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Business Smarts

How do you find the clear thinkers who make the difference?

Every successful CEO faces a central challenge: finding peoplewith great business acumen for their leadership teams’the kind of people who are capable of thinking things through and consistently arriving at the right answer. Essentially, they are looking for people with a type of intelligence’an executive intelligence’one that determines a senior manager’s success.

Pat Russo of Lucent Technologies describes the importance of such people for your business: €˜I’m often asked during a talent search what I’m looking for, and my response always includes €˜clear thinkers.’ Clear thinkers’the ones who can cull everything down into the right point’ can be very hard to find. But if you get yourself a team of clear thinkers, the possibilities are endless.

At General Electric, Jack Welch valued this type of intelligence even more than work experience: €˜It’s my belief that industry knowledge can be gained by someone with good thinking skills. If they bring that to the party, they can assess the new environment and get a feel for the business very quickly.

Dick Parsons, CEO of Time Warner, puts the challenge in these words: €˜The truly insightful people that can really get to the right place are quite rare. Many executives have trouble dealing with complexity. They get lost in data and are unable to pull back and see what’s really important.

What compounds this shortage is the sheer number of people with superior business acumen who are needed by every business. It is not enough to simply hire one or two exceptional people and expect them to take your company where it needs to go. But very few companies are able to ever reach this critical mass, and it has a profound effect on their bottom line. €˜When it comes to hiring enough people to fill 500 openings, the vast majority of them are inevitably not going to be €˜A’ players,’ says Steven Kaufman, senior lecturer at Harvard Business School and former CEO of Arrow Electronics. €˜The problem is that these less-skilled employees exist in such large numbers and are in so many different parts of the company that they start to have a lot of influence over the core behavior of your organization.

The dramatic increase in the number of people with critical decision-making responsibilities is one reason that companies with more skilled executives outperform their competitors. But there is also another, more complex dynamic that gives these companies a decisive edge: They are able to create an atmosphere that demands, recognizes and rewards these attributes. And why is this so crucial? Individuals with high executive intelligence cannot reach their peak performance unless surrounded by others with a similar level of skill.

So to achieve the highest performance from your people, you must create an environment where equally sharp individuals are brought together. Dell’s leadership recognizes how critical it is to have people with these skills throughout the organization. €˜We use such a collective way of thinking to improve upon each other’s ideas that the end product is often very different from where we started,’ CEO Kevin Rollins explains. €˜That route and path to coming up with an ever-evolving and better strategy is the genius of the company.’

Intelligence Is the Key

Clearly, CEOs recognize the importance of intelligence when assembling their team. And management research supports their conclusion. Research has shown that one’s level of intelligence is the most single, predictive component of professional success.

Two of the most respected researchers in this area, Professors Frank Schmidt of the University of Iowa and John Hunter of Michigan State University, declared in the Journal of Personality and Social Psychology that intelligence determines occupational performance €˜better than any other ability, trait or disposition, and better than job experience.’

So if CEOs and researchers alike note intelligence as the key to executive success, why is finding the individuals who possess it so frustratingly hit or miss? It is because we almost never measure how much intelligence someone has before we either hire or promote them. It is easy to understand why this is the case, since to date we have not had a way to evaluate cognitive ability in a form that is acceptable to executives. Though traditional intelligence tests are powerfully predictive, these instruments have too many shortcomings to be used with a modern, managerial population.

Criticisms such as the irrelevance of the subjects tested, adverse impact issues involving gender and race, and significantly declining test scores as candidates get older and more removed from academic problem-solving have led to a situation in which intelligence testing is almost never used with an executive population. Unfortunately, current assessment methodologies, while valuable, are incapable of measuring intelligence.

Internal performance reviews and 360- degree feedback systems are used by more than 95 percent of the largest 500 companies to evaluate employee performance. Reference checking is universally used as a means to assess candidates in pre-hire situations. While these methods do provide valuable insights about an individual, they have a shortcoming. Research has shown that reliance upon the subjective judgment of untrained evaluators make these methods untrustworthy measures of an individual’s intelligence.

