Organizational and Employee Development Special Report: Upon Further Assessment…

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If you are in the market for a leadership assessment tool, there is no dearth of options. The sheer number and variety of assessment tools—and the vendors that provide them—make even a seasoned HR professional’s head spin.

Just some of the types of tools HR professionals can employ to assess a candidate for a leadership position—or an employee for leadership potential—include:

• Self-assessments.
• Knowledge, behavioral and personality testing.
• In-basket simulations that test ability to prioritize, plan and delegate tasks.
• Multi-rater assessments, often called 360-degree assessments.
• Structured interviews with trained assessors.
• Panel interviews.
• Employee engagement surveys.
• Job simulations.

Bersin by Deloitte values the assessment market at more than $800 million annually. Vendors range from Korn/Ferry International, SHL, Mercer, Center for Creative Leadership, and Development Dimensions International to thousands of smaller companies that offer specialized assessments.

To help HR professionals sort through the clutter, the Institute for Corporate Productivity (i4cp) conducted a leadership assessment survey of 610 business professionals from various industries and company sizes. Fifty-four percent reported to i4cp that they have some kind of formal assessment process.

The 2012 survey also found that, among the 25 tools respondents were given to choose from, 360-degree assessments were the most common, used by 77 percent of respondents’ organizations. This was followed closely by the Myers-Briggs Type Indicator and DiSCbehavior and personality profiles. In addition to being the most commonly used, 360-degree assessments were rated as highly effective by 40 percent of respondents.

When assessing managers and executives, three-quarters of respondents use 360-degree assessments in combination with other tools, such as the Myers-Briggs Type Indicator, Hogan Personality Inventory,DiSC and psychological assessments developed by Lominger Ltd.

Fifty-one percent assess candidates for virtually all management and supervisory positions, and 64 percent employ a mix of tests and interviews. The i4cp researchers say assessment results are more accurate when at least two tools are used. "Almost none of them were designed to be used alone," the researchers stated, "since they tend to look at different facets of leadership qualities."

Multiple Approaches

A 2011 Global Leadership Forecast by Development Dimensions International also concluded that organizations using a mix of simulations, tests and interviews have stronger leadership benches. In general, a leadership assessment uses one tool or a combination of tools to measure a candidate against criteria that the vendor chooses based on years of validated data and the client’s leadership competency model.

Assessments capture personality traits, preferred skills and behavioral tendencies. For instance, DiSC measures a person’s "dominance," "influence," "submission" and "compliance." The Hogan Personality Inventory looks at a person’s ability to remain calm and even-tempered under pressure, ambition, values, social and interpersonal skills, and communication skills.

In most cases, vendors administering leadership assessments issue reports that outline the candidates’ areas of strength and weakness and that provide recommendations for development.

Cost is a factor, but there are options for most budgets. "You can definitely get an off-the-shelf online assessment that is cost-effective, for instance, at $250 per person," says Kim Lamoureux, lead analyst in talent acquisition at Bersin by Deloitte.

Simple, low-cost assessments may be sufficient for front-line supervisors, but tests become more complex at higher levels. "For senior-level positions of director and above, a battery of tools—personality, behavioral-based and simulation-based—is usually used," Lamoureux says. At those levels, assessment centers—which test candidates in many ways for four hours or longer—help determine how candidates perform under pressure. A 2007 survey of 180 business professionals by i4cp and HR.com found that 44 percent of their organizations used assessment centers.

Sending one candidate to an all-day assessment center can cost $10,000 to $20,000, according to vendors. For some employers, the cost is worth it. "There is more at stake because selecting the wrong person for a critical role can have an enormous financial impact on the organization," Lamoureux explains.

HR leaders working with smaller budgets may create a lower-cost hybrid approach "that uses an online, vendor-provided simulation followed by an in-person presentation on that simulation in the next room for the assessor or hiring manager," says Jim Higgins, principal in Mercer’s Talent Assessment Solutions Group.

That’s the approach HR professionals at Advance Auto Parts Inc. took in finding leaders for its 3,900 stores and 55,000 employees. "We looked into creating an assessment center, but we chose a vendor who designed an in-depth process using off-the-shelf assessments," says Tonya Baker, the retailer’s director of talent management systems.

Why Bother Testing?

HR professionals find value in leadership assessment tools for three reasons:

New-hire fail rates. In a 2012 study, Development Dimensions International found that the success rate for front-line managerial positions is 60 percent when promoting internally and 50 percent when hiring from outside. HR professionals "seek assessment tools to improve their 50-50 chance of making the right hiring decisions," says Katherine Graham-Leviss, founder of XBInSight, a talent assessment firm.

