Amid a Category 5 storm of controversy over the political experience and personal dramas of Republican vice presidential candidate Sarah Palin, the heated questions about John McCain’s vetting process before selecting the 44-year-old Alaska governor—Was it enough? More than enough? Who cares?—particularly resonated around corporate water coolers last week.
Like presidential hopefuls, companies can find themselves in quick need of a qualified and dynamic individual to fill one of their most visible senior positions. Yet when vetting potential candidates—be they internal or external—can a company ever know exactly what it’s getting when making a key hire? Can a top manager or board afford to simply go with their gut over an exhaustive due diligence process? Can a company’s troops and its customers get past an embarrassing surprise after a high-profile hiring?
“Every so often, there’s an event that causes companies to take pause, and consider just how deep and intense their vetting process is,” said Chuck Eldridge, managing director at executive search firm Korn/Ferry, reflecting on the Sarah Palin buzz among recruiters and corporate clients last week. “This could very well be one of those events.”
It’s not that companies need to deploy armies of private investigators to dig for Juno-esque family foibles. But corporations and their boards must double- and triple-check every relevant fact about the people they are sizing up for an executive post. Smart companies must consider much more than just the résumé and references of a potential top exec, recruiters say, citing assessments of candidates’ psychological backgrounds and personal and managerial styles as increasingly important factors when settling on a finalist.
“You never truly know who you are hiring until that individual is on board,” said Richard Koppes, an attorney at law firm Jones Day and a director at Apria Healthcare Group and Valeant Pharmaceuticals. “But you can always find ways to mitigate the risks that you expose yourself to when naming a new executive officer.”
So the days of relying mostly on one’s gut instincts, as some have suggested McCain did in tapping Palin, may be long gone in the corporate world.
“The vetting process has to start at the very beginning of the search, before you even take a candidate to a client,” said Marylin Prince, a partner at executive recruiter PrinceGoldsmith. “And we tell candidates that if they have any issues that may surface during a background check, they need to let us know immediately.”
Not even Palin’s harshest critics have accused her of deceiving the McCain camp, which asserted it knew of her unwed teenage daughter’s pregnancy well in advance of the governor’s selection, but the revelation still came as a shock to the public, illustrating just how vulnerable any organization—political or corporate—is to the element of surprise. Whether voters or shareholders, nobody likes being blindsided.
First, companies and recruiters should be verifying a candidate’s prior job experience and education. It’s the no-brainer in any hiring process, yet it’s surprising how frequently it’s glossed over: Such publicly traded companies as RadioShack, Bausch & Lomb and Veritas have been burned in recent years by executives who fabricated or inflated their résumés.
At RadioShack, David Edmondson admitted in 2006 that he had lied about receiving degrees in theology and psychology, prompting him to resign as CEO of the electronics retailer, which had hired him as a vice president in 1994. Former Veritas CFO Kenneth Lonchar stepped down from his post several years ago after the company learned he had falsely claimed an M.B.A. from Stanford University. Bausch & Lomb let CEO Ronald Zarella keep his job after the company discovered he never actually obtained his M.B.A. from New York University, but it withheld his roughly $1 million bonus in 2002 for the embellishment.
“For truly senior-level people, there’s often the assumption that a candidate has already been vetted and referenced several times over for prior jobs,” said Scott Viebranz, chief sales officer at Kroll, a risk consulting firm that performs background checks on individuals for corporations. “Yet if a discrepancy is ever uncovered, it can cause severe reputational damage to the company, and of course the individual.”
In presidential politics, the ultimate example is George McGovern’s veep choice in 1972, Thomas Eagleton, who unbeknownst to McGovern had undergone electroshock therapy years earlier. After publicly promising to stick with Eagleton, McGovern then dumped him in favor of Sargent Shriver, which did nothing to prevent a landslide loss to Richard Nixon. The controversies surrounding Palin last week pale in comparison, especially after her fiery acceptance speech at the Republican National Convention, which attracted nearly 38 million television viewers.
Beyond more rigorous fact-checking, companies are also making deeper background checks a regular habit, to make sure there are no surprises that candidates might be reluctant to disclose in the interview process.
“It’s become a standard practice to run criminal, civil and credit checks on prospective candidates,” Korn/Ferry’s Eldridge said. “You even have to do a check to see if they’re registered sex offenders—you just can’t take the chance.”
Once a candidate’s experience and background have been scrutinized and confirmed, then comes the most difficult part of taking the measure of a prospective executive: evaluating what recruiters like to call the “intangibles.”
“There is a good reason there’s so much executive turnover these days,” said Ginny Corsi, an independent corporate talent consultant and a former advisor at the U.S. State Department. “When a CEO leaves a company, it’s not always about their performance—it’s often because their personality or management approach just wasn’t the right fit.”
The typical stay of a CEO has shortened dramatically in recent years. On average, the tenure of CEOs that departed large companies in North America last year was 6.8 years, down from an average of 8.6 years in 2006, according to researcher ReputationRX.
“It’s been said that a CEO assignment is becoming somewhat of the world’s best temp job,” said Richard Wellins of management consultancy Development Dimensions International. “That’s largely because companies just aren’t collecting the right information about their candidates.”
To get more out of a CEO or CFO than just a few years, companies and their consultants often try to determine whether a candidate's management DNA will mesh with the corporate culture.
Corsi regularly administers the Birkman Test to senior managers, for example, in an attempt to gauge an individual’s primary motivators, sociability and management style. “If someone is interviewing for a CEO position, they clearly know how to present and communicate,” she said, citing the famed psychology test’s potential for getting past some of the postures that people can present to the world. “But you don’t really get a sense for what they need to thrive in your organization.”
Consulting firms like DDI and Personnel Decisions International will frequently subject senior-level candidates to job simulators, which present candidates with typical challenges that pop up in the role they might assume. The candidates could be confronted by people posing as disgruntled employees, for example, or even asked to deal with a potentially damaging story in the media.
“Companies have to measure intangibles to validate their executive hiring decisions,” noted Teri Hires, senior vice president at human resources consultancy PDI. “Hiring the wrong CEO is a visible and extremely costly mistake that no company wants to make.”
The same applies to presidential candidates and their veep picks. Just ask McGovern.