Justin Menkes is managing director of the Executive Intelligence Group, a subsidiary of Spencer Stuart. He wrote the Wall-Street Journal besteller Executive Intelligence and has authored articles for the Harvard Business Review, Chief Executive, and Directorship Magazine. His research led him to the discovery and definition of the theory of Executive Intelligence (ExI). Menkes, graduated with honors from Haverford College and received his M.A. in psychology from the University of Pennsylvania. He holds a Ph.D. in organizational behavior from Claremont Graduate University where, during his doctoral work he studied under the late Peter Drucker.
Morris: How does “executive intelligence” differ from “intelligence” as it is generally defined?
Menkes: There is a common misconception that intelligence is synonymous with IQ. “Intelligence Quotient” or IQ was originally built to predict the academic aptitude of schoolchildren, and is nothing more than a measure of the skills needed for academic success. Intelligence, however, is a much broader concept that encompasses a person’s level of skill for any of a number of subjects. “Executive intelligence” focuses on those subjects and skills that determine business success such as: accomplishing tasks, or working with other people.
For instance, we frequently hear how essential it is for someone to think “outside the box,” but what actually determines one’s facility for doing so? In other words, what skills make someone a creative thinker? Typically, creative thinkers can view issues from multiple perspectives, define problems in several different ways, and anticipate likely obstacles. Someone’s aptitude for these skills determines how well he or she will perform as a creative thinker.
Or, we often say that someone has exceptional political or social savvy, but what specific cognitive skills allow these people to handle interpersonal situations so effectively? Typically, socially skilled people are exceptional at recognizing underlying agendas, anticipating the probable effects and likely unintended consequences of a chosen course of action, and they understand how those involved will likely react. These specific capabilities determine one’s “people smarts.”
The point is that just as academic institutions rely on IQ tests to understand a student’s potential, so too must companies start to focus on and measure the relevant skills for business success.
Morris: Here’s a question you’re probably asked frequently. “Isn’t executive intelligence just using ‘street smarts’ when making business decisions?”
Menkes: I am asked that question a lot and it’s not surprising. Most people define “street smarts” as some innate ability to make savvy decisions, or one that has developed as a result of a person being confronted with very challenging circumstances in the past. I think another common term that is used is one who has amazing “business acumen.” But, whatever we call it, it is always associated with some mysterious ability, only a few possess, that allow them to make better decisions than the rest of us.
The point is that is not so mysterious. Those who have high business acumen display specific, identifiable cognitive skills that permit them to perform better than their peers. Once we understand that street smarts is skill-based, we can measure it, compare it, and improve it in the general population.
Morris: You assert that executive intelligence is “so rare.” Why do you think so?
Menkes: First, I think I should clarify. It’s not that executive intelligence is so rare; it’s that those possessing the highest level of executive intelligence are uncommon. Every professional displays a certain level of executive intelligence; or the cognitive skills that allow one to function in a business setting. The executive population typically falls into a normal distribution, or bell curve; ranging from those who are skill-challenged, to the “genius” subset of the population. Similar to IQ, the very top executive intelligence performers comprise only about the top ten percent of the entire population. As a result, in most industries, a shortage of “brilliant executives” exists. That is what I mean when I say that executive intelligence is “rare.”
As to why I think there is a shortage of top performers; I believe it is a question of focus – both in identifying pertinent skills and cultivating them. Until Alfred Binet identified a set of cognitive skills that predicted school success, there was no means available to consistently quantify “academic intelligence.” Even to this day, debate continues among academics as to the percise definition of intelligence and the skills that comprise it. The same holds true for executive intelligence. Only recently have we begun to understand the specific cognitive skills that contribute to business success and how to measure them. Hopefully, this insight will allow us to more keenly focus our attention on indentifying and cultivating decision-making abilities in the executive population.
Morris: Jeffrey Pfeffer and Robert Sutton assert that many decision-makers suffer from a “knowing-doing gap.” Two separate but related questions. Do you agree? Also, to what extent does such a gap indicate insufficient executive intelligence?
Menkes: Pfeffer and Sutton believe, and I agree, that there is a huge problem with executives who believe that they know what should be done, and then those same people fail to take steps to achieve those identified goals. They posit that executives are often lulled into inaction or make bad decisions because of the disconnect between how they percieve they should be acting, and what logical actions the situation they are confronting actually requires. They call that “being trapped by implicit theories of behavior.” They believe that in order to overcome this endemic problem, businesses need to take a more practical approach to training – one that stresses exposure to real, hands-on, problem-solving challenges over formal, classroom, theoritical training.
