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Get Results With SHL
1.
July, 2010
SHL Clients: Demonstrating the Positive Impact of Assessment on Business Performance While assessments have been a critical part of the talent management Research Brief landscape for some time, the ways organizations go about using them has Aberdeen’s Research Briefs been evolving. SHL, a player in the assessments space since 1977, has also provide a detailed exploration evolved as the industry has experienced pressure to create a more holistic of a key finding from a primary view of talent, expanding the use of assessments from a pre-hire HR activity research study, including key to a valuable tool used throughout the organization and the employee performance indicators, lifecycle. In Aberdeen's March 2010 study Talent Assessment Strategies, over Best-in-Class insight, and 250 organizations currently using assessments were studied, including 74 vendor insight. organizations using SHL solutions. This Research Brief will look at how users of SHL assessments are performing in three key areas - extending the use of assessments into the post-hire, providing managers with actionable assessment output, and making better entry-level hiring decisions. Assessments Throughout the Lifecycle The past few years have seen several shifts in the use of assessments - organizations are using assessments in new ways, and are integrating assessments data throughout talent management systems to make better talent decisions. In both 2009 and 2010, respondents to our surveys indicated that increased business competition and skill shortages were the top two pressures driving them to pursue a talent assessment strategy. To combat these perennial pressures, assessments are being viewed as having an impact well beyond just hiring decisions (Figure 1). Figure 1: Goals for the Use of Assessments 75% 69% "For an assessment strategy to 63% take off, it needs management Percentage of respondents, n=264 commitment, competency level definitions, and valid and 50% 46% reliable assessment tools." ~ Lara Kenchington, Manager, HR Development / Organizational Development, 25% Areva Resources, Southern Africa 0% Improving quality of hire Identifying high-potential Identifying skill / competency talent gaps for each job role Source: Aberdeen Group, June 2010 © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
2.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 2 Assessments have long been viewed as a tool for pre-hire decision making, Fast Facts but an increasing number of organizations are using them as guidance at √ Organizations integrating multiple points in a career. This shift in emphasis has lead organizations to their competency framework look at how assessment tools are used throughout the employee lifecycle. across the entire talent However, this broader use of assessments requires increased consistency in lifecycle are 5 times as the qualities or skills that are being assessed. Building or acquiring a likely to achieve Best-in- competency framework to assess against was the top strategy identified by Class performance organizations to achieve their assessment goals. And in Aberdeen's November 2009 look at Competency Management, it was discovered that Best-in-Class organizations not only utilize competency frameworks against multiple aspects of talent management, but that those using a consistent competency model across talent acquisition, learning, performance management and succession processes are five times as likely to achieve Best-in-Class performance as those that do not. This need to consistently apply an assessment strategy, and integrate the results of assessments across talent processes is clearly demonstrated by Best-in-Class organizations (Figure 2). Figure 2: Assessments Integrated with Talent Management Processes Best-in-Class Criteria 100% Best-in-Class 92% All Others The following key 85% Percentage of respondents, n=264 79% performance indicators were 74% used to determine the Best- 72% 75% 69% 61% 64% in-Class for use of 56% assessments, with top performers achieving 50% 38% impressive results: √ 84% of employees received 25% rating of “exceed” on last performance review 0% √ 81% of key positions have Recruitment Onboarding Performance Succession Learning at least one willing and management planning able successor identified √ 33% year-over-year Source: Aberdeen Group, June 2010 improvement in hiring manager satisfaction While top performing companies still do integrate assessments in the pre- hire, they are more likely to use them at all other points in the talent Best-in-Class: top 20% of management lifecycle. Clearly, the consistent use of assessments in the pre- aggregate performance scorers and post-hire is a growing trend, and for good reason as the next section will demonstrate. Industry Average: middle 50% of aggregate performance scorers Consistency is King Regardless of the source of assessments, using them consistently is critical Laggards: bottom 30% of to achieving maximum benefit. As Figure 3 shows, using assessments in both aggregate performance scorers © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
