The job seemed like a perfect fit for the newly hired executive. Having graduated from a top MBA program, he was buttoned-up, meticulous in dress, had the right experience and exhibited an assiduous attention to detail. But it wasn't long after he was on the job that it became painfully evident that he wasn't the right senior leader to take the organization where it needed to be. He exhibited weak people skills, and had difficulty motivating his staff and making decisions. In short, he was a disaster.

Today, organizations must reconsider how they select senior leaders. A mistake like the one described above can be costly, both in dollars, company growth and staff morale. Three trends warn that scrutiny of the process is long overdue.

• The job is getting tougher. Information technology and global competition challenge organizations to be more flexible, streamlined and innovative to keep their competitive edge.

• Many executives fail. Estimates of executive failure typically range from 30 percent to 50 percent. Shareholders, spoiled by the long bull market, are impatient when earnings fail to boost stock prices. And when shareholders bark, boards of directors bite.

• Leaders are increasingly scarce. The pool of 35- to 44-year-olds is too small to replace retiring baby boomers. Other factors also are contributing to the leadership shortage -- expansion of executive positions as the economy grows, downsizing of old economy organizations and increasing job mobility among available managers.

Since the 1970s, managerial roles have continued to shift in the direction of leading and working with people, and leadership competencies have proliferated. Older competencies are not gone, just overshadowed as new skills and qualities emerge.

Leadership competency at all levels tends to cluster within the same overarching domains, which include the ability to lead others, decision-making skills and professional knowledge.

Within these domains, competencies vary by management level in content, scope and scale. All managers are decision-makers, for example, but lower-level supervisors make decisions about carrying out functional work whereas middle- or higher-level leaders are concerned with operational decisions for a functional division.

Senior leaders' decisions are far more strategic and cover an entire business or independent business unit. As a result, a competency model for selecting a senior leader will be driven by strategy rather than specific job tasks, as might be true at lower leadership levels.

Companies fill most leadership vacancies with internal candidates. Organizations that promote from within generate loyalty, boost morale, ensure continuity, capitalize on experience and save time and money.

Nevertheless, when organizations face an emergency -- from poor performance or rapid growth -- they are more likely to recruit an executive from the outside. External successors bring fresh approaches and unique experiences.

They are free of cultural baggage -- not bound to the firm's policies, traditions, and practices -- and are more objective when evaluating people and scrutinizing projects.

Organizations can benefit from recruiting leaders from both internal and external sources, varying the ratio according to circumstances.

When recruiting from within, companies use job postings and supervisory referrals to promote internal candidates. When contemplating higher-level openings, they often establish formal succession planning.

But yesterday's detailed replacement charts and long-term stair-step career plans are unrealistic in today's fast-changing economy. Progressive companies establish flexible succession pools and use both horizontal and vertical movements.

Search firms typically rely on interviews and references to assess external executive candidates. High-level executive candidates infrequently undergo tests and simulations, despite the demonstrated validity of these methods. Organizations assume that high fliers have sufficient skill and experience and would be insulted by a formal assessment. Instead, companies focus on evaluating the fit between the candidate and the company's culture, history, future prospects and other senior executives.

The complex new demands on 21st century executives and their high rate of failure suggest that companies err when they assume candidates' skills and experience are always up to the job. Firms evaluate internal candidates in succession management programs with rigorous methodologies like assessment centers, but when emergencies prompt them to look outside, they subject external candidates to less exacting scrutiny.

Hiring processes are less precise for senior than other leaders, but this can and should change. Companies often insist on rigorous evaluations for their succession management programs. They should be no less rigorous in evaluating potential senior leaders from the outside.