
The Best Interviewers Are: • Intelligent • Familiar with the range of experiences and competencies relevant to the position • Great listeners and able to decode non-verbal behaviour • Able to plan and act in parallel • Most important: Motivated to conduct a sound appraisal
© 2016 Egon Zehnder
21
Suggested Interview Approach Simple / short
Complex / long
5
10
Introduction: warm up the candidate
15
30
Discuss the job
10
20
25
50
5
10
60
120
Interview (Minutes)
Spend most time on Competency Interviewing
TOTAL
Elements
Walk through the background • Family background, interests, general facts • Complete CV data - salary, language
Competency Interviewing
Find out about ‘potential’
© 2016 Egon Zehnder
22
There are two ways to structure your interview Interviewing by Story
Interviewing by Competency
“Can you talk about 1 or 2 of your biggest achievements, that best showcase your abilities…”
“Please give me an example of actions you have taken to …”
• This is a natural business conversation that is easy for the candidate and can give you richer data faster • However, it can be harder to manage and unless you can think quickly it can leave you with an evidence gap • Towards the end of the interview you need to be aware of any gaps and then fill them with competency-specific questions
• Questioning competency-by-competency is easier to structure and ensures you cover everything • However, it requires the candidate to work out which example best illustrates a competency, which he/she can find hard to do • Candidates can feel under pressure to think of lots of different examples, often with diminishing relevance or alternatively it can become rather repetitive
© 2016 Egon Zehnder
23
Finding out how something was achieved is key • Only recounting what someone has done (experiences) leaves many unanswered questions • For example, hearing that a person has delivered on time and budget still does not tell you if he/she is an effective manager because you don’t know - What the starting situation was - What his/her exact role was - How he/she achieved the goal - If the result might have happened anyway
WHAT did you do?
HOW did you do it?
WHAT was the result?
© 2016 Egon Zehnder
24
Use short, open-ended questions; follow the story • • • • •
What led up to the situation? What did you inherit? Who was involved? What happened first? What happened next? What was the outcome?
…..then probe for detailed behaviours: • What were you thinking [at the time]? What was going through your mind? • How did you know? • What did you say? What was the response? • What were you feeling [at the time]? • How did you do that? • Give me an example.. • Tell me more….
© 2016 Egon Zehnder
25
What makes for good evidence of competencies? The person actually did it
NOT: “Generally I coach the person…” or assertions of ability “I talk a lot to my team…”
The person did it him/herself
NOT: “We went on in…” or “My employee and I worked it out…”
The person did it (or thought it) at that time
NOT: “What I would say now is…” or “Now I realise what happened was…”
You know how the person did it in believable (and testable!) detail
NOT: “I just went ahead and did it…” or “I convinced my team…”
© 2016 Egon Zehnder
26
© 2016 Egon Zehnder
27
Accept we are biased
Create the right conditions
Set fairness as goal explicitly and instruct yourself to be fair Create inclusive environments
Role model the behaviour and be prepared to deal with conflict
Step 1 Step 2 Step 3 Step 4 Step 5
© 2016 Egon Zehnder
28
Executive MBA - Class of 2016 Egon Zehnder Workshop: Pre-reading Pack
5 August 2016
Great People Decisions • Matter • Are hard • Can be mastered
© 2016 Egon Zehnder
2
The Key for Company Value
Year Effect
Industry Effect
Company value Company Effect
Leader Effect In some markets, the leader effect accounts for up to 40% of the variance in value Source: “When Does Leadership Matter?”, Wasserman, Nohria and Anand, Harvard Business School working paper no. 01-063, April 2001 © 2016 Egon Zehnder
3
The Key for Career Success! 100% 90%
People and Organisational Competencies
80% 70% 60%
Thinking Competencies
50% 40% 30% 20%
Results and Functional Competencies
10% 0%
Seniority
© 2016 Egon Zehnder
4
Hiring Gets a Failing Grade • Most companies react to hiring as emergencies • Hiring practices lack a model of best practice • Executives have widely differing views about - Desirable attributes of new hires - Whether it is best to hire insiders or outsiders - Who should be involved in the recruiting process - What assessment tools work best - What are the keys to successful hiring and retention
© 2016 Egon Zehnder
5
People decision traps 1. Overrating capability 2. Snap judgements 3. Over emphasis on branding 4. Seeking confirmatory information and buy-in 5. Saving face 6. Sticking with the familiar 7. Failure to engage all the key stakeholders 8. “He’s a good guy. I like him.” 9. “The people before me in the process have done the due diligence.”
© 2016 Egon Zehnder
6
Consultant Introduction
David Campbell Melbourne MBA with Distinction, Melbourne Business School, Australia; B. Engineering (Honours), Monash University, Australia; B. Science, Monash University, Australia. Formerly General Manager Outerwear, Pacific Brands Limited, Australia; Group General Manager Juice and Beverages, General Manager Corporate Strategy and Strategic Programs, Senior Brand Manager, National Foods Limited, Australia; Business Systems Manager, Linfox Pty Ltd, Australia; Analyst, Andersen Consulting, Australia.