3.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 3 the pre- and post-hire versus in the pre-hire alone results in increased performance on several key metrics. And SHL's clients are reaping the Fast Facts benefits of this shift in focus as well. Figure 3 compares those using Compared to organizations assessments in the pre-hire stages only, as well as those using both pre- and using other solutions, SHL post-hire assessments, to their peers that have partnered with SHL. customers using assessments in the pre- and post-hire Figure 3: Performance on Key Metrics are seeing: √ 15% greater performance in 100% Pre-hire only 90% first year retention 84% 85% SHL Pre-hire 76% 78% Pre- and post-hire √ 18% greater new-hire 74% 76% 72% 75% SHL pre- and post-hire performance √ 33% greater improvement in hiring manager satisfaction 50% 28% 21% 25% 18% 19% 0% First year retention New -hire performance Change in hiring manager satisfaction Source: Aberdeen Group, June 2010 It is interesting to note that even in pre-hire metrics, performance is improved when the organization has committed to a strategy that includes the use of assessments in both the pre- and post-hire. And the results are even better for SHL users implementing assessments across the talent lifecycle. SHL customers using assessments in the pre- and post-hire are seeing 15% greater performance in first year retention, 18% greater new- hire performance, and a 33% greater improvement in hiring manager satisfaction versus organizations using other solutions. These results send an important message to anyone looking to impact metrics usually associated with hiring and onboarding through the use of assessments in the pre-hire. While first year retention, new-hire performance (defined as the achievement of first performance milestones within agreed-to timeframes) are often rolled into quality of hire metric reporting, performance in all of these areas is improved if the assessment culture is continued beyond the hiring process. Even more importantly to managers and leaders is the impact the use of SHL assessments across the employee lifecycle is having on profit and revenue. Using SHL assessments in the pre-hire only is having a positive impact on financial performance (measured as change over the previous 12 months), but when used in both the pre- and post-hire the improvement is dramatic (Figure 4). © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
4.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 4 Figure 4: Performance on Key Metrics Fast Facts 15% SHL Pre-hire SHL customers (compared to SHL pre- and post-hire organizations using assessments 12% 11% in the pre-hire only) using assessments in both the pre- 10% and post hire saw: √ Six-times greater increase in revenue per FTE 5% √ Eleven-times greater increase in profit per FTE 2% 1% 0% Increase in revenue per FTE Increase in profit per FTE Source: Aberdeen Group, June 2010 Managers Take the Lead Obviously, simply purchasing and implementing an assessment solution in Fast Facts and of itself will not result in improved performance. Like any tool or √ SHL customers are 31% technology solution, the context in which that tool is used has a great more likely than all other impact on the results attained. Given the performance levels achieved by organizations to have in SHL's clients, it makes sense that the capabilities in place to support the use place a process to clearly of assessments are differentiated. communicate assessment results to managers As a whole, SHL clients are 31% more likely than non-SHL clients to have in place one key capability: the clear and regular communication of assessment results to managers. With 88% of SHL clients citing this capability, it is the most commonly found capability among this subgroup, and it sets the tone for how assessments are viewed within the organization. Those that view assessments as a tool to be used by managers to make real time decisions that will impact the business and allow them to employees in front of the right customers armed with the right skills, behaviors, aptitudes competencies and information are going to achieve better results. And when we break down the top capabilities among organizations utilizing assessments in the pre-hire only versus pre-and post, the contrast is even more striking (Figure 5). Clearly, integrating the use of assessments into the pre- and the post-hire is emerging as a best practice for all organizations. © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
5.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 5 Figure 5: Capabilities Supporting Performance 100% 93% SHL Pre-hire Pre- and post-hire 81% 79% 76% 76% SHL pre- and post-hire 75% 63% 50% 45% 45% 27% 25% 0% Assessment results clearly Support for assessments Career progression communicated to managers from managers milestones are identified and documented Source: Aberdeen Group, June 2010 Putting the results of assessments into the hands of managers is critical to Fast Facts help drive performance for organizations. And these same companies that √ SHL customers using are getting assessment results into the hands of managers are also getting assessments in the pre and greater buy-in for the overall assessments strategy. SHL clients using post-hire are 25% more assessments in the pre- and post-hire are 25% more likely to support the likely to have manager buy- assessment strategy than those using them in the pre-hire only. This makes in and support for their sense because the more managers realize that assessments can help guide assessments strategy decision making, the more supportive they will be of their use. The last differentiated capability was the definition of career progression milestones and metrics. This capability is linked to the previous discussion of defining competencies. When there is a clear picture of what is required, both at an organizational level and for individual job roles, it is much easier to assess against those