The CEOs and senior executives of Enron Corp., WorldCom Inc. and other disgraced companies have certainly gotten their fair share of press, but the huge scandal that nobody talks about is the multitude of cases in which top positions are filled with mediocre people. After almost 20 years of experience in helping companies to find and recruit people for senior positions, I am convinced that the problem of poor appointments is serious, pervasive and highly dangerous. (See “About the Research,” p. 68.) But many firms are either unaware of the problem, slow to react to it or severely hampered by a number of psychological obstacles.

Understanding the Problem

Three factors explain why companies have such trouble making the best people decisions at the top. First, even for organizations that are adept at selecting winners, the deck is still stacked against successfully finding those individuals. Second, assessing people for senior positions is inherently difficult for a number of reasons. Finally, powerful psychological biases impair the quality of the decision-making process. A closer look at those three factors explains how each contributes to the failure of companies in making crucial appointments.

A Stacked Deck

To understand why companies have such trouble finding top-notch executives, first consider the way in which certain sophisticated skills are distributed across the managerial population. When it comes to complex jobs such as that of a senior executive, the distribution of talent is highly skewed. (See “A Good Performer Is Difficult to Find,” p. 70.) The implication is that the best executives will perform at a much higher level than that of their peers. In fact, the performance spread grows exponentially with the complexity of the job. Simply put, the more complex the job, the larger the expected difference between top performers and others.1 The problem is that the odds are against companies finding those outstanding individuals because there are so very few of them around.

The deck is further stacked by the large impact of assessment errors, even for high levels of accuracy. To understand this issue, answer the following hypothetical question: Assuming that you want to hire only the top 10% of candidates for a position and that you are 90% accurate in assessing them, what will your success rate be? Many people might expect it to be 90%, but the true answer is just 50%. Here’s why. If you assess 100 candidates, 10 of those