Thanks to Michael Krot, associate principal of Heidrick & Struggles Leadership Consulting, for his work in handling the research, introduction, and review of this chapter.

This chapter is organized around four key questions. Through answering each, it becomes possible to develop an appreciation of the role a best practices approach to executive assessment plays in creating value for companies. First, Why perform assessments? Answering this question involves describing the different ways assessment can be used to improve the effectiveness of an executive—and in aggregate the effectiveness of a company. Second, How do you identify what to assess? Answering this question outlines how decisions are best made as to the capabilities, personality characteristics, and experiences an assessment process is designed to gauge, so that companies can be certain they are focusing on what matters. Third, How do you measure what matters? Knowing what might improve executive effectiveness is just half the battle, of course. If those precursors of high performance cannot be measured in a reliable and valid manner, the battle will be lost in the end. Answering this question provides guidance in regard to the steps necessary to ensure reliable and valid results. Finally, How do you develop what matters? Whereas the specific goals of executive assessment may vary from company to company and executive to executive, one common denominator is the opportunity to use the results to develop executive talent further. Answering this question gives rise to ideas for how best to leverage the assessment opportunity for developmental purposes.

This review of what has been written about executive assessment as a process uncovered three useful treatments toward my purpose in this chapter. In the 2008 Pfeiffer Annual Leadership Development, Adam Ortiz (2008) defined executive assessment as “a process that establishes criteria for an executive’s success, measures those criteria on an individual-by-individual basis, and then provides input to help executives and their managers make decisions and form plans to enhance individual and organizational performance.” Ortiz later suggests that simply administering the Myers-Briggs Type Indicator or 360-degree feedback is not an executive assessment. He emphasizes the importance of an assessor’s bringing together sources such as behavioral interviews, personality and cognitive ability testing, simulations, and interview feedback and then identifying themes based on the many sources of information in combination. Ortiz described what he considers to be the constants of the executive assessment process: define what is to be measured through the assessment, ensure that people know what to expect, use the right tools to obtain the right information (behavioral interview, observations, tests and inventories), bring it all together, share the results, and make the most of the assessment investment.

There are a number of reasons for performing assessments of senior executives. Speaking broadly, assessments of performance and potential constitute the core of a company’s talent management processes. Assessments are performed on candidates during searches to fill open positions. Assessment can also be an important tool in identifying talent during a company’s succession planning efforts. It can be used as a development tool to identify areas where, through training or coaching, improvements in individual performance might be recognized. Next, assessments can be used in efforts to build and deploy a top management team best. Finally, assessments are often used as part of a merger or acquisition to assist management of the new company in their efforts to institute a process that is seen as fair and just when making decisions about how best to allocate executives—many of whom are unfamiliar to them. Of course, these reasons for assessment are not mutually exclusive. In all, assessments are not ends themselves but rather means to achieving organizational ends.

Executive assessment is most familiar as a selection tool that a company’s management team uses to evaluate potential candidates for an open position. In this context, most companies have relied on it as a way to vet external candidates. Internal candidates have traditionally not been subjected to formal assessment; management teams often view them as known quantities. Recently, however, more companies have been designing systems where internal candidates are subjected to formal assessment just as outside candidates are. This is an encouraging trend because it means management teams will have more truly comparable data on each of the candidates for the position. Without this practice in place, internal candidates are not as easily objectively viewed. While this could result in either an over- or an underconfidence in the suitability of internal candidates, our experience indicates that in fact, internal candidates often suffer relative to candidates from the outside. On the one hand, some internal candidates may undeservedly wear a halo as someone’s golden child. On the other hand, sometimes internal candidates suffer from a bias rooted in a belief that external candidates somehow bring more excitement to the table. Stated in a slightly different way, there are instances where there is a bias toward the devil you do not know, and internal candidates may undeservedly suffer from their reputations where external candidates may appear better than they are. In addition, because external candidates lack tacit appreciation for the company, they represent a greater transition risk that is often underestimated during the assessment process.

