On the back of new research from FT Longitude, a member of the Financial Times Group, Kingsley Gate’s new report, “Bad Decisions: Why companies miss the most important factor in executive hiring,” reveals findings on the many benefits of ensuring that decision making is an integral factor in the leadership hiring process; how to empower senior executives to make good decisions; and how to accommodate contrasting decision-making styles. Stream Senior Partner Paige C. Scott’s conversation with NBC News Radio for more details on the report below.
Paige: We are very excited to share some of the insights from our research conducted with FT Longitude, a part of the Financial Times Group. This was done this past May and June. Like a lot of search firms, we are in the business of helping our clients improve performance by hiring great people, great leaders in particular. I think we now are on to something that is different than what other search firms are doing. And it’s really around this decision making piece as a core lens to understanding how qualified a candidate is and how much of a fit he or she will be in that organization. So, the FT helped us really kind of conduct the research to learn more about the decisions that executives are making or not making – and how those decisions are driving business performance. (We) got some really interesting results out of it.
Paige: We analyzed what our competitors were doing and realized that no one really kind of had put their finger on what is leadership. You see a lot of verbiage about leadership and world leadership search firm, but what does that mean? It’s just sort of this amorphous sort of term. And so, we sought to get a little bit more granular about what really drives leadership – good leadership – whether that’s at the executive level or throughout an organization, and how it can impact business results. And we really came on to this theme of decision making – not only how people make decisions but also decision-making rights – where are they, who has them, and how are they made.
Paige: A lot of interesting data, but there are a couple of things that really jumped off the page for us. The research in particular showed that 63% of the executives that we surveyed had either resigned or considered resigning because of their frustration with how decisions were being made in their companies. It’s a pretty high number and the topic of decision rights is something many candidates and clients and I discuss explicitly. Like I said earlier, who has the actual authority to make those key decisions? And does everyone have the same understanding of who those people are and how those decisions are made? So, 63% want to resign because that’s not effective, it’s not efficient and it’s not in alignment. That was one key observation.
Paige: Yeah. What’s shocking is that when you think about the fact that the average adult makes 35,000 remotely conscious decisions every day – whether that’s about what you eat, what you wear, or decisions like operating decisions, strategic decisions – it’s a lot of decisions. But the fact that there’s so much of that already entwined consciously and unconsciously on how we operate and then you extrapolate that in the business and you see that 25% of the executives that we interviewed or surveyed have never had an explicit conversation about decision making – whether that’s their decision-making experience or the decision they are expected to make on the job before taking a position as a senior executive of a company. I mean, that’s crazy. That number should be 100% when you think about how confident somebody is in making those decisions.
Paige: I think people get at it in less efficient ways. I don’t think anyone concentrated on the fact that it is really the decision making structure and abilities (kind of) at the core of how firms and people operate. So it’s, number one, identifying it (decision making) as a core competency and capability. I don’t think it’s ever really been articulated as such. I think many of us because we make 35,000 decisions a day, take for granted that there’s importance in being able to measure that, to be able to evaluate that, to be able to understand precisely how those things might differ from company to company, culture to culture.
And again, I don’t think anyone’s really honed in on it. We continue thinking about this strategically as we thought about, how you evaluate people. How do you look at human behavior? How do values and motivations and prior experiences also factor into decision-making capabilities? Because there’s a lot of subjective, instinctual pieces of decision making that, I think, most companies find very hard to measure.
And we’ve now developed a structure in a process where we can be more systematic about how to hone in on that specific capability and competency. And again, that has not ever (kind of) come to the floor. I think it was just something that people took for granted and just assumed it was part of that discussion process.
I think maybe you’ll get questions in an interview like, ”Tell me about the time when you made the wrong decision or it was a decision that didn’t have the outcome you wanted.” And while that’s helpful, it’s really only scratching the surface. I don’t think companies, whether they’re recruiting firms, or hiring companies or individuals, go far, or deep enough if you’re really doing that analysis.
The interviewer competencies can wildly vary from person to person at any given company. Some people are just intuitively very good at interviewing, while others have some very specific structure of interviewing skills, and some have none of that. And, because you have this range of experiences and key competencies in terms of interviewing, we’re going to have wildly different outcomes in terms of what you’re looking for and what you’re going to extract out of that process or experience. And so again, part of that is, how do we create more discipline and more focus in what we’re really measuring and how we’re aligning those things to the results and outcomes that the companies need to have—and the people, ultimately, want to have—in relationship to that company.
Paige: I think it’s really sitting down at a basic level – whether it’s with the support and help of the processes and digital tools that we’ve created to identify that decision-making structure or whether, anecdotally, it’s a function of, “let’s be more deliberate and purposeful about asking about who has decision making”, “how does that fit within our company?” and “what is the style and specific expertise of that person in making those decisions?” And also going through a much deeper dive and asking, not just the first question, but the follow-up questions around, “What would happen if you had made a different decision?”, “What do you think that outcome would have been?” or, “Why did you decide to make that decision and not make the other decision?”, and, “Was there a different degree of risk that you were evaluating as you ultimately chose the path you chose?”
I just don’t think people go far enough in the interview process to really uncover the pros and cons of those decision-making experiences and just be deliberate about making that the agenda within an interview and applying that same agenda across every candidate you interview. I think what you find is that, depending on the conversation, the strength of the interviewer who controls the conversation or doesn’t control the conversation, you may or may not get to those answers. But if you structure an interview process where it is part of everyone’s agenda on the interview team, then you’re going to ultimately be able to compare those results in a more systematic way. So, it’s really about integrating the line of questioning into that process in a more systematic and consistent way.
Paige: Almost 80%, ~76%, of the executives were satisfied with where they were because they were in alignment with the decision-making structure and leadership decisions at their company. That’s a very high satisfaction rate. And the flip side of that is, 36% of people were dissatisfied with their culture, company, and leadership decision-making experience and, ultimately, were looking to leave their company as a result of that decision or lack of decision-making expertise.
So there’s a pretty huge delta between those numbers. It makes a world of difference. If you want to put an even fine point on it, the cost of failing to empower employees to make decisions, (let’s talk about bottom line numbers), you could estimate that the cost is 6 to 9 months of an employee’s salary to replace them. That is a negative in the bottom line. So let’s just say that to replace an employee making $600,000 a year, it would cost the company somewhere between $300,00 and $400,000 per employee at that level.
Paige: We’re very excited to forge ahead using this research as the backbone for how we intend to differentiate with our clients and our candidates in the marketplace. We expect to see really high stick rates as a result of working through this decision-making matrix and process. And you’ll see some of those headlines coming in the very near and long term!
