By Leslie Pratch, Ph.D.

I have always been fascinated by leaders and leadership. As a professional psychologist, my work focuses on the study of the psychological qualities associated with effective business leadership. I earn my living making in-depth assessments of senior managers, comparing candidates with impressive careers and determining which one will function best in a given position. I have used the data I have gathered over the years to develop and successfully employ, as a consultant to over 120 organizations over the last 14 years, a methodology for predicting effective leadership. The process is designed to predict who will maintain strong leadership not merely for one project or in one position, but over the span of a career.

I started down my current path while still at Northwestern University studying for a Ph.D. in clinical psychology. My area of focus was personality and leadership. In 1991, the Dean of The University of Chicago’s Graduate School of Business asked me to lead research into the personality predictors of leadership. As the principal investigator, I designed and directed research on predicting which of the school’s M.B.A. students selected to participate in an elite program for developing leaders would emerge as the most successful leaders. I worked with two such select of students participating in this highly prestigious leadership development program from April 1990 until June 1994. Based on the strength of the findings of the first study, the school funded a second study to see if we could replicate the results. We did, and on that basis, published the findings in peer-reviewed academic journals.

This research became the basis of my Ph.D. dissertation at Northwestern, and motivated me to broaden my base of knowledge. To better understand the business world, I went on to earn an M.B.A. at The University of Chicago, focusing on two areas about which I had known next to nothing before: strategy and finance.

My experience led me to grapple with the elusive quality of leadership: What are its components? Can it be measured or predicted? What makes a person a leader? Why do some lead superbly throughout their careers, while others falter?

The corporate world is a highly charged, ever changing crucible for leaders. There are other arenas where leaders are sorely tested—the military and politics, to give two examples—but the business world drew me in because it was the place I could most influence the selection of leaders who would make a positive impact on the lives of others. This focus refined the questions I was asking myself. I studied executives and wondered how to identify the ones who would consistently exercise good judgment and rise to the responsibilities of leadership in the complex, ever-shifting landscape of business. Was it possible to predict which executives were potential time bombs? Could I learn to tell a young Warren Buffett from a young Michael Milken? Could I help a young Michael Milken to behave like a Warren Buffett?

In the wake of the recent economic meltdown, many in the general population have started asking questions about leadership similar to the ones I had been exploring for years: How did so many of the top executives in banking, finance, insurance, manufacturing, energy, and real estate make so many mistakes? Why did the system allow them to make the decisions that brought on the current global crisis? How could they have ignored the danger signs? How can we choose better leaders in the future?

To give some specific examples: Who would have predicted from the 20-year tenure of David Pottruck at Schwab that he would fail so miserably as the hand-picked, groomed successor to founder Chuck Schwab? Or similarly, that Doug Ivestor at Coke would fail when he followed famed CEO Roberto Goizetta? Who would have predicted that Harry Stonecipher—a man selected on the basis of his reputation for integrity to rejoin Boeing’s leadership specifically to repair the aerospace giant’s global reputation after a string of military procurement scandals—would have an affair with a female subordinate? How could organizations avoid hiring charismatic yet ultimately value-destroying leaders like Jeff Kindler, first at McDonalds and then at Pfizer?

Through years of researching and observing executive leadership, I have found answers to many of these questions. I decided to write this book because I thought that my approach to assessing and developing managers would be compelling and useful to readers interested in leadership. Although GOOD ON PAPER focuses on business executives, the information I have gathered through my research can be used by any reader wishing to improve his or her leadership potential. My observations do not apply to everyone but they are relevant to a wide range of adults who function near or at the top of their professions. They may be leaders of business organizations, or artists, lawyers, or scholars; the unifying factor is that they are ambitious and want to continue to succeed in their chosen fields.

An effective leader must meet challenges and resolve them productively, day after day. He must constantly adapt to the unforeseen—and must mobilize, coordinate, and direct the efforts of others. But when hiring executives, how do you know which candidate possesses such qualities? When they all look good on paper, how do you make a choice?

Active Coping

Central to my model for predicting effective leadership is a variable I call “active coping.” Even if you have never heard that term before, you know active coping when you see it, whether in a leader or in the people around you. When a person always seems prepared, and quickly recovers from any setback, that is active coping. When a person earns the trust of his friends and colleagues by refusing to take unfair advantage of others, and refuses to let others take advantage of him, that is active coping. When a person has the vision and self-confidence to rise above the “business as usual” when necessary, that is active coping. When a person is open to the people around her, listens to bad as well as good news, and is aware of her own motivations, strengths, and shortcomings, that is active coping.

To many, the word “cope” has connotations of barely scraping by. I use it to refer to a sense of mastery. Individuals can learn to master themselves and the circumstances that surround them, taking an active coping stance toward the world. Or they can be passive copers, allowing themselves to be defined by their circumstances and enslaved by their personal needs. It is when circumstances change unpredictably that an individual’s latent weaknesses—or untested strengths—may emerge.