© 2016 Egon Zehnder
7
Our agenda for the session 1.
Introduction
10 mins
2.
Defining the need
30 mins
3.
Finding the talent
20 mins
4..
Assessing candidates
45 mins*
5.
Integrating the executive
15 mins
6.
Synthesis
30 mins
7.
Q&A
30 mins
*Including 15 minute break
© 2016 Egon Zehnder
8
our approach to great people decisions Executive MBA - Class of 2016 Egon Zehnder Workshop
31 May 2016
In order to make Great People Decisions consistently… • Make sure that only high-caliber individuals appraise people • Train those who will frequently play assessment roles • Before making any senior hiring or promotion decision, formally review: - The way the assessments have been conducted - The evidence for each key competency • Review the assessments one or two years down the road - Useful feedback for the assessors - Helps assess your organization’s appraisal skills - Helps you select the best assessors in the future • Objectively assess your results, and be willing to undo a bad decision
© 2016 Egon Zehnder
10
Assessing candidates Performance, Readiness and Potential determine Career Trajectory Past
Present
Future
Performance
Readiness
Potential
Past Outcomes; How abilities have been applied to get results
Fit between role requirements and current state
Traits that predict development of executive ability and the speed of that development
Value Creation
Critical Skills and Experience
Curiosity
Competencies
Insight
Identity
Engagement
Culture Fit
Determination
© 2016 Egon Zehnder
11
Assessment methodologies: research findings Approach
Valid r
Multi-criteria, multi-method, multi-observer
0.68-0.73
Competency-based interviews
0.62
References not employee-named
0.57
Case studies and simulations
0.55
Ability tests
0.54
Personality tests
0.38
Unstructured interviews
0.31
Employee-named references
0.13
Graphology/astrology
0.00
Egon Zehnder Approach
Competency-based assessment is also the least biased form of assessment Anderson, Neil & Shackleton, Vivian (1993). Successful Selection Interviewing McClelland, David C. (1998). Identifying Competencies with Behavioral-Event Interviews. Psychological Science, 9, 5 Spencer, Lyle M., Jr. (2004, personal communication)
© 2016 Egon Zehnder
12
Competencies are scaled to give absolute scores of executive capability Positive and responsive behaviours
Typical average executive behaviours
Reactive
Transformational competence, highly leveraged impact, C-level and outstanding executive behaviours
Active
Proactive 7 6 5 4
3 2 1 Results Orientation
• Works
• Meets and beats goals
• Improves the way things are done
Strategic Orientation
• Aware of larger issues
• Plans and prioritises
• Creates significant strategic direction
• Goes along
• Supports teamwork
• Facilitates partnership
• Allows development
• Supports development
• Builds organisational capability
Team Leadership
• Tells
• Involves
• Empowers
Change Leadership
• Open to change
• Change agent
• Mobilises change
Market Insight
• Knows market basics
• Differentiates
• Sees the future
Inclusiveness
• Identifies differences
• Engages with other worlds
• Creates bridges
Collaboration and Influencing Building Organisational Capability
© 2016 Egon Zehnder
13
Scales reduce subjectivity and increase precision Consistency enables rigorous comparisons across people and roles
Relative Ratings
Scaled comparison
Strategic Decision Making Ratings
Strategic Decision Making Scale
Relative Role Fit
7 Exceeds
VP Strategy
6
Meets
5
Partly meets
VP Ops (exceeds)
4 3
Does not meet VP Strategy (partly meets)
2
VP Strategy Person 5 Target 6 Fit -1 VP Ops Person 3 Target 2 Fit +1
VP Ops
1
© 2016 Egon Zehnder
14
Different roles require different targets For example, Results Orientation
Resets industry performance Delivers best-in- benchmark class 7 Drives relentlessly performance for higher 6 performance Delivers beyond expectations Consistently delivers Strives to deliver consistently Fulfils assigned tasks
1
2
3
5
4 People demonstrating this competency drive for improvement of business results. • Low levels: They are dissatisfied with poor performance and drive to set goals • Moderate levels: They go beyond goals set for them and drive towards higher, world-class goals • High levels: They intelligently transform a business for significantly improved results
© 2016 Egon Zehnder
15
The targets depend on the role and the strategic context Example – Group CEO in different contexts 5
Results Orientation 6
6
Strategic Ability 4
5
Change Leadership 6
Growth CEO: Improves business practices for higher performance levels Turnaround CEO: Redesigns business practices to deliver breakthrough results
Growth CEO: Develops a new company strategy incorporating competition, industry, and market issues Turnaround CEO: Translates larger corporate objectives or strategy into an action plan for a specific part of the business
Growth CEO: Takes specific action to mobilize others to change Turnaround CEO: Introduces dramatic, high-impact actions such as redesigning organizations and processes
Growth CEO (sample profile) Turnaround CEO (sample profile)
© 2016 Egon Zehnder
16
Using the competencies to specify roles and assess candidates Using competency based assessment to specify the role… What OUTCOME / GOAL do you require?
