Venture Capitalists: Crack the code on assessing management competence
Warren Buffet considers assessing management competence to be the most difficult challenge when considering an investment in a company. We crack the code of understanding a management team’s contribution to valuation with data from developmental psychology.
Even the Oracle of Omaha felt he was staring at a mysterious black box when measuring human behavior and its influence on a company’s KPIs (key performance indicators).
By using techniques from the Subject/Object Interview method and assessment developed at the Harvard University Graduate School of Education, one can accurately assess the dimension of management and organizational effectiveness that Buffett has found elusive.
Understanding management’s effectiveness along with understanding the ability to grow to its potential involves four steps:
Learning how individuals interpret and make meaning from their experiences. In other words, observing how self-aware a person is and how they learn from their experiences
Examination of how individuals work together as colleagues and how they understand these relationships. This will reveal a group and its culture.
Assessing the group’s potential for innovation: How does a group work together to identify non-obvious problems, which require broad contextual thinking based on diverse sources? Are they able to organize this thinking into behaviors that get things done?
Measuring the group’s openness to feedback, reflection, and coaching. How open is the group to considering new ideas from one other as well as to receiving outside coaching? (Everybody says they’re open to feedback. Who walks that talk?)
The Gershfeld Group uses this interview assessment in combination with specific coaching and feedback training to identify high potential groups and screen for individuals and groups who will struggle to manage others.