In 1999, Cornell University psychologists Justin Kruger and David Dunning performed a series of experiments examining the accuracy of the evaluative judgment of different individuals. They found that most people were unable to recognize the superior thinking of others, even when such judgments were dramatically better than their peers. The vast majority of individuals tend to be highly unreliable sources of information regarding other people’s decision- making skills. This makes reference checking or 360-degree feedback an inadequate means of assessing intelligence.

Another commonly used assessment tool, competency interviewing, derives objective performance information using expert raters. Often referred to as Past Behavioral Interviews, or PBIs, this method is currently considered best practice for benchmarking executives. Research has proven PBIs to be powerful predictors of performance, capable of measuring about 25 to 30 percent of the variance between individuals. Yet, as with peer referencing and 360-degree feedback, PBIs are not dependable measures of intelligence.

Recent studies have shown that scores on PBIs correlate minimally with scores on intelligence tests, about 3 to 4 percent. This is significant because it demonstrates that PBIs and intelligence tests have almost no overlap with one another and are, in fact, measuring very different things. Jon Miller, AOL’s CEO, explains the limitations of traditional interviewing: €˜As someone who interviews a lot of potential employees, I have a theory that if you’ve survived in business to a certain point, and done reasonably well, you probably present yourself well, have a good base of business knowledge and have a good story. Yet none of those things are enough to tell you whether someone is actually going to excel in your organization or not.

So how do we ensure that we are getting an individual who is capable of contributing the type of sharp effective thinking we seek for our leadership team? Just like educational institutions test for academic IQ, we must test for the cognitive skills that determine business aptitude. Business intelligence exists and can be identified. It’s called executive intelligence, which defines the specific skills that are at the heart of exceptional business decision-making.

For instance, we frequently hear how essential it is for someone to think €˜outside the box,’ but what actually determines one’s facility for doing so? In other words, what skills make someone a creative thinker?

Typically, creative thinkers can view the same issue from multiple perspectives. They are able to define a particular problem in several different ways, anticipate likely obstacles, and identify sensible options for overcoming those obstacles.

Someone’s aptitude for these skills determines how well he or she will perform as a creative thinker.

Or, we often say that someone has exceptional political or social savvy, but what exactly does that mean? What specific cognitive skills allow these people to handle interpersonal situations so effectively? Typically, socially skilled people are exceptional at recognizing underlying agendas, gauging how these agendas may conflict with one another, and anticipating the probable effects and likely unintended consequences of a chosen course of action. They understand how those involved will likely react, and they weigh this information appropriately in their response. These specific capabilities determine one’s €˜people smarts.’

Nearly everyone acknowledges that executives must be able to recognize their own mistakes and minimize the costs of their missteps. But what allows someone to be €˜self-aware’ and adaptive? Generally, such people are highly sensitive to the cues that suggest that they are making a mistake. They seek out and encourage this constructive criticism and use it to make appropriate adjustments to their plans of action. When they blunder, they are quick to see their mistake and change course to correct the problem. People who do these things well are €˜smart’ about themselves.

In an executive intelligence measure, a candidate is forced to demonstrate his or her facility for certain skills, such as anticipating likely obstacles, critically examining the accuracy of assumptions, considering the probable effects of actions, and pursuing feedback that may reveal an error in judgment. These abilities are all components of executive intelligence, and the best executives rely upon these skills and build organizations that value them. That is how they consistently out-execute their peers.

An executive intelligence assessment cannot evaluate all of an individual’s capabilities. Like behavioral interviews, executive intelligence interviews predict 25 to 30 percent of the variance in performance between candidates. But because both methodologies measure totally different skills, when combined, the two approaches offer a much more complete understanding of a candidate’s potential’ yielding predictive accuracy around 50 to 60 percent. By employing this multi-method approach, interviewing methods can now achieve a whole new level of assessment.

About justin menkes

Justin Menkes is a consultant at Spencer Stuart and an author on C-suite talent evaluation. His latest book, “Better Under Pressure,” (Harvard Business Review Press) was recently published.