criteria. In many organizations, job descriptions and requirements for entering the organization have been made clear. But for an individual wishing to progress their career or a manager wanting to help coach someone along to take on a new role, the next steps can often be less clear. When career paths are laid out, assessments can be used at an individual level to test for readiness, to help gauge potential, and to help an employee plan their development to get to the next level. This type of clarity on what will be required can also help mine existing talent pools for untapped aptitudes and competencies to make better decisions about career progression for both the individual and the organization. And for a manager, laying the results of assessments against the picture of what they need to move the organization forward can help them identify critical gaps and maximize existing talent. In addition to these capabilities, several differences were seen in the enabling tools and technologies that SHL customers were using to support their success through assessments. The most differentiated tools are all around competencies and gap assessment. As illustrated in Figure 6, the © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
6.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 6 ability to use assessments to support the development of the skills, capabilities and knowledge required of the business is a key driver of success. Figure 6: Enablers Supporting Performance Fast Facts 75% SHL Pre-hire SHL Pre- and post-hire √ 88% of organizations using Percentage of respondents, n=264 61% SHL assessments ensure that assessment results are 48% clearly communicated to 50% 46% managers, compared to 81% of the Best-in-Class and just 31% 67% of users of other assessment solutions 25% 0% Competency model libraries Competency gap analysis tools Source: Aberdeen Group, June 2010 In embarking on an assessments initiative, it is important to remember the “Quick and easy-to-interpret critical role of the manager when evaluating the user experience, the types reports enable interview panels of reporting, and how the solution fits in with the rest of the talent across our operations to management processes and solutions already in place. The number one consistently ask the right type criteria cited by Best-in-Class companies for assessment vendor selection of questions to ensure we get was the ability to integrate with other HR and talent management software, the very best candidates who a key feature of SHL's value proposition for it's users. And, as mentioned, possess the relevant key Oxfam currently 88% of organizations using SHL assessments ensure that GB behaviors. Furthermore, we assessment results are clearly communicated to managers, compared to have seen a consistent improvement in the quality of 81% of the Best-in-Class and just 67% of users of other assessment candidates hired.” solutions. Having tools that are integrated with existing talent management software, designed to be used by managers, and that deliver clear, actionable ~ David Benson, Head of results to the line is a critical capability, and one that SHL is addressing for Talent at Oxfam GB, an SHL its customers. This mindset is also driving performance improvement on User both quality of hire and succession benchstrength (defined as the percentage of key roles for which one or more successor has been identified) metrics (Figure 7). © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
7.
SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 7 Figure 7: Performance of Companies with User Friendly Output 100% Assessments usable by 86% managers Percentage of respondents, n=264 82% 80% Not in place 73% 75% 61% 50% 47% 25% 21% 14% 0% New -hire retention New -hire Succession Change in hiring performance benchstrength manager satisfaction Source: Aberdeen Group, June 2010 Case in Point The case study below of one SHL client illustrates how one global organization took its assessments strategy from pre- to post-hire, and created a new culture of feedback and assessment. Their story demonstrates how they built internal demand for expanded use of assessment tools by first demonstrating the benefits to a core group of managers, and helping them improve the business. “Where at first our recruiters Metso is a global supplier of technology and services for the mining, felt fear at using pre-hire construction, power generation, oil and gas, recycling, and pulp and paper assessments, now they feel industries. With over 27,000 employees in over 50 countries worldwide, more and more pride in their Metso is a major player in three primary market segments: mining and professionalism, and know that construction technology, energy and environmental technology, and paper they have the tools to help and fiber technology. From its home base in Finland, the company is hiring managers make quick, committed to the strategic priorities of sustaining profitable growth over efficient and effective the long term, and on improving competitiveness and cash flow in the hiring decisions." short term. ~ Hilkka Alatalo-Korpi, SVP of Talent Management, Even among other organizations of its size, Metso faces some unique Metso, an SHL User challenges that come as a result of its company origins. The business was founded in 1999 with the merger of two existing Finnish companies. This confluence of cultures, having occurred so recently, made it difficult for Metso to establish a cultural identity of its own. This became a top priority for the company, which knew that a business spread out over such a variety of services and over such a wide geographical distribution would need a strong performance-oriented culture. One of the big ways in which this was accomplished was through the use of talent management assessments. The assessments strategy that Metso laid out, in partnership with SHL, took a two-pronged approach, the first being on the pre-hire side. This was © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