Active coping is made up of four interconnected parts, four elements of psychological functioning: integrity, psychological autonomy, integrative capacity, and catalytic coping. Integrity includes both our core values and the consistency of the actions we take in upholding those values. Psychological autonomy allows us to resist giving in to external pressures or internal desires or fears. Integrative capacity requires awareness, tolerance, and comprehension of both ourselves and the world around us—it means absorbing information and learning from it rather than denying it or shutting it out. Catalytic coping is the ability to create solutions to problems and implement those solutions.

The model used in this book is developmental (long-term) in nature. It takes into account influences, relationships, and environments throughout executives’ lives: not only in their business careers, but also in their childhoods and time spent outside of the realm of business. Many models in use today for assessing leadership are current-state models. These models focus on short-term, situation-specific decisions with no reference the nature of the challenge facing the decision maker, or to the character of the person who makes the decision. The two types of models, developmental and current-state, complement each other, and are both necessary for psychological research; however, I have long felt that developmental models are underutilized in the study of business leadership. Because the business landscape is constantly fluctuating and leaders are continually evolving, long-term models are optimal for making predictions in this milieu. I hope the evidence I present in this book can encourage wider use of long-term models in conjunction with other, more common business tools.

GOOD ON PAPER is organized into two sections: In the first section, I describe active coping in detail and explain how it contributes to good leadership, giving examples drawn both from history and from my own experiences practicing psychology in business. Chapter 1 defines and describes the elements that make up active coping. Chapter 2 illustrates how active coping—or lack thereof—affects an executive’s performance. Chapter 3 delves deeper into the techniques I use to uncover the subtle differences between highly functioning candidates who all look good on paper. Chapters 4 through 8 each expand on one of the four dimensions of active coping: integrity in Chapters 4 and 5, psychological autonomy in Chapter 6, integrative capacity in Chapter 7, and catalytic coping in Chapter 8. Chapter 9 concludes the first section of the book with advice on how to become more effective by developing your own active coping.

The second section of this book is a technical companion outlining the science behind my methodology, and providing a detailed breakdown of much of the data I have gathered over years of assessing senior executives. The predictions and results I describe in the first section are contained here, along with additional the material gathered in my studies and an explanation of the statistics underpinning the accuracy of my predictions.

My approach to predicting leadership is an example of new work in this field. There are others investigating these concepts, each according to his or her methods. I will not use this book as a forum to compare my methods versus theirs; I will mostly focus on my research and experiences.

I have continued doing academic work, publishing in a number of journals including the Journal of Applied Behavioral Science and the Journal of Private Equity. But, since 1998, I have been earning my living as a psychologist consulting to private equity investors, corporate directors, and senior executives of both public and privately-held companies. In this capacity, I have conducted in-depth assessments of over 400 existing or potential CEOs or other senior executives.

Components of an Assessment

When conducting an assessment, I begin by asking the candidate to fill out a biographical questionnaire, which serves as the foundation for an in-depth interview. I want to get to know each person I assess as a whole person, not a collection of test scores. I ask about past development, problems and positives in the present, and visions for the future. I ask about home life, work life, and how those interact. I then administer a number of psychological tests designed to elicit responses at three levels of psychological functioning: conscious, semi-conscious, and unconscious. I analyze all of this information to create a three-dimensional profile of the candidate, which I can then use to compare to the profiles I construct of other candidates in line for the position. I also compare each candidate’s profile to determine how well it matches up with the requirements of the position. The most complex aspect of the assessment process is the time factor: predicting whether a candidate matches a position not only in the present, but in the future, as the person, position, and organization all change over time.

The executives I assess are all holders of or finalists for senior leadership roles. And they are not unknowns. If the company is promoting from within, a great deal is known about the candidate. If a search firm presents candidates from the outside, it will have interviewed prospects, done extensive reference checking, and discreetly found out as much about each candidate as an experienced search professional can uncover. My clients call me in only when they have reduced the number of candidates still in the running to three, two, or even just one.

What my assessment adds is insight into the psychological qualities that distinguish one high-flyer from another. The assessment is particularly designed to predict how well the candidates will cope with unexpected and unanticipated circumstances, to which their past performance and personalities are not always a good guide. I am sure you can think of more than a few examples of leaders who started with good records of past achievement who have surprised in both directions—some by their unexpected success, others (like David Pottruck) by their unexpected failure to cope.

It’s important to get some sense of what new problems might face the business so that the assessment can focus on the qualities needed to cope with those kinds of problems. For example, George Fisher had been an outstanding leader at Motorola. He seemed an ideal candidate to reposition Kodak from film-based to full-spectrum-imaging technology, but he failed to react quickly enough to make the necessary change. In a similar situation, I would assess not only the candidate, but also the corporation and emerging technologies in order to avoid such a mismatch.

I should make it clear that my assessments are not always one-shot affairs. The candidate assessed, if hired, normally receives my report and an opportunity to review the findings with me. At times, this review leads the executive to a period of self-evaluation and requests for coaching or certain kinds of repeat assessments to gauge his or her progress. I continue to track the performance of executives I have assessed. My clients’ feedback indicates that the success rate of my assessment indicators is in excess of 98% in predicting the executive’s performance.

