The use of psychometric assessments in human resources and financial management has grown in popularity. The goal of this article is to provide evidence-based analysis of the ROI of psychometric assessments in these areas. The purpose of this paper is to discuss the various types of psychometric assessments, their benefits, and strategies for maximizing their ROI.
Types of Psychometric Assessments
Psychometric assessments come in a variety of forms that are commonly used in human resource and financial management. Aptitude tests, personality tests, situational judgement tests, and emotional intelligence tests are examples of these. Aptitude tests assess a person’s cognitive abilities, which include verbal reasoning, numerical reasoning, and abstract reasoning. Personality tests evaluate a person’s characteristics, values, and behaviors. Situational judgement tests assess a person’s decision-making abilities as well as how they respond to various workplace scenarios. Emotional intelligence tests measure a person’s ability to comprehend and manage their own emotions as well as the emotions of others.
Benefits of Psychometric Assessments
HR and financial management benefit from psychometric assessments in a variety of ways. For starters, they provide objective and standardized measurements of an individual’s abilities and characteristics, which can be used to inform recruitment, selection, and training decisions. Second, they can assist in identifying high-potential candidates for leadership and management positions. Third, they can be used to identify areas for development and training, which can improve employee performance and productivity. Fourth, they can help to reduce turnover by ensuring that the right people are chosen for the right roles and that they receive the necessary support and development. Finally, by ensuring that recruitment and selection decisions are based on objective criteria rather than subjective biases, they can help to create a more diverse and inclusive workplace.
Strategies for Maximizing ROI
To maximize the ROI of psychometric assessments in HR and financial management, several strategies can be used. To begin, it is critical to select the appropriate assessment tool for the job. Different assessments are designed to measure various abilities and characteristics, and it is critical to select the tool that is best suited to the specific role or task at hand. Second, it is critical to ensure that the assessment is administered correctly and fairly. This may necessitate training for those in charge of administering the assessment, as well as the use of standard scoring criteria. Third, the assessment results must be used to inform recruitment, selection, and training decisions. This necessitates careful data analysis and the ability to interpret the results in the context of the specific role or task at hand. Fourth, it is critical to provide candidates and employees with feedback on their performance in the assessment. This can boost motivation and engagement while also providing valuable insights into areas for development and training. Finally, it is critical to evaluate the effectiveness of the assessment tool and the strategies used to maximize ROI on a regular basis. This may entail conducting regular assessments, analyzing performance data, and soliciting feedback from candidates and employees.
Evidence-Based Analysis of ROI
A growing body of evidence supports the ROI of psychometric assessments in human resource and financial management. Aptitude tests, for example, have been shown in studies to be effective predictors of job performance, particularly in jobs requiring complex problem-solving abilities (Schmidt & Hunter, 1998). Similarly, personality tests have been shown to be good predictors of job performance, especially in jobs requiring interpersonal skills (Barrick & Mount, 1991). Situational judgement tests have been shown to be effective predictors of job performance in a variety of roles, especially those requiring decision-making abilities (Chan & Schmitt, 1997). Finally, emotional intelligence tests have been shown to be good predictors of job performance, especially in roles requiring emotional labor or social sensitivity (Jordanet al., 2002).
Psychometric assessments have been shown to provide a positive ROI in a variety of ways, in addition to their predictive validity. Gifford and colleagues (2015) discovered, for example, that using psychometric assessments in the selection process resulted in a 9% increase in productivity and a 14% decrease in turnover. Robertson and Smith (2001) discovered that using personality assessments in the selection process resulted in a 22% increase in sales and a 31% decrease in turnover.
Furthermore, Schmidt and Hunter (1998) discovered that the ROI of aptitude tests was approximately $28,000 per hire, while the ROI of personality tests was approximately $29,000 per hire in a meta-analysis. These figures include the cost of administering the assessments as well as the cost of turnover and lost productivity due to poor hiring decisions.
HR and financial management benefit from psychometric assessments in a variety of ways, including objective and standardized measurements of an individual’s abilities and characteristics, identification of high-potential candidates, identification of areas for development and training, reduction of turnover, and promotion of diversity and inclusion. To maximize their ROI, they must choose the right assessment tool, ensure accurate and fair administration and scoring, use the results to inform recruitment, selection, and training decisions, provide feedback to candidates and employees, and continuously evaluate the assessment process’s effectiveness. According to the evidence, psychometric assessments have a positive ROI and can result in significant increases in productivity, sales, and turnover. As such, they are an invaluable resource for HR and financial management professionals seeking to make data-driven decisions and improve the performance of their organizations.
Barrick, M. R., & Mount, M. K. (1991). The big five personality dimensions and job performance: A meta-analysis. Personnel Psychology, 44(1), 1-26.
Chan, D., & Schmitt, N. (1997). Situational judgment and job performance. Human Performance, 10(2), 99-118.
Gifford, B., Warshawsky, N. E., & Bowles, H. R. (2015). The economic benefits of using psychometric assessments in the selection process: Implications for HR professionals. International Journal of Selection and Assessment, 23(1), 37-43.
Jordan, P. J., Ashkanasy, N. M., & Härtel, C. E. J. (2002). Emotional intelligence as a moderator of emotional and behavioral reactions to job insecurity. Academy of Management Review, 27(3), 361-372.
Robertson, I. T., & Smith, M. (2001). Personnel selection. Journal of Occupational and Organizational Psychology, 74(4), 441-472.
Schmidt, F. L., & Hunter, J. E. (1998). The validity and utility of selection methods in personnel psychology: Practical and theoretical implications of 85 years of research findings. Psychological Bulletin, 124(2), 262-274.