External executive assessment should be a central component of a company’s succession planning. A best practice approach to succession planning begins with a comprehensive competency-based assessment of the key internal talent. Outside consultants can be an important resource here because of their ability to provide an independent perspective, benchmark against industry norms, and provide insights regarding the broader marketplace for talent. Commonly these assessments are performed on the direct reports to the CEO.

Assessment should always be framed as an opportunity to help executives develop. If the exercise is instead viewed as a way merely to reveal an executive’s Achilles’ heel, its biggest potential upside will be missed. This is a reason that companies that invest in regular assessments have better success with the tool. If assessment is not part of the organizational routine and instead is employed only when a vacancy needs to be filled, the purpose of the assessment is transparent because it is precisely about including or excluding individuals from opportunities. When done regularly, assessment can honestly be presented as a development tool that allows the organization to manage its talent pipeline.

There is an increasing awareness that is critical to the development of a high-performance top management team and has come to be known as complementarity. Complementarity refers to a complex multidimensional fit of the members of a team. Simply put, some teams are made up of members with redundant capabilities; others are missing critical capabilities for high performance. Through assessment practices, boards and CEOs can develop a sense of how well a team presents itself in a complementary manner, and as turnover occurs, they acquire a clearer sense of the particular capabilities that need replenishing (or development among remaining team members).

Mergers and acquisitions represent unique challenges for companies and their leadership teams. Whereas the specific circumstances can vary widely, what is common is the challenge of sorting through gaps and redundancies in the capabilities of the combined executive team. Assessment can play a valuable role in sorting through this, and such a practice is increasingly being deployed by, for example, larger firms as they make bids for smaller companies. Similarly, the purchasers of these assessments include private equity firms as they become owners of a previously publicly held company.

Assessment has predictive value only when what is measured meets two tests: reliability and validity. In an assessment context, two types of reliability are important. Test-retest reliability means that the method of gauging an underlying dimension is stable over time. That is, an assessment performed on one day would yield results similar to those from an assessment performed another day; only a true change would be reflected in the results. Interrater reliability means that the results are not subject to bias from the person conducting the rating. In an assessment context, it means that an executive’s result would be the same regardless of which member of the assessment team conducted the process—or that fellow executives would rate the target executive similarly (that is, differences in their evaluations would reflect only a true score difference in what each saw in the target). Clearly both kinds of reliability are important in ensuring the company that the results obtained from the process are a function of the true capabilities of the executive, not a function of when or by whom the process was performed. Validity in this context means that the results of the assessment are predictive of performance: individuals suggested by the results to be high performers are in fact high performers. An assessment protocol that lacks validity is simply not useful for any of the purposes described here. In choosing what to measure, companies need to narrow their focus to what can be measured in a reliable and valid way.

Most writing on leadership, assessments, leadership development, executive coaching, and succession planning is grounded in the widespread belief that the best predictor of future behavior is past behavior. Kouzes and Posner’s The Leadership Challenge (2002) provides a good example of this view. These authors offer a behavioral model of leadership built on five major practices: modeling the way, inspiring a shared vision, inno vating and leading change, enabling others to act, and recognizing and celebrating the contributions of others.

One way to review measures in executive assessment is to identify categorizations of specific characteristics. Whereas the number of categories and the specific content of each category are open to debate, a best practice scheme should be collectively exhaustive, and the categories should be mutually exclusive. In other words, the categories should cover the universe, and no category should overlap any other category. This allows more efficient data gathering, tighter analysis and coding of data collected, and clearer recommendations.

Identifying and categorizing interrelated leadership characteristics that are a best fit for the challenges of a certain leadership level is a growing area of research. Research on CEO succession planning, such as Bower’s The CEO Within (2007), and CEO derailment factors, such as David Dotlich and Peter Cairo’s Why CEOs Fail (2003) and Patrick Lencioni’s The Five Temptations of a CEO (1998), focus on the unique challenges of enterprise leadership. Nathan Bennett and Stephen Miles’s Riding Shotgun: The Role of the COO (2006) focuses on the additional role requirement of the chief operating officer. Each expands on a notion of effective leadership by noticing the nuances of the specific leadership role.

