Leadership Assessment

Recognizing potential in employees is the core task of the HR department. Especially when it comes to leadership, because every company needs structured succession planning (also known as a “talent pipeline”). Leadership assessments are therefore part of every HR manager’s toolbox – whether for identifying potential or selecting (future) managers.

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Leadership assessments help companies to identify potential within the company.

Particularly in view of the increasing uncertainty regarding future challenges, it is important not only to pay attention to employees’ current skills, but also to identify their potential for change.

There is no single leadership assessment tool that can be used to recognize potential; effective assessments follow the principle of multimodality and capture different areas of competence using different methods.

Definition of

Leadership assessment literally means “the assessment of managers” or “the assessment of leadership skills”. Leadership assessments are an important tool for future-proofing a company and optimizing the leadership potential of the management team.

Leadership assessment: recognizing managers at an early stage

Discovering potential is one of the key success factors in any organization. The most important potential of companies are management skills and leadership abilities.

After all, the long-term success of a company is a direct result of the quality of its managers. Today more than ever, leadership is a critical success factor.

Questionnaire for the diagnosis of entrepreneurial potentials

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Our consultancy focuses exclusively on management diagnostics and can draw on benchmark data from over 30,000 executive assessments.

Making the right management staffing decisions. Recognize competencies and potentials of managers. Avoid bad investments due to miscasting.

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Succession planning

A key success factor is structured succession planning. Successful companies have one or two potential success ors for every key position in the company (see diagram). The aim is therefore to systematically identify high-potential employees within the company.

This not only ensures qualified replacements in the event of short-term changes in management, but also has a motivating effect on high-potential employees – knowing that you are a potential successor for one or more positions increases a person’s loyalty to the company.

Potential versus performance

Succession planning is often based on the current performance of employees. Of course, the current performance of employees is a basic prerequisite for being identified as a high-potential employee, but it is not the only one.

On the contrary – the best developer is not necessarily the best development manager, the best sales employee is not automatically the best sales manager. When assessing potential on the basis of performance alone, you even run the risk of making two mistakes at the same time during a promotion: You lose an excellent expert and gain a mediocre manager.

Assessment of managers

The identification of high-potential employees and the assessment of their leadership skills is usually based on the evaluation by the respective manager. However, this is not always objective.

The suitability of employees is often based on rather subjective criteria, such as the similarity of the employee to the line manager. The extent to which managers create opportunities for employees to show and develop their potential also depends heavily on their leadership styles, soft skills, coaching skills and leadership competencies.

The assessment by superiors is also subject to a number of known perception and assessment distortions, simply the lack of competence of a manager to systematically and objectively recognize potential.

Leadership Development

Identifying and developing high-potential employees is the primary task of managers. However, HR development and external consulting firms (such as ours) should support managers in making well-founded assessments of potential – through the use of leadership assessments and assessment tools (questionnaires, test procedures, structured competence models).

Potential assessments are forward-looking

What makes it difficult to assess potential is that you want to recognize the extent to which someone is suited to mastering future challenges that we don’t even know what they will look like today.

What leadership role will be necessary in the future? What leadership behavior and leadership styles do Gen Y and the following expect? What leadership skills characterize future managers?

Companies are often unable to clearly identify these future challenges – because they are not yet aware of them. The leadership assessment is therefore about assessing fundamental personality traits and skills that are helpful in overcoming future challenges that may be unknown today.

Potential in the VUCA world

Assessing potential is made more difficult by the VUCA world (see illustration) in which we live today. In order to be successful as a company in the long term, the following information, which is evaluated in the leadership assessment, is particularly important for high-potential employees:

Learning ability – the willingness and ability of a manager to quickly acquire new knowledge, methods and behaviors.
Self-reflection – the ability to accept and implement feedback, to know oneself, one’s strengths and weaknesses.
Networked thinking – being able to recognize and control dynamic, networked and partially non-transparent relationships.

These skills are also summarized under the term “learning agility“.

Challenges of the VUCA-World
Volatile	We live in a world that is constantly changing, that is becoming more unstable every day, in which large and small changes are becoming more and more unpredictable – and they are becoming more dramatic and are happening faster and faster. As events unfold in completely unexpected ways, it is becoming increasingly impossible to determine cause and effect.
Uncertainty	It is becoming increasingly difficult to anticipate events or predict how they will develop; historical forecasts and experiences from the past are becoming less relevant and are rarely suitable as a basis for predicting future developments. It is becoming almost impossible to plan investments, developments, and growth as it is increasingly uncertain where the journey will take us.
Complexity	Our modern world is more complex than ever before. What are the reasons for this? What are the effects? The problems and their effects are more complex and more difficult to understand. The different levels intertwine and make it impossible to gain an overview of the interrelationships. Decisions are reduced to a web of reaction and counter-reaction, and it is almost impossible to choose the right path.
Ambiguity	“One solution for everything” and “best practices” are a thing of the past – in today’s world, things are rarely completely clear or precisely definable. Not everything is black and white – gray is also an option. The demands on modern organizations and management are more contradictory and paradoxical than ever and are turning our personal value systems upside down. In a world where the “what” takes a back seat to the “why” and the “how” making decisions requires courage and a willingness to make mistakes.

