Fit Happens: The Executive Search Podcast

Jason Baumgarten 00:00
I'm Jason Baumgarten and you're listening to Fit Happens, the podcast where top leaders, investors and board directors share the stories, surprises and hard earned lessons behind finding the right fit. Let's get into it. Here's something that might bother you a little bit once you think about it. The last time your organization hired someone, especially a senior leader, CEO, a C suite exec, or a board member, think about what the conversation was probably like behind the closed doors. I almost guarantee that someone said some version of "she's impressive, but does she have the right background?" Not "can she do the job?"
Jason Baumgarten 00:43
That's a very different question. But the question about signals and about whether the resume tells a story that makes the person making the decision feel safe. And I want to talk about why that distinction matters more than most people realize, and what it can cost all of us. What it can cost organizations. Welcome to Fit Happens.
Jason Baumgarten 01:04
I'm Jason Baumgarten. This is a solo episode today and I want to dig into something that sits underneath almost every leadership selection decision, but very rarely gets talked about openly. The gap between being capable and being seen as qualified. And fair warning, once you start thinking about this, it might just annoy you. So let me start with a claim that sounds obvious, but it probably isn't.
Jason Baumgarten 01:29
Leaders are not chosen solely because they are more capable. They are chosen because they emit signals that help decision makers feel confident under uncertainty. Now let me read that again. Leaders are not chosen solely because they are more capable. They are chosen because they emit signals that help decision makers feel confident under uncertainty.
Jason Baumgarten 01:50
So it's not actually about who's best. It's about who makes the person doing the choosing feel the least amount of risk. And in today's market, the most powerful of those signals are credentials. A credential can convert an already capable person from unqualified to qualified in the eyes of a board or a CEO or really any hiring manager, without anything fundamentally changing about what the person is capable of. Now if you ask a board chair or CEO to describe their ideal successor, you'll hear a very familiar list.
Jason Baumgarten 02:22
This person is strategic and emotionally intelligent and decisive and ethical and empathic and hard charging. Great. The problem is that those qualities are largely invisible before somebody's actually doing the job. You can't really unpack a lot of them that well just from prior behavior, and interviews are wildly unproductive. So you have to really think about it differently.
Jason Baumgarten 02:50
So first of all, let's talk about what decision makers actually do. They make these leadership choices under amazing uncertainty and often without observing the true capability. They observe fragments, resumes, references, interviews, working session assessments, track records assembled from different contexts and sources. And they infer competency from those signals because they weren't living it. They may not know that even though the person had great revenue growth, they had very little to do with it, or in the opposite, that they stemmed a massive loss that would have happened had they not been there.
Jason Baumgarten 03:26
So this is where it gets interesting. There's a framework from economics called signaling theory that explains this, and I think most leaders should understand it. Here's the basic premise. When decision makers can't directly see something, judgment, integrity, capability, they rely on observable signals that they believe correlate with that thing. Now, some of those signals are cheap.
Jason Baumgarten 03:50
Good executive presence, a nice suit, confident talk, looking the part, well cultivated references, a big title. And others are costly, meaning they're hard to obtain and hard to fake. A degree from a highly selective institution, a rigorous employer, a super senior title at a company that's stingy with titles. And the costlier the signal, the more decision makers tend to treat it as very trustworthy.
Jason Baumgarten 04:17
And that makes great intuitive sense, right? If it was hard to get, it must mean something. But here's the key insight. Qualification is not simply an objective property of the person. It's a social judgment formed by people trying to reduce risk with imperfect information.
Jason Baumgarten 04:33
And that's a really important distinction. Michael Spence won a Nobel Prize for this. He showed that education often functions less as a creator of productivity and more as a tag, a marker of pre-existing traits like intelligence, diligence, persistence. Employers use degrees as a shortcut when they can't directly observe ability, which for early stage employees, let's be honest, is
Jason Baumgarten 04:55
almost all the time. And boards and CEOs do the exact same thing when they select leaders. Now, the signal is better, but there's still some challenges with using these credentials. So why do they have an outsized influence? Why do credentials have this massive influence?
Jason Baumgarten 05:13
Well, think about what makes a credential attractive to someone making a high stakes hiring decision. It seems costly, it's hard to fake. It requires time or money or selective hurdles. A senior role at McKinsey or Goldman Sachs or Google or Anthropic suggests that other high status, high capability people have already vetted this person. I recently ran into this where somebody said to me, "I absolutely don't want to hire anyone from company X."
