Leslie Pratch on Assessing and Developing Leaders

By Leslie Pratch

The recent financial meltdown in the United States has starkly exposed a leadership crisis in Corporate America. How did it happen and why did so many senior executives fail so disastrously?

Failed leaders are being replaced not only in the financial sector but in all business sectors, as tight credit markets have put troubled companies like the Detroit Three and the nation’s largest financial institutions under intense scrutiny.

What can be done to improve the odds that new senior executives being recruited will perform more effectively?

There are two main ways of identifying candidates for senior management roles. Either a position is filled from within or a search firm is retained to recommend outside candidates. General Electric is an outstanding example of the first practice, as its CEOs have always come up through the ranks. A notable example of the second is the dual search mounted by Heidrick & Struggles and Spencer Stuart to find a CEO capable of restoring solvency and changing the culture at IBM. The final candidate, Lou Gerstner, became CEO in 1993 and performed brilliantly, leading IBM into the 21st century and overseeing a succession process that put Sam Palmisano in place as new CEO in 2003.

The above examples show that companies can predict an executive’s performance with a high degree of confidence. But too often, the results lead to disappointment.

Why, for example, did the performance prediction made when Heidrick recruited George Fisher to head Kodak not pan out? Fisher’s outstanding leadership at Motorola seemed to make him the ideal candidate to reposition Kodak from film-based to full-spectrum imaging technology.

• What vital information was not factored in when Kodak made its decision?

• What vital information is often lacking in the selection of an “inside” candidate?

Obviously, in an internal recruitment processes, a great deal is known about the character, capability, and performance of executives being considered for promotion. When a search firm presents candidates to clients, the firm has already interviewed prospects, done extensive reference checking, and discreetly found out as much about each candidate as the search professionals can turn up.

But neither process is adequate to predict an executive’s future performance. Measures of past performance conflate individual capability with situational factors. Too often, hiring decisions are made without disentangling an executive’s success from that of the firm where he previously worked. How an executive has performed in the past may not bear on how he will perform in the future – especially as industry and organizational conditions change.

What can boards of directors do to increase the probability that an executive’s future performance will be optimal?

Two steps are essential:

1. Determining the core integrity of the executive, in the context of an assessment of his or her whole personality; and

2. Evaluating the active coping of the executive under the widest possible range of conditions and challenges.

In the next few entries I will explain and demonstrate a method to determine the integrity and active coping of the executive in order to ensure that the executive will perform as required.
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Leslie Pratch, Ph.D. is a clinical psychologist with an M.B.A. in Strategy and Finance and a B.A. in Religion from Williams College. She works with boards of directors and private equity investors to select and develop executives. She can be reached at (312) 464-7919 or email her at leslie@pratchco.com or visit www.pratchco.com.