By
Mike Russiello

In today's tight labor market, some people have suggested that skills testing is an investment in quality they can't afford. With too few candidates, they say, they cannot be very selective.

However, skills testing is more important in a tight labor market than when candidates are plentiful. This is because skills testing helps you identify the most desirable candidates early in the selection process, before they are lost to the competition. Additionally, skills testing reduces the chances of making a bad hire in an environment where the likelihood of making such an error is greater and the cost of a such a mistake is increased.

Despite these benefits, recruiters and hiring managers are sometimes uncomfortable asking a potentially valuable candidate to take a skills test. They worry that the candidate will balk and disappear forever. Often, the converse is true. Skills testing says something about the organization that uses it. It adds objectivity and fairness to the process and indicates that the organization will compensate based on merit more than other factors. Many elite organizations draw their prestige from the fact that everybody knows how difficult it is to get in. Consider why Harvard University or the Navy Seals do not admit applicants without testing them.

Where's the proof? In a recent Human Resources Executive survey, 69 percent of 283 HR professionals said their organizations use pre-employment testing to evaluate job applicants. 85 percent of those surveyed said testing in general is effective for identifying the best candidate and 83 percent believe it promotes hiring fairness¹. Clearly, testing has become an institutionalized part of the hiring process.

Skills Testing lets you Focus on the Best Candidates

"Take our twenty best people away, and I can tell you that Microsoft would become an unimportant company."
-- Bill Gates, Chairman of Microsoft

The only lasting differentiator between competing organizations is the talent of their staffs. Appropriately, the goal of a selection process is to hire the best possible talent at a reasonable cost.

Successful sports team coaches are experts at recruiting the best available talent. They discovered a long time ago that the key to recruiting the best candidates is attention. Candidates tend to go where they receive the most attentive treatment. Besides giving the impression of objectivity and fairness, skills testing gives you the opportunity to be more proactive with highly qualified candidates by identifying them early in the selection process. If they are not identified quickly, highly qualified candidates do not get the attention they demand and are quickly lost to competitors.

The best way to focus on the most talented candidates is to encourage them to quantify their skills before they apply ? so you can see right away who you want to concentrate your efforts on. Educational degree requirements are an example of this practice, as are the increasingly popular skills certifications.

Hiring Mistakes are More Likely in a Tight Market

"Saving time and money are only interesting if the quality variable is constantly addressed."²
-- John Sumser, Interbiznet, a respected writer on recruiting strategies

When labor is in short supply and the costs of a bad hire more severe, it is easier than ever to make a hiring mistake. This is because:

• Busy managers, unable to dedicate enough time to technical interviews, rely on non-interview aspects of the selection process or the recruiters themselves to qualify talent. However, in fast moving areas like technology, many recruiters do not know how to measure advanced skills.
• Higher salaries for in-demand skills cause the pool of candidates to become flooded with half-taught individuals pretending to have skills they have not fully developed. Resumes become inflated.
• The temptation to accept less-than-qualified candidates is high, as recruiting organizations are pressured by unrealistic quotas and hiring managers struggle to staff projects and meet deadlines.

When properly used, skills testing reduces the likelihood of a hiring mistake. How? By providing an efficient, fair, and objective way to measure skills. Armed with this information, a recruiter has the power to see through an inflated resume and to provide the hiring manager a meaningful assessment of skills.

By reducing the chances of a bad hire, skills testing helps organizations avoid the high costs associated with hiring an employee who absorbs rather than adds value. In fact, numerous industry analysts are predicting continued advancements and increases in the use of assessment within the recruiting process for this purpose. These include Charlene Li, of Forrester,³ and Mark Mehler and Jerry Crispin, of CareerXroads⁴.

To help you visualize the type of information available when you use skills testing, we will show some of the reports available to users of skills testing in the next section.

The Costs of a Bad Hire are Higher in a Tight Market

Recruiting in a tight labor market is truly a challenge. Not only are the candidates harder to find, the cost of selecting the wrong candidate is also higher. This is because hiring mistakes typically result in many wasted labor hours, both from the employee and others, such as managers, peers, and human resources personnel. Since labor costs are higher, and person-hours more precious, the cost is higher. Additionally, the length of time needed to find a replacement for a departing worker increases when candidates are scarce. This results in a larger opportunity cost.

So what's the cost of a bad hire? We divide the cost into two main components, the cost of replacing a worker and the opportunity cost of having an open position.

Cost to Fill A Position

According to the Employment Management Association, the average direct cost per hire for an exempt (non-hourly) worker was $10,500. This figure is conservative in that it does not include recruiter salaries, management interview time, and applicant travel. Additionally, this cost has risen more than 100 percent over the last 10 years, from about 5,000 in 1991⁵.