Jason Baumgarten 05:41
And I said, "Well what do you think about this executive?" And they said, "Oh, that, that executive looks really good." I said, "But 98% of their career was at company X." "Oh yeah, but another company now took a risk on them. That's seen as a blue chip company."
Jason Baumgarten 05:56
So it takes a chain of endorsements to get this right. Those decisions always happen under pressure. Selectors use credentials as a filter for very practical reasons. First, they help us make sense of a large candidate pool.
Jason Baumgarten 06:08
If you've got a bunch of names on a list and you need a way to cut it down and you don't really know anyone, credentials help. Second, they help justify decisions to skeptical stakeholders. If somebody worked at three great companies, it's an easy story to tell. It has built in legitimacy. And third, and this is the one that's very human, credentials protect us as selectors against downside risk.
Jason Baumgarten 06:33
If it doesn't work out, a director can much more easily defend choosing a candidate with a badge of legitimacy. And the one that's a little less conventional, nobody gets fired for hiring the candidate from central casting. It's why we all like to hire people who have done the job we're hiring for before. But if I was really good at that job before, why on earth would
Jason Baumgarten 06:53
I want to do it again? But notice what this does. A candidate might have the capability to succeed in a role before they have the credential. And that's when their value to you is the most unique, because there's asymmetrical value in recruiting somebody who's about to be excellent than somebody who may be excellent and you're now going to pay a premium.
Jason Baumgarten 07:13
But until they cross that credential threshold, they're invisible. They're seen as not quite ready because the signals available don't match the organization's mental model of what you would have if you were qualified for the role. The most extreme of this is having been a CEO before. Every board that ever hires a CEO
Jason Baumgarten 07:32
starts with the premise that if I've already been a successful CEO, I'm more likely to be successful for their company. The data doesn't prove this out, but it's an unmistakable signal that we use as a credential. And this is the paradox. I've seen it play out a dozen times. Before the credential, a director looks at a candidate and says, "Smart, but seems risky."
Jason Baumgarten 07:54
"Seems like they're not quite ready." And after the credential, the exact same person a month later is qualified. I recently worked with somebody who was desperate to become a CEO but couldn't get any offers. Eventually worked their way into a CEO role, was in the role for a very short amount of time,
Jason Baumgarten 08:12
too quick an amount of time to really judge whether he was successful or not. And then suddenly had multiple CEO offers simply six months later. The same person, same brain, same judgment, same personality, same integrity, but suddenly he was way more qualified. Well, if six months boot camp as being a CEO is much more qualified, we should design six month boot camps. So again, their phone is ringing off the hook. Once they have that credential, nothing really changed, their character, their judgment.
Jason Baumgarten 08:44
But that decision maker signal, that new credential, allowed them to have trust. So Spence's economic model predicts this. When signals are treated as reliable proxies, decision makers update their beliefs the moment that signal appears. They don't need the credential to actually transform the person. They don't actually need the learning from it.
Jason Baumgarten 09:04
They just need to transform their perception of risk. This is why executives can plateau for years. Genuinely exceptional people can be stuck and then vault into top roles after completing a program or getting a title or some tweak in responsibility in how others perceive their resume. I was recently chatting with a board of a very large company and their internal CEO candidate was a mere manager a few years back. And I said, "Boy, manager to running a $30 billion organization seems like an enormously large stretch."
Jason Baumgarten 09:39
And they said, "Oh, but in this last job, which this executive had had for barely two years, he's done a good job." Well, that's good. That goes beyond credentialism. There's some learning there, but in terms of readiness, it's still a very, very, very large lean on signal and less of a lean on actual learned experience and credibility. So the issue gets pronounced when you think about people moving across contexts.
Jason Baumgarten 10:08
Take a high performing divisional leader inside a large company. Internally, she's a compelling CEO candidate for succession. People have direct experience about her, her judgment, how she behaves, how she handles a crisis. They've watched her build teams and they know what she can do.
