7. ASSESSMENT AND DEVELOPMENT CENTRES – Hurconomics for Talent Management: The Creation of a Business-driven HRD Missionary

7

Assessment and Development Centres

Introduction

In a competitive world, past success does not always guarantee future success. The risks are particularly high for those who have been operating in a protected environment. Economic reforms are constantly exposing organizations to higher and tougher levels of competition. In order to fight competition, firms need to advance at high speed in all areas: technology, processes, management, finances, quality, costs, the creation of new markets and product inventories, and, above all, increased employee efficiency, motivation and productivity. Competing organizations from other countries have easy access to the best technologies, unlimited finance, well-established management systems and practices, high quality orientation, brand equity and simple flat, cost-effective structures with fewer but very competent people to handle them. Under such circumstances, firms have no option but to become more technology-driven, market-sensitive and customer-focused, quality-conscious, cost-effective, systems-driven and managerially effective. To achieve this, having competent managers in strategic roles is a must. With competent managers, organizations can gain strategic advantages; without them, they cannot survive long.

Rationalizing organizational structures

For a variety of reasons, there have been too many levels created within organizations in the past. The high level of role differentiation was unnecessary. An increased number of layers adds to delays, reduces speed, gives a false idea of easy profitability and frustrates employees rather than motivating them. It increases inefficiency, frustration and also creates unrealistic aspirations.

The managerial structure needs to be rationalized to include a maximum of three to four levels. At best, these could be junior, middle, senior and top management cadres. The culture should be that of a peer and performance culture.

Aligning compensation plans

To keep motivation levels high, there could be running scales and appropriate compensation mechanisms, so that people do not get frustrated if they do not get promoted. Years of service and consistent high performance should be recognized, and valued more than a promotion. It is possible to design compensation systems that keep people’s motivation levels high, but their aspiration for promotion low or limited.

Promotion policies should be rationalized and they should be based on competence. Mere changes in salary grades and compensation without changes in tasks (responsibilities, accountability, nature of jobs performed, and so on) should be treated as upgradations and not as promotions. Upgradations should be considered as valuable and given to more employees. Promotions, however, should be limited to those who are required to perform new roles or tasks, assume higher levels of responsibilities or meet different kinds of challenges. A promotion should always be accompanied by the following:

  • Grade change
  • Designation change
  • Change in compensation structure and emoluments
  • Change in responsibilities with a reasonably significant number of tasks to be performed in the new role.

Appraisal of potential

Today, it is beyond argument that competent people should handle strategic and critical roles. Hence, there is a need to constantly identify competent people. This is what makes the appraisal of potential very significant.

To retain competent people, we must know the competency requirements. And, to understand the competency requirements, we must know the job profile or the list of tasks to be performed. There should then be a reliable and valid method of assessing the extent to which a given employee has the competence to perform new tasks. Potential appraisal is nothing but an assessment of the extent to which a given individual has the potential to perform a new task or job. The simplicity or complexity of a potential assessment depends on a number of factors.

It is simple if the employee is already performing most or all the tasks as part of her/his current job. In such cases, the appraisal of current performance is a good enough indicator of future potential and the performance appraisal is an appropriate tool to assess potential. For example, if a deputy manager (production) has to be promoted as manager (production) most of the tasks will remain the same. Normally, such promotions are more a case of re-designation.

However, a potential appraisal is complicated if the employee is to be considered for an altogether new job or task. Here, one has to gather evidence of the person’s potential to perform the new job, and past performance is not always enough of an indicator. The best way to judge a person’s potential and, therefore, ability to succeed in the new role is to actually put her/him on the job and then assess her/him. However, there are a lot of practical constraints to this. For one, the organization cannot afford to take such risks and second, there would be many aspirants for a particular post. The next best alternative available in such situations is to simulate the job and observe the person’s performance. This is where the importance of assessment centres becomes evident. Assessment centres are established specifically to simulate certain job conditions and to observe a person’s performance under those conditions, thereby assessing her/his potential to occupy that position. Again, it is not necessary to simulate the entire job. In any case, in a promotion, 60 per cent to 70 per cent of the work can be handled well as a result of past experiences. It is the remainder that is critical and requires a different set of competencies. And, therefore, this critical part of the job can be studied, competencies identified and methods designed to evaluate these competencies.

Promotions should be preceded by a thorough testing of the competencies or potential for occupying the position to which the employee is being promoted. It is here that the function of an assessment centre becomes particularly relevant. The assessment centre should clearly communicate to employees that the firm will focus on performance and competency.

