What You Need to Know About What’s Happening in the Pre-Employment Assessment Market

Over the past several years, an increasing number of companies have begun to realize the potential revenue to be gained from selling pre-employment tests as part of a suite of hiring tools and processes designed to help organizations make effective, legally sound hiring decisions. There’s a wide range of companies offering some form of pre-employment assessments. These assessments span a range from pre-screening measures to personality assessments to full-blown job simulations. The increased popularity of all types of pre-employment assessment tools has led to quite a bit of business activity amongst the vendors who offer them. Much of this activity has taken the form of mergers and acquisitions.

I believe that these business deals are going to have a big impact on the way pre-employment assessment is developed, sold, and implemented. I have boiled down the movement within this field into four major trends. Below, we’ll take a look at each of these and what they mean to you.

Pre-Employment Assessment Vendors Buying Each Other

For the most part, each vendor offers a specific “secret sauce” in the form of a set of products and methodologies that are best suited for predicting applicant success at a specific type of job or within a specific industry. Few companies are able to meet broad-ranging client needs. Unfortunately, best practices in pre-employment assessment often call for more than one type of assessment tool to be used. While there are many, many types of assessment available, it has been difficult to choose one vendor to meet all of one’s needs. This situation either leads to an attempt to force a round peg in a square hole by blindly charging ahead with just one vendor, or a situation in which one hiring process is complicated by the need to involve multiple vendors. Vendors realize this, and, as a result, have the choice of either buying another company to be more of a one-stop shop, or developing more products in-house. Developing assessment products properly takes two valuable commodities: time and money. Doing it right requires a scientific process that involves the collection and analysis of mountains of data. It is often much simpler and easier to leverage someone else’s work (and his customer base too!). So what does this trend mean to recruiters and other hiring professionals? I believe it means the following:

  • Streamlining. In the short term, I believe the real impact of this trend will be that it will become increasingly easier to shop for assessment tools. The ability for one vendor to offer a wide range of tools and thus offer more options for measuring the key factors that drive performance at any given job will cut down on the need to implement and manage multiple vendors. The ability for vendors to offer more services will also make it easier to use assessments for a wider range of jobs. So, the benefit will really be in simplicity, in the form of the need to bring fewer vendors to the table. This means managing fewer vendor implementations, contracts, databases, etc., and will also allow organizations to form deeper, longer lasting vendor relationships.
  • More options for the small guy. This trend also means that hiring professionals in smaller organizations have greater access to assessment tools. Currently, small to medium organizations don’t have nearly the range of products to choose from as the larger organizations. I believe that continued product development driven by consolidation will provide a new set of products aimed squarely at this relatively untapped market segment.
  • Increased value. In the long run, I believe that this consolidation will allow vendors to continue to refine and integrate their own products such that their understanding of how to extract value from their products will increase. The benefit to hiring professionals will be the ability for vendors to offer unprecedented levels of accuracy, and thus value, through their products and services. This is good news for hiring professionals because it will help them to make more accurate, consistent hiring decisions.

Applicant Tracking Companies Integrating With Pre-Employment Assessment Vendors

A second type of integration involves the result of applicant tracking vendors seeking to integrate assessment content into their own products. This type of integration is also not too surprising when one thinks about it. It is really a natural part of the evolution of the modern hiring process. When job boards first became the rage, it was all about advertising jobs and collecting resumes. It didn’t take long for most everyone involved to realize that, while job boards were useful, they created a host of new problems for people attempting to sort through all of the resumes they were bombarded with. This gave rise to applicant tracking systems. While these systems solved lots of problems, they didn’t improve applicant quality. While most every company solved the need for these tools via paying lip service to partnerships, many companies saw the writing on the wall and reached out to add the missing component needed to help sell based on quality and results.

As a result, we’ve seen several applicant tracking companies begin to acquire assessment companies to help them get started in the game of offering pre-employment assessments as an integrated product. It’s still quite possible to integrate a third-party vendor’s assessment tools quite effectively; in fact, this is still the norm. However, companies going after ownership of the entire hiring process and the ability to crow about value and results are realizing that it makes sense to begin developing assessment capabilities in-house.

