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ROI of assessment

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  • 1. Innovative, pragmatic, online psychometric assessment solutions Objective assessment and ROI (return on investment) 18 November 2009 Moscow Roger Holdsworth Chairman, Talent Q International Ltd
  • 2.
    • ► 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
  • 3.
    • ► 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
  • 4.
      • ► 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
  • 5. 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
  • 6. 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
  • 7.
    • ► Increase validity
    • ► Decrease cost
    • ► Improve intangible factors
    How to improve ROI of assessment the measure of people
  • 8.
    • ► 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
  • 9.
    • ► 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
  • 10.
    • ► 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
  • 11.
    • ► 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
  • 12.
    • 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
  • 13.
    • ► 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