WHAT will they need to do?
HOW will they do it?
Using competency based assessment to assess the candidates…
WHAT did you do?
HOW did you do it?
WHAT was the result?
© 2016 Egon Zehnder
17
how to interview
Executive MBA - Class of 2016 Egon Zehnder Workshop
5 August 2016
The complete evaluation process Review CV and career history
• Compare to role specification • Formulate your hypothesis
Take preliminary references
• Pre-screen – don’t waste time interviewing the whole world • Revisit your hypothesis
Pre-interview phone call
• Makes your interview more efficient • Ask for missing background information • Revisit your hypothesis
Interview candidate against targets for the role
• Use a competency-based approach to test your hypothesis and build the picture
Interact with retained candidates in a systematic way
• ‘Do unto others…
Take formal references
• Triangulate and compete the full picture
© 2016 Egon Zehnder
19
Some people are much better at making people decisions Range of Interviewer’s Validity (1)
Worst Interviewers
Best Interviewers +0.7
-0.1
0
Random Assessment
1
Best practice Assessment
The range of interviewer’s validity is huge: • Some are very good • Some are hopeless, even worse than a random assessment!
(1) Source: Pulakos, E.D., Schmitt, N., Whitney, D. & Smith , M. (1996). “Individual differences in interviewer ratings: The impact of standardization, consensus discussion, and sampling error on the validity of a structured interview.” Personnel Psychology, 49, 85-102 © 2016 Egon Zehnder
20
The Best Interviewers Are: • Intelligent • Familiar with the range of experiences and competencies relevant to the position • Great listeners and able to decode non-verbal behaviour • Able to plan and act in parallel • Most important: Motivated to conduct a sound appraisal
© 2016 Egon Zehnder
21
Suggested Interview Approach Simple / short
Complex / long
5
10
Introduction: warm up the candidate
15
30
Discuss the job
10
20
25
50
5
10
60
120
Interview (Minutes)
Spend most time on Competency Interviewing
TOTAL
Elements
Walk through the background • Family background, interests, general facts • Complete CV data - salary, language
Competency Interviewing
Find out about ‘potential’
© 2016 Egon Zehnder
22
There are two ways to structure your interview Interviewing by Story
Interviewing by Competency
“Can you talk about 1 or 2 of your biggest achievements, that best showcase your abilities…”
“Please give me an example of actions you have taken to …”
• This is a natural business conversation that is easy for the candidate and can give you richer data faster • However, it can be harder to manage and unless you can think quickly it can leave you with an evidence gap • Towards the end of the interview you need to be aware of any gaps and then fill them with competency-specific questions
• Questioning competency-by-competency is easier to structure and ensures you cover everything • However, it requires the candidate to work out which example best illustrates a competency, which he/she can find hard to do • Candidates can feel under pressure to think of lots of different examples, often with diminishing relevance or alternatively it can become rather repetitive
© 2016 Egon Zehnder
23
Finding out how something was achieved is key • Only recounting what someone has done (experiences) leaves many unanswered questions • For example, hearing that a person has delivered on time and budget still does not tell you if he/she is an effective manager because you don’t know - What the starting situation was - What his/her exact role was - How he/she achieved the goal - If the result might have happened anyway
WHAT did you do?
HOW did you do it?
WHAT was the result?
© 2016 Egon Zehnder
24
Use short, open-ended questions; follow the story • • • • •
What led up to the situation? What did you inherit? Who was involved? What happened first? What happened next? What was the outcome?
…..then probe for detailed behaviours: • What were you thinking [at the time]? What was going through your mind? • How did you know? • What did you say? What was the response? • What were you feeling [at the time]? • How did you do that? • Give me an example.. • Tell me more….
© 2016 Egon Zehnder
25
What makes for good evidence of competencies? The person actually did it
NOT: “Generally I coach the person…” or assertions of ability “I talk a lot to my team…”
The person did it him/herself
NOT: “We went on in…” or “My employee and I worked it out…”
The person did it (or thought it) at that time
NOT: “What I would say now is…” or “Now I realise what happened was…”
You know how the person did it in believable (and testable!) detail
NOT: “I just went ahead and did it…” or “I convinced my team…”
© 2016 Egon Zehnder
26
© 2016 Egon Zehnder
27
Accept we are biased
Create the right conditions
Set fairness as goal explicitly and instruct yourself to be fair Create inclusive environments
Role model the behaviour and be prepared to deal with conflict
Step 1 Step 2 Step 3 Step 4 Step 5
© 2016 Egon Zehnder
28
