How to Use Pre-Hire Assessments

In 1944, mother-daughter Isabel Myers and Katherine Briggs published the Myers-Briggs Personality Type Indicator, also known as MBTI. The personality assessment initially intended to help women entering the World War II effort at home determine which jobs would be most suitable for them based on their personality type. Soon enough, Myers-Briggs had become a staple test for career-minded individuals.

Today, the use of assessments in corporate America has grown tremendously beyond traditional personality tests. A 2014 report by business intelligence firmAberdeen Group showed nearly 60 percent of employers use a formal hiring assessment. Moreover, research and advisory firm Bersin by Deloitte estimates that the assessment industry has grown 30 to 40 percent in the past five years. Some estimate its revenue nearly $800 million.

Driving demand for pre-hire assessments are costly hiring mistakes. According to HR trade association the Society for Human Resource Management, the cost of a bad hire can shoot up to as much as five times that of new hires’ annual salary. To offset this cost, more companies are turning to assessments to get quantifiable data with the hope of reducing “gut instinct” hiring.

But as this special report will show, while assessment vendors proliferate, using them in the hiring process is a delicate balancing act — one that forces talent managers to weigh their potential benefits and drawbacks in equal measure.

Identify Purpose

Talent managers largely need to ensure the assessment serves its purpose. “An assessment should take the guesswork out of hiring,” said Jim Starr, vice president of human resources at S.P. Richards Co., a division of Genuine Parts Co., based in Atlanta. “We want to make sure the hire is a good fit for us and the candidate; it reduces the ‘misery index.’ ”

When not used correctly, even the best tools can backfire. One example is this past summer’s legal battle involving retail giant Target Corp. In that lawsuit, the U.S. Equal Employment Opportunity Commission sided with Target job candidates who said the tests they were given as part of a hiring process for upper-level management positions were not sufficiently job-related. They also argued the assessments disproportionately screened out applicants based on race or gender. Target agreed to pay a $2.8 million settlement.

Such high-profile cases haven’t stopped proponents from saying the tests are scientifically able to predict job success. “Well-developed assessments have repeatedly been shown to reduce turnover and predict job success,” said Samuel McAbee, an organizational psychologist and assistant professor in the psychology department at the Illinois Institute of Technology.

To be useful, companies must understand what’s required to implement the assessment properly. “It’s critical that you talk to vendors about the variety of tests they offer,” said Tomas Chamorro-Premuzic, CEO of Hogan Assessment Systems. “Are they skills-based? Do they assess potential job performance? Do they include business scenarios and personality and behavioral assessments?”

In addition to understanding the types of assessments offered, talent managers should understand how to interpret their results. Any vendor should also have industry-specific expertise.

For example, Pegged Software, a Baltimore-based provider that specializes in the health care industry, goes beyond skills and behavior testing to include the Hospital Consumer Assessment of Healthcare Providers and Systems scores into its algorithm. “This score reflects patient satisfaction and enables us to figure out who might have the potential to influence patient care in a positive way and might be most likely to succeed in a role,” said Mike Rosenbaum, CEO and founder of Pegged.

Assessments don’t come without flaws. There are important steps talent managers should take to make sure an assessment is a good fit, said Linda Henman, author of “Challenge the Ordinary” and founder of consulting firm Henman Performance Group.

The first step is to ensure the assessment is valid for hiring. “Not all assessments are validated for pre-employment,” Henman said. “As popular as Myers-Briggs is, it’s not validated for hiring, and I wouldn’t put it in my battery.”

It’s also important to use tests that are developed by organizational psychologists who work in the testing industry. The American Psychological Association outlines guidelines in its “Standards for Educational and Psychological Testing.”

Second, never just do a personality assessment. “Every pre-employment battery should include at least one cognitive assessment for quantifiable data,” Henman said.

Finally, make sure a specialist is interpreting the data. “Hiring is both art and science, and talent managers aren’t generally equipped to interpret this type of data — you need a specialist to evaluate and protect the integrity of whatever measurement instrument you choose,” Henman said.

Clearly Define Roles

Assessments should only be used when the job they’re hiring for is clearly defined. One of the biggest mistakes employers make is assessing a candidate before understanding the role they are hiring for. “The basis of everything we talk about today in assessment is ‘job analysis,’ which is the in-depth, scientific study of the actual work someone will be doing,” Illinois Institute of Technology’s McAbee said. “For someone like me, that would be my ability to write a paper or teach a class.”

If talent managers keep returning to that core job profile, the assessment has a greater likelihood of success. “There is a science to selecting the right people, much like there is a science to nuclear physics,” Hogan’s Chamorro-Premuzic said.

S.P. Richards’ Starr, whose company specializes in supply chain and logistics, said it uses Talent Quest assessments to benchmark against specific job roles such as sales, management, supervisor and laborer. “To get the most successful matches, we identify the top seven traits in each job code assessment,” Starr said.

The company also uses additional assessments to test high-level management potential. “We bring some candidates to TQ for more in-depth assessments, and we also identify potential high-talent managers using the Gallup scores for motivator, assertiveness, accountability, relationships and decision-making,” Starr said.

The difficulty level of the assessment is important, too.