Definition of Assessment Centre

An assessment centre is a comprehensive, standardized procedure in which multiple assessment techniques, such as situational exercises and job simulation (business games, discussions, reports and presentations), are used to evaluate individual employees for a variety of human resource decisions. The approach has been mostly applied to individuals being considered for selection, promotion, placement, or special training and development in management.

Tools used in assessment centres

As already mentioned, the main characteristic of assessment centres is the use of multiple methods of assessment using multiple assessors. The main assessment tools used are:

Psychometric tests  In general, three types of tests or questionnaires can be used in assessment centres: aptitude tests, ability tests and personality tests. Aptitude tests are those that attempt to evaluate verbal and numerical reasoning ability. Ability tests attempt to measure awareness, knowledge and other such aspects. They also measure simple skills such as problem-solving. For example, a paper and pencil test could be administered to assess an individual’s level of skill in relation to computer literacy, financial management, and so on. Personality tests are those tests that aim to study various dimensions of an individual’s personality rather than her/his abilities. Tests such as 16 PF and MBTI are used in many organizations. While ability and aptitude tests have right or wrong answers, personality tests do not.

The tests are selected for assessment, taking the following points into consideration:

  • Objective: what needs to be measured
  • Reliability and validity
  • Length of time required to administer the test
  • Availability of qualified experts to administer, score and interpret the tests
  • Cost involved

Interviews  Generally, structured interviews are used in assessment centres to increase inter-assessor reliability. Questions are decided upon, sample responses are formed and classified as good, bad or average. This in turn is used to rate the participant’s response.

Background interviews are generally used if the participant’s performance on her/his current and previous jobs may be an indicator of her/his success for the role for which she/he is being assessed. The participant is required to give specific examples of how she/he has performed her/his duties or handled job-related problems in the past.

In case of situational interviews, the following types of interview questions are used:

  • Situational (or hypothetical): a candidate is asked what she/he would do in a particular job situation.
  • Job knowledge: defining a term, explaining a procedure or demonstrating a skill
  • Willingness to comply with the job requirements

In case of behaviour event interviews (BEI), the objective is to get a very detailed behavioural description of how a person goes about doing her/his work. The purpose is to get behind what people say they do, to know what they really do. As each situation is narrated by the interviewee, the focus is on what the situation was, who was involved, what the interviewee did/said/wanted to accomplish, and what the outcome was. Thus, a BEI is essentially an unstructured interview that focuses on asking the interviewee about specific incidents that reflect behaviours, thoughts and actions that she/he has shown in actual situations.

Leaderless group discussions (LGD)  This consists of a group of four to six participants who are given a problem to solve, and are instructed to arrive at a group decision within a specified period of time. Generally, real-life problems are given to the group. While various roles may or may not be assigned to the group, no one is designated as the chairperson. When assigned roles, leaderless group discussions (LGDs) simulate decision-making meetings in which resources have to be divided equitably. LGDs with no role assigned would be similar to ad hoc committees formed in organizations for specific purposes, for example, evaluating the marketing strategy, studying a particular issue or problem that the company is facing, and so on.

In-basket techniques  An in-basket test is another type of simulation exercise. The in-basket or in-tray test represents day-to-day decision-making situations that a manager is likely to face. The in-basket contains a variety of materials in the form of memos, correspondence, telephone messages, notes, requests, and so on for the participant. The contents are designed after a thorough job analysis, both in terms of duties handled and competencies required. The participant is then asked to deal with each of them within a limited period of time, stating her/his reaction in writing as far as possible. Based on the participant’s reaction, her/his general activity level, problem analysis skill, planning and organizing skill, time management, delegation, concern for priorities, and so on can be assessed.

Management games/simulation exercises  In case of management games or simulation exercises, again a real-life situation is simulated for an entire group, for example, running a manufacturing operation, stock-trading and running a large multidivisional organization. While the degree of complexity varies in these games, the common denominator is the relatively unstructured nature of interactions among the participants, and the variety of actions that can be taken by all participants. As the complex game unfolds, it often reveals other exercises such as LGDs, role plays and problem analysis. Often a computer programme is used to generate information and simulate the game. Participants are not allowed direct access to the computer, but a person acts as a mediator between the group and the computer. The mediator is essentially a neutral observer, who performs the role of providing any information that the participant groups ask for and introducing various environmental factors, such as the entry of a competitor, recession, and so on as part of the simulation.

