on May 15, 2014
We have the wrong brain and the wrong education to get people decisions right, according to Claudio Fernández-Aráoz in this book. We distrust people who are not similar to us, but to succeed in a globally minded environment we need to surround ourselves with people who have diverse backgrounds and complementary skills. And the vast majority of managers have not received proper training on assessing others and helping them reach their highest potential.
To complicate matters, we tend to assume that the difference in productivity between employees is normally distributed, so that the difference between an above-average performer and a below-average performer is not that much. However, in skilled occupations such as software development the productivity difference between a standout programmer and an average programmer can be as much as 1,200 percent. It really is important to try to recruit the star performers.
So, what are some of the key things you need to do when interviewing a job candidate?
• Carefully check for self-awareness and humility
• Reduce the social pressure for overly positive self-assessments
• Give the candidate a realistic idea of the required skills and behaviours and the expected challenges
• Tell the candidate to discuss the potential role and his or her readiness for it with close friends and colleagues
• Conduct smart reference checks
The book is filled with wisdom on topics associated with personnel recruitment including how many candidates you should interview, the benefits and pitfalls of using consultants, how to ensure that new hires fit into your organisation, how to support their integration, how to deal with compensation, and how to create teams that thrive.
This is an outstanding book, entertaining and informative in equal parts. I highly recommend it to anyone who is responsible for personnel decisions.
on July 22, 2014
In October 2011, international executive search consultant, Fernandez-Araoz addressed the World Business Forum, a group of 4000 senior executives and middle managers in New York. He asked his audience the question I pose to you, too: “How many of you have made major mistakes while making crucial people choices?” All 4000 people raised their hands.
I bring this very practical book to you attention because of the answer he received to the second question he asked the Forum: “How many of you have studied how to assess people (for the purposes of employment)?”
If you are like those attending the forum, the answer is no. Less than half of 1% of attendees had studied how to select the right person for the job.
Fernandez-Araoz has been an executive search consultant for 28 years across all major industries in more than forty countries. He concluded “the key to outstanding performance…is the ability to surround oneself with outstanding people.”
Jack Welch, the former CEO of General Electric (GE), was widely regarded as one of the greatest managers of the 20th century. He reports that as a junior manager at GE 50% of his appointments were wrong. 30 years later, as CEO, 20% were wrong.
If this legendary manager took 30 years to reduce his error rate by 20%, little wonder the rest of us have such trouble!
Combine this challenge with the limited talent pool we have available in South Africa. The best are in very short supply, and we need more of the very best to succeed against global competition.
The problem of employing the best is that people are not designed to make great people decisions. We are hardwired for unconscious biases and other decision impairing errors.
Fernandez-Araoz poses this hiring situation: “Mary graduated from an Ivy League university five years ago, and has since worked at an outstanding consumer goods company, where she has been promoted twice… Joe took twice as long as required to graduate and has worked for the last four years for quite an unprofessional family company, from which he was recently fired.”
You put Mary through an unchallenging interview and employ her. You throw Joe’s CV in the bin.
Mary, in fact, was only a C student, and was employed because of family connections. She is mean and abusive to colleagues. Joe worked night-shifts to put himself through university, and was fired to make room for the owner’s son.
In Joe’s case, you prematurely rejected a good candidate.
Why are we so sure, but so wrong? A primary source of hiring error is the human tendency to take what we see as all there is, placing too much weight on the information in front of us.
A landmark Harvard Business School study investigated the impact of different types of CEO succession on operating returns in 200 organizations over 15 years. The study considered four scenarios: (1) an insider promoted in a firm doing well; (2) an insider promoted in a firm doing poorly; (3) an outsider hired to a firm doing well; and (4) an outsider hired to a firm doing poorly.
One finding was that insiders did not change their company’s performance. The reason is not that similar people working in a similar way produce similar results. Rather, we simply do not work as hard to evaluate insiders as we do with people from the outside, especially when things are going well.
When we employ from outside, we are forced to write a proper job description, consider a larger pool of candidates, grill them in well-structured interviews, and conduct in-depth reference checks. We do not use the same rigour with internal appointments.
Companies should always look for opportunities to promote top internal candidates while also benchmarking against high-quality external ones. Research has consistently shown that the best appointments happen when you consider a wide pool of both insiders and outsiders.
For each position the company needs to fill, thorough background work must be done. I have seen this skipped even for external appointments.
Fernandez-Araoz suggests: “Map out your priorities, take a critical look at the people around you. Are you facing a demographics threat? What is the strength of your leadership bench? Are there looming vacancies you’ll need to fill? Who are your most strategic players? The most competent? The most critical? Who would competing teams, units, or companies be most likely to go after? How will you keep them instead? Perhaps most importantly— who are your rising stars? Who could take on a bigger or different role? What training will they need to do so?”
Does all this time consuming effort matter? Consider these facts and then decide if the effort is worthwhile.
The difference between a typical performer and a highly productive one on an assembly line is about 40%. The difference grows exponentially with the complexity of the job. A top life insurance salesperson is 240% more productive than the average one, while exceptional software developers or consultants outperformed most peers by 1,200%.
