It must have seemed like a good idea at the time — to somebody. Paul Flowers, a Methodist minister for more than 40 years, was hired in 2010 to be chair of the Co-operative Bank based in Manchester, U.K.
While Flowers had dabbled in banking many years before and served on boards, his banking experience was limited. Three years after he was hired, the Co-operative Bank was facing a capital shortfall of £1.5 billion ($2.7 billion Cdn) and Flowers was forced to resign while facing allegations of buying illegal drugs.
In giving evidence to parliament’s Treasury Select Committee in January, Flowers didn’t seem to understand the magnitude of the bank’s assets, loans or investments, according to media reports. So how did the reverend manage to assume such a prominent position in the first place?
Psychometric tests might be one reason, according to the bank’s former deputy chairman. During the interview process, there was not much discussion about banking experience and no references were asked for, said Rodney Baker-Bates, according to the Independent. And when asked if he knew why Flowers had beaten him for the job, Baker-Bates said: “I was told afterwards he did very well on the psychometric tests.”
It’s a bit odd that an organization would hire someone simply because he did well on the tests — but it happens, according to Rowan O’Grady, president of recruitment and staffing firm Hays Canada.
“You’ve got some companies where the actual test is literally the deciding factor of whether the person would get the job or not, and it supersedes or trumps everything else… The companies who take it too seriously do tend to cause themselves some problems.”
O’Grady has seen specific examples where he thought a candidate was not a good hire but, because she had a perfect psychometric match, the employer hired her — and three or six months later, she was gone.
“If somebody’s always using it blindly, then that is a mistake,” he said.
And while some companies might put too much weight on aptitude tests, others may go the other way, said O’Grady, who is based in Toronto.
“You’ve got people who’ve agreed to the profile they’re looking for (in a candidate), then they interview the candidate, fall in love with the candidate and they’re absolutely not a match through a psychometric profile — but they’ll decide to hire the person anyway, which is kind of a waste of time and money. If you’re going to do it, it should hold some kind of weight.”’
Use with care
To hire properly, employers should look at the strategic plan for the organization and try to work out exactly what the role will bring to the organization. Then that should be openly discussed among the other members of the board, he said.
“The testing has got to be part of that, it can’t be the only part of it.”
Psychometric testing is never intended to be the whole picture — it’s supposed to be used in conjunction with other forms of information-gathering, said Aidan Miller, performance and talent development consultant at Psychometrics Canada in Edmonton.
“We’re not looking to replace interviews but we’re looking to inform them a little bit better... the purpose of them is to simply diminish some of the uncertainty that is associated with using only one method or a couple of methods.”
So when someone does well on the test, it doesn’t mean she should automatically be hired but it sheds light on different areas.
“It just helps (employers) view the candidate through a certain lens or helps them address some of the uncertainty or some of characteristics they can’t tap into during an interview,” said Miller.
The notion of using assessments is becoming more popular, especially when it comes to CEO or executive management positions, because the consequences of making the wrong decision are so huge, she said.
“It has such massive implications if they don’t get the right fit the first time. It can be the difference between a successful organization one day and a disaster the next week so, increasingly, the battery of assessments is going to be larger and comprehensive for something like an executive-level-functioning individual.”
With a greater focus on corporate governance, this kind of scrutiny makes sense, according to O’Grady.
“That’s why psychometric testing continues to be more popular because it’s just another element of showing due diligence, to some extent, to say, ‘We put them through the screening process, we did the psychometric testing, they did six interviews, they met everybody in the organization’ — it’s showing due diligence and hopefully people are taking that seriously and it really is part of the process as opposed to doing it literally for the sake of doing it.”
At this point, there’s not a lot of psychometric testing when it comes to the board level. But there’s no reason it shouldn’t exist, according to Richard Leblanc, associate professor of governance, law and ethics at York University in Toronto. That’s because personality and fit matter — and a lot of these intricacies are underdeveloped for directors because it’s relationship-based as opposed to merit-based recruiting.
“(With) a small group of 10, 12 directors, all it takes is one to really dominate or unduly influence a board, so it’s crucial that prior to the appointment — because it’s difficult to extract them once the appointment happens… there’s a greater effort made,” he said.
You want people at that board table that have the right background, said Leblanc. Otherwise, what you see are legacy, pedigree directors who are selected on the basis of profile instead of subject matter expertise, he said.
“What’s been happening is you have directors that just don’t understand banking and how do they push back against deals and products when they have just a fundamental lack of understanding? So you need the best of the best, especially on bank boards.”
And the rules are changing, he said, as seen in the United Kingdom, where people at the helm — and especially the chair — are required to understand banking.
“It’s very complex — they need to understand the subtleties, when you get into instruments like derivatives, they need to have that background,” said Leblanc.
“So it’s entirely appropriate to scrutinize the industry background of the non-executive chair of a bank board, absolutely, and also the behaviours — you know, how they interact, their integrity, their leadership style, the ability to chair meetings, an orientation towards consensus, communication skills, credibility, gravitas — these are words that are frequently being used in director recruiting.”
Earlier this year, the Office of the Superintendent of Financial Institutions recommended financial institutions in Canada provide early notification of a candidate’s appointment or nomination for election to the board or an executive position, including his CV, so the office has time to express any specific concerns regarding the candidate’s appropriateness.
“There’s going to be greater regulatory scrutiny over industry background, risk expertise, even the softer skills, preparation for meetings. These softer skills are harder to detect outside a boardroom but they’re important,” said Leblanc.
“You need the brightest people there and these soft bios, these short two-paragraph bios that are disclosed, are just not going cut it so the regulators now are digging deep.”
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