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ROI of psychometric testing

Video transcript below:
 
Anna Temple:  Psychometric testing is a well established tool in HR’s armoury, but what exactly is its return on investment.  Jeremy Nichols of Chandler Macleod maintains that post GFC companies are becoming more discerning when taking on new talent and that psychometric testing is an increasingly large part of that.
 
Jeremy Nichols, Chandler Macleod Group
Jeremy Nichols:  The GFC as we all know, you know completely transformed the way organisations look at themselves and there is two critical I think with that.  One is speed and the secondly is around risk.  
 
Organisations are wanting to get talent upto speed as quickly as possible.  So psychometric testing in that context gives the leaders within a business much greater understanding of whether they are likely to have that agility, to have that ability to have the cognitive horse power for example, but also their personality traits which gives them a sense that they can adapt, they can cope and they can really work towards the culture that the organisation is trying to strive for.  
 
The other side which is around risk, post GFC there was, most organisations were much around how do we lower risk.  In Australia today we are still in that mode, but there is also the other side of risk, which is risk taking.  
 
Because what we are looking at is - Boards and Shareholders are looking for growth as they you know, want of doing and they need to, all businesses need to look for growth.  So therefore how do you get the other side of risk,  which is that ability to take risks, willingness to make mistakes.  I think that is the, the most difficult thing that organisations are struggling with at the moment is getting, “do we avoid risk or do we take risk?”  And in an essence you have got to be masters of risk as we call it which is to be able to get that balance right.  
 
So psychometric testing helps in that understanding of: 
1) a person’s ability, a leader’s ability to be able to handle risk; 
2) and secondly is their ability to get up to speed very quickly.  
 
Anna Temple:  Nichols can point to many examples where there has been a very clear return on the investment laid out for psychometric testing.  
 
Jeremy Nichols:  We were doing some testing for two people to go for a CEO role and the Board were quite clear about what it is that they required in that role.  One of the critical things that they were concerned about is the previous CEO became highly aggressive.  So that was a very big concern, because they had a huge flow down effect for that particular business.  So the incumbent or the person they wanted to come into that role, that was one of the key things they asked us to assess.  So in the simulations that we did, because I think that’s really important is how do you build that, not only the psychometrics but how do you test that through simulations. 
But actually they had put one of the, or both the incumbents under stress, you know in a simulated context and it was interesting how they both responded. So in fact the board were favouring one particular person but under stress, that person really displayed the characteristics which were counter to what they wanted in their organisation, particularly from a culture point of view.  
They ended up going with the other person and highly successfully and for the amount of investment they put into that psychometric testing in the simulations was absolutely miniscule compared to the costs that that would have been on the business if they had had put that person in place.
 
Anna Temple:  Nichols also warns that testing is just a small part of proceedings and that clarity throughout the process from both the employers and psychologists helps towards a successful result.  
 
Jeremy Nichols:  But it’s also being able to be clear on looking at that data and how that compares to exactly what you are looking for and particularly from a culture perspective.  “Is, what are the traits that we expect in this person to live that particular culture?”  “How do they drive that particular culture as leaders?”  So one of the things that organisations are trying to be really clear with is, “what is it that we are looking for?”  And once you define that, then you test to that and if you’ve got the right test, you’ve got right validity in those tests, you’ve got the right professionals to support you in understanding what that data is telling you, then you get a match.  Unfortunately I think we go the easy way, we just get the information and go, “ah yeah that’s good, that’s interesting”.  But we are not applying it to what we call – that success profile.  What’s the profile that you need to be successful?  And that’s where the value I think people like, you know and Chandler Macleod really brings to this process, which is being able to really see how we connect, both what you want, what the testing does and making sure that person is going to give you the best chance of success.
 
Anna Temple:  This is Anna Temple reporting for HC TV.