Assessing true potential

Assessment and development is moving away from being a pure HR function to a
broader business tool, enabling organisations to realise the true potential of
their workforce, while making development more focused and results based.
Caroline Horn examines how different companies are using these useful programmes

A tough trading climate has a significant impact on a company’s training
budget. Like marketing programmes, assessment and development plans are
generally among the first casualties of a downturn. But a number of
leading-edge companies have learned the lessons of the last recession and
realise that a clear strategy and sound management development during the
difficult years will put them at the forefront of any upturn.

Nicola Mindell, commercial director for Interactive Skills, says:
"Research following the recession in the early 1990s showed that companies
which maintained marketing and training budgets were much better placed to take
advantage of the upturn."

The company has recently started a programme with the UK arm of a major
international consulting firm to help assess individual learning needs at a
senior level. Mindell says: "It is a significant investment for this
organisation at a time when they have cut back on people, but they say – ‘this
is the company’s future, and these are the people we will need in the next few

Few companies will take a five or 10-year view on corporate and management
development. But as a senior manager at Sun Microsystems – one of the handful
doing so – says: "If a company is paying its senior management between
$250,000 and $500,000, then its seems silly to not spend a few thousand dollars
more on management development costs."

DDI, a consultancy specialising in selection and leadership, has seen a
significant increase in demand for assessment, and building exceptional skills and
executive bench strengths. "Companies realise they have to get the top
strata right," says Lucy McGee, marketing director for DDI. There is also
an increasing trend towards senior level HR appointments, such as talent
management directors. "People need to understand what skills level the
company has, how to deploy it and how to leverage training investment – to get
people where they need to be as quickly as possible," she says.

"What HR has to do, from the top down, is to show what the HR strategy
is and to show that it links to business strategy – that it is not an isolated
activity," says Charles Woodruffe, managing director of Human Assets.

BP, for example, is working to incorporate future skills need with its
business strategy through a global leadership programme designed by
occupational psychologists Pearn Kandola. Dr Binna Kandola, partner, says:
"They have taken a fundamental look at their global management and have
put in place a meticulously planned programme, examining people’s careers in
detail and reviewing all the competencies they use."

Often the starting point for companies will be: ‘What do we want to deliver
to shareholders, and what are the consequences of putting those strategic goals
in place – do we have the people who can deliver it?’, says Chris Watkin,
practice leader executive, assessment and organisational talent review at Hay
Group. "Talent reviews and executive development programmes can be an
energiser for change across an organisation," he says.

Sinclair Stevenson, a senior consultant at Penna Consulting, says the
increased demand for assessment centres is "partly because more people
realise the importance of linking assessment to goals, and partly because they
realise they can’t afford to get it wrong." When times are tough,
companies realise how important it is to get the right person in.

DDI conducted an assessment for global biopharma organisation Quest
Diagnostics which included selecting two key roles following the acquisition of
SmithKline Beecham in 1999. McGee says: "Following the acquisition, the
company wanted to know who to put into the top jobs – one an operational role,
the other more entrepreneurial. The CEO initially wanted person A in role A,
and person B in role B. But it was clear after the assessments that it should
be the other way around." That decision has impacted on ROI – since then,
the company has been one of the top performing stocks.

Stevenson adds: "It is also interesting the extent to which assessment
is being done at board level – so few directors are evaluated because they tend
to say: ‘I have proved myself through experience’, but who knows if their
existing skills are compatible with what they are doing now? As the recession
bites, you can expect shareholders to become more vociferous and bring more
pressure to bear on board members."

More positively, a talent review by Hay Group at BT Wireless – prior to it
becoming a stand-alone company (now mmO2) – showed the City that BT Wireless’
leadership was capable of taking the organisation forward on its own at mmO2.
Assessment, once used on a purely individual level, is increasingly used at a
group level and increasingly at a time of corporate change.

Companies in IT, finance and automotive industries are having to undergo
dramatic changes in order to survive – and key changes in strategy are
affecting key personnel. It is becoming more frequent for assessment to be used
as a tool to find out who an organisation want to keep, and who it can afford
to lose. Stevenson warns: "While assessment has been used as a tool to
deselect people, you have to be incredibly careful how you use it. Companies
use it as a selection tool – getting people to reapply for the available jobs.
But as long as it’s used carefully and as part of all best practice, then it is
a fairer way of deselecting people."

Prior to the Royal Bank of Scotland taking over National Westminster, Hay
Group built a leadership competency model to enable RBS to measure the people
quality it was acquiring and to assess executives for senior roles. Hay Group
also transferred the assessment technology to the RBS HR personnel, to allow it
to complete assessments for candidates further down in the organisation.
Results of the assessment speak for themselves. Less than a year after the
takeover, it was reported that RBS, which had predicted annualised revenue
gains of £120m in the first 10 months after the takeover, delivered £147m.
Annual cost savings had also risen from £550m to £653m.

Assessment can also be central to cultural changes within an organisation.
The Royal London Group, for example, used assessment as one tool in helping it
to develop a more entrepreneurial culture to ensure its future growth,
following the acquisition of United Assurance Group and Scottish Life. Robert
McHenry, chairman of OPP, says: "The parent company did not want to
replicate its culture or take on the culture of its acquisitions – it needed a
‘third way’ that was more entrepreneurial and which would ensure it reacted
more quickly to the market."

