Putting job candidates to the test
Sarah Fister Gale
In a slow economy, no one can afford to make bad hiring decisions. Every failed hire causes companies to throw precious dollars down the drain retraining recruits for the same position. That’s why pre-employment assessment tests are more valuable than ever. While many areas of human resources are feeling the pain of belt-tightening, these staffing tools are growing in popularity because they have such a significant impact on the cost of hiring and turnover.
An accurate assessment dramatically reduces the time that hiring managers spend interviewing because it automatically eliminates a percentage of the applicant pool. For a human resources team trying to do more with less, that saves valuable time and ensures that bad candidates don’t slip through the hiring process, says Mel Kleiman, managing partner of the Hire Tough Group, a division of Humetrics, an employee retention services company in Houston, and author of Hire Tough, Manage Easy. It also helps you to identify the best candidates by adding another level of evaluation to the process, he adds, and that is critical for success in today’s economy. “It’s no longer enough to hire good people. You have to hire the right people–and now is the time to do it.”
When the economy is good, the candidate pool is smaller and you can’t be as selective as you might like to be, he says. But in a poor economy, there are extremely talented people looking for work. “A bad economy is an opportunity to change the future of your company because you have access to the best possible people for the Job.”
In order to hire them, however, you have to know how to identify them, especially when you are being inundated with applications. “You can’t use the same hiring standards today that you used two years ago’ Kleiman says. You have to re-evaluate everything in your recruiting process, from how you interview candidates to how you define job performance and expectations. For example, downsizing can have a huge impact on job responsibilities. Employees have fewer people to support them and are expected to do more with less training. If you are using the same job descriptions and the same evaluation standards in a downsized environment, you’re not going to identify the right people for the job.
Assessment tests enable you to judge candidates on more than just work experience because they also evaluate cognitive ability, says Karen Timmins, assistant vice president of human resources and development for American First Credit Union in La Habra, California. Timmins uses a test from Wonderlic, Inc., a recruiting and retention services company in Libertyville, Illinois, to assess candidates going into her hiring process. At a time when good people from all industries are looking for work, this helps to identify those who best fit your culture and needs, she says. “I’m not limited to choosing people with bank experience. If I identify someone who’s bright and emotionally intelligent, I know they have greater potential for success and job satisfaction, regardless of their background.”
And the impact of that goes beyond individual potential; it has a bearing on the entire staff, Timmins adds. “If you hire a person who conflicts with your core values, it’s amazing how much they stand out. Their disruptive behavior affects everyone.”
To get the best results from assessment tests, many vendors use industrial psychologists to build custom profiles of ideal applicants by defining the high and low performers in that job. Then, using those profiles, they create a set of assessment questions that identify the most suitable candidates for the position.
Identifying specific performance criteria is critical to the success of the hiring process, says Pat Rowe, vice president of assessment services at Spherion Corporation, in Fort Lauderdale. He recently worked with a telecommunications company that wanted to increase revenues in its customer-service call centers. After the requirements for the position were evaluated, it became clear that, even though the title was “customer service representative,” the most successful people were those with good sales skills. Within a year of targeting candidates with sales skills, turnover decreased by 50 percent and revenue per seat increased by 15 percent, he says.
Getting the right people for the job is how you become a great company, says Charlie Wonderlic, president of Wonderlic, Inc. “The single greatest return on investment comes from the people you hire, yet most companies spend more time evaluating a $10,000 copy machine than they spend evaluating potential employees,” he says. “The cost of not hiring the right people is the cost of mediocrity and failure. How much is that worth to you?”
Assessment Saves Millions in Down Economy
Name: Outsourcing Solutions Inc.
Location: St. Louis
Type of organization: Provider of debt-collection services
Number of employees: 80,000
When the economy was booming a few years ago, staff members at OSI were forced to hire almost anyone who walked through the door. There was no real screening process for debt collectors at the company’s 13 call centers, says Clay Boyles, regional human resources director. “If they could communicate reasonably well, that’s all we looked for.” As a result, skill levels were often minimal, and many recruits quit in the first weeks or months on the job. Turnover was a whopping 222 percent, and it was difficult to keep seats filled, he says.