Opportunity Cost

Beyond the actual cost of replacing a worker, there is always an opportunity cost of having a position open. A recent study showed that an employee generates an average of $1,173 of revenue (beyond his or her salary) for his or her company per day⁶. For exempt workers, EMA found the average time to fill an open position in 1999 was 76 days⁷ ? two and one half months. At that fill time, there would be an opportunity cost to the organization of more than $89,148.

So what's the cost of a bad hire? Our estimate is $10,500 + $89,148 = 99,648. Notice that both these components of this number go down when the labor market eases, since the cost of filling a position is less and the number of days the position remains open is also smaller. In other words, as the market tightens, the cost of turnover goes up significantly.

How does skills testing reduce turnover? By ensuring that candidates are placed into the right jobs in which they have the skills to succeed.

What Information Does Skills Testing Provide?

When constructed and validated carefully, skills testing can provide a wealth of information. Test results can be produced that rate a persons skills against a set of validated criteria. Benchmark reports can be generated that compare candidates against one another or against a "benchmarked" set of employees. Graphical views of results on both and individual and group basis can be invaluable to interpreting results and planning training. To help you visualize the power of this information, some example reports are provided below.

Brainbench provides a full set of information on a person's skills, including overall score, strengths, weaknesses, percentile information, and automatic rankings against a select group of candidates. Reports are provided in graphical form via a web-based interface.

Here is the detailed result report provided by the Brainbench testing system:

The most effective use of skills testing is to benchmark your applicants against current employees within the same job or job function. A benchmark report, also available through the Brainbench system provides detailed test results, as well as relative data.

Additionally, the system automatically produces histograms that you can use to gain a clear view of how a specific candidate performed against all of your applicants. Here's an example:

Finally, it is often useful to evaluate a candidate's strengths and weaknesses by topic area against either other candidates or your current employees. The following report shows this information graphically:

You can see how this information will help you with screening and evaluating your candidates and, most importantly, avoiding hiring mistakes. Of course, skills are only one part of any selection process. Other factors, such as cultural fit, should always be given consideration when making a hiring decision.

Summary

In a tight labor market, the keys to success of the recruiting game are:

1. Focus attention quickly on the best available talent
2. Avoid mishires that are easy to make and can cost the company upwards of $100,000 in replacement costs and missed revenue.

Skills testing helps with both of these objectives by providing quantitative data early in the process. These data can help you quickly single out the highly talented individuals and avoid wasting valuable human resources or management resources on those who are misrepresenting their skills. By placing appropriately skilled personnel into jobs, retention is increased and turnover reduced.

When used appropriately, skills testing makes a positive impression on candidates, who observe first hand that the company takes its business seriously and selects employees carefully and fairly. People think "if I have to be good to get in, than I want in." At the same time, it provides invaluable information to recruiters in making hiring decisions and avoiding costly mistakes. Due to higher turnover costs and competition for the best talent, this information is even more valuable when qualified candidates are scarce than when they are plentiful.

Today's skills testing systems, like Brainbench, provide extensive data, some in graphical format, that allows the employer to quickly gauge a candidate's skills and compare them to either other candidates or employees in the same job. Having this information at you fingertips can be invaluable to the recruiter in today's competitive job market.

For more information, including some case studies, please refer to www.brainbench.com.

About the Author
Mike Russiello is President and CEO of Brainbench, the world's leading independent skills certification authority. Prior to co-founding the company in 1998, Mike was a manager at EDS, where he successfully led a large-scale software implementation for the U.S. Department of Education. Prior to his operational role, Mike was a salesperson for EDS and is credited with sales totaling over $500 million. Mike is a graduate of the U.S. Naval Academy and holds advanced degrees in Electrical Engineering and Business Administration from the University of California and University of Maryland, respectively.

About Brainbench
Brainbench is the rapidly becoming the accepted skills measurement standard for knowledge workers worldwide. ISO 9001 Certified and now with over two million registered users, the company pioneered online skills certifications. Brainbench provides professional online certification tests and employment assessments in information technology, finance, sales, administration, health care, and other categories. Corporate customers include EDS, Ernst & Young, IBM, Dell, PeopleSoft, Freelance.com, kforce.com, Manpower Professional, and TechieGold.com. Major investors include Manpower, Thomson Learning, Terra Lycos and Primus Venture Partners.

¹Human Resources Executive, January 2001, page 37

²Electronic Recruiting News, Interbiznet.com, October 19, 2000

³Forrester, The Career Networks, February 2000

⁴www.CareerXroads.com , Jerry Crispin and Mark Mehler, Trends for 2000, October 1999

⁵Employment Management Association, 2000 Cost per hire and Staffing Metrics Survey

⁶www.mobilerecruiter.com, http://www.wirelessworkforce.com/products/mrbenefits2.htm

⁷Employment Management Association, 2000 Cost per hire and Staffing Metrics Survey