A typical job interview is a conversation between two liars: Fernandez-Araoz

An expert on hiring at Egon Zehnder, Claudio Fernandez-Araoz says looking at potential is essential

R. Sukumar
First Published1 Dec 2014
Claudio Fernandez-Araoz. Photo: Hemant Mishra/Mint<br />
Claudio Fernandez-Araoz. Photo: Hemant Mishra/Mint

New Delhi: Claudio Fernandez-Araoz, global expert on hiring at executive search firm Egon Zehnder, has interviewed more than 20,000 executives in more than 40 countries. The author of books like It’s not the How or the What but the Who, Great People Decisions, Hiring Without Firing, and How to Hang on to your High Potentials, he is a frequent lecturer at Harvard Business School. In an interview with Mint, he speaks about succession planning and leadership assessment. Edited excerpts:

You must have hired a lot of people. How many?

I would have interviewed 20,000 people and hired about 400. That translates to nearly four interviews per day over 20 years. The more I interview, the more cautious I get to complement my interviews with reference checking, because even after 20,000 interviews, I still trust more in what people working close to the candidate can tell me about the person.

What can we learn from this?

A typical interview is a conversation between two liars. The hirer will tell the candidate that come and join us in paradise...it is a spectacular place, look at the integrity...we change the world, society... And the candidate who is desperate to get the job would say that the day I join you it will be like walking in paradise.

A lot of people ask questions in an interview which are absolutely useless. A typical question is: tell me about your strengths and weaknesses. What would you expect from a question like that? It is like a glorified lie where you show something that you hope the other person will interpret it as a strength which you tried to disguise as a weakness. The right interviews are interviews where you really focus on what needs to be done and you check that the person in the past has been able to do something similar that requires similar skills under similar circumstances.

For example, if you are looking for a project manager that needs to work on a strict deadline and a very strict budget, then you should ask the person if he has been in a situation where he had to manage a situation with a very tight deadline and a strict budget. Ask what was the situation like, what was his role, how did he do it, what were the circumstances and consequences. And then you need to complement or confirm that the person is telling you the truth. Technically, these are called behavioural type of interviews, where the person demonstrates that he/she has the right kind of skills to successfully perform in the job.

This is great at mid- and senior-level hiring. But when a company is recruiting tens of thousands of people at the entry level, what is a good model to have because it is not easy to have face-to-face interviews?

This is related to one of the things that fascinates me about India because Indians are blessed by an Anglo-Saxon mind. It is part because of the logical mind and part because of the huge growth and dearth of talent that India is a hotbed of innovation for people precisely at the mass level.

You probably are familiar with the case of TCS (Tata Consultancy Services Ltd). I met Subramanian Ramadorai and I asked him how many people was he hiring this year. He said 50,000. This is what they have been doing for more than a decade. They hire graduates from colleges, universities. For each one they hire, they calculate the rate of return. Then they divide the productivity of each programmer by their salary board and then they calculate the average rate of return of each hire of each university they are coming from. Then they go to the universities with the highest yields and make a blanket offer to the entire graduating class without interviewing anybody. So you spend zero time and money interviewing and you still manage to hire. When you yield massively you have a lot of data about what makes for success in that type of world and you can do all sorts of analytics. India is most advanced in applying this massive matrix to all type of decisions but for some reason has not applied it to managing talent.

In one of your books, you have said we should move away from hiring on the basis of competencies which everyone is obsessed with and focus more on hiring for potential. But isn’t potential nebulous and difficult to measure?

The answer is no. In order to assess the potential right, the first thing is to know what to look for... The first indicator is curiosity, and it is obvious looking at children as to how they move from doing nothing to achieving things because they are curious. They start playing, experimenting, they learn from their mistakes.

Then you need insights…the ability to connect the dots and the ability to separate the signal from noise and to see new possibilities. The third element is engagement; you have to do all this in this tough world, with all the crises and difficulties. Fourth condition for high potential is determination.

So if you look at all these four indicators—determination, curiosity, engagement and insights—then you are going to achieve a very good accuracy of about 85% that can help you identify potential in your own organization.

Can potential be developed?

Yes, out of these elements, determination is a result of an early upbringing and doesn’t change that much, though it can through a life-transforming experience. But the other three, curiously, develop through habit.

So, for example, if you look at some management consultants, they spend so much time looking at decision creation and analysis that you become, by exercising this, more insightful.

We’ve all been in this programme of influencing skills. All of these can be developed through training. Having said this, the brain is much more plastic in the early years; and if you look at a senior executive, you don’t want to run the risk of trying to develop the potential—it takes time and is very costly (the opportunity cost is huge), so you rather make sure that you assess high potential when making a senior appointment.

Looking at potential is essential for three things—the world has become more volatile and, by definition, if it is more volatile, your work itself changes. For instance, a person who has perfect competence for a job, his job will change rapidly and if the person doesn’t have the ability to adapt to the change...

The second reason why potential is important is because for a series of reasons, I’m convinced that there will be a major scarcity of qualified people. India is blessed with a wide range of demographic dividend, but all the European countries, for instance, or North America and, soon, even China and Russia, are not so blessed with demographics. You will soon have lesser young people. In the programme where I teach, we found that the pipeline that serves qualified successors is the lowest we saw in many years…

Could you elaborate on the pipeline of successors?

Pipeline means the number of qualified successors that you will have for senior leadership positions.

Does it indicate a failure of higher education or on part of the companies that hire them?

At the senior level, mostly, failure in the development process. The main reason for the failure we’ve identified at Harvard Business School is that companies are not very good at the process for developing people, such as proper job rotations. A child initially grows and learns so much is because he is exposed to so many things—first is walking and speaking, then thinking and communicating, and so on. So the way to develop high potential is to expose people from time to time to new challenges. Some organizations do this beautifully, such as ANZ Bank. Every time they spot high potential, every two-three years they assign them to a new responsibility, moving from one service to another to another country. The main reasons why organizations have poor successors is because they didn’t manage well their job rotation.

Everything you’ve said about potential is skewed towards young people.

No; so I will give you a dramatic example. I’m a Catholic. Last year, when pope Benedict resigned, I said this is the chance of my life, how can I influence this decision? So I wrote a letter to the electing cardinals where I tried to suggest to them criteria to appraise which of the electing cardinals had the highest potential to become a pope. You have to predict who has the highest potential. I made three recommendations, one central recommendation was to take a look at the indicators of potential; we use this criteria for CEO succession, for electing directors and boards.

Recently, for example, in London, we hired two directors for John Lewis Partnership, and the main criteria for appraising them was, where CEOs were joining the board part-time as directors, was potential and, particularly, curiosity. Jack Welch retired from his CEO role and remained a curious person and eager to learn.

Look, for example, at the CEO level. Twenty years ago, the average tenure of the CEO was 20 years; now, it’s five years; that’s because jobs change so much so if someone was a good potential, say, five years ago, he’s not any more; but if they have potential, they will be able to adjust, even at a high level in the future with a more complex job.

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