Jason Baumgarten 10:24
Now you put that exact same person in front of a board of another company and a couple of interviews and some references, that absence of already having done the job will be in many cases an impossible barrier to overcome. So somebody who can be seen as obvious succession material can be unqualified from a different board. And that's why we all have to think about not only our real capability
Jason Baumgarten 10:51
in doing a job, but these credentials and signals that we're accumulating to signal our capability. And these are especially potent when some attribution is ambiguous, when it's hard to tell how much of someone's prior success came from them versus the environment they're in. Was this person successful because they're exceptional or because they were just riding a rocket ship that was going up and dragging everyone behind it?
Jason Baumgarten 11:17
And in ambiguous situations like that, observers tend to over attribute outcomes to leaders who also look and sound the part. And they lean on that signal because they can't parse the substance out. And board decisions, director decisions are perhaps the most ambiguous of all. Who makes a good director? Well, there's been numerous academic studies trying to correlate the quality of directorship and governance to company outcomes.
Jason Baumgarten 11:44
And it's incredibly, incredibly inconclusive. Evaluating a director who might come from a different industry, a different culture, a different business model, a different economic cycle, a different generation, with limited time and inconsistent evidence, reputational exposure tends to be the key credential that boards use. So we rely on these signals to resolve the uncertainty. And it has two consequences.
Jason Baumgarten 12:10
A candidate without the right credential struggles to be seen as qualified, even with strong evidence of performance. And once that high status credential is added, the entire track record is reinterpreted through a new lens. Suddenly it's "oh, this person's fantastic." And they expect this is what they would get with someone like this. And that interpretive shift is important because the credential isn't really adding information, but it reorganizes the meaning for us.
Jason Baumgarten 12:37
It's like having context to apply what you're understanding from someone and what they're telling you. And prior experiences that might have seemed idiosyncratic or hard to compare suddenly become really legible once you have that new leadership context. So selectors often say they're choosing for capability, but in practice they're choosing for explainability. They want a candidate they can explain to the board, to investors, to analysts. And if we're honest with ourselves, credentials provide a common language of explanation.
Jason Baumgarten 13:09
Somebody ran strategy, McKinsey, got their MBA at Harvard, was a COO at a large company. That's a pretty easy story. It travels well and it may not predict success, but if it doesn't, well, it seemed like a very obvious decision. So many organizations use credentials as defensive filters, and then something predictable happens.
Jason Baumgarten 13:32
We have credential inflation. We're seeing that right now with AI. Everyone is a chief AI officer, using AI to transform their roles, everything's been appended by AI. Roles that once required some proven experience now demand new signals, certifications, degrees, experience in a narrow set of firms.
Jason Baumgarten 13:51
And the bar keeps moving. Not because jobs have gotten significantly harder, although they may have in some cases, but because competition's gone up and discoverability has gone up. As more people have their bios online and their websites and their podcasts and their newsletters. So research extending Spence's original idea around signaling shows this. When employees compete on signaling, individuals end up overinvesting in credentials because the return exceeds the actual productivity. In leadership markets, that often means that candidates feel compelled to keep stacking credentials to stay competitive, even when an additional credential may add very little value to their effectiveness.
Jason Baumgarten 14:33
And boards, unconsciously, as do CEOs, raise the baseline here. What used to differentiate becomes a minimum. It used to be if you were a CEO, you were able to get on a board. Now you need prior board experience and you need multiple board experiences. Now you need relevant board experience
Jason Baumgarten 14:51
in industry, same thing with CEOs, same thing with vice presidents, same thing with most leadership roles. So high potential leaders without those certain credentials get filtered out before their capability is assessed. And that reinforces power structures in a way that most organizations don't really look at. And there's a subtler cost, that over time people get taught that the goal, the thing you should aim for, is not the substance but the signal.
Jason Baumgarten 15:17
Instead of asking what experiences will deepen my capability, they ask what signal will improve my marketability. Just ask the latest guru who's pontificating on leadership without ever having studied it or lived it or selected for it. Jumping around to exciting firms is the number one way to improve your salary,
Jason Baumgarten 15:48
not your success in your role. So what we're teaching a generation is go find the hotter ticket, not succeed in the one you're with.
Jason Baumgarten 15:48
So let's focus on developing leaders, developing capabilities, not managing perception. So maybe this is a sobering picture. And let me be fair, credentials are not meaningless. I really appreciate my Stanford MBA and my time at McKinsey and Ogilvy & Mather and Microsoft and lots of big brands. And some of those experiences genuinely built incredible knowledge, discipline and networks.
