How to Utilize Assessments in Hiring, Promoting, and Team Integration
The Ipsative vs. Normative Debate
As a due diligence tool, pre-hire, or for management coaching and professional development post hire, the market is crowded with professional assessment tools. These types of assessments can engender fear, apathy or outright disdain depending upon one’s perspective.
Some professional business owners use assessment technology while building management teams for portfolio companies.
Others feel they either are not applicable because of the contractual obligations and agreements in the documents underlying the acquisition or investment, or they believe assessments are not applicable given the prior success of the target company.
However, many consultants focused on team building and integration, leadership development and strategic planning will not take on an engagement without administering assessments to the participants in the program.
Whatever your perspective, understanding the two fundamental differences of the assessments available, can go a long way to helping your firm deal with the risk inherent in management acquisition, team integration and post investment management performance.
“It looked good on paper.”
You may have heard these words before or even uttered them yourself, post acquisition or investment.
The numbers made sense; the projections were validated by your best and brightest. The management team’s resumes and references all looked great.
You even interviewed the management team and the interviews went well. Why is the management team now so dysfunctional post investment?
Typically, people problems in these circumstances can be summed up in two words, change and culture.
Try as you might to make the acquisition process as seamless as possible, subtle forms of change ripple throughout the organization and disrupt people’s effectiveness.
Whether certain leaders leave due to agreement or others change their roles, new reporting requirements are implemented and a new configuration of the board is put in place; change happens due to your involvement in a portfolio company.
Change affects different people in different ways.
Reaction to Change
Although the effect on people may manifest itself much like grief; where people get stuck in the grieving process is the key question.
Some experts describe the five stages of grief as follows: denial, anger, bargaining, depression, and acceptance.
A smooth transition is dependent upon knowing who might get “stuck” and where they may get stuck. This is where a comparison of the ipsative and normative assessments is critical.
Ipsative Assessment Tools vs Normative Assessment Tools
Ipsative Assessment Tools
Ipsative tools are by their nature, self reporting.
When one takes the assessment, one tells the assessment what he or she thinks of him or herself and the assessment reports that input.
It is not unlike going to the doctor and saying
“I have a back ache and believe I need surgery.”
Most doctors would not act on that input, save ordering more diagnostics assessments. Put another way, these types of assessments “look good on paper” but allow the assessment subject to tell the test what they think the end user wants to hear.
The output is not much more reliable than an interview and it is not necessarily a useful tool for predicting how that person will react to the change that results from your involvement in the company.
It is also very difficult to use an ipsative assessment to coach a person for performance improvement.
Essentially the tool leaves it to the assessment subject to tell the user where he or she needs improvement.
Like the doctor with only patient input, one is left with very little reliable diagnostics on which to act in order to affect a cure and make the patient better.
When coaching management members to accept change and thrive, behavior change is the cure, and one needs to know underlying hardwired behavior.
Many experts agree reliability is the key empirical measure of the efficacy of an assessment tool. Reliability is measured by the percentage of similar results each time a subject is administered an assessment.
According to the United States Department of Labor, anything less than 70% reliability may render a tool less than adequate.
Because ipsative assessments are self reporting, test subjects can simply change their answer each time they take the assessment, depending on what they think is expected of them. It can be quite easy for the output to change each time the subject takes the assessment.
Because the assessment is self reporting, it is not feasible to test for “distortion” or inconsistency of answers in just one assessment.
Normative Assessment Tools
The other type of assessments, normative assessments,
measure the subject’s answers against sample populations. The scores generated from these assessments are not unlike the percentile scores found in standardized tests.
They can measure core behaviors, learning styles and professional preferences as compared to the general working population or against benchmarks of best performers in various occupations.
The most cutting edge of these assessments claim 82% reliability. Normative assessments can also report distortion, or consistency of answers. As previously mentioned, ipsative assessments are by their nature distorted by the subject.
A measure of distortion is critical in order to know how candid a subject has been while taking the assessment.
Because most normative tools report core natural behavioral tendencies, learning styles and professional interests as compared to statistically viable sample populations, it is easier to predict how a subject will react to change, and when and how coaching can best be used to help that subject adjust and improve.
Team interaction and integration can be facilitated using a reliable tool that can help new owners understand their talent pool and how they will or won’t work together.
