ROI of assessment

Innovative, pragmatic, online psychometric assessment solutions Objective assessment and ROI (return on investment) 18 November 2009 Moscow Roger Holdsworth Chairman, Talent Q International Ltd

► Co-founder of SHL in 1977
► Founded SHL Russia in 1992
► Founded Talent Q in 2005
► Talent Q operates today in >20 countries (including Russia), in >20 languages (including Russian)
► Talent Q aims to increase the ROI of assessment, based on technology
Roger Holdsworth background the measure of people

► 75% of major Western corporations use psychological tests, but on average they only use them for about 15% of their hires
► The world-wide market for psychological assessment is probably worth about €4 billion
► 82% of organisations do not measure the ROI of their HR practices at all
Assessment in HR today the measure of people

► An analysis of 92 large studies showed that strategic HRM can improve profitability by at least 4%
► Objective selection alone can improve profitability by 1.3%
► A recent study of UK hospitals showed that the quality of HRM policies accounted for 7.7% of variance in patient mortality
Research on the impact of good HRM the measure of people

Calculation of assessment ROI
Job-holders 250
Turnover p.a. 14%
Hires p.a. 35
Average sales 1 525 000
Operating profit 8.5%
Op. Profit 130 000
SD of profit 13%
= (SDP) 17 000
Selection ratio 3:1
Coefficient (SR) 1,00
Sales representatives: Telecoms systems Selection process: 2 ability tests (V + N) Personality test CBI Line manager interview Cost 450 Validity (Val) 0.65 Benefit (SDP*SR*Val) Per hire 11 000 Net per hire 10 550 ROI per annum 2 346% Total ROI p.a. 370 000 the measure of people

Calculation of assessment ROI
Job-holders 250
Turnover p.a. 13,5%
Hires p.a. 34
Average sales 11 million
Operating profit 4.5%
Op. Profit 495 000
SD of profit 11,5%
= (SDP) 57 000
Selection ratio 4:1
Coefficient (SR) 1,20
” DIY” store managers Selection process: 2 ability tests (V + N) Personality test CBI Simulations Cost 875 Validity (Val) 0.46 Benefit (SDP*SR*Val) Per hire 31 375 Net per hire 30 500 ROI per annum 3 491% Total ROI p.a. 1 031 000 Talent Q ROI calculator: more complex system, available on-line the measure of people

► Increase validity
► Decrease cost
► Improve intangible factors
How to improve ROI of assessment the measure of people

► Use valid methods:
Validity Reference checking Very low
Unstructured interviews Very low
Competency-based interviews .30
Personality testing .35
Simulation exercises .35
Ability tests .40
Assessment centre .55
► Check local validity
► Validity studies improve interpretation
► Apply consistently, using trained staff
How to increase validity of assessment the measure of people

► Use low-cost methods:
Validity Cost Reference checking Very low Low
Unstructured interviews Very low Medium
Competency-based interviews .30 High
Personality testing .35 Low
Simulation exercises .35 High
Ability tests .40 Low
Assessment centre .55 Very high
► Remember the main costs are assessor and candidate time spent
How to reduce cost of assessment the measure of people

► On-line testing to screen out “no-hopers”
► Aim to see only 2.5 candidates per vacancy
► Train assessors on-line
► Use external experts to carry out validation
► Use on-line applicant tracking system
► Involve line managers, but only at final stages
Reducing assessor time the measure of people

► Reduce test time by 50%
► Focus only on relevant characteristics
► Make tests adapt to candidate’s level
► Provide candidate feedback
► Reduce time to hire
► This all improves employer branding
► For many employers, candidates could be customers
► Or candidates may be existing employees
Improving the candidate experience the measure of people

Customisation to company’s competency model
Uses company’s own language
Makes interpretation easier
Can be used by line managers
Available at €5 000 in 2 weeks
Re-use of assessment in other HR applications
Team roles
Composite team profile
Types at work
Sales profile
Emotional Intelligence
“ De-railers”
Learning styles
All standard TQ outputs
Assessment ROI “intangibles” the measure of people

► Proper, scientific assessment has a very high ROI (in the widest sense)
► So it’s well-worth doing it, and doing it better - a good investment
► People don’t usually bother to measure ROI of HRM policies or processes. Why not?
► Latest developments in assessment testing offer many advantages, and will lead to increased ROI
Summary & conclusions Спасибо за внимание ! the measure of people

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ROI of assessment

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