We cannot rely on the typical interviews as these are usually “a conversation between two liars.” The company is lying about their attractiveness and the candidate about their competence.
We need thorough preparation and rigorous interviewing and by people with superior “hiring averages.” A hiring average is your score on the number of candidates you employed and their success after six months in the position. If those responsible for employing in your company know they will ultimately be held accountable for their verdicts— with a hard number— interviews will change from chatting to real interviewing conversations.
With the right knowledge, training, and practice, AF believes everyone can master the art of great “who” decisions. Correct selection also provides the best opportunities for success you will ever have.
No matter how good the strategy, or no matter how good the method, you cannot be an A-grade company with B-grade people.
A good place to start honing you skill would be by reading this outstanding book, the best I have ever read on this subject.
Readability Light ---+- Serious
Insights High +---- Low
Practical High +---- Low
on June 12, 2014
This book should be compulsory reading by all leaders, both private and public sector. It states the truth, in a very accessible way, that the most important resource is the human resource. The book shows that this is true from a small team to a whole nation. The best people will always triumph, no matter what the task. Every student of history knows that the failure of an organisation, or a nation, is solely due to the failure of its people to meet the challenges they face. Claudio Fernandez-Araoz explains beautifully that while picking enough good people is hard, not least because of statistical error, it is possible to improve the hit rate sufficiently to tip the scales in favour of organisational triumph. Hiring enough great people is not rocket science, it is harder than that. Claudio, together with his earlier book Great People Decisions, shows it can be done. Buy this book.
on September 24, 2014
We had Claudio on our podcast, The Entrepreneurs Library, to give a full run down of It’s Not the How or the What but the Who. Claudio is a brilliant author and gives great guidelines. If you want to hear a review from the author himself check out episode 23.
on August 26, 2014
I just read "It's Not the What or the How but the Who". Being a passionate fan of talent selection and development and leadership (the Servant or level 5 type), I consider this paper a gem that should be the Bible (or handbook, not to fall into sin) for all middle manager up to the CEO (even more in family business). In the book, the author summarizes the main foundations for long-term success and sustainability based on capabilities building (all generated by and for people), not leaving aside the risks and business challenges...everything, absolutely everything, backed up with real experiences, studies and formal researches... it's amazing the number of quotes and references it gives for further study.
on June 8, 2014
Claudio Fernández-Aráoz published "Great People Decisions" in 2007. The book has achieved global fame with fifteen international editions, emphasizing how important people decisions are for the success of one's personal life as well as for the broader impact of leadership in the world we live in.
"It's Not the How or the What but the Who" provides extraordinary leadership insights through forty-four short essays. As an example of his effectiveness, if only for a short minute, in this review I want to focus on Essay 34, where Claudio describes what he calls "the Female Opportunity".
Claudio writes on page 160: Over the past few years, as I've traveled the world to speak with senior private and public leaders about talent issues,… I am often asked where I see the most opportunity. My answer is never a country, it's a gender: women"
A couple of pages later, Claudio ends this chapter on the Female Opportunity quoting one best practice: Italy.
And he does so with specific mention to the recent history of Italy's most effective legislation in favor of diverse boards.
Women mean talent, positive change, better corporate governance and endless possibilities.
I strongly recommend Claudio's book for precious insights as to the people element is crucial in addressing most key leadership challenges of our time.
on September 2, 2014
I read the book within two daysThe book is definitely one of the best in its kind. Firstly, it’s very reader-friendly, meaning that you can easily finish up one chapter within 5 minutes and rush into another chapter - that’s why I completed it within 2 days, with a lot of notes of course. The author Claudio’s diverse background and 20+ yrs work experiences at a globally top talent search company can almost guarantee that you will get something really valuable out of this book. I have a diverse background myself – got educated in China and worked as a financial analyst there, later went to a top 20 US school and then worked again as a financial analyst for multiple firm both on West Coast and Wall St. Now I work for the one of the largest media in the world at NYC and met countless top professionals. The book indeed echoes to what I’ve been pondering on in the past and inspires me in many ways. It’s not just a regular handbook or guide to talent searching, but a systematic approach to how to succeed by surrounding you with the best. The ideology is the key. Many of Claudio’s theories can be applied not only to work, but also to personal relationship and life in general. And for every issue Claudio brings up, he always gives you a solution, which is extremely helpful.
Allow me to share some of my notes to Claudio’s book:
1. Most of us are bad and slow at getting the wrong people off the bus. Why? Procrastination, loss aversion, compassion. Instead, you should think like a stock trader, stop loss when necessary.
2. Typical interview is a conversation between two liars. Even they don’t intend to lie, they will still be doing so because people always tend to amplify their strengths and ignore weaknesses.
3. The best predictor of future success is past success. It’s not true anymore.
4. Voting for the President is another form of talent searching. But we always tend to choose the most familiar faces – Clinton and Bush family controlled US for over a quarter century.
