How startups use psychometrics for leadership development can make or break them: 4 major principles to follow

A survey by the Society for Human Resource Management estimates that at present, 18% of companies use psychometric testing for a range of purposes, most commonly recruitment and hiring.  According to Harvard Business Review, skillful application of cognitive and personality tests (also known as psychometrics) help companies avoid hiring and managerial mishaps, which are estimated to cost a company at least one year’s pay.  Poor management can be especially fatal for startups, making skillful leadership critical to a startup’s early growth and success.  Ray Dalio founder of Bridgewater Associates, the largest hedge fund in the world managing $160 billion discusses the value of psychometric use for leadership development in his widely recognized bestseller Principles: Life and Work.  Dalio and his employees use psychometric observations and evaluations to identify and minimize derailing behaviors among high potential leaders.  In sum, leaders who lack self-awareness and fail to learn from their experiences contribute to their own derailment.  Honing self-awareness is the prevailing objective among clients in my executive coaching practice aiming to mitigate the derailing pitfalls that new challenges bring.   Applied research findings in this area reveal the most common derailments among faulty leaders:

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  • Problems with interpersonal relationships
  • Failure to build and lead a team
  • Lack of self-awareness
  • Inability to learn from feedback and experience
  • Trust/integrity issues
  • Inability to change or adapt
  • Poor composure under stress
  • Over-reliance on strengths

Unfortunately, many organizations choose the wrong psychometric assessments to use in their leadership development efforts, or use them in the wrong way.  Expert application of psychometrics can be a costly investment for small startups.  Typically the luxury of employing an esteemed management company like McKinsey for psychometric use in leadership development is far outside of the budget of early stage startups.

My professional experiences teaching and utilizing a range of psychometric assessments and later coaching tech leaders through challenging transitions provide a framework for offering these guiding principles on how startups can optimize psychometrics for their leadership-development.

Four major principles to follow:

Consider applicable laws.  Stay in legal compliance whenever employing psychometric tests. in your organization.  Anti-discrimination laws apply to psychometric assessment tools (particularly cognitive tests) stating they must be job-relevant and demonstrate internal and external validity.  The Americans with Disabilities Act provides specific guidelines for using psychometrics within organizations- they must respect people’s privacy and not aim to “diagnose” potential hires or employees in any way.  Historically organizations have used clinical psychometric assessments like the MMPI-2 for employment decision-making, though it was designed for the purpose of diagnosing mental illness and identifying traits common in those with personality disorders.  Because the MMPI-2 was developed for use with psychiatric and prison populations,  some employers have been taken to court for using it in their organizational decision-making and lost.  Using psychometric tools designed for use and application in industrial/organizational settings is a safer bet for company decision-making.

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Choose your tests wisely.  Aim to build an evidence-based approach for evaluating leadership growth and performance, with specific purpose in mind. If using psychometrics for hiring, aim to demonstrate that your hiring tools predict how you’re defining ‘success’ in a given role using rigorous statistical analyses.  Relying on interesting but random psychometric outcomes will at best waste time and resources, and at worst lead managers to make faulty decisions.  If using psychometrics to increase self-awareness in leaders, select assessment tools designed for this purpose, proven to be scientifically valid by experts in the field, and have demonstrated utility in identifying and redirecting problematic behavioral patterns.  Whenever possible, get support from experienced organizational consultants to help your company select appropriate tools for your company’s specific needs.

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Follow test administration protocol or risk invalidating outcomes.  “Proctoring” assessments ensures they are being taken according to the test’s protocol, either by having people take the assessments in front of an informed test proctor, or through video conference monitoring if they are remote.  Be sure that test takers are given clear directions according to the test developer or risk invalidating test results.  Be aware that some people may feel compelled to influence their results in order to appear more competent for a particular role, or may be more guarded in their responses as a way of presenting themselves in the most favorable light to potential employers.  Some psychometric tests have built-in measures that indicate whether a candidate’s pattern of responses reflect an effortful attempt influence their test outcomes, or if their responses are inconsistent with one another.  Using outcomes from multiple psychometric tests (referred to as a ‘test battery’) can help to gather a more accurate, comprehensive testing profile.

Leadership development initiatives with opportunities for privacy and self-directed learning enhance engagement.  When participants are allowed to maintain a sense of privacy over their psychometric assessment outcomes, they are more likely to engage in deeper, lasting growth.

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This practice provides a safer space for leaders to do a deep dive into understanding their own personal challenges.   Innovative venture capital firms like Alpha Bridge Ventures are investing in startup founder success with an on-boarding process that uses psychometric surveys to determine leadership style, then tailors support through an inter-disciplinarian team of coaches and wellness professionals.  Other venture capital firms like Andreessen Horowitz recognize the limitation of time and resources executives have to spare for developing their own employees.  Outsourcing leadership skill-building through founder retreats, externally facilitated consultation groups modeled after Stanford’s T-groups, or providing a broad and deep alumni support network à la Y-Combinator are all ways startup founders are achieving leadership success.   Larger organizations are investing in employee development through bespoke leadership programs like Potentialife, which provide participants access to strategic, self-directed leadership growth modules through the convenience of an interactive app.

Startups that invest in their leaders self-awareness will benefit from the long-term gains that self-knowledge delivers.  Appreciate that no matter how much progress we make, there’s always more to learn.

We cannot solve our problems with the same thinking we used when we created them.

– Albert Einstein

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