Assessments Can Improve Retention, Save Money

This is a story about how CashAmerica saved millions. And how your company might be able to save money, too.

Like so many companies, CashAmerica, a nationwide chain of loan and pawnshops, had a retention problem. By the middle part of the last decade the problem had become acute enough that the company regularly operated at 80-90 percent staffing.

That might have been good for the bottom line, but the cycle of hiring and training, not to mention lost productivity, had a cost.

Clint Jaynes, when he took over as SVP of human resources in 2006, figured the cost to be about $2,000 in training costs for every new hire.

As Jaynes studied the matter, he found many newly minted clerks left within the first 90 days; more within six months. By the end of two years, somewhat more than half of all new hires were gone.

Store managers, who cost five times as much to train, had a lower, but still significant turnover rate.

Jaynes suspected that a big part of the problem was in the selection process. Because of the hoary nature of pawnbrokering, hiring was largely done locally. Walk-ins were the norm.

“What drew me was the opportunity to bring some sophisticated tools to the managers,” Jaynes says. “They didn’t have many. They all hired people, but that wasn’t (much of) their training.”

Experienced in using assessments to help select candidates, Jaynes turned to PeopleAnswers. The company uses standardized personality and behavioral assessments, normalizing them against the results obtained by testing existing employees and analyzing their results against their performance.

The results of the high performers are then used by PeopleAnswers to give a thumbs up or down to each candidate.

Other assessment companies use different methods, with the most sophisticated — and pricey — method being the development of custom tests designed for specific jobs at specific companies.

Jaynes chose PeopleAnswers because he was both familiar with the company and knew that its results presentation would be easy for managers to use with minimal training.

At the end of two years, a period when 200 of the company’s 800 stores used the assessments, Jaynes found that where the assessments were in place, clerk turnover was 39.7 percent. In the 600 stores where no assessments were used, turnover was 53.3 percent.

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If the entire company had been using assessments, the training savings alone would have been in the neighborhood of $850,000 for the clerk position alone. Manager turnover also declined where the assessments were used in selecting candidates. Add in those costs and the total savings for training alone would have exceeded $1 million.

If the story ended there, it would be a happy ending for CashAmerica. It doesn’t. Besides the training savings, CashAmerica found that revenue increased where the assessments were being used; in some places by $50,000.

“We were able to get a higher-quality person,” says Jaynes. Ironically, that pushed up overall turnover because store managers no longer had to accept mediocre performance and terminated subpar workers. It also cut down on internal theft.

CashAmerica’s success is not an isolated case. Dr. Charles Handler, an industrial psychologist and president and founder of Rocket-Hire, a consultancy in pre-employment testing, screening, and assessment tools, says companies that use assessments see all sorts of benefits.

“Retention for a lot of companies might be a starting point,” he says, “But there are other reasons to use assessments.” Among them: cultural fit, leadership potential, decision-making, career planning, and advancement.

Handler cautions that though there are many assessment companies and tests available, price should never be the deciding factor. Instead, “The more you tailor the assessment to the individual, to the company, to the job, the more accurate and the more value it will show,” he says.

Today, CashAmerica regularly uses assessments everywhere. Turnover is down and performance is up. Not all of it can be attributed to the use of assessments, but that’s where it started.

The complete story and a look at the results other companies are getting with assessments will be in the June issue of the Journal of Corporate Recruiting Leadership.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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7 Comments on “Assessments Can Improve Retention, Save Money

  1. I am a big fan of assessments and use them regularly in helping select quality candidates for my clients. However, companies should also recognized that as your selection standards go up, your sourcing (advertising costs)along with the time to hire increases. Quality, cost, and speed are intertwined. Change one factor and the others are directly affected.

  2. A great example of how assessment can solve two business problems.

    Assessments can be viewed as measurement rigor to improve the yield of the business process called staffing. Staffing or recruiting yield can be measured in terms of staffing waste (early turnover) and performance variation (the range of difference between your best hires and your worst hires).

    The CashAmerica case study cites reduction in staffing waste as measured by training costs associated with turnover. Waste is often followed by re-work – the recruiting and on-boarding of the replacement hire.

    If you would like to explore the impact of reducing early turnover at your company, visit the False Start Waste and Rework ROI Calculator

    http://www.shakercg.com/roi-calculators/false-start-waste-and-rework-roi-calculator.

    Performance variation can bring an even greater magnitude of ROI. As Dr. Handler states, assessments that are developed for a specific job, at a specific company can be more accurate and add more value to the decision making in the staffing process. In one of our recent studies regarding retail store managers, assessment results help to identify individuals who operate their store in a manner that produces a 22% higher retention of front line retail associates AND achieve a 75% year over year comp sales growth.

    If you would like to explore the impact of reducing performance variation (hiring fewer low end performers), visit the Sales Impact of Better Selection ROI Calculator here.

    http://www.shakercg.com/roi-calculators/sales-impact-of-better-selection-roi-calculator

    As the article states, not all performance changes can be attributed to assessment, but they may indeed begin there. Those that have measures for their process almost always achieve better results.

  3. This might go without saying, but “assessments” are not something new and different, they are tests with a fancy name…The point being: better testing, especially testing that is job related, hard to fake, validated, and measures the whole person for the whole job will ALWAYS produce better employees…and better employees are more profitable.

    The real rocket science comes when people realize traditional interviews are good at reducing the clear-cut cases of candidate incompetence, but poor at predicting job success…of course, we all know that already.

  4. John,

    Nice work providing some hard evidence to back up what folks like WW and I have been saying and then banging our heads into the wall because no one seems to care about following a model that helps them see ROI from testing. Yes it takes some extra work and no testing is not going to make your hiring process perfect; but the numbers don’t lie and the value is there for the pickin’.

  5. Totally agree that assessment tests are clearly the way to go – but I would have to say that although they certainly add a step to the traditional employment practices used in the mainstream that the time spent elsewhere is greatly diminshed. As mentioned in John’s excellent post, the amount of time spent on turnover activity should greatly decrease (hiring, on-boarding, training, employee relations, etc). It seems obvious that the time savings and costs saved by using assessments greatly outweigh the effort of having applicants take a test and comparing the scores…

    Of course there are a whole bunch of other employment practices that should be evaluated for inefficiencies too – but for assessment, its a no-brainer. Once companies begin using strategic workforce management techniques and curtail the tactical approach, practices like assessment may finally begin to take off.

  6. Hmmm. Since increased retention threatens recruiters’ livelihood, and good assessments improve retention, should we be opposed to assessments?

    Cheers,
    Keith

  7. Keith, I think the answer to your question is yes if a recruiter is more concerned with maintaining employee turnover to keep internal and external recruiters employed at the expense of their employers and clients.

    A big part of the problem is that many people have used the MBTI and Ipsative assessments to no avail. Also, free assessments seem to be preferred by many hiring managers as if free is always better.

    If an assessment is a Normative, whole person assessment, and web based with automatic scoring and immediate emailing of the reports, then about one hour of the applicant’s time is required. Hiring managers can read the results immediately and make quick decision; hire immediately, hold for further review, do not hire, or look for other positions for which they may be qualified or could be trained to become qualified which I recommend.

    The time to hire can be reduced greatly. If the first applicant has a 95% job suitability, our term, then hire immediately, job done. However, we find that it takes 3 to 5 qualified to be hired job applicants to find one that has a good or better job suitability.

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