Assessing CEO Successors

9/26/14

As you may know, over the past two years we have increasingly studied aspects of the CEO succession process through the HR@Moore Survey of CHROs. A few years ago, one CHRO suggested that one reason so many outside hires fail is that, as she said "Everything we know about assessing people gets thrown out the window when in comes to higher level execs. We can't check their current workplace because of confidentiality. They don't want to take tests because they feel they have a lifetime of accomplishments to which they can point. So we end up bringing them onsite, conducting a series of interviews, and on that basis have to make a decision."

Thus, this year we asked CHROs about what assessment techniques they used to get information on internal and on external CEO succession candidates. In terms of internal candidate, not surprisingly, the most popular assessment techniques were past performance accomplishments (95%), past developmental needs (88%), 360 evaluations (80%) and unstructured interviews (69%). For external candidates, on the other hand, reference checks topped the list (87%) followed by past performance accomplishments (85%), unstructured interviews (72%) and structured behavioral interviews (71%).

What seems an area of opportunity is the use of formal validated assessment devices. Most of the previously mentioned approaches are either somewhat subjective (e.g., unstructured interviews) or results-based (past performance accomplishments). What seemed to me to be a relatively small number of companies use formal validated assessment techniques for personality testing (42% internals; 51% externals), cognitive ability tests (36% internals; 47% externals), work samples (27% internals; 30% externals), assessment centers (21% internal; 25% externals) and business simulations (15% internals, 16% externals). While recognizing that internal candidates can often have a significant track record, it seems strange to me that more firms would not want to also have the more objective information that can come from valid formal assessments.

These results seem to support my CHRO friend's observation. Years of research have shown that knowledge, skills, and abilities can be validly and reliably measured through objective assessments. However, when it comes to the most important hire a firm can make, most firms throw that data out the window.