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SHL Clients: Demonstrating
the Positive Impact of Assessment on Business Performance Page 8 essential for the company because, in order to establish a common culture, Metso needed to make sure it was attracting people with a common set of traits that fit with organizational goals. And the company also wanted to ensure that it was hiring people with the right skills to achieve top performance. This pre-hire assessment process aligns with Metso’s competency model to help create a more scientific view of each candidate and inform hiring decisions that will strengthen quality of hire. By starting with a small group, Metso was able to develop several internal proof points and make the case to all of their recruiters and hiring managers on the importance of pre-hire assessments. “Where at first our recruiters felt fear at using pre-hire assessments, now they feel more and more pride in their professionalism, and know that they have the tools to help hiring managers make quick, efficient and effective hiring decisions,” said Hilkka Alatalo- Korpi, Senior Vice President of Talent Management at Metso. Despite early success in the pre-hire stage, the process of implementing a post-hire assessments strategy proved somewhat of a challenge. Metso has never been feedback oriented, but there had always been hunger within the organization for feedback. According to Alatalo-Korpi, “At Metso, any feedback is like a gift, so by focusing on creating a new culture of feedback through the use of 360 we began to build traction.” Knowing that failure to “At Metso, any feedback is like launch, and dismissal of 360 assessments and feedback as a “flavor of the a gift, so by focusing on creating month” was a very real threat, the company decided to take it slow and a new culture of feedback once again rely on the support of internal champions. The process started through the use of the 360 we with a contained launch, implementing 360-degree assessments for a small began to build traction." group of middle managers who latched on to the feedback not only as a tool ~ Hilkka Alatalo-Korpi, to help them focus their own development, but as a tool to help them have SVP of Talent Management, better conversations with their teams. The group that had been selected for Metso, an SHL user the first assessment rollout became champions for the process and started sharing their experience with others. In just a short amount of time it went from a highly contained and risky venture to a fully-adopted, fully-supported, and mandatory company process. Metso also has a core group of people who are thoroughly trained to provide 360 feedback that are helping to build assessments into the entire talent management process. “When people go through a 360, they need to know what to do next. Assessments are becoming a bigger and bigger part of the development process - evaluating our talent pipeline, and how we identify new and high-potential talent,” said Alatalo-Korpi. The payoff from Metso’s assessment process has already been significant, both from the pre- and post-hire standpoint, even while the process is still maturing. From the pre-hire side, multiple teams reported satisfaction with the fact that they were able to make the interview process more efficient and minimize risk by taking a more scientific approach to selecting the right candidate. From the post-hire standpoint, by integrating assessments with the company performance management process, Metso was able to achieve measurable gains in employee performance. Perhaps more importantly, though, the company was able to make incredible progress in building the cultural identity it was looking for – one that actively engages in © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
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the Positive Impact of Assessment on Business Performance Page 9 development and feedback, fosters high performance, and makes it possible to achieve faster and more sustainable growth. Selection for all Levels Even though the value of assessments throughout an employee's relationship with an organization has been clearly demonstrated, it's also important to think about selection assessments for all levels of employees joining the organization. While the use of assessments has evolved, the pre-hire assessment process is still extremely important to getting performance off to a good start. Among all respondents to the March 2010 study on Assessments, 77% indicated that the use of pre-hire assessments for entry- level hires, making it the area where pre-hire assessments were most widely used. And SHL customers are dominating in this space. While the percentage of organizations using assessments for entry-level applicants jumps to 88% among Best-in-Class companies, 92% of SHL clients are assessing this critical group of candidates. This use of assessments at the start of a career is important because when someone is coming into an organization with little experience, their assessment results can help validate their capabilities, and can even inform steps to close any necessary