Companies need to embrace the science of leadership selection

As a mid-market private equity firm, Yellow Point Equity Partners often gets involved with entrepreneurs who are running good businesses but want to take their organizations to the next level.

One of the questions that we ask in the strategic planning process is whether the business has the management team to support the growth plan. Often organizations have a few really good people, but need to add one or two experienced managers to help drive the next stage of their growth.

Many owner-managed businesses also seek private equity as a catalyst for succession planning. Over the past 13 years, Yellow Point Equity Partners has helped 10 businesses with transitioning an owner-manager into a board or advisory role by hiring an external CEO to take over day-to-day operations.

The first part of any search is sourcing candidates. It is easy to get a ton of resumés, but more difficult to generate leads from the right type of candidates. In our history, more than half of senior executives hired have been identified through our business or personal networks. Joining an organization such as the Association for Corporate Growth is a great way to expand your business network.

Most people feel they are a good judge of character, but the hiring process is a very short period of time to make one of your company’s most important decisions. In this short time frame, it is easy to mistake confidence for competence.

Often intuition takes over. Rules of thumb trump rational analysis.

But interviewers must learn to distrust their instincts because biases can skew decision-making.

I remember one such interview, where in the post-interview debrief my fellow interviewer said that he thought the individual was a good candidate to be a future CEO. When I asked him why that was, his first response was that the candidate looks and feels like a CEO. By chance, this individual was white, male and tall. Yes, definitely a future CEO.

To overcome our inherent biases, Yellow Point Equity Partners has developed a systematic approach to assessing a candidate.

The first step is to develop criteria for the role, including both role-based and cultural competencies. Create a scorecard to measure how different candidates align with the criteria.

Next, set desired outcomes for the person to accomplish. Share these with candidates. These should be high enough to scare off “B” or “C” players, but achievable enough to attract “A” players.

Develop questions beforehand that allow you to assess how a candidate meets the criteria. For example, I will ask candidates what accomplishments they are most proud of to get the stories behind the resumé. “A” players talk about outcomes, linked to expectations. “B” and “C” players talk about events, people or aspects of the job they liked without getting into results.

The objective is to derive data that allows you to assess how well a candidate will perform while having a fluid conversation.

Interrupt candidates during the interview; don’t let them ramble. You need to see a clear picture of the different layers of the situation they are describing.

Another common mistake is focusing only on strengths. However, the interviewer needs to determine how well candidates can attenuate their own strengths. Effective leaders know that overreliance on their strengths can become a weakness.

Lastly, sell the candidate throughout the interview process. Focus on the five Fs: fit, family, freedom/autonomy, fortune and fun. This also means if a move is involved, don’t just sell the candidate; sell the families as well.

Getting the right people on the bus is one of the most important decisions for the growth of a company. With a little bit of rigour and pre-  planning, the chances of finding the right person will increase. Successful organizations see leadership selection as a science rather than an art.

Tyler Smyrski is a partner at Yellow Point Equity Partners. He is also a director and past president of the Association for Corporate Growth’s B.C. chapter and a past Business in Vancouver Forty under 40 winner.