The Business Case for Assessment

One of the most important steps in building a successful business is selecting and retaining the right talent.  The impact of putting the wrong person into a job goes far beyond the cost of finding a replacement; poor hiring decisions cost companies huge sums in lost customers and sales, lower productivity, higher turnover, poor customer service, and decreased morale.  Brad Smart, in his book Top Grading estimates that a bad hire at the $100,000 – $250,000 salary range is likely to cost your company 28 times that executive’s base salary.

Consider the following illustrations of the value and the predictive power of executive assessment:

1. In a study reported by Zenger & Folkman in The Extraordinary Leader, the top 10% of managers and executives outperformed the bottom 10% by 500%.  By investing in assessment, there is a reduced risk of hiring bottom performers.

2. A study of over 300 top executives from 15 global companies found that emotional intelligence competencies distinguished the stars from the average performers. (Boyatzis, 1999)

3. Partners in a multinational consulting firm who scored above-average on emotional intelligence competencies delivered $1.2 million higher profits (139%) than partners who scored less well on emotional intelligence measures. (Spencer, L.M., Jr. 1997)

4. In his book Executive Intelligence  Justin Menkes makes the point that intellectual ability is an important predictor of executive success and should not overlooked in a selection process.

5. Should a candidate try to bring a lawsuit against your company, you will be in a stronger position.  A comprehensive and well-developed selection process, which includes assessment, enhances objectivity and fairness, and thus provides a stronger defense than one which contains only subjective types of information. 

6. Peter Drucker once said that managers would not rehire two out of every three  people, if given the option one year later.  A widely accepted statistic says that 1/3 of the employees you hire will be strong, 1/3 will only meet expectations, and 1/3 will not perform adequately.   A follow-up study we conducted proved that we were able to help our clients achieve better results than these.

References

Boyatzis, R.E. (1999) From a presentation to the Linkage Conference on Emotional Intelligance, Chicago, IL., September 27, 1999.

Smart, Bradford  Top Grading.  Prentice Hall Press, 1999.

Spencer, L.M. Jr. et.al.  Competency assessment methods  History and state of the art.  Boston:  Hay/McBer, 1997.

Zenger, J.H. & Folkman, J, The Extraordinary Leader  McGraw-Hill, 2002

Menkes, Justin Executive Intelligence HarperCollins, 2005