The Cost of Failure

When an executive fails, many people and organizations are negatively affected. The company loses money: Firing an executive might incur large legal costs, the expense of recruiting and developing a replacement, and losses from interrupted schedules or abandoned projects. Dismissing a senior executive can cause upheaval and chaos among the company’s employees, even the board of directors if they are personally liable for an executive’s poor decisions. Productivity drops, which may have a trickle-down effect on the company’s clients or suppliers, eventually hurting the surrounding communities. As we have seen in recent years, our economy tightly weaves together many seemingly unconnected business sectors. For that reason, it is crucial for any business to be certain that its senior executives will stand the test of time. The method of assessment that I describe in this book is one tool to reduce the risk of future hiring failures.

The focus in this book is on understanding the personality characteristics of leaders, with a specific emphasis on business executives, who are likely to act with consistently high integrity and demonstrate good, timely judgment when they are in positions of power. The executives I examine are often similar in terms of background and temperament. But every executive is unique. They may differ in terms of original family background, work history, objective tests of intellectual ability, and some overt behaviors. But the most striking differences, though not obvious or immediately apparent, are in their underlying motivations and their coping tendencies. I will return to those two ideas throughout the book.

Greg Learns to Cope

Let’s look at a venture capitalist I’ll call Greg. As brilliant as his advice always was, he delivered it in a sarcastic, demeaning, and insulting way. Other venture capitalists hated working with him because of how he made them feel. Greg’s abrasive personality made it impossible for him to forge close working relationships. After repeatedly finding himself ignored by his partners and excluded from deals, he realized he needed help if his career were to move forward.

He turned to me as a coach to help him resolve his problems. Over a period of four years of working closely with me, Greg became aware that he denied his partners the same respect and admiration that he craved for himself.

While discussing his childhood, Greg began to understand the origins of his disparaging behavior. He had longed for his mother’s approval, but she had responded to his vulnerability with sarcasm and derision. This was exactly how Greg behaved as an adult. Decades after his childhood, working at a prominent venture capital firm, Greg treated his partners and portfolio CEOs the same way his mother had treated him. He wanted to be liked and admired but because he feared rejection he belittled others to hide his insecurity.

Eventually Greg understood that he treated his partners and portfolio CEOs poorly because their needs for approval reminded him of his own needs for approval, which threatened him. He was more comfortable being cold, rejecting, and condescending than letting this vulnerability show. His abrasiveness undermined him even though it was unconsciously intended to protect him.

Once Greg had this insight, he became more self-accepting. His desire for approval was no longer a threat to his psychological security. He was more able to give praise to his partners; to compliment and congratulate them; to make trade-offs and compromises. He became a warmer, more engaging person. Other venture capitalists now seek him out as a partner.

As Kenneth Blanchard and Spencer Johnson note in their management classic, The One Minute Manager, “People who feel good about themselves produce good results.”

The Many Dimensions of Personality

My assessments rest on four assumptions about personality.

One, personality is fundamentally a theoretical construct, not a concrete object that can be easily measured and discussed in absolutes. We use the concept of personality to explain how people think, feel, and act. We characterize personality in shorthand terms—Simon is warm and empathic; Julie, domineering and abrasive—but such characterizations touch only on a few of the many parts that go into the makeup of a whole persona. A personality is a rich and complex entity that, however conceptual, can be rigorously and scientifically assessed.

Two, with the right tools and training, we can predict the effects of personality on decision making.

Three, with concerted effort, often supported by psychotherapy, we can change certain aspects of our personality, but only to a limited degree. Our personalities are a function of our individual histories, especially our childhoods. This restricts the extent to which we are able to reshape ourselves.

Four, our personalities operate at different levels of awareness: conscious, semi-conscious, and unconscious. Each level affects how we think, feel, and act in ways that may not be obvious or easily measured.

We can think of personality as an iceberg. Just as the iceberg has different levels of submersion, our personalities have different levels of conscious awareness. What’s above the surface of the ocean is easily visible. This is the conscious level, the part of our personalities over which we have complete control. We can see this obvious level in action. Deep below the ocean’s surface is the unconscious level. That part of the iceberg we cannot see without special training and equipment to dive deep below the ocean’s surface. In-between is the semi-conscious level: we can vaguely make out what is just below the waterline. Much of our behavior is driven by what’s below the surface, by the unconscious parts we don’t see or understand. The unconscious influences the conscious, just as the submerged part of the iceberg influences the part above the water’s surface.

Because we are mostly aware of the conscious level, the tip of the iceberg, we feel that we have full control of our actions, but sometimes we discover that we don’t have control. We may do surprising things that may not be in our best interests, for reasons we don’t understand. We have deeper motives; we have hidden fears and wishes. The more aware we become of these unconscious dimensions of our personalities, the more likely we can master them. As we will see with Greg, the venture capitalist described above, he learned that it was important to be aware of parts of his history that had been too painful to admit. As an adult, with a little help, he was able to feel safe enough to remember rather than re-enact the abusive relationship with his mother.

Getting in touch with who we are is important if we are to behave with appropriate flexibility and strength, the hallmarks of active coping. The better we cope, the greater our chances of being successful.