Jason Baumgarten 16:14
But sometimes some other signal that is seen as less capable might actually have built more real lived experience that's relevant to a job. So that's why there are a few things that are critical. One is, does the context mean that that signal or that credential is as valuable? And two, are we looking for positive signals when we actually should be equally looking for negative ones? The best example is failure.
Jason Baumgarten 16:41
We learn more from failure often than success, yet we tend to shy away from anyone who's failed. So the problem isn't that credentials never matter. The problem is that we all over attribute causal power to them because they're easy, they're visible, and they're socially accepted. So the best selectors I've seen understand this distinction. They treat credentials as data points, not a verdict, not a reason to include or not include.
Jason Baumgarten 17:05
And then they dig in to understand whether that credential is actual evidence of preparedness or simply a proxy for comfort. They recognize that unconventional careers can produce equally credible and sometimes more relevant signals when the context is right. Otherwise, some of the most amazing founders and CEOs of our generation would never have achieved the impact they've had. Things like repeated success and hard turnarounds, or a mix of failures and successes under crisis, cross functional leadership and a sustained pattern of building amazing teams can be much harder and nuanced to dig into, but much more valuable. So if you're responsible for leadership selection in any way, I'd say listen, you can't ignore credentials.
Jason Baumgarten 17:50
They're deeply embedded in markets and institutions and how humans function, but we can use them more intelligently.
Jason Baumgarten 17:50
One. Separate must have signals from nice to have shortcuts. Ask yourself, is this genuinely predictive of success or just a proxy that makes us all feel better? Tighten your requirements with a clear link to the context.
Jason Baumgarten 18:10
Two. Add direct evidence alongside the signals, both to validate them and to ensure they fit. Complement credentials with data, role simulations, working sessions, structured interviews, structured references, case discussions. These things take more work, but they get you closer to triangulating the truth.
Jason Baumgarten 18:32
Three. Audit for structural bias in your signals. If there's something that is your signal, you'll be especially biased to wanting it in others. You played team sports, that must be a sign of leadership. You went to an elite school,
Jason Baumgarten 18:45
must be the pathway. You started in sales, knocking on doors, that must be the key gauntlet every leader must pass through. But it turns out many of these things are more unevenly distributed. And if your filters rely heavily on some signal that you randomly believe is important, you're probably excluding high capability leaders.
Jason Baumgarten 19:06
And that's a real issue.
Jason Baumgarten 19:06
Four. Make the signaling logic explicit. Don't just make it a list in a job spec. Connect the dots between why it's important and the job. And then finally, try
Jason Baumgarten 19:20
to get ahead of the signal. Always think about the arbitrage opportunity of selecting somebody just before that other employer, educator, or entity finds them and has them stand out. The more you become the talent scout, the less you're relying on others to scout talent and mark them up. For the individual executives listening to this, because I know you probably are, the lesson is sobering but actionable.
Jason Baumgarten 19:49
What others see often matters as much as what you can do. That doesn't mean you should chase these credentials and signaling indiscriminately, and many of them are not as valuable as the work that we put into them or the price. But it does mean understanding which signals your target market treats as credible and deciding deliberately whether acquiring them is an
Jason Baumgarten 20:08
important aspect of your career pathway. And the reality is that legitimacy in leadership is constructed socially through signals. The stories we tell and the collective belief of those who have worked with us or those that are in our extended networks. And credentials are part of that construction.
Jason Baumgarten 20:25
But they're not the whole thing. So I'll leave you with this. We all need to acknowledge the truth, that people are often declared qualified the moment the signal fits the prevailing template, not when their capability reaches some objective threshold.
Jason Baumgarten 20:40
And the opposite is often true, that people with signal value can often miss some of the key attributes required for the role. But we don't always see it, and we don't always let ourselves see it. So for organizations, credentials matter, they clearly do.
Jason Baumgarten 20:58
But the question is whether your leadership systems and personal biases are rewarding people who are best at leading, or are they rewarding the ones who are best at acquiring the symbols, internally and externally, that others have learned to trust. This shapes who gets seen, who gets
Jason Baumgarten 21:13
sponsored, who gets promoted, and ultimately who gets to lead. Thanks for listening. I'm Jason Baumgarten and this is Fit Happens.