To put a slightly different spin on the problem, in executive intelligence parlance, many executives can identify a problem but do not possess the decision-making skill needed to take logical action to solve the problem. Pfeffer and Sutton have identified the “theoretical” focus of formal educational business programs as contributing to this skill shortage. To some extent, I think they are correct; although I think the recent trend is for business schools to employ a more applied-knowledge approach than in the past. The larger problem, in my opinion, is that business schools, like other types of academic programs, fashion curriculms that too heavily weight teaching subject-matter expertise, rather than focusing on underlying reasoning skills. The executive intelligence “gap” that exists, therefore, does not come as a result of a classroom versus apprentiship imbalance, but rather a failure to make decision-making skill improvement a larger part of the curriculm.
Morris: To what extent is someone born with executive intelligence and to what extent can it be learned or developed?
Menkes: Research has shown that one’s level of intelligence is determined roughly in equal parts by genetic inheritance and environmental factors. Though we cannot choose our parents – and therefore improve our genetic predisposition – studies have shown that learning and practicing cognitive skills can have a measurable effect on increasing intelligence examination results.
In many pre-college educational settings, curriculems are to some extent, shaped by the subjects covered on IQ examinations. Accordingly, students have frequent exposure to these topics and an opportunity to practice the various cognitive skills that contribute to academic performance. In the business world, however, opportunites for training and education are far fewer than in an academic setting. What often happens is that executives are hired and promoted within organizations with scant attention being paid to improving their underlying decision-making abilities over time. Even most formal business educations, like MBA programs, focus very little attention on cultivating cognitive skills. The belief is that students attending such programs have already proven themselves academically and, therefore, those curriculums focus a lot of attention on imparting information – not improving thought processes.
What we need is a bit of a paradigm shift. The more horizontal structure of many businesses means that decision-making responsibility is being spread out among a larger executive population. Accordingly, the demand for individual’s with exceptional thinking skills has never been greater. If we keep neglecting the cultivation and improvement of cognitive skills (both within formal educational and internal-developmental programs) we will miss opportunities to improve the decision-making skill of the business population as a whole.
Morris: Here’s a follow-up question. In your opinion, how can – and should — formal executive training programs within organizations be modified to improve the strengthening of cognitive skills?
Menkes: That’s a really good question. Presently, a lot of internal training programs focus on imparting specific subject matter information. To name a few, there are programs use exercises to foster team building and interpersonal bonding; programs focusing on imparting new knowledge like IT training; and programs designed to improve specific aspects of an organizational function like process-improvement courses.
In most organizations, however, very little attention is paid to improving the decision-making skills of both individual executives and the organizational benchstrength as a whole. Often we find that this is overlooked because there is a common assumption the business executives have all the requisite cognitive skills they need when they come to work for the organization. The problem with that perspective is that it overlooks the fact that thinking skills can be learned and improved at any time during the course of a persons lifetime. What is more, no amount of information can make up for one’s inability to process and make good decisions.
To that end, organizations can realize dividends if they provide ongoing decision-making training to their employees. Because a major part of skilled thinking involves the ability to recognize flaws in the ideas of others and using input from others to improve one’s own plans, the training should be conducted in a group setting. Real-world scenerios should be presented and reasoned through with the help of a trained moderator. Over time, participants will discover an improvement in their individual skills, and the organization will be strengthened by having better decision-makers throught its ranks.
Morris: From your perspective, how do knowledge and intelligence differ?
Menkes: In the simplest terms, knowledge is the accumulation of information whereas intelligence is one’s ability to process information to render good decisions. Think of it this way; an individual may be encyclopedic in their ability to retain facts and statistics. They may be the hardest person to play Trivial Pursuit against because they always seem to “know” the right answer. The question is, however: are they intelligent? And the answer to that question depends not on what they know, but rather on how well they can apply what they know to effectively and efficiently solve problems.
In a business setting, one’s intelligence is crucial. Many problems faced by today’s executives are unique and ill-defined. So, one’s ability to analyze information and render a decision based upon the probability of success is imperative. What it comes down to is that all the knowledge in the world is useless if one has no means of processing and applying it. Organizations run on the brainpower of their people. An executive with deep institutional or industry knowledge can be an invaluable contributor to the smooth operation of his or her company. Without a sufficient number of individuals with executive intelligence, however, creativity can be stifled and long-term success can be jeopardized.