Daniel Goleman, in Working with Emotional Intelligence (1998), suggests that emotional intelligence is more important to leadership effectiveness than IQ. Goleman offers a leadership competency model based on emotional intelligence that groups twenty-five behavioral competencies into five categories: self-awareness, self-regulation, motivation, empathy, and social skills. While aspects of emotional intelligence do seem essential for effective executive leadership, empirical research has not demonstrated that emotional intelligence is the main factor predicting future success for executives.

Each of the choices in regard to data collection varies in terms of time and cost and familiar trade-offs with regard to reliability and validity.

A best practices executive assessment process is grounded in an understanding of the business context and the leadership requirements. Often assessors conduct formal or informal interviews to better understand the industry dynamics, the strategic imperatives, and the leadership requirements. Sometimes these findings are documented and shared with the CEO and top management team, while at other times, the findings are simply applied in the assessment process.

An assessor conducts structured in-depth interviews to review an executive’s career history. During this interview, the assessor typically probes for situations that provide the executive with an opportunity to describe specific situations, actions, and results for critical leadership competencies. These so-called behavioral event or competency-based interviews provide a structure for the assessor to evaluate an executive. The key notion here is that the executive provides example after example of things he or she actually did versus trying to game the interview by giving the assessor the “right” answer.

Assessors often interview up, across, and downward references in order to better understand the executive’s strengths, development areas, specific results, and competency-based behaviors. In addition to improving the accuracy of the assessment, these confidential, nonattributed reference interviews provide valuable feedback for the executive.

An assessor collects questionnaire feedback from an executive’s up, across, and downward relationships to collect information about performance and potential against key leadership competencies. These surveys differ from 360-degree feedback tools because the assessors analyze and synthesize the 360-degree data with the rest of the assessment sources of information to form a holistic perspective about the executive that is contextually relevant.

External benchmarking involves comparing the assessed executive against an external peer reference group. The comparison is made for the executive’s current role or potential role, or both. One benefit is that the organization develops an understanding of how a key executive stacks up against the competition. Another benefit is the valuable information learned about how attractive a competitor might find the executive. Armed with this information, the organization can take action to ensure that star executives and those with high potential choose to remain in the organization.

Developed at AT&T, assessment centers are often used as input in an executive assessment. Although they were originally designed to assess candidates for first-line supervisory positions, assessment centers have been used for higher levels of management. In this approach, assessors use job-related simulations to observe how an executive handles challenges for the next job level.

The group evaluation methodology is an approach to collecting information in an executive assessment that uses a group discussion format with the executive’s peers. In this approach, the assessor poses questions to the group and facilitates the discussion. Multiple perspectives about the same question are surfaced, and the assessor explores differing perspectives and consensus to glean deeper meaning. This approach typically focuses on a description of the individual’s leadership behavior, prediction of future performance in the same or different roles, and generation of areas for development.

On occasion, assessors use psychological instruments to study the personality or cognitive abilities of an executive. These instruments are best used as complementary with interview findings and understood within the context of the executive in the business environment. A review of these instruments is beyond the scope of this chapter.

The perfect executive is a fiction. Furthermore, leadership jobs are not getting any easier. Global competition, challenging economic conditions, increasing public scrutiny over a company’s financial or environmental performance, and difficulties in getting and keeping talented employees are just a few of the many reasons that this situation persists. Consequently, the case for ongoing executive development is easy to make, and clearly that process begins with assessment. Understanding each executive’s strengths and weaknesses, as well as the challenges that loom on the company’s horizon, provides a basis for the development of an executive coaching plan. Coaching should focus on the critical few: at any time, an executive should be working on one, two, or at most three ways to improve his or her effectiveness in the job today or readiness for the job of tomorrow.

