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CEO Diagnostic Instruments: What / Which / How

A prior post on this blog referenced the use of formal assessments as a vehicle to support first time CEOs. I have admittedly received pushback in the past on this point from experienced CEO-pals who question the value of such instruments. Fair enough; to each their own. But I stand by that position and offer this post in an effort to support it. This piece will double-click into three questions relating Lock 8 Partners’ use of diagnostic tools for execs:

I. What is the general thinking behind using formal appraisals with execs?

II. Which specific tests do we use and why?

III. How do we administer and use the assessments for optimal impact?

The goal here is to share some lessons learned in order to help others optimally position CEOs / execs for success in their leadership roles.

I. General Thinking:

Leadership is critical to organizational performance, and CEOs / execs are key drivers of company success. Likewise, CEO roles — even in small businesses — are enormously complex, with many potential variables ultimately influencing outcomes. At Lock 8, we naturally want to leverage any available resource to help CEOs succeed, particularly the first-time CEOs whom we prioritize hiring.

To be clear, our objective with these assessments is not to weed out the “smart” from the “astonishingly smart” — that’s not what we believe matters most to small-scale SaaS businesses. Rather, we are trying to understand how execs align to a specific role in two main areas: (1) personality factors and (2) problem solving. To do this, it is first necessary to have an in-depth understanding of the particular business and nuances of that particular executive role. Only with that context are we then able to use these two types of information to understand how someone aligns to a given role, builds relationships, performs under pressure, processes information, and makes sound decisions. If an assessment can offer an advantage to our CEOs in this fascinating and high-stakes puzzle, then sign us up for these tests…

II. Which Test(s):

…but, not just any test, and certainly never only one test. The CEO role and the individuals who successfully navigate those roles are simply too complex to rely on any one measure to predict success. It would be the equivalent of saying “choose one thing that makes all CEOs successful” — it just doesn’t exist. Rather, such a multi-faceted endeavor warrants using several different tools, measures, and techniques. Following expert guidance, we have oriented around four tests, with two focused on each of (1) personality factors and (2) problem solving.

Personality Factors: Personality factors speak to the types of preferences and inclinations that determine how a person is likely to behave under normal circumstances, as well as when under pressure. We use two instruments to measure these different aspects of personality; they are the Hogan Personality Inventory (HPI) and the Hogan Development Survey (HDS).

The HPI is a measure of “normal personality” that provides the following:

• A description of various aspects of personality related to such things as sociability, ambition, open mindedness, desire for learning. These speak to behaviors that drive CEO success.

• Insights regarding likely performance in the workplace including such issues as managing stress, interacting with others, approaching tasks, and proactively addressing problems.

The HDS identifies the following:

• Interpersonal behaviors that could potentially undermine or “derail” effective relationships and careers, especially when a person is stressed, bored, or fatigued.

• Insights regarding blind spots that may trigger unproductive behavior.

The HPI and HDS provide a more in-depth understanding of the preferences and thinking that drives what many refer to as “Emotional Intelligence” (EI) or “Emotional Quotient” (EQ). They also facilitate a very quick / early understanding of an exec’s communication style, in order to better inform how that person could interact with a team. Research consistently shows that leaders who have higher self-awareness regarding their strengths, opportunities for growth, and biases to behave in certain ways are more likely to be successful. They often build stronger, more mutually respectful relationships with a broader range of people; and this increases the probability of being able to address highly complex issues effectively. For these reasons, we pay close attention to HPI and HDS.

Problem Solving: But it isn’t all just touchy-feely. Problem solving and critical thinking skills are foundational in considering whether or not someone has the capacity to serve in a leadership role such as CEO. This is where the Watson-Glaser Critical Thinking Appraisal II (W-G) and the Raven’s Advanced Progressive Matrices (RAPM) come into play.

The W-G helps us measure the following:

• The ability to recognize assumptions and determine those that are likely to be true or not.

• The ability to evaluate arguments objectively without allowing a confirmation bias (the tendency to look for and agree with information that confirms prior beliefs) that leads to poor decision-making.