Morris: In Judgment, Noel Tichy and Warren Bennis assert that “winning leaders make great calls.” In your opinion, by what process are such decisions made?
Menkes: That is a really great question, and one that is pretty hard to answer. If pressed for the simple answer, I would have to say that the process for making “great calls” demands bringing to bear the right set of cognitive skills at the right time. For instance, let’s say we are the CEO of a large manufacturing company. Our CFO comes to us and tells us that if we were to consolidate some of our manufacturing capacity we could shut down a factory and save money. He believes that we could save on overhead, staff costs, transportation expenses, and make Wall Street optimistic about our performance for the upcoming year.
A less skilled decision-maker might analyze the situation only from a narrow perspective and weigh the pros and cons asking questions such as: “What will be our annual predicted savings?” “How will shuttering the plant impact our ability to meet customer demand?” or, “How will this move be received by the financial community.”
A “winning leader” would likely be far broader in his or her considerations, asking questions such as: “What is the likelihood that we will need increased production capacity in both the near and far terms?” “How will this move be percieved by the staff that we retain at our other factories?” “How will it be percieved by our customers – will they lose confidence that we are on firm financial footing and start pulling their orders?” “Is cost savings the answer, or is there another fundemental problem with our business model?” “Is there an opportunity to retool the factory and expand our product offering or market footprint?”
These are just some of the questions a “winning leader” might ask – but the point is that the scope of their inquiry and consideration requires the application of a broader set of cognitive skills. Not only are they analyzing the financial impact on the company, they are also considering how other stakeholders might respond, and questioning whether they themselves may have contributed to the problem by having created a strategy that is too narrow. Though decision-making is an inexact science, these type of skilled executives “get it right” at a much higher percentage than their less skilled peers.
Morris: You write about the executive intelligence gap. What is that?
Menkes: The intelligence gap is essentially a shortage of executives with superior thinking skills who are needed by every business, as compared with the number of decision-making positions available. As shocking as it is to hear, 80 percent of executives feel that their peers frequently fail to achieve the objectives they have been assigned to accomplish. What is more, almost half of executives surveyed, rated their peers at average or below when it came to understanding critical issues in complex situations.
Particularly as companies grow and spread decision-making responsibility across a larger pool of people, businesses need skilled executives dispersed throughout organizations to achieve peak performance. What is more, innovation can only be achieved through the work of a team, and everyone’s performance is enhanced or limited by the quality of the talent surrounding them. Quite simply, individuals with high executive intelligence cannot reach their potential unless surrounded by others with a similar level of skill. Without a concerted effort on the part of businesses to seek out those with exceptional decision-making abilities, the gap between who businesses actually need, and who they hire and promote, will remain wide.
Morris: You say that businesses need to hire and promote as many employees with high executive intelligence as possible, yet it appears that most organizations are very hit-or-miss in this regard. What are managers and leaders doing wrong?
Menkes: What it usually comes down to is that businesses are failing to look for and measure the skills that predict executive success; the top being intelligence. Research has shown that one’s level of intelligence is the single most predictive component of professional success – better than any other ability, trait, or even job experience. Yet, too often, employees are selected because of their likeability, presence, or charisma.
Think about the typical hiring process. Most companies conduct a resume review to understand past experience and determine if they will even meet with a candidate. They then conduct a lot of interviews with company personnel, and do some reference checking. What it typically comes down to, however, is whether the decision-maker likes the candidate, and feels that his or her personality will be a good fit in the organization. While these characteristics can tell us whether we would enjoy having dinner or playing golf with an individual, they tell us nothing about the individual’s professional capabilities. Ultimately, this hit-or-miss process tends to yield results that are no better than flipping a coin and hoping that the person we hired will work out.
The hiring process can be so much more rigorous in terms of predicting how successful a person will be, and that can take much of the guesswork out of the equation. For instance, we never ask candidates to demonstrate their skill. We ask lots of questions about past experience, but simply looking at the results of their decisions does not let us understand the process that they used to make the choice in the first place. A good analogy is sports. If you wanted to know how well a person plays basketball, for example, you could look at statistics like shooting percentage or blocked shots. But, this is just an historical account of how well the individual played in the past – the numbers do not tell us much about how that individual plays basketball now. For that, we have to put them on a court and watch them play. In sports, the tryout has been universally accepted, yet in a business setting, we almost never do this.
Put quite simply, we focus on the wrong attributes and do not make job candidates prove that they can do the job we’re asking them to do.