Evaluation of existing managers

Particularly in rapidly changing environments, the question sometimes arises as to what potential the existing managers have to be able to meet future challenges.

A ⇨ Management audit or ⇨ Management appraisal is then used for this.

Procedure of the potential analysis

Requirements analysis

As with any aptitude assessment procedure, the first aim of the leadership assessment is to gain an insight into the (future) requirements for managers. These are of course different for each company and each position/role.

Nevertheless, there are some areas of potential that should always be covered.

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Potential for change

How open is someone to change – new tasks, new cultures, new challenges?

Intellectual potential

One of the most important prerequisites for mastering future challenges is intellectual potential. Not only in the sense of classical intelligence, but above all in the ability to cope with complex situations – even when new topics and tasks are involved.

Relationship potential

Leadership skills are also a strong focus of the leadership assessment. Leadership skills, empathy, communication, assertiveness and behavior in conflict situations are good indicators of potential for successful management and leadership behavior.

Personal potential

Here, the leadership assessment focuses on the area of motivation: what drives someone, in what kind of environment can someone best develop their potential? Other areas of personal potential are resilience (resilience/emotional stability) and the ability to self-reflect.

Leadership Assessment Tools

There are numerous tools, questionnaires and tests on the market designed to assess the potential of managers. Unfortunately, there are far more dubious, less valid tools than reputable ones.

It is almost impossible for the layman to assess the quality of individual procedures. Decision-makers often choose the leadership assessment tools that provide the most comprehensive feedback (usually visually perfectly prepared) and make the most promises.

However, it is impossible to determine leadership potential with a single leadership assessment test, even if the providers claim the opposite. Serious leadership assessment tools consist of different procedures and approaches, this is called the multimodal approach to aptitude diagnostics.

The multimodal approach
Behavior	Observations, e.g. in role plays, case studies
Psychometrics	Personality and motivation questionnaires
Biography	Biographical interview

Typical procedure of a leadership assessment

Psychometric methods

Participants in a leadership assessment often carry out various tests, so-called psychometric procedures, in the run-up to the assessment. These can include self-assessment questionnaires, cognitive performance tests, motivation and personality questionnaires.

Behavioral observations

So-called “simulation exercises” are used here. The best-known simulative method is role-playing – the participants conduct a conversation, e.g. an employee interview with a role-player. But case studies (business cases) are also included.

Interview

Every leadership assessment involves personal contact with the participants, an interview to establish their background and career, formative experiences and self-assessments.

Excursus: Myers Briggs Type Indicator

Probably the best-known psychological questionnaire is the “Myers Briggs Type Indicator“(MBTI). It was developed by two lay psychologists, Katharine Cook Briggs and Isabel Myers, in 1944 and is based on the ideas of the psychoanalyst Carl Jung; it is also used in Germany in the context of personnel development or even leadership assessments. In short, the MBTI categorizes each person into one of sixteen types – there are four different dimensions, each with two poles, so there are 4 to the power of 2, or 16 different combinations.


Energy	Extraversion E	Introversion I
Mind	Observant S	Intuitive N
Nature	Thinking T	Feeling F
Tactics	Judging J	Prospecting P

Various questionnaires are used to determine which of the eight possible types you are. The MBTI is frequently used – especially in the USA – also in the context of leadership assessments.

Unfortunately, the scientific basis of the MBTI is in contrast to its popularity, and the practical benefits of the MBTI are close to zero. Of course, it is always good when people do a self-assessment and therefore start to think about themselves – be it on the basis of a horoscope, the MBTI or a scientifically based questionnaire. But since there are a lot of good and valid questionnaires, there is no reason to use unscientific instruments such as the MBTI or the DISG.

Here are the most important criticisms of the MBTI:

MBTI questionnaires have a low reliability (i.e. “measurement accuracy“). If you fill out the questionnaire twice within a few weeks, you are most likely a different “type”.
The concept of the 16 types has not been scientifically confirmed.
The behaviors described in the 16 types can only rarely be found in real life (i.e. with behavioral observations). Predictions about behavior or even professional success cannot therefore be made with the MBTI.
Not only are the dimensions not based on any serious psychological theory, but they have no relation to the behavior or success factors of managers.

Conclusion

The assessment of leadership skills is an important success factor for companies in order to recognize potential within the company, reduce the risk of wrong appointments and hire the right managers to ensure the future success of the company.

Serious leadership assessments do not just consist of a single component (e.g. a skills assessment), but of many different components (“multimodal approach”). A leadership assessment based on scientifically sound principles helps companies to make the right personnel decisions and position themselves for the future.