Three companies cut turnover with tests

Workforce, April, 2002 by Sarah Fister Gale

Recognizing the fallibility of interviews, an increasing number of recruiters have added pre-employment assessment tests to their hiring process. These tests rate the personality and motivation of potential employees, allowing recruiters to choose candidates according to how they will fit into the existing corporate culture.

Evaluating candidates' personalities as well as job skills greatly improves recruiters' odds of making successful hires, which reduces their corporate turnover rates, says Tom DeCotiis, managing partner of DeCotiis Erhard, a consulting firm in Colorado Springs, Colorado. That can have a huge impact on the bottom line. When you add up the money spent on recruiting, hiring time, lost productivity, orientation, and training, turnover costs are about 150 percent of an employee's annual salary. If the average salary in a company with 1,000 employees is $50,000 and there is a 10 percent turnover rate, the annual cost of turnover is $7.5 million, he says. And a 10 percent turnover rate is considered low for most industries.

The primary reason for high turnover is bad hiring decisions. When the wrong candidate is put in a position, the company pours time and money into someone who will likely leave within months and may cause irreparable damage in the meantime. In a position where teamwork is critical, a bad hire can affect the morale of the entire staff. "A major cause of job dissatisfaction and the desire to quit is the quality of the people you work with," says DeCotiis. If you can zero in on the best candidates for the job, you have a much better chance of keeping them and the rest of your staff, which drives down the cost of turnover. The tricky part is knowing which candidate is the best fit for your organization's culture.

"You'll always find someone with the right credentials, but if they don't have the right attitude, they aren't going to work out," says Robert Fox, executive vice president of marketing at MindData Systems, a provider of Web-based evaluation tools, located in Dallas. Unfortunately, most people are poor judges of character, especially when the only contact they have is in an interview. "Anyone who's bright can phrase their responses according to what you are looking for." It's not until they are on the job that their true character shows through.

Personality assessments give you an unemotional evaluation of a candidate's character and attitude--qualities that are difficult to judge in an interview alone. These tests don't rate a person's skill level, but rather how he will behave on the job. They evaluate traits such as aggressiveness, motivation, sensitivity, and the ability to handle stress. Using the test results, a recruiter can determine how a person will interact with the existing staff and how well she will perform on the job.

To make the most of these tests, you have to benchmark your existing employees by giving them the tests, says Putt Fleming, sales manager at MindData. "All business cultures are unique. It is necessary to benchmark high-performers in order to take full advantage of a profiling tool."

Applying your own knowledge of who the top, bottom, and middle performers are, you can use their test results to create a custom profile of what the ideal candidates will look like. "When you validate test results against your highest performers, you increase your chance of making a good hire," Fleming says.

Each position will have a different profile of success. For example, the best salespeople generally rate low on compassion and low on sensitivity, whereas the best managers rate high on compassion and low on sensitivity, he says. You may interview someone for one position and realize that his assessment results make him a perfect fit for a completely different job. "The more data you have on your existing people and positions, the more useful the tests will be."

But the tests alone, like interviews alone, are not enough to make a sufficient assessment of a potential candidate. "It's a mistake to rely on test scores alone," says Randy Lucius, research director for Fitability Systems, an online interview and assessment company based in Atlanta. "They aren't foolproof." But if you use them in conjunction with the rest of your hiring techniques, including behavioral interviewing, skills tests, and your own intuition, you make a better hiring choice.

"It comes down to money," Fleming says. "By knowing more about the person that is being considered for a position, you can reduce turnover, increase productivity, and increase the quality of your corporate culture. All of this leads to a more favorable bottom line."

SMALL COMPANY

Wanted: Relationship Builders

Name: New Horizons Computer Learning Centers of Colorado

Location: Denver, Colorado

Type of organization: Franchise software training company

Number of employees: 150

New Horizons uses pre-employment assessment testing to identify the most promising account executives in a sea of applicants, says Janice Panting, sales supervisor, trainer, and mentor. The online test, developed by Fitability specifically for New Horizons, is part of a multi-phase process that weeds out unfit applicants, allowing Panting to spend more face-to-face time with those most likely to succeed.