Media from the Wall Street Journal to CNN, and CEOs with whom I’ve spoken, agree that one of the top strategic initiatives of many companies is hiring not only new talent,
but also the right talent. It is forecast that by 2012, we will be fully engaged in a high-level leadership and knowledge worker talent shortage.
Given the diminishing available talent pool, and the compelling messages about offshore, lower-skilled labor and processes, I predict that the pendulum will swing and companies will re-recognize the need to invest in hiring and retaining key people. This will allow companies to leverage their opportunities to innovate, compete and achieve their corporate objectives. But where will this talent come from?
The impetus for this talent “shortage” is that
growth-oriented companies are demanding more of their workforce, and are
unwavering in their desire to attract and hire “difference makers.” Companies
committed to winning the war for talent will not only have to create an
environment that fosters growth, development and challenge, but will also need
to implement systems and operating practices that maximize their ability to
attract and retain the best.
Given the amount of effort and money that will be budgeted to createextraordinary retention programs, these same companies will need to evaluate and improve their internal hiring practices so that only winners get in the door. In today’s competitive talent market, with candidates demanding top salaries, companies have the right to know what they are getting, and have the right to expect a return on investment with each hire. That’s where assessments can have a huge impact.
Another major consideration affecting the use of assessments, or assessmentservice companies, is the need to analyze the cost of a bad hire. Besidessalary, taxes and benefits, there are an immense number of hidden costswhen a company hires someone who does not succeed.
COMPARING COST OF TURNOVER TO COST OF ASSESSMENT PROGRAMS
Company XYZ has 200 employees, of which 40 are sales/execs and 160 arehourly. They are planning to expand by 10%, or 20 people, during theupcoming year.
If turnover for the sales/execs is 15%, then XYZ Co has turned over 6 people (40 x 15%). If the average sales/exec earns $80K, then based on DOL figures, the turnover cost for that group is 6 x $100K ($80K x 125% = $100K).
TOTAL COST OF TURNOVER
TOTAL COST OF ASSESSMENTS
With an average test cost of $300, the cost for assessing all new exec/sales candidates would be $300 x 6 tests.
If turnover for the hourlies is 30%, then XYZ Co turnover is 48 jobs. With the average turnover cost at $6500 for an hourly, the turnover cost for this group is 48 x $6500.
With an average test cost of $180, the cost for testing all new hourly hires would be 48 x $180.
PROJECTED EXPANSION Projected 10% or 4 exec/sales positions
Projected 10% or 16 hourly positions
LESS THAN $15,400
The days of testing only salespeople or executives are past. Your senior-level administrative and service people are critical elements in your company and for your customers.
Assessments are one of the fastest-growing HR sectors. They are used to evaluate everything from candidates’ motivations, values and behaviors to communication style, personality traits and organizational ability.
There are many questions you should ask before engaging assessmenttools. First, what categories are available? Some assessments focus on only one dimension, like mental acuity. Some consider motivations, communication style or personality traits; and there are even others that focus on competencies and capacities for sales or leadership.
I strongly recommend interviewing your internal clients (the actual managers) to determine what they want to achieve from their people and how an assessment would measure the person’s ability to accomplish. You may find that it is important for managers to have an assessment that enables them to better mentor their newly hired employees, or that they need a formalized assessment that allows them to understand how to motivate, fully empower and engage their employees. Additionally, your managers might need a tool to elevate their ability to allocate their human resources talent more effectively.
The bottom line is, knowing your client’s needs and what the market offers enables you to choose the right assessment. The most powerful use of your money and time is choosing one assessment that can be applied to the whole human capital picture, from hiring through succession planning and retention.
If you choose a single assessment, you should have evidence that it has passed the validation process. Some companies state in their marketing material that their assessment tool is not to be used as a hiring tool. Other assessment tools fail the 4/5th rule, a legal mandate that if 4/5ths of a protected class cannot pass the assessment, then it is most likely discriminatory. Another form of validation is benchmarking. When an assessment is given to over 100 top performers from different companies in a similar role, the benchmarkvalidation is the average sum of the results in each category. You can alsocustomize your benchmark by determining the motivations, traits and communication style of 9 to 13 top performers in a specific role within your company; having someone analyze this data and assess the common denominators identifies strategies for building with more of the best. Another form of validation is a measure that indicates how often candidates distorted their answers, which can greatly diminish the accuracy of the assessment.
Partnership is another aspect of selecting the right assessment. Each vendor has its own specialty and philosophy. Partner with someone who understands your company’s objectives. Research their programs, training and certification, and how they will integrate with your current hiring practices. Using an assessment you know nothing about to determine a candidate’s placeability is akin to carrying a loaded gun without training.
Commitment is a key element in the decision to
use assessments. Are you prepared to get certified? You will likely need
someone on staff who can learn these assessments, understand the validation
process, and believe in the results. Your recruitment team — the people finding,
assessing and representing the talent — must also be trained so they can make informed
recommendations. Or you can simply pay to have individual assessments done. The
cost is higher, but you don’t have to worry about integrating the assessment
with your existing hiring process. Just be sure the company has an experienced
staff to help you interpret the results.
Consider hiring an adviser who is not trying to persuade you to buy a particular assessment. Take your time and conduct your due diligence. There are people who act hastily, pay the fees, and take a webinar, only to find that they are running in the wrong direction. Assessments should not get in the way of your hiring process; they are a tool to aid you in selecting the best while weeding out the rest. If you plan to fully utilize assessments, learn to interpret them or hire a consultant to do it for you. Knowledge is power and the cornerstone of your credibility.
As the war for talent rages on, your company might find itself in a position to increase benefits, extend vacations, offer additional tuition reimbursement, and improve development and retention programs, in turn increasing overall overhead. Smart companies that choose to win the war for talent also choose to adopt the good-to-great philosophy; they make conscious choices to put the right people on the bus in the first place. The right assessment is key to putting the right people on the bus.