It was during this good economy that Boyles went looking for a tool to help him reduce turnover. He selected Spherion Assessment Services to develop a custom pre-employment assessment test for all of the call centers. Spherion’s psychologists interviewed the company’s top and bottom performers and created an online assessment test that evaluates candidates on five established competencies for service rep and supervisor roles.
“The test was a godsend,” Boyles says. In the good economy, it helped hiring managers weed out applicants who would most likely perform poorly or quit in the first 30 days, which made it a valuable investment, he says. But now, when the economy is struggling and his applicant pool is much larger, the assessment test is saving the company millions of dollars in personnel and turnover costs. In the past they were fortunate to have a small pool of applicants to choose from, he says. “No one grows up wanting to be a debt collector.” But with today’s high unemployment rates, if Boyles puts an ad in the Sunday paper, there will be 150 applicants at the door on Monday morning. “We don’t have the capacity to handle that’ he says.
Before they even speak with a recruiter, candidates are given the assessment test. They receive a good, average, or low rating. The last group, about 15 percent of the applicant pool, is automatically eliminated from the interview process. “That saves us a ton of time,” says Boyles. It also saves the company from making a lot of bad hires. Before they started using the assessment test, at least half of those people would have been given jobs.
The test costs $8 per person, running the company roughly $10,000 per month for the six offices that use it. It’s an expense that the executive team has questioned in a time of cost-cutting, but Boyles defends it vigorously. “The assessment process is a cost-cutting tool,” he says. It’s especially helpful when he’s ramping up a new office. “There is no way I could go through a pile of applications and get 60 good collectors in the door through interviews alone.” The test helps him identify the best candidates in a much shorter amount of time.
And he has proof that the tool is paying off. In the two years since it was implemented, turnover has dropped to 117 percent during a time when the company more than doubled the number of service reps, from 700 to 1,800, and added two call centers. “To reduce turnover in a time of growth is impressive,” he says. “Usually when you are hiring to fill seats, turnover spikes.”
Boyles estimates the savings related to the assessment process to be a million dollars per year. That number incorporates the saving of roughly $5,000 per person for hiring costs, plus the salaries of three full-time recruiters that the company is able to do without because it is hiring fewer people and interviewing fewer candidates. That number does not include increases in productivity. Three years ago if an employee stayed three months, managers considered it a successful hire, he says. But research shows that 80 percent of the money OSI collects comes from customer-service reps who have been with the company for six months or more. “No one thought about that cost of turnover,” he says. “The people who aren’t right for the job leave in the first 90 days.”
Now they recognize the value of the top performers and, thanks to better hiring decisions, revenues and gross collections across the company are up. For example, after reducing the number of reps at the call center in San Antonio, Texas, from 100 to the 60 top people, collections went up for the following two months. “We are screening the riffraff out at the door, which allows us to support and focus on our best performers.”
Employee Theft Drops, Loyalty Soars
Name: Spectrum Stores, Inc.
Location: West Point, Georgia
Type of organization: Convenience store chain owner
Number of employees: 1,000
Spectrum’s managers believe that if they hire the best people and take care of them, the business will be successful. Customers are very loyal to the people who work in the stores, says Bob Holcomb, vice president of human resources. “We know we’re not the only people who sell Snickers and Budweiser. The thing that makes us different is our people.”
To make sure they get and keep the right people, Spectrum offers employees benefits not typical in most convenience stores, including access to health benefits for full- and part-time workers, opportunities for bonuses, and salaries above the minimum wage. But Spectrum also has a rigorous hiring process that includes criminal-background checks, drug screening, and an assessment instrument from Humetrics. The assessment evaluates candidates for honesty and for their communication and customer-service skills.
