How do you evaluate and then prepare high-powered individuals for the top jobs? Justin Menkes, a PhD in organisational behaviour from Claremont Graduate University in the United States, uses a performance evaluator he created specifically to evaluate C-class executives, measuring their acumen and potential according to their levels of “Executive Intelligence”.

It’s been a business success story for this protégé of internationally-recognised management theorist Peter Drucker, and Menkes has written two books explaining his theories. He has founded and leads the Executive Intelligence Group and works with a board service and advisory practice at Spencer Stuart, evaluating successors for successful companies that have included Blackstone, Chevron, Mass Mutual and State Street. “[Drucker’s] central lesson was always that the key differentiator of an effective executive is someone who knows not only what needs to get done but how best to get it done,” he explains. “The methodologies for understanding what made us successful at doing just that were inadequate. So I created the methodology to help identify and better assess who was able to know this, and if they had weaknesses, what those weaknesses were and how best to address them.”

Menkes defines Executive Intelligence as a set of specific conditions that happen to be the best common denominators for leaders who are strong enough to handle a global business landscape fraught with variables. “Executive Intelligence gets very specific,” he says. The problem with intelligence, he adds, is that it becomes so broad that the term itself begins to lose meaning, whereas Executive Intelligence is what it means to be a smart senior executive. It looks at three kinds of intelligence: not necessarily ‘musical intelligence’ or ‘basketball intelligence’, but areas of intelligence that are most central to being an effective senior executive: practical intelligence (analytical skills); social intelligence (the ability to get things done through and with other people); and emotional intelligence, which is the ability to adapt yourself to the evolving circumstances around you. “Those three components may narrow the definition of Executive Intelligence but that narrowing is intentional. It is to sharpen, to look at only what most matters to the effectiveness of a senior executive.”

Three qualities of a good leader

Menkes’ second book Better Under Pressure, released in May, elaborates on these intelligence definitions to prescribe three qualities leaders must have to be successful. He says of the Spencer Stuart practice the importance of making the right decision means boards demand a high level of rigour about each individual being considered – data that include intelligence tests, performance evaluations, past behavioural interviews and personality tests on hundreds of candidates. “When I began my research, I had 243 of these CEO candidates in my database with this level of data. I divided them into quartiles in terms of performance evaluations, who were at the top and who were at the bottom. There were clearly three qualities that differentiated them, in fact it was painfully obvious – to have realistic optimism; to present and thread through their workforce a subservience to purpose; and their ability to find order in chaos.”

But surely there are other qualities that would equally define good leadership – experience, market savvy or entrepreneurial instinct, for example? “These are good things,” he says. “In our work we hear many of these competencies that might be important. What’s most important is to start with a needs analysis - where has this company been and where does it need to go in the next five years, and then what are the attributes that an individual must have in order to take it there? Market savvy might be what you’re looking for, and then you need to find the best way to assess an individual’s capacity, not just backward-looking, in terms of their market savvy. Executive Intelligence is forward-looking, putting them into unknown hypothetical situations that require market savvy, and we use the two together to understand whether this individual can have that market savvy, for instance, that your company might be looking for.”

Just as there are those who stand out for their potential, there are others that show warning signs of failure, but Menkes warns against being too keen to lump your next potential leader into the in or out basket too quickly. “We overly fixate on categorising people,” he says. “When I walk into a boardroom, they inevitably ask me to rank their candidates as As, Bs or Cs. Are they stars or are they slouches? I find myself always having to help them broaden their approach to include the context they’re in because some people do thrive on the need of a situation or the pressures, while others might collapse in that particular context. We have to help them understand what brings out the best and worst. Executive Intelligence looks at people’s capacities for certain things, but each one can be learned and taught, improved upon.

When to be wary

“Perhaps the most frequent question I’m asked by a board about an individual they’ve often been preparing for years to take over, is: ‘This person is in trouble, are they worth saving?’ The simple single answer I give is how much in their psychology do they blame their current circumstance and problems on themselves, or on others. If we see ourselves as victims and the problems that exist around us in our business are not our fault but everybody else around us failing us - that type of psychology is the toughest to change.”

With globalisation comes a level of competition unseen in business history and along with that levels of market volatility that are unprecedented. Menkes keyed his second book, Better Under Pressure, with the troubled waters of today’s business environment in mind and the message that CEOs need not fear stress – under the right conditions they can feed on it. “The qualities that make up Executive Intelligence are becoming more appropriate because of globalisation and elevating pressure that accompanies it,” he explains. “When you make the world smaller and increase the number of companies that can legitimately threaten your core business, you elevate risk, you elevate volatility and you elevate speed. Human beings experience that as an increase in pressure. Executive Intelligence is the ability to think, react and manage people and situations, and yourself, while under this pressure.”

Menkes maintains pressure, or stress, that is negative is all about preparation. “An individual that is unprepared for the pressure that they are about to be put under, that is negative, that is panic. Panic is an unprepared mind. It is ultimately the responsibility of their leader, manager and teachers that failed them in terms of preparation. But a well prepared mind entering a situation of pressure can and does find it enlivening.”

Leadership - its own reward

An animated speaker, Menkes’ power for motivation is obvious, as is his passion for the philosophies behind his choice in vocation, and he puts paid to the expression: I never met a man who on his death bed said ‘I wish I'd spent more time in the office’. “The happiest people are not necessarily those balancing their lives between jetskiing and mountain climbing and an occasional bit of work,” he says. “The most satisfied are those who believe they are doing something that matters in the world. They bring a level of dedication that might not look like work-life balance, but they are on every measure quite joyful about their lives. It doesn’t mean they don’t have regrets. Every chief executive, the masters included, when I ask them about the sacrifices they have made to be the best… inevitably these CEOs… their eyes soften about the sacrifices they have made. Would they have done it differently? Without exception, none of them would. They are thrilled with the accomplishment of helping thousands of people reach their full potential, to grow and make good lives for themselves. So the sacrifices they make are worthwhile, but that doesn’t mean a purposeful life is without regret.”