It Happened To Yahoo, It Will Happen To You

High level hires can backfire as in the case of Yahoo’s Scott Thompson but using the three tools cited here, an executive hire should never blow up in your face.

July 10 2012 by Chas Klivans


The resignation of CEO Scott Thompson after just five months at Yahoo highlights a major flaw in the way all corporations hire high-level executives today. This need not happen to you. The Yahoo Board of Directors knew it had no room for error. Company revenues and net income had shown no growth under the previous CEO, leaving the stock price flat for over three years and Wall Street dubious about the company’s future. They needed a new chief executive who was full of new ideas, fearless, and charismatic. When Scott Thompson, a successful executive just completing a long run as CEO at PayPal, presented himself, the board saw a charming, bright leader with all the right answers and the blessing of their well-regarded search firm.

Their problem of corporate stewardship was solved when they hired Thompson in January of 2012, or so they thought.

Then on May 3, 2012, shareholder activist Daniel Loeb presented Yahoo’s directors with the likelihood that Thompson may have lied on his resume. The board’s first reaction was denial. As one Yahoo director said, “Scott is a forthright, no-nonsense, straightforward personality and a likable guy.” However, just days later, Mr. Thompson, his credibility in shreds, submitted his resignation, deciding to part ways with Yahoo.

How did a small unlikely allegation by a shareholder against a seemingly excellent executive turn into a crisis? Was this small incident in reality the “surface symptom” of a larger problem, a trail of past similar behavior which could have been uncovered much sooner during the hiring process?

First, let’s look at what actually transpired during Thompson’s hiring process and then look at the early warning signs Yahoo could have followed. As he presented himself as Yahoo’s corporate savior, according to the May 19, 2012 edition of The New York Times:

  • Mr. Thompson’s resume listed a degree in computer science, but the college didn’t offer such a degree until several years after Thompson claimed he earned his.
  • When the falsification allegation surfaced, Mr. Thompson asked a number of top Yahoo executives to pledge their support to him even as he refused to discuss the question of his resume, blaming the “error” on his executive search firm. One refused and Thompson told him not to reveal their conversation.
  • The search firm, Heidrick & Struggles, was Yahoo’s search firm (and did not represent Mr. Thompson this time), but had also handled Thompson’s previous hiring at PayPal, stated that his attempt to blame them for his falsified résumé was “verifiably not true.”
  • Thompson told the board he was having minor surgery weeks before the résumé scandal hit but never mentioned it was for thyroid cancer. The Friday before Thompson resigned, he contacted Yahoo board member Brad Smith and revealed that the surgery was for thyroid cancer.

Thompson joins a long list of prominent people, including chief executives from Lotus Corporation, RadioShack, and Bausch & Lomb, a former Notre Dame football coach, a director of the Federal Emergency Management Agency, and an MIT admissions director, who falsified their resumes and were felled for doing so.

When corporations like Yahoo need leaders who can shake the trees, rattle cages, and get things done quickly, candidates like Mr. Thompson present themselves as the perfect solution to the company’s problems, sometimes in the process hiding underlying problems such as those listed above.

We Co-Enable This Problem

The New York Times article mentioned that Yahoo may need to add a psychologist to its team to locate their next CEO. In my experience, boards and management teams would then miss critical learning regarding the true root causes of under-hiring, in which they are part of the problem and integral to the solution.

Unfortunately, search firms, loyal board members, and helpful co-workers need to accept that conventional hiring and promotion practices do not catch many of the deceptions some candidates for high-level office use. There are three reasons for this.

  1. The mental health literature shows that some individuals are very astute at fabricating the preferred answers on psychological tests, even though these tests are administered specifically to weed out this type of person.
  2. Hiring teams mistakenly attribute “take charge labels” to what are actually dominating behaviors. Taking charge to get others to do what you want is good management, but it can also hide well-packaged bullying.
  3. Companies like Yahoo, when confused about their future growth direction, look favorably on people who appear to be strong, calm, and possess supreme confidence.

Protect Your Company Use Modern Tools

Upgrading conventional hiring and promotion practices to catch deception such as the falsification found in so many resumes requires adding new tools that borrow best practices from the disciplines of business and psychology.