Prospective employees complete the assessment when they fill out a job application. Before conducting any interviews, managers call a Humetrics hotline with their responses and get immediate results to determine whether applicants meet the defined criteria, Holcomb says. They receive one of four ratings: highly recommended, recommended, recommended with caution, and not recommended. Managers need permission from corporate to hire someone “recommended with caution” and are not allowed to hire people who are “not recommended,” Holcomb says. The bottom two ratings eliminate 35 to 40 percent of applicants.
Holcomb gets four or five requests a year to hire people who are recommended with caution because they wowed managers in person, but he is reluctant to agree. “A lot of people are great in interviews. They tell you what you want to hear instead of being truthful,” he says, which is why the assessment tool is so important. “It lets us make better decisions and it streamlines the process.”
Since the assessment was implemented, turnover rates have come down considerably–they are at 85 percent this year, whereas the industry average is close to 200 percent. But reduction in turnover is not the only reason Holcomb uses the tool. “It helps us hire better people who will be honest and reliable’ he says. It also reduces many of the personnel problems that affect operating costs and quality of service. For example, absenteeism and tardiness rates across the company are low, and–internal shrinkage–theft by employees–is less than 1 percent. That’s less than half of the industry standard of 2.23 percent, according to the 2001 National Retail Security Survey, conducted by the University of Florida For a company that does $300 million in annual sales, that amounts to a savings of more than a million dollars.
The assessment also contributes to the steady increase in sales and builds loyalty among customers. “Success comes down to your people,” Holcomb says. “When you have a better person in the box, you win.”
Quality Program Begins with Hiring
Name: American Residential Services
Headquarters: Memphis, Tennessee
Type of organization: Heating, venting, plumbing, air conditioning, and electricity service company
Number of employees: 7,000
When American Residential Services started its Six Sigma quality-improvement process, one of the first issues it targeted was turnover among the company’S 4,000 service technicians. In 2000 its turnover was 70 to 80 percent–not bad for the industry but unacceptable in the eyes of the ARS executive team, says Robert Beckmann, vice president and Six Sigma Black Belt, whose sole job at ARS is to implement Six Sigma projects. “One of our primary objectives with Six Sigma is to put greater focus on employee development. That begins with hiring,” he says. “We needed to do a better job selecting people?”
To reduce the number of bad hires and to get a better overall understanding of the quality of applicants, Beckmann implemented a wonderlic pre-employment assessment test for service technicians. At first, hiring managers were worried that the test would cut off their supply of labor, he says. But when they saw the results of the pilot project, which tracked assessment scores at two service centers, their fears were quelled. Only 10 to 13 percent of applicants scored below 70, which is the test’s “be careful number,” Beckmann says. “It eliminated applicants with the least likelihood to succeed, but it didn’t prevent managers from filling job openings.”
Beckmann sees that 13 percent elimination as a significant cost-savings for the company. He estimates that each lost technician costs $5,500 to $7,000 and believes that before the test, all of those techs would have been hired on the spot. Except for drug and criminal-background screening, the company didn’t have a detailed interview process. “If they had a license, we got them on a truck,” he says.
With the success of the pilot program, Beckmann rolled out the tests to the rest of the company’s 70 service centers in January 2002. Now, whenever technicians fill out an application, they also complete the 90-question test, which rates their reliability, customer-service aptitude, and retention likelihood. Managers fax the test to Wonderlic and are e-mailed the results in minutes, allowing them to determine on the spot whether to continue the interview process.
One year later, the number of those who score poorly on the assessment hovers at 10 to 14 percent for all the centers, he says, and the result of not hiring those people has been dramatic. While the number hasn’t been officially calculated, preliminary data shows that turnover had dropped 20 percent by November of last year. That means they are hiring about 100 fewer service techs per month, which amounts to a savings of about $7 million a year. Beckmann attributes that largely to the test and its impact on the hiring process. “It gives rigor to our entire selection process,” he says. “It makes us take a better look at people and think about the implications of hiring them.”
And the benefit of the tests touches all of the company’s employees. “Every service team is like a club,” he says. “When there are people in the group who don’t fit, it’s demotivating for the others. Our goal is to have elite teams of technicians who take care of each other and look out for one another.” The test, he says, is the first step in helping them achieve that goal.
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