• The ability to draw sound conclusions that are logical and consistent with the evidence at hand.

The insights gained from the W-G involve whether an individual can process highly complex information efficiently and make strategic decisions that take into account both short- and long-term consequences. However, the situation and the data regarding it are often ambiguous or incomplete; and this is where the RAPM is useful.

The RAPM helps us accomplish the following:

  • Measure the ability to use abstract information to recognize patterns, formulate new concepts, extract meaning out of confusion / ambiguity, and make the inferential leaps required of under-the-gun executives
  • Gain insights regarding whether an individual realizes the relationship among different aspects of a problem and can “make the connections” that others don’t realize.

Combined, these two measures shed light on an individual’s ability to do the “systems thinking” or to “see the bigger strategic picture” that successful CEOs must have. In addition, they allow a CEO to prioritize issues and direct time and resources to those most critical concerns in a timely manner.

III. How To: Handle with Care

Given these robust, valid measures of both critical thinking and key personality factors, the question becomes how these assessments should be administered, used, and shared. The honest answer is: with flexibility, care, and compassion. That said, below are the core takeaways from our experience:

1. Awareness versus Selection: Perhaps surprisingly, we do NOT use these assessments to evaluate or select CEO candidates. Rather, we use them purely to support execs’ professional / personal development. Leaders complete these diagnostics only once they have been selected / accepted the job, and are in-seat at a business. We find that this completely changes the exec’s perception of the diagnostic. As opposed to being a test to be endured or “passed,” it becomes an investment in a set of tools that can help execs succeed in their new roles.

2. Is there a Doctor in the House? These are highly nuanced diagnostics; and it is critical to engage a qualified professional to interpret them. We always work with a psychologist who is a certified testing expert to provide a detailed analysis and briefing of the results. And, even before that, a critical step in the process is for the CEO to do an extensive 90 minute “get-to know” session with the psychologist. Again, this is in service to making the whole experience valuable for the exec; and this approach goes a long way toward opening minds toward this as a worthwhile endeavor for them.

3. Give Good Feedback: If a primary objective of this initiative is to raise CEO self-awareness and self-management, then the feedback loop back to the exec must be exemplary. This feedback comes from both Lock 8 and the aforementioned experts. In either case, key aspects that need to be present include:

a. Feedback must be in the context of the role at hand, i.e., not generic leadership advice

b. Recommendations needs to be actionable, i.e., changes in behavior that can be readily observed and measured

c. Observations should be accompanied by a means to recognize the “triggers” that cause unproductive behavior

d. Comments are most useful when they both raise self-awareness and drive a tangible action plan

4. Not Sharing is Caring: For this to help CEOs, a safe space needs to be fostered in connection to what should be confidential assessment results. No CEO wants a broad population of people accessing highly sensitive information that might reveal deeply personal vulnerabilities. So don’t share it broadly. We have committed to a policy where only three people having access — the executive, the psychologist, and Lock 8’s managing partner (me). That’s it.

5. Many Happy Returns: This is not shelf-ware. Rather, the results of these assessments should be used repeatedly; and it is critical to revisit them on a regular basis. When CEOs are looking to build out their leadership team, it should be with an eye toward addressing gaps that may have been revealed via the diagnostic. When doing semi-annual exec performance reviews, it ought to be informed by these assessments. Assessments cost both time and money, so these should be viewed as resources that assist in optimizing some of the company’s most important “assets” — key executives.

In closing: I’d like to thank Dr. Gary Lambert of Q4 Psychological Associates, not only for his significant contributions to this post, but also for his generosity of spirit in the sharing of his expertise and experience. Gary has been a great collaborator in Lock 8’s efforts to consistently improve our ability to set executives up for success. Beyond all of that, Gary is a pleasure and a lot of fun to work with.

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In SaaS businesses, operating results are earned every single day; and good businesses are made, not found. Writing here about building organizations, learning from the experience, and appreciating the ride.

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Todd Gibby

Todd Gibby

SaaS operator-turned-investor | Founder of Lock 8 Partners | Sharing observations, thoughts, and lessons learned from the ever-educational journey.

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