subject: Executive Recruiting: Draft Your Corporate Executives Correctly by:Paul Frankenberg [print this page] Everyone loves a good sports analogyEveryone loves a good sports analogy. The upcoming NFL Draft prompted me to consider how the player selection process compares to how businesses succeed with executive recruiting. Because I'm interested in how organizations assess a leader's capabilities and their subsequent success, I set out to determine whether the NFL can offer a few tips to improve an organization's executive recruiting.
A recent New York Times article about Harvard Business School (HBS) research gave me the basis for a football and business comparison. The research, conducted to determine whether CEOs learn from a failed business experience, studied entrepreneurs/CEOs who received venture capital (VC) funding.
While a fun and timely comparison, there is a basic similarity between venture capital firms and NFL organizations. Both NFL teams as well as venture capital firms operate in a high risk and high reward environment where executive recruiting is a rigorous exercise to minimize risk and maximize reward.
The HBS research found that "for the average entrepreneur who failed, no learning happened." What they found was that the only experience that counts is success. HBS's definition of success was going public or filing to go public during the time period from 1986 to 2003.
Research Findings:
1st time entrepreneurial CEOs who received VC funding had a 22 percent success rate.
Entrepreneurs whose companies had been liquidated or gone bankrupt had a 23 percent follow on success rate. Take away: Failure resulted in only one percentage point of learning.
Already successful entrepreneurs had a 34 percent success rate in their future role of leading a VC funded business. Take away: Greater learning gained from success.
As I watched ESPN's Draft Review one evening, Mel Kiper, Jr. and others debated each NFL team's probable selections and who they believed were the best available performers. Kiper pointed to an individual's performance on the field during the last three years, at the recent Combine and during workouts with NFL team scouts in discussing the player's projected success in the NFL. Suddenly, it hit me. Each NFL prospect goes through tremendous public scrutiny on specifics of his past and recent performances to determine the environments where the player would be most likely to succeed. I laughed as I wondered; can NFL teams and the NFL draft teach VC firms how to improve executive recruiting outcomes?
I decided to compare business leaders to Top 10 NFL draftees. Each year these Top 10 NFL draftees are the highest paid athletes, they are clearly world-class performers and they are expected to provide team leadership. HBS researchers used 'going public' as their measure of success, and I decided to measure each of the NFL's Top 10 Draftee's success by being named to the annual Pro Bowl. I used the same 1986 - 2003 time period and needed to determine the percentage of Top 10 NFL draftees who achieved Pro Bowl status. Additionally, I wanted to know which players among this draft group achieved follow-on success, defined as being named to multiple Pro Bowls. The results of my research:
Top 10 NFL draftees who played in at least one Pro Bowl: 43 percent
Of the Top 10 NFL draftees who played in at least one Pro Bowl, the percentage of these same Top 10 NFL draftees who played in more than one Pro Bowl: 73 percent.
Venture capital firms successfully choose the right performer 22 percent of the time while NFL teams successfully chose the best performer 43 percent of the time. Even more contrasting, those who succeed with venture capital firms achieve a 32 percent success rate in a follow-on attempt where NFL players who achieve one Pro Bowl have a 73 percent success rate in being named to at least one additional Pro Bowl. Some light research (loosely using the term "research"), reveals that the NFL is twice as good in identifying top performers. Even more interesting is that the NFL teams that hire correctly end up picking long-term performers. Again, performers who achieve our definition of success, a Pro Bowl invitation, are more than 73 percent likely to have future success!
Granted, the NFL's decision makers have resources not available to venture capital firms and the rest of us in business. Without a business leaders Combine performance and reels of film to review, we have to rely on other measures to help determine a prospect's potential for success.
But what can the NFL draft teach us about executive recruiting for our business's top leaders?
1. Don't hire a wide-receiver to be your linebacker.
A successful corporate and NFL leader has experience and expertise doing specifically what you need to have done. In the NFL, the large majority of players play one position in college, perform at the Combine in that same position and will attempt to make an NFL roster in the same position. The successful NFL franchises use caution to avoid becoming awe struck by the super athlete, for example Bo Jackson. It's interesting to note that Jackson did not play in a single Pro Bowl game, and he played in only one Baseball All-Star Game. NFL teams and the individual players know their individual role, their specific strengths and weaknesses in that role and where their teammates need to support their deficiency.
In Corporate America's executive recruiting, the leader you hire should have industry knowledge and, based on my NFL research, the executive should have recently played a similar role in a successful, previous business.
2. It's hard work to assess soft skills.
I talked briefly with Titans' General Manager Mike Reinfeldt about this article and asked him whether soft skills are important in determining which player the Titans draft. He quickly stated, "Very important". Mr. Reinfeldt added that the draftee will be paid like a leader, looked upon as a leader and expected to be a leader. How he communicates with the team, the coaches and the community is very important. Draft prospects are interviewed by multiple people to assess fit within the organization and community, which Mr. Reinfeldt stated was equally important to the level of athleticism.
A business leader's soft skills and ability to be effective with investors and the board, senior management and staff, prospects and customers, policy and regulatory authorities, vendors and those within the community are vitally important in your executive recruiting process and hiring the right leader.
3. The Heisman Trophy winner may not be the best leader.
Only two of the eight Heisman Trophy winners selected from 1996 to 2003 have been named to a Pro Bowl. An equally interesting comparison is that during the 1986-2003 time period, eight individuals who were #1 draftees made at least one Pro Bowl while seven individuals who were #10 Draftees made at least one Pro Bowl. There is a dramatic perception difference and guaranteed income difference between the Number 1 draft pick and the Number 10 draft pick; however; the significant income difference does not correspond to results on the field.
When a business experiences a vertical growth trajectory, it creates the perception that the company's leaders are truly world-class. As a result, we may rush to hire an individual from this company. While this strategy may lead to a great hire, do not let yourself get caught up in the excitement and conduct the executive recruiting process without proper and thorough diligence.
In Summary:
My light-hearted comparison was interesting to highlight a few thoughts to consider when hiring a key executive. Companies do not follow business leaders like the NFL follows prospects; nor do we interview business leaders like the NFL Combine. Top executive recruiting firms may be a very good resource to you as they are supposed to know these business leaders well and possess knowledge of their past performance. Additionally, a good executive recruiting firm should also have the ability to thoroughly and accurately assess a prospect's relative fit within your organization and his/her performance ability. But once your executive recruiting firm has identified, assessed and recommended top candidates for an executive position, it's still important that the investors, board members and senior leaders engage to assess both the hard and the soft skills of the top draft pick before adding him or her to the corporate roster.
About the author
Paul Frankenberg is President & Co-Founder in Kraft Search Associates. The firm has been recognized as one of the nation's Top 25 Healthcare Executive Recruiting Firms in the USA by Modern Healthcare. Paul has personally completed more than 250 search assignments.