01/19/2012 10:48 am ET Updated Mar 20, 2012

About Leadership: Searching for Stars

When I joined Sohio, at an advanced age for a new entrant, I was told that before joining I would attend an assessment center, or at least a mini version of one, where my potential for senior management would be evaluated. Well, I was a good academic, so I did a little research on such things, and found articles in Harvard Business Review about assessment centers in companies such as JC Penney and AT&T. In JC Penney one of the competencies they were looking for was customer responsiveness, and to assess this, participants would receive phone calls in the middle of the night from actors playing the role of irate customers, with their approach being evaluated. I can't recall anything about what I learned of the AT&T one, though that probably involved something with telephones as well.

What I attended at Sohio was not terribly interesting, mainly consisting of a battery of mathematical and verbal reasoning tests, along with some psychological testing and interviewing. This was not really an assessment center, although I later learned that the senior management of Sohio believed that the mathematical and verbal reasoning tests had great predictive ability for successful leaders. I somehow doubt this was ever verified by evidence -- rather it was one of those prejudices it is more comforting not to try to test. Some years later Whitehead Mann convinced BP to give all of its senior managers a similar set of aptitude and psychological tests, with equally useless results.

But assessment centers, real assessment centers, are much more fun and much more useful. They involve taking a peer group of employees away for a few days, where they carry out a series of exercises, individually and in groups, in the presence of observers. The classic individual exercises are the in-box, in which the individual takes action on a full array on incoming paperwork (probably by now the inbox is electronic anyway), and the difficult employee, in which an actor plays an employee who is causing problems on a project or within a team.

In the group exercises, there is usually a problem of some sort to be solved -- a missed production schedule, a decision on an investment, something where individuals are not assigned but rather find their roles. Some people become very operational, others very strategic. Some try to dominate the conversation, others fade into the wallpaper. These exercises can be very revealing, but the observers must be skilled and perceptive.

In the best version of this that we ran in BP, the exercises had been professionally designed to give participants a chance to demonstrate the competencies that BP felt were important in its senior leadership. It is very important that competencies rather than skills are being judged. The observers see all the participants in different situations, and note down what they see. Only after all this is complete do the observers, led by a professionally trained facilitator, sit together and share their observations. Finally, having heard and discussed this, they discuss what this means in terms of the observed competencies of the individual participants.

All of this is then fed back to the individuals, and becomes input to the committees at board level that look at development assignments for key employees.

Well, if this all sounds like a time-consuming and expensive process, you are right, it is. But if it works, if it identifies from among a talented pool those individuals who are really suited for broad senior leadership roles in a big corporation, then surely it is worth it.

Moreover, in my experience, the assessment center did two other things well. It identified employees who were thought of as good but not extraordinary, but who shone in the assessment center. In several cases this result led to more challenging assignments for these people, which they often did with distinction. It probably only takes one of these results every now and then to pay back the investment in the assessment center.

The other good outcome was to highlight employees who were really good at what they did, but who did not have the potential to work more broadly. The superb trader, lawyer, engineer, or scientist. When the assessment center worked well, the feedback to individuals at the end of the week along these lines was generally very well received.

Can you find your stars through assessment centers? Yes, but first you must have a very good idea of what sort of competencies a star in your corporation will have. If you have not reached consensus on that, how can you possibly assess individuals. Then you have to invest to do it professionally, and recognize that a substantial up-front investment and ongoing investment of time is important. Senior leaders in the corporation need to participate as observers, and that means that they have to commit to blocks of time, including time for training.

This role of senior management as observers, at least once, goes right to the top of the company. Unless the people who are going to look at the outputs of the assessment center have been through the process as observers, they will not be able to interpret the reports and evaluations coming out of it with intelligence and understanding. So: expensive and time-consuming? Yes. But can there be any more important use for our time and money than identifying our future corporate leaders and their development needs?

About Leadership: About Leadership is a series of 52 columns on corporate leadership -- essential skills, leading teams, managing your career, the strategic and business practices to make a company and its leader distinctive from competitors. These columns will be of interest to people leading small and medium-sized companies today, many of whom have not had much formal training in management skills and techniques; for the many people in big companies who aspire to senior management; and for anyone who thinks: Give me a hint, how can I do this better?