As companies are required to do more with less, talent decisions take on greater complexity. The mandate for greater efficiency with fewer resources draws attention to the power of assessments. The data derived from these tools can help to maximize performance and productivity while reducing the cost and risk associated with bad hires. Assessments also can inform workforce and succession planning.
A report by the Aberdeen Group, a business research company, called “Talent Acquisition Strategies 2010” revealed organizational fit was the top factor in quality of hire two years in a row. The report also found best-in-class organizations believed team fit was more important than a candidate’s skills when evaluating overall organizational fit. This can lead to a broader use of assessments across the employee lifecycle.
Aberdeen Group conducted similar research for its “Assessments 2011: Selecting and Developing for the Future” study in April with more than 640 organizations. It divided study participants into three categories — best-in-class, average and laggard — and used a maturity class framework with three main performance criteria to distinguish best-in-class companies from other organizations:
• Hiring manager satisfaction: How much satisfaction with new hires has improved in the last 12-month period indicates how well the recruiting and staffing function is doing matching new employees’ skills, talents and behaviors to hiring managers’ needs.
• Bench strength: The number of key positions that already have identified at least one willing and capable successor shows how good organizations are at identifying and developing the next crop of talent, based on future needs.
• Employee performance: How many employees received an “exceeds expectations” rating on their last performance review demonstrates how well organizations are at aligning individuals’ efforts with organizational expectations.
Best-in-class organizations represent the top 20 percent of aggregate performance scorers and demonstrate their dominance with the following scores:
• 19 percent year-over-year improvement in hiring manager satisfaction.
• 69 percent of key positions have at least one willing and capable successor identified.
• 73 percent of employees received a rating of “exceeds expectations” on their last performance review.
Average respondents represent the middle 50 percent of scorers, and the remaining 30 percent of respondents are considered laggards, with the lowest aggregate performance scores.
Aberdeen used its PACE Framework — pressures, actions, capabilities and enablers — to examine each respondent organization’s assessment use for insight into what practices enable organizations to hire effectively and perform optimally. Organizations that get the most out of their assessments:
• Consider assessments to be a tool to enable better talent decisions throughout the employment lifecycle.
• Create competencies to assess against, based on a collaborative effort between HR and the business.
• Use a variety of assessment types, appropriate to the decision point, to help them minimize risk when making crucial talent decisions.
The survey revealed that best-in-class organizations share several common assessment practices, beginning with a strong alignment between HR and key business strategies to identify the critical competencies required to drive business results. While 74 percent of each organization class understood the importance of business alignment, buy-in and alignment are not the same thing. Among best-in-class organizations, 72 percent reported a collaborative effort between HR and the business to make sure the assessments being used met business needs. Further, 63 percent of this group also reported using consistent competency definitions for hiring, performance management and development decisions; just 50 percent of all others had these competencies in place (Figure 1).
Assessment Variety Yields Results
Armed with defined and consistently applied competencies, best-in-class organizations use a variety of assessment types, such as behavioral-based/personality type assessments, skill-based assessments and critical thinking/cognitive ability assessments. Not every assessment is appropriate for every position or at every stage. A wise strategy for assessment use — basic skills, multi-dimensional, high stakes and motivational — leads organizations to not only make better hires but promote better long-term performance as well.
The best-in-class group is 85 percent more likely to be able to correlate post-hire assessment results to ongoing performance and 42 percent more likely to be able to tie ongoing performance back to pre-hire assessments than all others combined. Twenty-nine percent of best-in-class companies state they can directly link the use of assessments to changes in revenue or profitability, and they have the data to back that up, versus 12 percent of average organizations and 6 percent of laggards.
For all four of the following indicators, using a combination of post-hire and pre-hire assessments resulted in better returns: key positions filled internally, key performance indicators or management objectives achieved, improved bench strength and new hires achieving first performance milestone.
American Airlines leveraged assessments in a variety of ways to achieve business goals. The global organization is dispersed, with almost 88,500 employees across all job types. Accordingly, the airline uses a variety of assessment tools, including skills testing, 360 feedback and personality indexes. The organization has established itself as a best-in-class company, however, in how it applies its assessment data.
American Airlines’ “Leading Others” leadership development workshop starts with personality, competency-based and 360-degree instruments, followed by a two-day event. The first day is devoted to individual assessment feedback via one-on-one and small group sessions. The second day zeroes in on using that feedback — specifically, how participants can use their new self-knowledge to grow as leaders, and then creating an individualized development plan. In the three years since the workshop was implemented, more than 70 percent of the airline’s leaders have voluntarily gone through the program.
This success has spurred additional assessment use throughout the company. Consultants are using assessments in individual and team coaching sessions, and the head of the airports division approved a version of the Leading Others program for his 1,200 employees. A second phase focuses on the division’s six major strategic goals and how these leaders can use their individual skills to achieve those goals.
American Airlines conducted a return on leadership development (ROLD) study to determine the bottom-line business success of its program. ROLD measures innovation, productivity, effectiveness and efficiency of the leadership initiative itself and of its impact on business. It looks at specifics such as the impact of innovation on the organization, whether bench strength and the leadership pipeline have been increased and the overall business impact of leadership initiatives. The airline was able to report a return on investment of 631 percent for its leadership program.
Trusting the Data
Another differentiator among organizations is how much trust they place in assessment results and how those results are used in talent decision-making processes. The best-in-class group places more of its trust in assessment data for use in talent decisions than all other groups (Figure 2).
This difference is most clearly seen in identifying high potentials. When asked what pre-hire assessment data was used post-hire, 57 percent of best-in-class organizations replied “identifying high-potential talent.” That’s compared to 50 percent of all others. Forty-three percent of the top organizations rated “evidence of accuracy in predicting potential” as one of the top three criteria for choosing a vendor, whereas only 29 percent of all others included this as a priority (Figure 3). The significant percentage gap suggests best-in-class organizations have attained that status at least in part due to a focus on identifying top talent.
The best-in-class group also trusted pre-hire assessment data more in terms of whom to interview. Interviewing candidates who aren’t suitable for a position is a waste of time and can yield disastrous results in terms of culture fit, productivity and turnover. It begs the question: why conduct pre-hire assessments if the results have no bearing on hiring decisions?
Best-in-class organizations also pay more attention to assessment data than other factors, including manager recommendations, when making promotion decisions for key management positions. Top companies rely on recommendations from hiring managers 11 percent less than others. The best-in-class group also was more likely to use multi-dimensional/whole person assessments — 58 percent vs. 46 percent for others — and high-stakes assessments — 29 percent vs. 23 percent for others — in the decision-making process for management roles (Figure 4).
Hiring departments are tasked with finding great talent while running a tight, streamlined ship, and Aberdeen’s data shows pre-hire assessments can help decision makers choose candidates wisely. Assessment data provides insight not only into hiring but also informs development and promotion decisions — if that data is properly used and appropriate to the position. Such information not only enables organizations to maximize the talent they have but to see deeper into current strengths and future needs. That knowledge can position organizations for ongoing success.
Mollie Lombardi is the research director of Aberdeen Group’s human capital management practice. She can be reached at email@example.com.