ROI of assessment


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ROI of assessment

  1. 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. 2. <ul><li>► Co-founder of SHL in 1977 </li></ul><ul><li>► Founded SHL Russia in 1992 </li></ul><ul><li>► Founded Talent Q in 2005 </li></ul><ul><li>► Talent Q operates today in >20 countries (including Russia), in >20 languages (including Russian) </li></ul><ul><li>► Talent Q aims to increase the ROI of assessment, based on technology </li></ul>Roger Holdsworth background the measure of people
  3. 3. <ul><li>► 75% of major Western corporations use psychological tests, but on average they only use them for about 15% of their hires </li></ul><ul><li>► The world-wide market for psychological assessment is probably worth about €4 billion </li></ul><ul><li>► 82% of organisations do not measure the ROI of their HR practices at all </li></ul>Assessment in HR today the measure of people
  4. 4. <ul><ul><li>► An analysis of 92 large studies showed that strategic HRM can improve profitability by at least 4% </li></ul></ul><ul><ul><li>► Objective selection alone can improve profitability by 1.3% </li></ul></ul><ul><ul><li>► A recent study of UK hospitals showed that the quality of HRM policies accounted for 7.7% of variance in patient mortality </li></ul></ul>Research on the impact of good HRM the measure of people
  5. 5. Calculation of assessment ROI <ul><li>Job-holders 250 </li></ul><ul><li>Turnover p.a. 14% </li></ul><ul><li>Hires p.a. 35 </li></ul><ul><li>Average sales 1 525 000 </li></ul><ul><li>Operating profit 8.5% </li></ul><ul><li>Op. Profit 130 000 </li></ul><ul><li>SD of profit 13% </li></ul><ul><li>= (SDP) 17 000 </li></ul><ul><li>Selection ratio 3:1 </li></ul><ul><li>Coefficient (SR) 1,00 </li></ul>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. 6. Calculation of assessment ROI <ul><li>Job-holders 250 </li></ul><ul><li>Turnover p.a. 13,5% </li></ul><ul><li>Hires p.a. 34 </li></ul><ul><li>Average sales 11 million </li></ul><ul><li>Operating profit 4.5% </li></ul><ul><li>Op. Profit 495 000 </li></ul><ul><li>SD of profit 11,5% </li></ul><ul><li>= (SDP) 57 000 </li></ul><ul><li>Selection ratio 4:1 </li></ul><ul><li>Coefficient (SR) 1,20 </li></ul>” 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. 7. <ul><li>► Increase validity </li></ul><ul><li>► Decrease cost </li></ul><ul><li>► Improve intangible factors </li></ul>How to improve ROI of assessment the measure of people
  8. 8. <ul><li>► Use valid methods: </li></ul><ul><li> Validity Reference checking Very low </li></ul><ul><li>Unstructured interviews Very low </li></ul><ul><li>Competency-based interviews .30 </li></ul><ul><li>Personality testing .35 </li></ul><ul><li>Simulation exercises .35 </li></ul><ul><li>Ability tests .40 </li></ul><ul><li>Assessment centre .55 </li></ul><ul><li>► Check local validity </li></ul><ul><li>► Validity studies improve interpretation </li></ul><ul><li>► Apply consistently, using trained staff </li></ul>How to increase validity of assessment the measure of people
  9. 9. <ul><li>► Use low-cost methods: </li></ul><ul><li> Validity Cost Reference checking Very low Low </li></ul><ul><li>Unstructured interviews Very low Medium </li></ul><ul><li>Competency-based interviews .30 High </li></ul><ul><li>Personality testing .35 Low </li></ul><ul><li>Simulation exercises .35 High </li></ul><ul><li>Ability tests .40 Low </li></ul><ul><li>Assessment centre .55 Very high </li></ul><ul><li>► Remember the main costs are assessor and candidate time spent </li></ul>How to reduce cost of assessment the measure of people
  10. 10. <ul><li>► On-line testing to screen out “no-hopers” </li></ul><ul><li>► Aim to see only 2.5 candidates per vacancy </li></ul><ul><li>► Train assessors on-line </li></ul><ul><li>► Use external experts to carry out validation </li></ul><ul><li>► Use on-line applicant tracking system </li></ul><ul><li>► Involve line managers, but only at final stages </li></ul>Reducing assessor time the measure of people
  11. 11. <ul><li>► Reduce test time by 50% </li></ul><ul><li>► Focus only on relevant characteristics </li></ul><ul><li>► Make tests adapt to candidate’s level </li></ul><ul><li>► Provide candidate feedback </li></ul><ul><li>► Reduce time to hire </li></ul><ul><li>► This all improves employer branding </li></ul><ul><li>► For many employers, candidates could be customers </li></ul><ul><li>► Or candidates may be existing employees </li></ul>Improving the candidate experience the measure of people
  12. 12. <ul><li>Customisation to company’s competency model </li></ul><ul><li>Uses company’s own language </li></ul><ul><li>Makes interpretation easier </li></ul><ul><li>Can be used by line managers </li></ul><ul><li>Available at €5 000 in 2 weeks </li></ul><ul><li>Re-use of assessment in other HR applications </li></ul><ul><li>Team roles </li></ul><ul><li>Composite team profile </li></ul><ul><li>Types at work </li></ul><ul><li>Sales profile </li></ul><ul><li>Emotional Intelligence </li></ul><ul><li>“ De-railers” </li></ul><ul><li>Learning styles </li></ul><ul><li>All standard TQ outputs </li></ul>Assessment ROI “intangibles” the measure of people
  13. 13. <ul><li>► Proper, scientific assessment has a very high ROI (in the widest sense) </li></ul><ul><li>► So it’s well-worth doing it, and doing it better - a good investment </li></ul><ul><li>► People don’t usually bother to measure ROI of HRM policies or processes. Why not? </li></ul><ul><li>► Latest developments in assessment testing offer many advantages, and will lead to increased ROI </li></ul>Summary & conclusions Спасибо за внимание ! the measure of people