11/22/2011 05:09 pm ET Updated Jan 22, 2012

Don't Pick a Failure? Think Again

Past performance is the best indicator of future success, right? It is hard to disagree with this notion, and when evaluating the prospects of a new leader, it is accurate to make performance assessments based on someone's tangible achievements and impact. However, this is not at all the same thing as eliminating candidates who have experienced a setback or, worse, an abject failure. Considering people only whose career trajectories have been a straight line of successes is dangerous business. Of course, no one wants to pick "a failure." But it may well be your situation where the candidate crashes and burns for the very first time. Not only that, it will at the very least limit your pool of potentially attractive candidates. The keys to avoiding this pitfall are to assess mistakes carefully and to focus as much on the competencies that will be required for success in the position you are deciding on.

When someone is released from a position, it is usually assumed that the individual was at fault. But hiring managers are reticent to take a risk on someone with a visible failure because it opens them up to criticism later on if it doesn't work. Betting on a candidate with a failure takes courage.

One company did take that risk and hired a technology leader who had fallen out with his company's founder and been forced to resign. Initially there was surprise and skepticism. But the company did its homework in the form of deep references and due diligence. They spoke to people not only on the individual's reference list but to many others who were not on the list. The nature of their inquiry was to understand the conditions that led his actions and decisions to not work and to delve deeply into the nature and personality of the company's founder and culture as well. There was no disputing the facts -- a long track record of success followed by serious challenges in the company wrought by the economic collapse and new competition and then a precipitous ousting. But they concluded that what he attempted to do in his prior company that got him sideways was precisely what was needed in their company. His mistakes were "good mistakes"; there were no integrity issues nor was there a strategic misreading of the situation. Rather, his actions -- to make several key top management changes, to reduce costs by closing a money-losing but historically important division, and actually making a symbolic increase in product development investment while reducing top management compensation -- were deeply at odds with the founder's views and elements of the corporate culture. The new company could live with that -- in fact, that was exactly what the doctor ordered.

There is another important benefit to opening up your consideration set to candidates who have achieved significant setbacks. They are highly motivated to succeed. They are eager to reclaim their reputations. So you may get a potentially deeper reservoir of underlying motivation and work ethic.

In general, to assess a person's setbacks or weaknesses, you need to go beyond a cursory glance at the way one part of a career ended. An open mind and thoughtful consideration go a long way in helping you find the leader you need, and the one you deserve.

James M. Citrin co-chairs the North American Board & CEO Practice at Spencer Stuart and is the author of You Need a Leader--Now What? How to Choose the Best Person for Your Organization, now available from Crown Business