“It works best when the assessment mirrors the complexity of the role,” said Joseph Murphy, executive vice president and co-founder of candidate evaluation firm Shaker Consulting Group. In the case of hiring mid-to senior-level management roles that require strong critical-thinking skills, this means going beyond multiple-choice questions and participating in “situational judgment,” or having candidates participate in reasoning, task delegation or brainstorming exercises.

Still, assessments are all but moot if they aren’t job-specific. “All assessments must be tailored to the specific job family or specific position,” said Ric Heimke, vice president of talent management for Sedgwick Claims Management Services Inc. “The validity of the assessments is critical to appropriately identifying skills and competencies that are matched to the role.”

This increasingly means business acumen. “For midlevel managers, usually up to director level, we use an online tool to conduct a personality and motivational assessment but we couple that with a managerial judgment test that measures how candidates solve common business problems,” said Joe Ungemah, vice president and head of the leadership practice at assessment provider CEB.

The firm then often takes all of these inputs and customizes the assessment based on an employer’s own leadership competencies. “This way we can report back the results in the company’s language instead of ours, which enables the recruiters to be more self-sufficient in interpreting the results,” Ungemah said.

CEB also employs a tactic called “in basket” in its assessment process. “It feels like an Outlook interaction, and the applicant has to reply as they would in a real business situation,” Ungemah said.

Candidates are then assessed based on factors like the content of the replies, how many times they opened emails, how long it took them to reply, whether they prioritized emails from a supervisor or a client first, and how they handled difficult situations.

A well-developed assessment should also measure the less-quantitative aspects of the role. “HR folks need to balance the tasks that the candidate is expected to do with the interpersonal behaviors they are expected to show,” McAbee said. “If you are hiring for a front-line, customer-service-oriented role, this is key. A potential hire must be friendly, outgoing and talkative — those are valid criteria that are tough to train.”

Tailoring assessments by role isn’t always realistic, especially in large companies. An alternative is to think about role groupings. “If we used one assessment per role, we would have over 20,000 assessments, and that’s a bit unrealistic,” said Adam Hilliard, senior manager of global selection and assessment strategy for Wal-Mart Stores Inc.

Finally, in terms of return on investment, the biggest payoff of assessments is that they help companies determine when it might not make sense to move further with a candidate.

In the case of Wal-Mart, it uses an assessment with a defined “cut score” to eliminate candidates who likely don’t have the skills necessary for a role. “By using a legally defensible cut score, our hiring managers spend the most time with individuals who are most likely to be successful in a role,” Hilliard said.

Model Top Performers

A good assessment takes into account the skills and characteristics of a company’s top employees. According to Aberdeen Group, companies who correlate pre-hire assessments with ongoing employee performance are 24 percent more likely to have employees who exceed performance expectations.

However, identifying top performers is easier said than done. “Most organizations don’t do a good job of identifying their top performers, in which case the best assessment in the world can’t help because they have no idea what good performance actually is,” Hogan’s Chamorro-Premuzic said.

Some assessment providers view a critical part of their role as steering employers toward a deeper understanding of top performers. “Sometimes our job is to convince employers that they may be focusing on attributes that they think are critical, but when we dig deeper and test assumptions, they’re not the attributes their top performers actually have,” Chamorro-Premuzic said.

One way to get better data on top performers is to consider piloting an assessment technology with your current employee base and then do a rigorous profile on the results of the high performers. Those skills and attributes can then be used to help build the assessment and be correlated to candidate results.

When creating profiles of top employees, companies should use all the information at their disposal. This includes the results of annual performance reviews, employee engagement scores, customer satisfaction scores and any relevant financial data. 

Not surprisingly, industries that depend on data for their financial health tend to be most effective at this. “Large hotel chains are the best clients because of the amount of performance data they have,” Chamorro-Premuzic said.

Many talent managers are proponents of continuing to use assessment results even after the hiring stage. “Our managers use the assessment reports as an ongoing developmental tool for our employees,” said Jessica Stembridge, vice president of wealth-management firm Diversified Trust. “The results have proven very helpful for managers in working constructively with direct reports.”

Training teams can also more easily plan their learning approach for employees based on initial candidate assessments. “Based on scores at the time of hiring, our operating teams as well as training teams have been able to build plans that are better-suited to employees based on their current levels of skills,” said Yogendra Jain, global talent acquisition leader at business process firm Genpact.

Assess the Bigger Picture

While assessments are yielding more insightful data, they are just one piece of a hiring strategy that should include traditional measures such as in-person interviews, social networking sites like LinkedIn and résumés.

“Different types of inventories have their own strengths and weaknesses, and today you’re able to incorporate the best of what’s around,” Wal-Mart’s Hilliard said. All of these measures combined provide a more robust candidate profile.

That multimodal strategy is key to driving return on investment. “Clients reduce their interview-to-hire ratio by 30 to 40 percent, which ultimately means they are spending less time with poor-fit candidates, more time with good-fit candidates, and getting to a smaller sample of more-qualified individuals faster and more reliably,” Shaker’s Murphy said.

Assessments alone also won’t deliver the return on investment that most companies are seeking in hiring.

“The assessment tool is only one resource that needs to be coupled with other processes to create a turnover reduction,” Starr said. “Companies also need to continue to focus on things like refining their prescreening questions and training managers on interview techniques.”