The interactive nature of the business game provides opportunities to assess dimensions such as strategic planning, team work, team skills, leadership and analytical ability. A great deal of expertise is required to run this game and assessor-training also needs to be very extensive.

Role plays  Role playing is a method of adopting roles from real life, other than those being played by the person concerned, and understanding the dynamics of the role. It can be described as a ‘method of studying the nature of certain roles by acting out its concrete details in a contrived situation that permits better and more objective observation’ (Pareek and Rao 1981). Role playing can be used as an evaluation technique, as it helps provide insights into various processes of human relations and into a person’s attitudes and behaviour in a particular role. Certain dimensions that can be evaluated with the help of role play are conflict management, leadership skills, group problem-solving, team skills, verbal and non-verbal communication, interpersonal skills, flexibility and motivational style, depending on the type of situation used.

Role playing is a particularly effective technique in assessment centres, because it minimizes the distortion of real-life situations, and, at the same time, helps magnify the situation to focus on certain aspects. Even for developmental purposes, giving feedback to a person is relatively easier as the person is able to accept the feedback without any threat to her/his ego and hence without becoming defensive.

Presentations  Individual presentations are extensively used in assessment centres. Presentations could relate to business vision, various organizational issues, case studies, and so on.

360° Feedback as an Instrument in Assessment Centres

360° feedback can be used as a tool for assessment in the assessment centre methodology. This is a feedback mechanism where an assessee is provided feedback on all the people she/he interacts with at work, that is, her/his boss, peers, subordinates and external customers. Feedback can be sought on various managerial and behavioural dimensions. The multi-rater feedback can then be compiled to prepare a profile of the assessee. Such a profile highlights the following:

  • How well she/he is performing various managerial roles
  • Other strengths and areas that need improvement:
    • As perceived by herself/himself
    • As perceived by others.

On the basis of this feedback, the assessee can prepare an action plan to improve her/his managerial effectiveness, and make a positive impact at the work place.

The various benefits of using 360° feedback are:

  • It is more objective and not much affected by individual biases.
  • It is a high-involvement and participative method.
  • It enables better planning of performance.
  • It provides an opportunity to improve the quality of inputs and service to internal customers.
  • It is a developmental tool that helps discover unknown and blind spots.
  • It provides scope to generate new ideas.

Assessors: selection and training

The assessment staff usually consists of managers who are one to three levels above the position for which people are being assessed. One could also take the help of psychologists, but the latter are generally preferred at high levels in the organization or when the job has a general management dimension. However, it is always better to train the organization’s senior managers as assessors for the assessment centre. This is because they have a better idea of the job and the competencies it demands. They also enjoy more credibility and their evaluations are generally more acceptable.

The relationship between the assessors and participants also needs to be considered while selecting assessors. If assessors are the line managers of the participant population, one needs to be careful to avoid a situation where a line manager finds herself/himself directly assessing a member of her/his own staff. This will prevent assessment errors arising from previous knowledge and perceptions of the participant, and may alleviate unnecessary additional pressure for the participant.

An ideal assessor to participant ratio is 1:2, but this ratio may face constraints related to resources and other practical considerations.

Role and skills

The role of assessors can be summarized as follows:

  1. To collect and record data on the performance and views of the participants during the assessment.
  2. To collate and interpret information about the abilities of the participants.
  3. To provide participants with feedback and assistance in their formulation of development action plans (in case of diagnostic assessment centres or development centres)

Assessment decisions about the performance of participants are based on observation and recorded evidence, so the accuracy of the data produced in an assessment centre depends heavily on the skills of the assessors. At the very least, all assessors require analytical skills, which can be broken down into four elements:

  • Observation: the ability to observe the behaviour of participants as they complete various activities
  • Recording: making notes of behaviour that constitutes the evidence of performance and ability, and is used for later analysis
  • Classification: classifying observed and recorded behaviour against the appropriate competencies
  • Evaluation: evaluating the performance of participants in each area of the competence used, by evaluating the evidence and giving it a numerical rating

In addition to the analytical assessment skills, effective assessors also should have good communication skills, specifically, empathy, listening, questioning and interpersonal skills. A third dimension—that of personal qualities—is also necessary. This includes integrity, the ability maintain confidentiality of data, show open-mindedness, be non-judgmental, and exhibit managerial professionalism and credibility based on experience.