And many more…
I definitely recommend the book to everyone. It really worth it.
on June 16, 2014
This is a clear, profound but very understandable study on the recruitment and motivational process in management appointments or successions. Claudio has the ability to transform complex statistical studies or intricate psychological treatises into clear to understand and often humorous language, making his book easy to read and as exciting as a good detective novel. A "must read" for those decision-makers who want to hire or promote as well as for those who seek career progression.
on September 26, 2014
Even with unemployment rampant, companies around the world are complaining about the shortage of good talent.
“We found alarming signs of…a massive talent crunch over the following decade,” says Claudio Fernandez-Araoz in his new book It’s Not the How or the What but the Who, published by the Harvard Business review. The crunch comes “as a result of three factors: globalization, demographics, and pipelines.”
To begin with, globalization is generating increased competition among companies not only in the traditional centers of business and finance in the developed world, but from emerging countries as well.
Major emerging market multinational firms – Odebrecht and Embraer from Brazil, Bimbo and Cemex from Mexico, Techint from Argentina, Koç Holding from Turkey, Tata from India – are all expanding outside of their home countries, and their need for high quality talent expands daily. The IMF estimates that nearly 70 percent of the world’s growth will in coming years will emanate from such emerging markets.
Then there is the promise and peril of demography. Fernandez-Araoz points out that the age group of 35 to 45 year olds – the prime age of top executives at the majority of global companies – is shrinking around the world. “While a decade ago this demographic shift was affecting mostly the US and Europe, the problem now extends to many more countries,” he writes. “By 2020, many other large economies, including Russia, Canada, South Korea, and even China will have more people at retirement age than entering the workforce.”
And while many emerging markets are seeing a “demographic boon” in the 18-25 year old bracket, that age group won’t supply enough middle and senior management positions for some time. The youth provide great opportunity for a consumer boom and entry level positions, while leadership roles become harder to fill.
Finally, broken “pipelines” refer to the breakdown between employer and employee that is making it increasingly difficult to cultivate executive level talent. Companies are offering less to their employees, in terms of compensation as well as job security, and thus employees are becoming less loyal, changing jobs often rather than pursuing a long term ascent within one organization.
The difficulty of major multinational firms to find enough employees contrasts sharply with the high unemployment and underemployment rates all over the world. Beyond emerging economies with their large informal sectors, the same disconnect is dragging down advanced European economies as well.
In its recent report “Education to employment: getting Europe’s youth into work,” McKinsey details the extent of the crisis. Despite Europe’s 5.6 million unemployed youth, “employers are dissatisfied with applicants’ skills: 27 report they have left a vacancy open in the past year because they could not find anyone with the right skills.”
The report goes on: “One third [of employers] said the lack of skills is causing major business problems, in the form of cost, quality, or time. Counter intuitively, employers from countries where youth unemployment is highest reported the greatest problems.”
Two massive questions arise from this data. First, what exactly are the missing skills that our youth will need to be ready for better jobs – both corporate or non-corporate – in the 21st century? And, perhaps even more importantly, how must we revamp our education systems to provide the next generation with these skills?
Fernandez-Araoz answers the first question by pointing to the assets that all high-performing executives share: curiosity, strategic thinking and problem solving, grit and determination, and team-oriented social skills and a knack for collaboration. Above all, he emphasizes “the ability to surround oneself with outstanding people.”
The book, however, delves less into the second question – how to impart such skills through education. Traditional elite universities do foster many of these skills, but the problem is their exclusivity – they simply don’t produce enough of these leaders to fulfill the demand. Secondary classrooms could be improved and technical schools expanded to help meet this need, but as it is there is a major disconnect between public institutions and the labor market.
The private sector has begun to get involved through corporate social responsibility programs, but given the scale of the crisis companies should perhaps be even more concerned with shifting public policy, by investing directly in new education models, lobbying policymakers, and highlighting successful reforms. Initiatives like Business Backs Education, launched by education entrepreneur Sunny Varkey and backed by firms like Blackstone, Barclays, and many others, are good examples of this type of engagement.
While business and civil society are mobilizing to effect change, Fernandez-Araoz’s book should be required reading for education thinkers and policymakers around the world, who have direct impacts on school curriculums and teacher training. Without change, the talent crunch will only continue to get worse.
on September 1, 2014
My wife recently bought me this wonderful book, which I both enjoyed and found extremely useful. This collection of essays from Claudio Fernandez-Araoz (some of which appeared earlier in Harvard Business Review) offer readable, easily-digestible nuggets of wisdom to managers and leaders alike.
Not only are these essays well-written, they also draw on extensive scholarship, either from academic researchers or from his own firm, Egon Zehnder. Nor are they simple opinion pieces; Fernandez-Araoz provides a plethora of useful frameworks, such as the 4 leadership assets common to all high-potential executives (curiosity, insight, engagement, determination), how to prepare high-potential executives for senior leadership (give them more complex assignments), and Egon Zehnder's proprietary "Team Effectiveness Review."
Finally, the author's humanity comes through, particularly in the touching story of how his global partners at Egon Zehnder supported his team in Argentina after the Argentinian default of 2001. After reading the book, I felt like I had learned about Claudio Fernandez-Araoz the man, as well as his ideas.