Let’s be realistic with expectations. It is easy for the board, management team, and ourselves to miss early negative behavioral clues candidates may exhibit as they move through conventional hiring and promotion screenings. This is similar to the risk of embezzlement in a business. The reality is not if funds will be stolen, but when. No business can stop stealing from occurring, but management can implement fail-safe safeguards to detect and catch it early before major damage happens.

The same is true of the hiring process. When companies use these new tools, they weed out most of the deceptive and highly manipulative candidates early in the recruitment process. In the worst case, if a very manipulative individual gets hired you can identify them during their three month probation period.

Tool 1 – Upgrade Position Qualifications to Drive Long-Term Company Growth

In my experience, ranging from large public companies to small private family businesses, conventional wisdom in most companies is that making money is by far the most important skill for candidates to possess. Leading teams of people is considered to be a far less critical qualification.

This traditional formula inadvertently keeps us from appreciating the leadership skills today’s corporation needs to grow sales and profit. Instead of the conventional wisdom (requiring one dominant skill to make money), the leader of the modern organization needs three equally weighted qualifications: 1) the ability to increase financial results, 2) capability to lead teams to achieve this wealth creation, and 3) proficiency at using emotional sovereignty© to break through personal limits, setting an example that team members can use to break through their walls.

Emotional sovereignty, a trainable skill, is a necessary requirement for leaders that want to elevate the long-term performance of the organization they serve.

Business (and life) has ups and downs. Leaders who have learned emotional sovereignty have these common traits that contribute hugely to their success:

  • They do not let emotions (theirs and others) overcome them. No matter how great the problem, they feel safe and secure in what they are doing
  • When reality intervenes, they shift their actions to whatever will best serve the greater good of the business
  • They learn from those who know more, do better, and see more clearly. They master the art of leadership by becoming a superb apprentice

Although the modern leader needs three distinct qualifications, the primary company purpose remains to increase hard financial results. In this spirit the people equation in a company remains fully subordinate to making money.

The contrast between the conventional leader and modern leader composition is vivid:

  • Conventional leader – mostly about making money and a bit about leading teams
  • Modern leader – equally weighted making money, leading teams, and using emotional sovereignty to break through individual limits

Tool 2 – Convert Hiring and Promoting from a One-Time Event to a Sequence

My observation has long been that none of us are smart enough to base important personnel decisions on a one-time review. The art of hiring and promotion improves proportionally to the increase in the number of screens that the candidate must pass through. We recommend increasing the hiring screens to six. These recruitment screens include the: position description, sourcing candidates, phone interviews, group interview, reference checks (degrees, criminal, credit, and employment), and the on-boarding screen completed during the three month probation period.

Tool 3 – To Get Top Level Leaders Locate Their Lifetime Prototype

Are you searching for leaders who have the right stuff to lead your management team through that wall of fire to reach greater success? My experience is that these rare people are born leaders, who have demonstrated a lifelong gift for leading peers. Ask the hiring or promotion candidate to “tell you their story” from elementary school through high school, concentrating on when they were part of groups. At this young age, peers know exactly what you are made of, and they don’t give leadership for very long to anyone who abuses their trust. You will especially want to hear what she or he did as a leader when their group hit a wall with a project or when some adventure failed, since this will reveal to you how much emotional sovereignty they have taught themselves.

Sometimes we inadvertently co-enable highly manipulative or deceptive leaders to be hired and promoted in our companies. We do not need to continue to fall for the web of deception these people spin.

Start by elevating the qualifications you ask of your hiring and promotion candidates to include equal amounts of increasing financial results, leading teams to make more money, and demonstrating a pattern since childhood of earning leadership from peers (which will reveal the group role they will be granted by peers in your company). Then let’s make hiring and promotion a sequence of six tight screens to understand how the candidate shows-up before hiring and during the 90 day probation period working on the job “leading troops when taking fire”.

Leading a business is about managing risk, just like life. When we master the art of leadership by “triangulating our candidate choices” using these latest powerful tools every team can master, we greatly increase our odds to end up with the best executives to take our companies to the next level of success.