Assessor training

A typical assessor training programme focuses on the following:

  • Competency framework familiarization
  • Training on interviewing techniques
  • Group process observation skills training

Thornton and Byham (1982) have listed certain basic principles that need to be adhered to in the assessment centre process which,‘… when applied systematically … lead[s] to accuracy of assessment and prediction of managerial performance’:

  • Assessment should be based on clearly defined dimensions of managerial behaviour.
  • Multiple assessment techniques should be used.
  • A variety of job-sampling techniques should be used.
  • Assessors should know what it takes to succeed. They should be thoroughly familiar with the job and organization, and, if possible, have experience in the job.
  • Assessors should be thoroughly trained in assessment centre procedures.
  • Behavioural data should be observed, recorded and communicated among members of the assessor team.
  • Group discussion processes should be used to integrate observations, rate dimensions and make predictions.
  • The assessment process should be separated into stages that delay the formation of general impressions, evaluations, overall ratings and final predictions.
  • Assessees should be evaluated against a clearly understood norm—not against each other.
  • Prediction of managerial success must be judgemental.

Assessment centres in India

I attempted the first assessment centre in India in 1974, for selecting project leaders for an entrepreneurship development programme in Gujarat. This was briefly mentioned in a 1975 article entitled ‘Role Set Based Assessment Centre Approach to Personnel Selection’ (Rao 1975). Subsequently, efforts were made to introduce assessment centres in L&T (Pareek and Rao 1975, 1998). L&T intended to use them for the purpose of promotion. L&T did a lot of work on job profiling, but never got to the stage where an assessment centre could be developed for potential appraisals. Crompton Greaves tried to use an assessment centre approach for selecting their general managers internally. Once again, this was a one-time effort and was not repeated subsequently. This endeavour of the early 1980s has been described elsewhere by Susan Varghese (Varghese 1985). An attempt was later made to introduce assessment centres in Ballarpur Industries (BILT) by Dr Anil Dixit with the help of the Behavioural Science Centre. However, this did not take off as expected because of resistance from line managers and a change of HR leadership.

It is only after liberalization in the 1990s that the interest in assessment centres has been renewed. Many organizations have begun setting up their own assessment centres. This is a natural response to the need for competent people to man strategic positions.

It is estimated that at least over a dozen Indian companies have established assessment centres and many others are exploring the possibility. The latter companies include the RPG Group, Escorts, TISCO, the Aditya Birla Group, Eicher, Cadburys, Castrol (India), Glaxo, Grindwell Norton, ONGC, Mahindra & Mahindra, SAIL, Siemens, Wipro, Wockhardt and J&J. Other fifty-odd organizations are in the process of establishing assessment centres. Different organizations have initiated assessment centres for different purposes, such as recruitment, selection, placement, promotion, career development, employee recognition and fast growth, performance appraisal, succession planning, development needs like the identification of training needs and high potential managers, and creation of a pool of managerial talent and multifunctional managers who would be available across the business group.

Generally, the competencies to be measured are determined by each organization using methods such as job analysis, managerial aptitude profile surveys, identifying competencies in the star performers, and so on. A variety of assessment techniques such as in-baskets, business simulations, questionnaires, group discussions, role plays, interviews, case studies and individual presentations are used in Indian organizations. While all organizations feel the need to test the reliability and validity of the tools used, many of them do not actually test them. Both internal and external assessors are used for evaluation. Assessor training is done either through in-house training programmes, or with the help of external institutions like the Academy of HRD (Hyderabad) and SHL (UK). Some Indian organizations have also sought assistance from organizations abroad that use assessment centres, such as GE, Sun Microsystems, AT&T, Nortel, Cisco Systems and Motorola. Certain eligibility criteria are laid down for employees by assessment centres, such as minimum years of experience with the organization, a proven track record and educational qualifications. After attending the assessment centre, participants are given feedback, counselling and other developmental inputs as already explained.

