What Does a Dividing Assessment Market Mean for Your Company?
It’s not quite a full divorce, but the assessment market is splitting up. Driven by the emergence of new technologies, it is transforming into two separate markets, each of which addresses a very different question about individuals and their ability to succeed. Like most splits, it isn’t being advertised, but it will nonetheless have significant consequences for how organizations source and use assessment tools and providers. So firms need to understand what the split involves, why it is happening, and how to tell the two sides apart.
Two Basic Questions
For a long time, assessment providers have helped organizations answer two basic questions about people: Whether a person is good in general (as in, do they have a high level of capability) – also known as benchmarking; and whether a person is capable of performing a particular role, situation or context. These are no totally separate. Benchmarking often includes references to role criteria and contextualized assessments often use some of the same measurement tools as benchmarking. But the focus of each camp and the basic question they ask is different. And what we are beginning to see in the market is a split between these two sides.
The reason for the split is a growing divide in the approaches and methods that each camp uses. Progress in benchmarking is being driven by a flood of new HR technologies. Assessment providers are harnessing new tools to more efficiently and accurately analyze data about individuals, such as the use of specialized software to analyze candidate resumes. And they are using new technologies to measure aspects of individuals that they were previously unable to assess, such as voice tone, language use and posture in interviews. These developments are undoubtedly exciting and while it is unclear if they will all prove successful, some of them are likely to succeed in improving our ability to predict success.
Getting Specific
Benchmarking techniques all work in broadly the same way. They evaluate people on characteristics that are believed to be important for success. Then they compare each individual’s results against averages gathered from 1000s of people working in different roles, industries, and cultures. They are thus able to say whether people score above or below average on these characteristics, and from this they can then say how likely in general someone is to succeed. These tools, then, act as rough guides and are particularly useful when evaluating large numbers of people.
What organizations often want to know, though, is not how good someone is in general, but how effective they will be in a very specific role, situation, and context. And growth in this side of the assessment market is not being driven by technology, but by changes in what is being assessed. Historically, this type of assessment has involved assessing people on certain characteristics and then comparing results to particular role criteria. But the depth of attention paid to these contextual factors was usually fairly limited, often restricted to relatively simplistic job descriptions.
Now, however, assessment providers are finding ways to measure contextual factors in greater depth. These factors include things like the culture of an organization, the characteristics of teams and colleagues, and even cultural expectations of what leaders should be and do. Factors like these are important because they create different demands on leaders and so change what leaders need to do to succeed. By paying greater attention to factors like these, assessors are able to predict with greater certainty how strong a degree of fit there is between an individual’s qualities and the contextual demands of a role.
The Price of Power
Contextualized assessments, then, are becoming more able to predict how someone will do in a particular situation. Yet as with most things in life, you don’t get something for nothing, and the cost of the greater predictive power is, well, cost. Measuring context is more difficult than measuring individual qualities, and as a result – when done well – it is significantly more time-consuming and expensive. As a result, possibly the most visible difference between the two assessment camps is price, in that benchmarking is becoming cheaper, while contextualized assessments are becoming more expensive. For this reason, many firms are using benchmarking in large scale recruitment, and are restricting using contextualized assessments to senior level assessment or where the cost of making a wrong call is much higher. For example, Private Equity firms are increasingly purely using contextualized assessments, as the decisions they are making tend to be about specific contexts and they need every bit of predictive power they can get.
What This Means
What all this means for firms is that they need to become ever more careful about what they are purchasing. This is particularly true in light of all the new technologies emerging, many of which are being marketed as marvels of the modern world, cure-alls that can do all you need them to. In the face of this, firms need to be clear which of the two fundamental questions they need answering, where they will need more contextualized assessments and where benchmarking will do. They may need a bit of both, of course. But there is usually one that is primary, and it is this that should lead firms’ search for a solution.
About the Authors
Nik Kinley is a Director at the global leadership consultancy YSC, based in London, England. Shlomo Ben-Hur is Professor of Leadership and Organizational Behavior at IMD Business School in Lausanne, Switzerland. Together, they are the authors of Talent Intelligence: What you need to know to identify and measure talent.