This is somewhat of a difficult proposition for many companies, as they generally have little experience with assessment; but, in my mind, it is a good move as there is still time to learn. However, it must be stated that to be successful, applicant tracking vendors must remain amenable to allowing clients to use the assessment vendor of their choice. This is due to the fact that most companies already have the applicant tracking part of the equation solved before they begin hunting for assessment tools. I do believe this will eventually change as we gain more experience with both types of tools. But, as I stated earlier, this will be a longer-term proposition. For recruiters and other hiring professionals, this means the following:

  • More options, but caution is still advised. This trend means that applicant tracking vendors have been increasingly able to help their clients to use assessment content as part of the applicant tracking system implementation. This is a good thing, and, for the most part, I believe that the assessments offered by applicant tracking vendors can definitely add value. However, understand that no one assessment is perfect for every situation. Therefore, perform due diligence to make sure that the assessments being offered by the vendor are the best thing for your specific needs.
  • One-stop shopping. In the long run, there’s no doubt that as applicant tracking and assessment vendors begin to integrate, product offerings are going to get easier for everyone. Tighter integration means that it will be easier to use one system to back the entire hiring process. The upshot of this will be the ability of hiring personnel to access one portal that will provide them with all of the information needed to make hiring decisions. Assessment results will become easier to manage and understand, increasing the ability to help hiring personnel make better decisions with less effort.
  • Helping promote a focus on the whole hiring process. One of the most important aspects of the increased integration between applicant tracking and assessment vendors will be the increased focus on hiring as a process instead of a series of discreet events. I believe this will help hiring personnel to avoid over-reliance on assessment results, and promote a more holistic form of decision making. This mindset has traditionally been a difficult one for hiring personnel to develop, but I feel increasingly integrated products will provide a good bit of help in this area.

Pre-Employment Assessment Merging With Training/Learning/Development

This trend is one I have been talking about for years but has proven very slow to develop. Perhaps this is because the areas of hiring and development seem to have walls between them in most organizations, thus preventing consumer demand for this type of integration. This is a shame, as there’s much benefit in using pre-employment assessment data to assist in training and development. While most assessment vendors have realized this and are starting to offer products that build bridges between the two areas, uptake has been slow. Most companies still don’t have the vision and open lines of communication needed to make it happen. Still, the writing is on the wall and as consumer demand heats up, we’ll see an increase in development firms looking to add pre-employment assessment to their product offerings.

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Most development-oriented firms already understand some of the key elements of good assessment, such as competencies and the evaluation of outcomes related to their systems. This will certainly help them develop pre-employment assessment capabilities in-house; however, I believe that there will still be movement in which some of the bigger players in e-learning and development seek to add pre-employment assessment content to their product offerings. It will be interesting to see who acquires whom as this trend unfolds. It is entirely possible that this type of consolidation may see an assessment company acquiring an e-learning/development company. For recruiters and other hiring professionals, this means:

  • Increased HR systems integration. The theme of continued integration of products, systems, and processes is carried on here. As companies begin to take a more competency-based approach to defining performance, it just makes sense to begin to link these competencies to pre-employment assessments. Eventually, hiring personnel will be more connected to other key HR processes, such as performance management, and the result will be a better overall understanding of what traits are required to do the job well. This type of knowledge should help to greatly increase the ability to make good selection decisions.
  • Increased ability to understand value. The ability to link selection and development activities will allow for even better understanding of the value provided by making sound hiring decisions. This will go a long way in helping staffing organizations demonstrate the value that is inherent in the use of pre-employment assessments.
  • Better on-boarding. The ability to immediately understand the developmental needs of a new hire can play a big role in the ability to provide an effective on-boarding experience. This can have tremendous value as much research has shown that important employee attitudes, such as satisfaction and commitment, are impacted by the quality of on-boarding experiences.

