The hiring process for any white-collar gig can be long, frustrating, and stressful. It typically involves multiple interview rounds, showcasing relevant skills and experience, and sometimes an aptitude test to weed out unfit candidates. That, however, pales in comparison to what can be a grueling assessment process for CEO contenders.
At the highest level of corporate leadership, candidates go through a series of cognitive and psychometric tests, behavioral assessments, and job simulations so boards can determine whether they have the personality, skills, and characteristics needed to excel in the corner office.
Such assessments have become a vital tool for executive recruiters to learn about a potential CEO's work ethic, situational awareness, judgment, emotional faculty, approach to team-building, stamina, attention to detail, and the speed and precision with which they make decisions.
Unlike the standard pre-employment screening for rank-and-file employees, CEO assessments demand far greater scrutiny and investment to ensure a long-term job match. Proper succession planning—one that makes certain that leadership transitions are seamless with little to no negative impact on profitability—is one of the most important jobs of the board of directors, says Taylor Griffin, chief operating officer at the Miles Group, an executive coaching and development firm that conducts psychometric tests and assessments. The room for error when filling a corner office vacancy is small, and a bad pick can result in a material loss.
As such, boards avail themselves of a host of intensive evaluation tactics. According to Jim Link, chief human resource officer at the Society for Human Resource Management (SHRM), job simulation is one assessment tool that has gained popularity in the last five years. Simulation plots vary depending on company needs and the firm conducting them.
Russell Reynolds Associates, a leadership advisory and executive search firm, sends CEO candidates a packet of information ahead of the simulation that lays out a mock scenario in which an executive might find themself. The packet contains relevant emails, analyst reports, financial information, media articles, and quarterly and annual disclosures for a fictitious company.
Candidates spend roughly half a day in about five in-person meetings immersing themselves in the concocted scenario as they work toward a resolution. Actors play the role of board members, other executives, stakeholders, regulators, and investors to create an all-encompassing real-world feel.
“The candidate is pushed to act on their feet, showing their decision-making and leadership,” says Dean Stamoulis, managing director at Russell Reynolds, whose team conducts a handful of these simulations monthly. “They seem to like the contextual immersion because they get a chance to show what they can do, as opposed to just talking about it.”
Simulation plots are constructed based on the company's priorities and looming challenges for the incoming CEO.
“It could be that two directors on the board disagree about the M&A strategy of the business, so the CEO has to lead and influence them and work his or her way through that,” says Stamoulis. “It could be some type of crisis involving an ethical dilemma; let’s say activists are constantly pushing the company.”
Candidates don’t typically struggle with the various assessments, says Griffin of the Miles Group. But their results help boards understand how an executive arrives at a decision or communicates when stressed. There is no right or wrong answer, and boards tend to recognize the perfect CEO model doesn't exist.
“The board defines the forward-looking needs of the organization and translates that to a profile that has behavioral, experiential, skill, and competency elements,” Griffin says. “We view succession as a multi-person event, requiring a strong team that complements the individual’s skill sets.”
Though more companies today are using a range of CEO assessments, Link says, just 6% use simulation exercises in executive-level hiring. That’s likely because they’re more time-consuming and don’t come cheap. Simulations can run upwards of $85,000 per candidate, while some executive search firms charge a flat package fee that includes multiple CEO assessment types for as much as $500,000.
Behavioral and cognitive testing, however, is the most popular C-suite evaluation. Thirty-two percent of companies use behavioral or personality assessments in executive hiring, 54% conduct behavioral interviews, and 16% perform cognitive skill assessments, according to SHRM.
Companies use psychometric testing to assess candidates' suitability for the CEO role based on their personality traits, mental capability, and behavioral style. These tests, either in person or online, typically occur in two parts: one at the beginning of the hiring process and another closer to the end. CEO candidates take two to five psychometric tests in each round, totaling over five hours for both rounds. Firms hire Ph.D.-level consultants to develop and conduct the assessments and analyze the results.
“You're asked a bunch of questions where all you're doing is describing yourself, such as, ‘How assertive am I? How persuasive am I?’ The questions, of course, are much more detailed and nuanced,” Stamoulis says. “They address the way you communicate, the way you make decisions, the way you lead. The idea is that if you ask a bunch of these questions in a nuanced way, you get a clear trend across the entire questionnaire.”
The Hogan assessment, an industry-standard personality test that many firms use to formulate their own, phrases its psychometric questions as statements offering a “strongly agree” to “strongly disagree” range of responses. Candidates might see, for example, assertions like: I expect to succeed at everything I do; I am sensitive to others’ feelings; I always admit it when I make a mistake; and I am destined for greatness.
Psychometric tests help paint a full picture of the candidate, indicating whether they have the soft skills needed for modern leadership. To that end, some executive search firms like Spencer Stuart conduct 360 reviews with managers, peers, report staff, and even friends and acquaintances outside the office.
Going to such lengths to uncover a potential CEO’s mode of governing makes sense when looking at the data, Link says. He points to a SHRM analysis wherein 78% of HR professionals said the quality of their organizations’ hires improved due to assessments that included psychometric testing. Twenty-three percent said assessments have helped improve the diversity of their hires, and 36% said candidates who score high on assessments are “very likely” to make the final list of candidates even without the minimum years of requested experience.
“These assessments are superseding other criteria,” Link says. And it’s a trend that will likely shinny up into the C-suite as boards search for high-quality executive hires.
But measuring soft skills—drive, ambition, reliability, communication style—can be challenging, especially when a company has two or three candidates competing. Spencer Stuart believes it has come close to perfecting its appraisal formula for assessments.
“[Grading assessments] sounds like a conversation, but there’s actually a mathematical method behind it,” says Cathy Anterasian, who leads the company’s CEO succession services. The firm uses an “executive intelligence” rubric, quantifying CEO candidates’ critical and conceptual thinking, social and emotional intelligence, and ability to learn and grow in the job even as the corporate landscape changes.
Spencer Stuart says that senior executives who score high on its assessments are more likely to be promoted and promoted 22% faster than lower-scoring executives, according to data it released in 2015. The firm declined to provide more recent data on the correlation between high CEO assessment scores and their company's financial performance once in the role.
Ben Machtiger, chief marketing and communications officer at Spencer Stuart, says the firm's analysts undergo extensive training to ensure consistency and precision in how the assessments are executed and scored.
“It's pretty amazing to watch a group of like 20 Spencer Stuart people watching a video of somebody being interviewed and scoring executives' answers,” he says. “Then there's a discussion about, ‘Why did you do this or do that?’”
Even then, experts at search firms and on the industry’s periphery say assessments shouldn’t be the only indicator to predict a candidate’s CEO potential. They’re merely another tool among a litany that boards should use.
“The challenge is that you need to base the decision on something. Prior performance and behavior in similar contexts are as good as we can get,” says Peter Cappelli, a management and human resources professor at the University of Pennsylvania's Wharton School of Business. “The question is, what else would help? I would be judicious as to how I used the information from assessments and mainly use it to answer questions from information about prior performance.”
Still, an entire industry exists to help boards inch their way through one of the most significant decisions for a company’s continued longevity.
“These things are great indicators, not predictors, of future performance,” Link says. “If anything, they're pretty good predictors of the behaviors that most of us would think of as potential derailers for the job.”