Imperfect screening. It is hard to gauge through interviews whether a candidate will succeed in your organization. "Interviewing is highly ineffective," Higgins says. "If you can put someone in a situation and have him show his ability, then the analysis will be more accurate."

Science. Well-designed, validated assessment tools provide objective data to inform a promotion decision. Based on decades of neurological research, the tools uncover values, motivators and behaviors that otherwise may not become apparent for months. "Assessments capture the soft skills that are hard to glean," Graham-Leviss says.

Making an effort to ensure a match between leaders and the organization is worthwhile, according to the i4cp survey—particularly since it determined that 89 percent of the time, new hires fail because their attitudes don’t match up with the organization’s values, not because the individuals lack skills.

It’s akin to a football player who underperforms on one team and then goes on to have a Hall of Fame career on another team, Lamoureux explains. The skills are the same, but the environment has changed. "When it comes to leadership, so much of it is driven by potential within a certain organization."

Employers should evaluate providers to find assessments that fit their cultures, Lamoureux advises, and should "be wary of vendors that say they can use the same tool to assess everyone."

Mark Fernandes, chief leadership officer at Luck Cos., a mining and crushed stone supplier in Richmond, Va., looks for such alignment. "The major vendors in this market are all competent," he says. "I want to know which one sees things the way we do."

Once the choices are narrowed down, the people involved in the decision should take the assessments to ensure that they’re user-friendly, relevant and not overly time-consuming. "A criterion-related validation study shows a statistical link between performance on the assessment and performance on the job," Higgins explains. Graham-Leviss suggests using a sample of current leaders representing high-, mid- and low-performance to validate the tools.

The Experience

HR managers should not assume that candidates will eagerly await testing.

The assessment process at Advance Auto Parts takes candidates through four hours of online testing for personality, behavior, critical thinking and financial acumen. Used for store managers, district leaders, regional vice presidents and senior vice presidents, the tests are followed by a 45-minute interview with an assessor. The vendor assesses each candidate for job fit and capacity to lead.

Baker says hiring managers prepare the top two or three candidates for the extensive testing. Although most executive-level candidates have experience with testing, Baker says some comment on the duration or content of the assessments. She pays attention to that feedback because she doesn’t want to lose good candidates as a result of testing.

Lamoureux adds that, in preparing candidates, HR professionals should stress that there are no "right" answers. "The tool is as much to help the candidate as it is the company," she explains.

Assessments typically ask the same question multiple times in different ways. The analyses will group similar questions together to give broad indicators of how people score. "A lot of people ask if users can ‘game’ the test," Lamoureux says. "But well-written assessments ask a question so many ways that it’s very difficult for the user to be inauthentic on a consistent basis."

Make the Most of the Data

To get more bang for your buck, Graham-Leviss urges HR professionals to mine assessment data for training and development purposes as well as succession planning needs.

Luck Cos. employs a 360-degree assessment tool from the Hay Group primarily for development purposes. All leaders participate in annual 360-degree assessments that measure them against company values, leader competencies and desired attributes. Annual engagement surveys and performance reviews further gauge how leaders perform against a values-based leadership model that Fernandes developed. For succession planning, Luck’s HR team relies on a VBL "index," a score based on each leader’s 360-degree assessment, department or team engagement survey, and performance appraisal.

Fernandes and his HR team are expanding the assessment to individual contributors so that the data can feed the leadership pipeline. "We have 850 associates, and we’re trying to develop 850 leaders," Fernandes says. "In that hourly workforce is an individual contributor who can run this company someday." Managers at Advance Auto Parts continue to use assessment data well after hiring. The process generates one report for HR and the hiring manager, and the person hired receives a copy. The reports highlight areas for improvement and training. To plan for development, Baker shares such test results with internal candidates who aren’t selected.

Assess Your Assessments

Even though i4cp recommends that employers evaluate the effectiveness of their efforts to identify suitable types of leaders, only 20 percent of respondents report that their organizations analyze outcomes, according to i4cp’s 2012 survey.

Fernandes is working with researchers at the University of Richmond to formally measure the return on investment of Luck’s VBL model. He cites figures that he says demonstrate the assessments are effective. For example, in 2004 prior to the assessments and the VBL model, Luck generated $2.50 in cash flow per ton of stone sold; this year, the company is projected to generate $5.50 per ton. "Do we know for sure that VBL and these assessments directly caused these numbers to improve? Yes. Can we prove it? No, not directly," Fernandes says.

At Advance Auto Parts, "We know the assessment is valued by the leaders because of the desire to expand its use to other levels," Baker says.

She adds that HR professionals shouldn’t get overwhelmed by choices and options. "There is no perfect assessment process," she says. "Find one that works for your organization and can be flexible to your needs."

Adrienne Fox is a contributing editor and former managing editor of HR Magazine.