Aggregation to Support Outsourced Hiring

Of the trends discussed so far, this one is one of the newest to emerge. The general trend of HR outsourcing is, of course, nothing new. Many companies have taken advantage of the ability to have some of the more mundane HR functions taken over by a third-party. I’m not talking about third-party recruitment firms here (like a search firm or a temp agency), but rather firms whose mission is to own the entire hiring process, including recruitment, screening, and assistance, in making hiring decisions. Until recently, most of the focus in HR outsourcing has been on low-hanging fruit, such as benefits administration. However, this industry is getting bigger because of its successes and is pushing into other areas, such as hiring. Outsourcing all hiring isn’t for every company. Some folks feel a strong need to keep this in-house because, among other reasons, they feel it’s difficult for an outsider to understand them at a level that will allow them to hire people based on company values.

So, this full-scale recruitment outsourcing is still in the embryonic stages. There are a handful of full-scale outsourcing firms that are in the process of assembling the machinery required to source applicants, manage them effectively (applicant tracking), and evaluate candidate quality (assess). The assessment part of it is imperative for these vendors because, being outsiders who are actually assisting in making hiring decisions, they must be able to clearly demonstrate their value day in and day out. For this they need assessment tools. Again, in-house knowledge of assessment tools is pretty low in most of these companies, so the easiest thing for them to do is use an existing company to help provide knowledge and service in these areas. Outsourcing firms have several advantages over applicant tracking companies and existing assessment firms that will surely aid the outsourcers in their quest to leverage assessments.

First of all, these companies are usually very big and have lots of cash to spend. Acquiring an assessment firm is pretty easy for them. Secondly, these firms are already selling a lot of services many times via a large, distributed sales force. This offers them a foot in the door because they already have relationships with key decision-makers, and they can win the numbers game because they have a sizeable sales force to use to move their products. While the examples of this type of integration are few at the present time, I expect to see lots of action here in the not-too-distant future. The bottom line is that outsourcers are helping to solve problems and create value in lots of areas within HR, and hiring should be no different. Outsourcers know that they will need assessments to do hiring well, and, lacking in-house capabilities, are going to steadily begin to gobble up firms that can help them hit the ground running. While acquisition of pre-employment assessment companies by other similar companies and by applicant tracking companies is accounting for most of the action in the present day, I expect to see this change. We may see some outsourcers seek to acquire applicant tracking companies who themselves were built off of the acquisition of assessment companies.

For recruiters and other hiring professionals, this means more options for delivering qualified candidates. The benefits of this trend are pretty clear: more ways for organizations to use pre-employment assessment to help them make hiring decisions. This trend allows for the delivery of a slate of prequalified candidates directly to hiring personnel and provides them with a much greater chance of making a solid hiring decision. The trends outlined above have ramifications for both hiring related businesses and hiring personnel. The movement in the marketplace has driven – and will continue to drive – the availability of products and services that can help hiring professionals make better hiring decisions. I believe that this relationship will help businesses with their bottom line as more value can be realized via ROI associated with good hiring decisions.

Dr. Charles Handler is a thought leader, analyst, and practitioner in the talent assessment and human capital space. Throughout his career Dr. Handler has specialized in developing effective, legally defensible employee selection systems. 

Since 2001 Dr. Handler has served as the president and founder of Rocket-Hire, a vendor neutral consultancy dedicated to creating and driving innovation in talent assessment.  Dr. Handler has helped companies such as Intuit, Wells Fargo, KPMG, Scotia Bank, Hilton Worldwide, and Humana to design, implement, and measure impactful employee selection processes.

Through his prolific writing for media outlets such as ERE.net, his work as a pre-hire assessment analyst for Bersin by Deloitte, and worldwide public speaking, Dr. Handler is a highly visible futurist and evangelist for the talent assessment space. Throughout his career, Dr. Handler has been on the forefront of innovation in the talent assessment space, applying his sound foundation in psychometrics to helping drive innovation in assessments through the use of gaming, social media, big data, and other advanced technologies.

Dr. Handler holds a M.S. and Ph.D. in Industrial/Organizational Psychology from Louisiana State University.

LinkedIn: https://www.linkedin.com/in/drcharleshandler

 

 

 

 

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