A best practice approach to executive assessment can be described in four discrete steps: (1) preassessment activities, (2) assessment design and implementation, (3) reporting results, (4) postassessment activities, and follow-up refresh.

The central preassessment activities are directed toward developing a deep understanding of the critical success factors for each focal position, as well as a similarly deep appreciation for the company, its culture, its current competitive position, and its foreseeable future challenges. Through this process, a likeness of the strongest incumbent for each position will emerge.

The second part of the assessment process addresses project management and project execution. When an outside firm is engaged to conduct assessments, it is important to ensure that it has a key contact placed at a high level in the company so that access to the necessary individuals and information is unfettered. Agreements also need to be reached with regard to the number and types of individuals to include in the assessment—and for each of those individuals, the right number and types of references or 360-degree appraisal participants. During this stage, decisions around the use of any preexisting psychometric tests and internal performance data are made.

The best way to report results depends on the choices made regarding the type and volume of data collected. The central consideration here is to be certain the reporting is clear in terms of three things. First, does the report clearly explain executive strengths and weaknesses? The best reports provide concrete examples of events or behaviors that exemplify each. This feedback is much more actionable because it points to specifics the executive can implement. Second, does the report provide benchmarking to help the company and the executive understand this individual’s capabilities relative to the appropriate comparison group? Finally, does the reporting of results provide a solid foundation for the development plan that should accompany the assessment process?

The strong likelihood is that everyone involved in the assessment project will be presented with areas where they can raise their game. A best practices approach to assessment includes from its initiation a plan to provide the necessary support to executives—whether it is something the company does (such as job rotation or international assignment) or simply provides (such as education or training or executive coaching). The importance of this element of the plan cannot be overstated: an assessment that ends by pointing out a deficiency and then leaving it in the lap of the executive to attend to will not be well received. The quality of facilitation of the developmental feedback to the executive often determines much of the overall value of the process. The best researched and written report is useless unless the assessor builds enough trust and credibility to help the executive take in not only positive feedback but also constructive recommendations. Organizations often sponsor refresh assessments with some light 360-degree referencing to determine progress against the prior developmental recommendations and identification of emerging issues. These refresh assessments are often invaluable because the process can help references see the progress of a motivated-to-change executive that their biases may have blocked them from noticing. It also creates a huge motivation for these executives to engage personally with their feedback and actively work on their key developmental areas because they know they will be measured again in the future.

This chapter began by posing four questions critical to understanding the role executive assessment can play in talent management. To best recognize a return on this sort of investment, thoughtful answers to each of the four questions should be developed early in the process. First, decision makers should make sure there is a consensus regarding why the investment is being made. As in other contexts, investor goals may differ. Because the process itself needs to be tailored to the desired outcomes, agreement a priori on what success looks like is important. Second, an ever-widening swath of executive competencies is replete with candidates for measurement. Because the responsibilities and, consequently, the needed knowledge, skills, and abilities vary from position to position, decision makers are cautioned to think carefully about what to measure. The most important consideration here is the best possible forecast about the way each focal position will evolve over the next few years. Third, it is important to work with assessment tools that are established and appropriate. The last key point is a strong admonition that assessment should represent a beginning, not an ending. If the process ends without a deliberate plan in place to help individuals remediate areas of relative weakness, then both the assessed executives and the company have been shortchanged.

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Stephen Miles is the managing partner Americas within Heidrick & Struggles’s Leadership Consulting Practice and oversees the worldwide executive assessment and succession planning practice. He is a key member of Heidrick & Struggles’s CEO and board practice. With over thirteen years of experience in assessment, succession planning, organizational effectiveness, and strategy consulting, Miles focuses on CEO succession and has partnered with numerous boards of global Fortune 500 companies to ensure that successful leadership selection and transition occur. He is a recognized expert on the role of the chief operating officer (COO) and has consulted to numerous companies on the establishment and the effectiveness of the position.