Because of their reliability, normative assessments can also be used to benchmark the best performers in a company. Benchmarking allows the creation of a continuity plan to facilitate replacement of departing key people.
Proper benchmarking can make the continuity plan more predictable and less risky.
Matching candidates to fill roles in a specific company or department based on learning styles, behavior tendencies and professional likes, increases the probability that there won’t be a performance drop off post departure of key individuals.
This is frequently referred to as analyzing candidates for “job fit”.
One other benefit of normative assessment tools is some meet or exceed regulatory guidelines for non-biased hiring and promotion tools. As you develop the organization at any portfolio company, very difficult decisions often need to be made.
The risk of litigation can often hamper optimum decision making for hiring, promotion and allocation of duties.
Because the latest normative assessments are often based on third party research, validated over periodic studies, they are accepted as a third party analysis of a candidate’s fit for a position or role.
Properly utilized, use of the tools, have stood up in court. (We are not lawyers and this is a matter to review with your employment counsel. The assessment landscape should be evaluated with your advisors with these guidelines in mind.)
Beyond risk mitigation, proper use of these assessment tools can help owners advise portfolio management on where their teams “core strengths” can best help the organization achieve its goals.
Aligning management teams to tasks and functions, based on individual core strengths can go a long way to deliver high performance and the results that follow.
Some organizational experts believe that when tasks are aligned with those best equipped to execute those tasks, overall organizational performance improves.
Peter Drucker once said:
"The task of management is to make people capable of joint performance, to make their strengths effective and their weaknesses irrelevant."
When change is occurring, the task is to handle the change and minimize the disruption it causes the organization.
Normative assessments can allow owners better visibility as to who in a portfolio management team is best equipped for the task of leading the company through the change and transition to new ownership and control.
As mentioned before in this article, culture is also cited as reason for disappointing outcomes post acquisition or merger. Corporate culture is described by W.P. Carey as “the core values, ways and beliefs, business principles and traditions” of a corporation.
The missing piece in this description is people. More specifically, how the people of the corporation operate in order to make it a successful organization.
Notwithstanding the organization chart one is shown pre-acquisition or merger, the informal organizational chart of the actual organizational communication and decision flow, holds the key to the culture of the corporation.
Management typically fears changing that natural flow. That fear manifests in various ways that are sometimes described as culture clash.
This often includes turf battles, sudden departures to competition, and worse. There is nothing nefarious about the informal organization chart. Successful high performing organizations, either by design or serendipity, allow their management teams to develop their role in the corporation to their individual strengths, notwithstanding titles.
With normative assessments in hand, management team integration in spite of disparate cultures is more easily facilitated as ongoing tasks can be aligned with individual strengths.
New owners can help facilitate the negotiation of roles, task assignment and the selection of go forward practices that best fit the new integrated team.
Once the ownership transition has been executed, normative assessments can also allow owners to provide coaching to management team members tailored to the particular person’s strengths and core characteristics.
Because quality normative assessments are empirical; they can also be added to 360 and 180 assessments and are not redundant to the self assessment portion of these tools.
This allows a coach or superior to temper the emotional response frequently encountered post 360 assessment, by pointing to the empirical “x-ray” as confirmation of other people’s subjective concerns.
As a result, the best normative assessments can be confidently utilized much like a doctor uses an x-ray, MRI, or other third party diagnostic tool.
Ipsative tools on the other hand, are subject to and require subjective interpretation and can be more easily distorted by the subject. While useful in certain settings, ipsative tools are self assessments and therefore not reliable tools for developing strength based integrated management teams.
If one is inclined to use assessment tools, and we encourage their use, we believe normative assessment tools are best practice for developing high performing management teams post merger or acquisition.
When used properly along with other due diligence methods, these tools are also very useful and valid tools for people due diligence tools pre merger or acquisition.
About the author: Ken Greenberg, has extensive experience as an Organizational Development Professional, Investment Banker and a Private Equity Professional. Prior to joining Auctus Search Partners, LLC as a Senior Managing Director focused on Executive Recruiting for C-Level positions, Ken was the founder and CEO of KLG Consultants, LLC, which was acquired by Auctus Search Partners, LLC in November of 2016.