A strategic alignment was followed by assessment and development of all
senior managers, and OPP is about to start working with middle managers. The
programme, which included one-to-one coaching and team awareness workshops, is
currently in its second year, and has helped establish a performance-driven
culture by focusing on the strategic aspects of leadership.

More companies are trying to link assessment and development activities to
their bottom line, but McGee warns: "The results of better productivity,
lower recruitment costs and better retention take a while to show. You can
demonstrate ROI, but not in six months."

A development programme at luxury car manufacturer Lexus has focused at the
front end, on customer services. HR specialist CDA group created a development
framework for Lexus, based on the broad objectives of Lexus’ dealer network to
help drive forward new skills and behaviours, says CDA principle Caroline Dunk.
When it evaluates the success of the programme, CDA will consider the overall
competence of the workforce as well as customer satisfaction levels.

This kind of programme will take longer to impact on Lexus’ bottom line but
companies are increasingly keen to see a return on their development
investment, says Mindell. "Before, companies just asked if people were
happy with the training; now they want to know what difference it has made to
them, to their team and to the business."

It is argued that management development programmes can increase individual
performance from 150 per cent to as much as 400 per cent. Standards such as
Investors in People can make a significant impact, says Peter Jones, director
of quality at IiP, who points to research showing that 70 per cent of companies
say the standard improves their competitive edge and productivity (Building
Capability for the 21st century, CREATE 1999), while 74 per cent of firms
involved believe it does deliver bottom line results (UK Tracking Study –
Employer Research, MarketShape, Feb 2002).

Watkin agrees there is usually a business case for development. One
professional services firm the Hay Group worked with found that the top end of
its ‘talent pool’ delivered about £160,000 of business, compared with the
average of £116,000. Watkin says: "There’s usually a 40 per cent
differential between average and superior people. So it is worth trying to get
more people at the upper end of that scale."

When a multi-national client of Pearn Kandola evaluated the impact of
management development centres (MDCs) attended by managers from its various subsidiaries
over a four year period, it found a link with improved staff retention (some 30
per cent lower among attendees than in the general management population), as
well as an indication the MDCs lead to better performance. This was done by
analysing sales per employee, both before and after the development centre
programme started – it was estimated that by sending one participant rather
than none, an average operating company would have increased sales by between 2
and 3 per cent.

It is easier to evaluate a programme that is directly related to a company’s
front-line performance. TMI, for instance, completed a programme with DIY store
Wickes, which involved a rebranding exercise in 20 of its stores, combined with
a customer services training initiative. "There is clear data
demonstrating the links," says Susanna Mitterer, director of sales and
head of consulting. "All the stores had the rebranding, but only six had
extensive training. The sales revenues of those stores went up by 17 per cent,
while the others increased by about only 4 per cent."

But while some assessment and development costs are simple to quantify, the
hidden costs of not getting it right can be much higher. For example, the cost
of assessment can be judged against the costs of a company’s key roles and how
long they were vacant for, the business costs to the company, and what was
spent on head hunters. What is harder to quantify, though, is the value that
the former member of staff has added to competitive strength in a world that is
becoming increasingly dominated by just a handful of competing companies.

Case study: Bayer Diagnostics
Pharmaceutical and chemical giant finds ‘a third way’

When chemical and pharmaceutical
group Bayer bought Chiron Diagnostics in 1998, the challenge was to merge the
two cultures. Rather than adopting either existing culture, the Bayer team
decided to define a new approach to meet the future needs of the business,
Bayer Diagnostics.

The new culture would be based on behaviours determined by
customer expectations – and how employees met those expectations. Tim Bray,
vice-president of global and executive development at Bayer HealthCare, parent
company of Bayer Diagnostics, explains: "How do you get the business
leaders to stick to something? Find the questions that are indicative of
customer loyalty, challenge the leaders to meet the answers head on, and be
prepared to be measured against them."

Bayer Diagnostics worked with Getfeedback to realise its new
vision. Getfeedback founder Alison Gill says: "They wanted to create a
more customer-focused business, that was more productive and which used all
their new skills."

Once Bayer Diagnostics had determined customer demands through
customer satisfaction surveys, it put in place an employee attitude survey for
about 7,000 of its employees, with a core of ‘B12’ questions. These are the 12
key measures of employee attitudes that, for Bayer, drive customer loyalty.
They include whether employees felt inspired by the business, and if they felt
their job activity directly affected customers.

Managers and supervisors took part in a separate 360¼ feedback
programme. Gill says: "Every year, anyone with management responsibility
is assessed using 360¼ feedback. It is not considered to be a measure, but a
tool to provide those people with the opportunity to improve their
skills." The company says this has helped management to develop to meet
the needs of the business and created a common language of leadership across
all the countries in which Bayer Diagnostics operates.

All feedback processes are linked through the use of the
Balanced Business Scorecard, measuring performance in four areas – financial,
people, process and client. Ongoing surveys, conducted via the web or on paper,
mean that Bayer can analyse trends and predict the changing behaviours of its
workforce, allowing its leaders to make informed decisions about what actions
to take to ensure the business performs.

The development programme has helped to create and establish a
new culture at Bayer Diagnostics and has impacted directly on certain business
areas. New hires and promotions are now tested against the model to avoid
future problems (staff turnover was already low).

Bayer Diagnostics says it has also seen a steady improvement on
a return on sales – although figures were not available – and there has been a
9 per cent improvement in employee feedback surveys, showing a closer fit
between customer expectations and employee behaviours.

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