Passing the test

Think you’d like to be CEO of a major corporation?

Best get ready for this test: The employer informs you that over the next day and a half, you’re the leader of a hypothetical company. You prepare by reading reams of hypothetical reports generated by your hypothetical company. As you arrive at your computer, you’re assaulted by a barrage of tasks—calls that must be returned, meetings that must be scheduled.

Before the day is out, you’ll write and deliver a business analysis and deal with nebby media who’ve been leaked key, possibly harmful, information and now must be confronted. And all this under the watchful eyes of professional assessors who will measure your performance against those of your rival CEO candidates.

This may not be the traditional path to CEO selection, but more and more companies are adopting assessment to help them choose the best candidates and avoid the substantial costs of bad hires. And to create and administer those assessments, many of those firms are turning to Pittsburgh’s Development Dimensions International (DDI), a pioneer in both executive assessment and development.

Headquartered in Bridgeville, DDI has been a primary national and international player in its specialties almost since the field of industrial-organizational (I-O) psychology solidified in the wake of World War II. It was during the war that the Office of Strategic Services began using assessment exercises to simulate the conditions officers would experience on the battlefield. I-O psychologist Dr. William C. Byham, who co-founded DDI in 1970, adapted those wartime exercises for use in the corporate world.

Over the years, DDI’s clients have hired and promoted an estimated 21 million people using DDI’s selection systems. Just as important, DDI has helped leadership candidates understand and acquire the skills they need to move to the next level. The company calculates that it has provided leadership training for more than 16 million people.

DDI calls its two-pronged approach “talent management,” and it has enabled the company to establish a vast footprint. It operates 42 offices and affiliates in 26 countries, serving such executive assessment clients as Hertz, Mutual of Omaha and Fifth Third Bank. For Walmart, DDI completes up to 6 million field selection (pre-hire) and promotional assessments per year, and it has completed more than 800 executive assessments for the giant retailer over the last five years.

“Because of the e-world, a company that used to get 100 resumes a day now gets 5,000 a day, so they need ways to sort those out,” says Byham, DDI’s chairman and CEO. “We make systems that screen people before they finally get to the interview.”

Although I-O psychology remains something of a niche discipline—the Society for Industrial and Organizational Psychology numbered only about 3,600 members in 2000—the U.S. Bureau of Labor Statistics ranks it the fastest-growing occupation in America. DDI is such a power in the field that Byham estimates his company employs more than 10 percent of all I-O professionals in the country.

So executive assessment may not be new, but its application to CEO candidates is. Historically, candidates for the top spot would work their way up the corporate ladder, sometimes over a prolonged period, sometimes in a blaze of wildfire accomplishment. But many selected for the job turned out to be miscast in that role, and Byham thinks he knows why.

“You saw all these high-fliers, a pool of people who moved right up the organization,” he says. “The problem was, they never were in any job long enough for anybody to see their mistakes.”

As an alternative, some companies engage—and still rely on—headhunters to identify outside CEO prospects, an approach Byham calls even less effective than the customary promotion from within.

“Just because you were a good CEO at one company does not make you a good CEO at another because the job is very different,” he notes. “The CEO, more than anything, needs to be aimed relative to where the drivers of the organization are.”

Because so many companies made mistakes using time-honored approaches, they began ever so gingerly to add assessment to the selection mix; it gave them a chance to evaluate CEO candidates operating under conditions that approximated what they would face on the job. Five years ago, Byham recalls, DDI was averaging a single CEO assessment per year. Today, the company is performing about 100 CEO assessments per year, with clients ranging from small businesses to $40 billion organizations.

Typically, a company will present DDI with three to six CEO finalists for assessment, although one larger firm’s short list included 15 names. Then the fun begins. After boning up, the candidates present their business analyses to a “board of directors”—actors assembled by DDI who also portray media later in the exercise. Says Tacy Byham, an I-O psychologist, DDI’s senior vice president, leadership solutions, and Bill’s daughter:

“We’re looking at your presentation skills, at your level of analysis. When the ‘reporters’ come in, are you able to set a vision and a value? Are you able to put out the fire appropriately?”

Since candidates may be scattered across the globe, the exercises may take place at any of DDI’s 35 assessment centers. Moreover, all the action is taped, so DDI’s team always has access to the material. One of the strengths of the format is that each of a client’s candidates is evaluated by the same panel of three DDI assessors. Results aren’t skewed by varying standards among varying assessors.

“They all go through the same exercises in our assessment centers,” Byham says. “They’re judged by the same people against the same standards. So what we offer is an absolutely fair, equal track.”

Where candidates are being assessed in the same building at the same time, DDI takes extraordinary measures to ensure the hopefuls never encounter each other, thereby maintaining the secrecy of the process.

“There’s no interaction among candidates,” Byham confirms. “We never, ever have them cross in the hallway.”

DDI supplements the information the assessment exercises provide by sending questionnaires to candidates’ managers and others who know them, and they ask the prospects to rate themselves. The result is a trove of hard data presented to the client’s board of directors—the real board, not the actors—who now have no excuse for acting on their “gut.”

“Because of the unparalleled amount of insight that we get from going through our assessment,” Tacy Byham says, “when we sit down with the current CEO for a strategic talent review, the data often ends up showing that the candidate considered the frontrunner is not.

“We’re really landing on the truth, because this is the truth from what your assessors say, from what your team says, from what your manager says, from what the candidate says—all these pieces together get you to that truth.”

Clients usually accept that truth—and are happy when they do. Tacy Byham reports that the CEOs DDI has assessed and helped place have experienced zero turnover, a remarkable record in today’s volatile business world. And it’s likely that the use of CEO assessment will increase. Years ago, requiring high-level prospects to submit to assessment may have seemed demeaning to employers and candidates alike: “Larry, sweetie, I know you’re Sir Laurence Olivier now, but you still have to read for this part.” Now, both groups, if they haven’t embraced assessment, are at least comfortable with it.

Says Bill Byham: “Executive assessment was held back for years because the decision makers would think they were impugning your status to ask you to come to something like that. That’s what’s changed. People expect it now. We’re seeing younger candidates who are more used to it, and companies are just tired of making mistakes.”