gaps. Clients using SHL pre-hire assessments for the hiring of this important and often largest group of candidates are seeing a positive impact on the results achieved by those new hires as a result (Figure 8). Figure 8: Performance Impact of Assessing Entry-Level Hires Fast Facts 100% SHL Clients 86% √ 92% of SHL clients are Percentage of respondents, n=264 82% Non-SHL Clients assessing entry-level candidates, compared to 75% 64% 88% of Best-in-Class 55% √ SHL users are demonstrating 50% a 47% greater improvement in hiring 25% manager satisfaction by using 25% 17% assessments for entry-level 0% First year retention Succession benchstrength Change in hiring manager satisfaction Source: Aberdeen Group, June 2010 The impact that a strong assessment process for entry-level hires has on succession benchstrength is important to note. SHL clients are 16% more likely to have successors in place when assessments have been used at the ground level of hiring efforts. Particularly given the shortages of key talent and critical skills highlighted at the beginning of this report, this is a powerful finding. By hiring the right people at the beginning of their career, who can © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
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the Positive Impact of Assessment on Business Performance Page 10 not only be successful in the short term, but lay the foundation to grow in the long term is critical to combat these skill shortages. In addition, SHL users are showing a 47% greater improvement in hiring manager satisfaction by using assessments at the entry-level. Truly, hiring, development and performance can not be looked at in a vacuum. They are closely interrelated, and the assessments used to evaluate individuals along that continuum must be as well. Key Insights Utilizing assessments to not only select the right people, but to develop and Fast Facts monitor performance throughout the life cycle is critical. Maintaining a √ The ability to integrate consistent assessment strategy and a consistent set of competencies against assessments with existing HR which to perform these assessments is important as well. Aberdeen's or talent management solutions research has shown that organizations executing on this idea are was the top vendor selection outperforming those who don’t, but it has also show that organizations criteria identified by Best-in- using SHL solutions to do so are outperforming those organizations using Class organizations assessments from other sources. In the use of assessments across both the pre- and post-hire, the involvement of managers through accessible and actionable output, and in screening entry-level hires, SHL users were demonstrating performance levels above the rest of the crowd. The solutions offered by SHL are connecting the dots for organizations throughout the employee lifecycle, and driving performance results. When it comes to evaluating assessment solutions and providers, Aberdeen found that Best-in-Class organizations are mostly concerned about the solution's ability to integrate with existing systems. Whereas organizations that are not the Best-in-Class place the highest value on price, top performers rank it a somewhat distant fourth. The data also found that a provider's ability to work with the end-user organization to build a business case and establish metrics or pain points is also a key factor in the decision making process. Figure 9: Solution Selection Criteria 60% Best-in-Class All Others Percent of organizations, n =264 52% 50% 44% 37% 38% 40% 35% 35% 31% 30% 24% 20% 10% 0% Ability to integrate Provider has Ability to Price w ith other HR or experience w ith demonstrate talent management organizations of business value by softw are similar needs helping build a business case Source: Aberdeen Group, March 2010 © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
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the Positive Impact of Assessment on Business Performance Page 11 Clearly, the selection of a particular solution provider, or indeed a specific assessment tool or product is not going to drive success alone. But when the selection of a tool and provider is made in support of other key organizational capabilities, performance is dramatically improved. And paramount among these, for SHL clients and all Best-in-Class companies is to involve managers in the assessment process, and make assessments, along with the results gleaned from those assessments, meaningful to how managers make decisions and manage talent. For more information on this or other research topics, please visit www.aberdeen.com. Related Research Talent Assessment Strategies: A Talent Acquisition Strategies 2009: Decision Guide for Organizational Cutting through the Clutter and Performance; March 2010 Proactively Managing Quality Onboarding: The First Line of Candidates; August 2009 Engagement; February 2010 Employee Performance Management: Integrated Talent Management: Individual Goals Boost Satisfaction Improving Business Results through Inside and Out; July 2009 Visibility and Alignment; Assessments in Talent Management: December 2009 Strategies to Improve Pre- and Post- Competency Management: The hire Performance; March 2009 Foundation for Talent Success; November 2009 Author: Mollie Lombardi, Senior Research Analyst, Human Capital Management (mollie.lombardi@aberdeen.com) Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (010110) © 2010 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897
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