Assessment: Are You Investing in All the Wrong Places?

Assessment: Are You Investing in All the Wrong Places?

Organisations assess leaders in many ways to make promotion, hiring, and development decisions. Assessments used include manager ratings, interviews, psychometric assessments, and other tools. On a positive note, companies in Asia are increasing their use of assessments. Unfortunately, they often focus their time and energy on assessments that are not giving them a great return on their investment.

To understand practices in Asia, we conducted a practice survey with MNCs. We compared this to the practices that the best companies in the US use for assessment. More importantly, we compared our survey results to the academic research on which assessments give the best return. Below are a few of the key findings.

Assessments Used More for Development, Less for Decision Making

Most companies in the survey were large MNCs operating throughout Asia and most used assessment of some sort. For example, 96% of companies used assessment for development purposes with high-potentials, whilst 79% used assessment for developing senior executives. Only about 50% of the companies used assessments for decision making (e.g., succession planning, assessment of potential, and selection of external candidates).

Using the Worst (mostly) Assessments

Most companies (over 75%) used manager ratings of potential and/or multisource 360 ratings as part of their assessment practice for senior executives (see chart below). Interviews, profiling tools, and personality assessments were used less frequently. Although exact percentages varied for use of assessments with high potentials, overall results were similar.

Three of the top five assessments used (manager nominations/9-box, 360s, profiling tools) provide individuals with insight, but have limited value in decision making and development. Manager nomination/ratings are not highly reliable and often correlate with overall performance. Multisource feedback instruments (360s) are error-prone and often do not result in development. Profiling tools such as the DISC or MBTI are interesting and insightful, but are not valid predictors of potential or performance. They also are "development light" in terms of helping leaders identify development needs.

Companies often do not use some of the best methods to assess potential and predict future job performance. Based on validity studies, we've put together a chart mapping validity vs. % of MNCs using a particular tool (below). Test batteries (including cognitive ability and personality inventories) and assessment centres are the best methods to assess leaders, but are least used in Asia. Instead, companies are investing their time and money on assessments with lower validity. By selecting different assessments, companies can improve both development and selection of leaders.

Behind the Best US MNCs

A similar study was conducted in the US focused on the best MNCs and their practices. This is a good comparison as many of the assessment practices used today were developed in the US, and these companies are viewed as some of the best for their development of leaders1.

Some of the differences are highlighted in the chart below, which focuses on use of assessments with high potentials. The US best practice companies are much more likely to use personality inventories, bio-data, cognitive ability tests, and other tools than are Asian MNCs. They tend to use the best predictors of success more frequently.

Closing the Gaps

We are not suggesting that you take manager nominations/ratings and 360s out of your assessment practice. Input from others is important. However, you can dramatically improve the data you gather and use for development and decision making purposes. Here are a few tips to get you started:

  • Limit the use of profiling tools (MBTI and DISC). These are great for team sessions, but not particularly useful for selection and development
  • Introduce valid assessment tools to help inform the views of managers when it comes to their ratings/nominations. We recommend focusing assessment first on executives, where the impact of the assessments can be much greater. For example, make assessment a requirement as part of development and selection before being promoted to Director or VP levels
  • Use some limited assessment tools lower in the organisation so that you screen managers better and ultimately improve your talent pipeline

Companies are investing significant time and money in assessment. Fortunately, there are over 100 years of research and practice to guide decisions and maximise ROI. By investing wisely, you can improve the development and selection of leaders, ultimately improving your leadership pipeline and your leaders' performance.

Church, A. H., & Rotolo, C. T. (2013). How are top companies assessing their high-potentials and senior executives? A talent management benchmark study. Consulting Psychology Journal: Practice and Research, 65(3), 199-223.

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