There are certain issues that presently persist in Indian organizations with respect to assessment centres, such as:

  • Complexity of implementation
  • Clear behavioural description of competencies
  • Availability of assessors
  • Assessor training
  • Inter-rater reliability
  • Appropriateness of selection tools
  • Validity of exercises
  • Organizational commitment in terms of time and resources
  • Involvement of line managers
  • Feedback to participants
  • Data security

Individual and Organizational Assessment Centre (IOAC)

With the rapid development of organization-wide strategies of planned growth and development, there has emerged a strong need for diagnosis and assessment not just of individuals but also of entire social units, primarily formal work groups, departments and entire organizations. An integrated approach that deals with both individual and organizational assessment—termed the individual and organizational assessment centre (IOAC)—has been developed by the Academy of HRD (an institution of the National HRD Network). IOAC is a comprehensive technique that uses multiple methods of assessment to evaluate both individual and organizational effectiveness. While it incorporates the principles and methods of traditional assessment centres, it has a much broader utility and application. Since the IOAC focuses on individuals, teams and organizational assessment, it needs to be derived from organizational strategy and be well integrated with various HR systems such as career planning, training, promotion, and so on. The centre also plays a vital role by assessing the various properties of the organization, such as its culture, climate, employee profiles and attitudes. While there is sufficient research supporting the validity of the various methods of assessment used in IOAC, there are numerous other benefits. IOAC can contribute valuable information to a large number of functions, such as organizational placement, compensation, training, appraisal, and so forth, in ways that support the objectives of the organization. IOAC can create the need for self-development among people, while satisfying their need for a more objective and accurate appraisal. It makes people aware of the need to take personal responsibility for one’s own development. IOAC helps in clarifying the organization’s expectations of people in terms of competency requirements for various jobs and positions. It provides more accurate and credible information and facilitates a joint approach to career planning in which the employees and the organization can collaborate and make plans. The centre also increases the involvement of line managers in the selection, promotion and placement systems, thereby making career and performance management systems more credible. In summary, IOAC can be utilized as a strategic tool for promoting a culture of performance in the organization.

The IOAC project can be classified into four stages, namely, planning, training, implementing and improving.

  1. Planning stage: The organization has to ask critical questions about the nature and purpose of IOAC at this stage. Setting up a steering committee with representation from the top management is necessary. The steering committee has to select the assessors from different functions, who can also serve as members of the design team responsible for designing the IOAC.
  2. Training stage: During this stage the selected members of the design team and assessors are trained by the Academy of Human Resource Development (AHRD) faculty on the IOAC procedure, methods and philosophy.
  3. Implementation stage: At this stage, the design team actually conducts a role analysis of the respective departments to identify the critical attributes required for each role. The results of each role analysis are documented and shared with all. The design team also does a SWOT analysis to identify the organizational requirements. Based on the results of this analysis, the members meet to design situational exercises as well as to select the appropriate tests and survey instruments. Finally, members run an individual assessment and an organizational assessment on a trial basis with the help of facilitators from AHRD.
  4. Improving stage: At this stage, the team makes changes based on each assessment experience to improve methods and tools. It is desirable that it also conducts a utility and validity analysis after running the centre for six months. The responsibility for collecting the data required for validation will be with the design team members. However, AHRD does the data analysis to establish the validity and utility of the centre. By this stage, the in-company IOAC becomes a stable and a regular affair. AHRD involvement is totally terminated by this stage.

Assessment centres: Current status

In the recent past, a few organizations have expressed an interest in establishing assessment centres. Corporations need competent managers in all their strategic roles and positions for the following reasons:

  1. To become more competitive as they are increasingly required to compete with multinationals and locals with better organizational designs, technology, more competent people and rationalized organizational structures
  2. To prepare more numbers of middle and senior level managers for senior and top level positions that could give the organizations a strategic advantage
  3. To fill vacancies in the top and senior levels due to retirement and resignation
  4. The pressure to do business more effectively and efficiently through fewer but more competent people and rationalized structures
  5. Increased pressure to perform and benchmark themselves according to international standards in terms of per employee productivity and contribution.

Under these conditions there is no substitute for having competent managers to handle strategic roles and contribute continuously to organizations. Seniority must be replaced by competence and merit.

Suggested Methodology for Assessment Centres in Indian Firms

As already explained in the‘Introduction’, every organization needs to review its HRD philosophy and promotion policies, rationalize its structures, align its compensation plans and use assessment centres and other potential appraisal mechanisms.

Choices to be made when establishing assessment centres

There are a number of choices to be made when setting up assessment centres. These deal with the groups to be covered, methods to be used, objectives to be focused upon, strategies to be used for constructing the assessment centres, and so on. Some of the questions an organization faces are:

  • Should it be an assessment centre, a development centre or an IOAC?
  • Should the focus be on development, or objective evaluation for promotions, or building continuous in-house assessment and capacity-building at various levels?
  • Should it cover all levels or only some levels? (top, middle, junior or new recruits)
  • What levels will give the organization a strategic advantage?
  • How sophisticated should the centre be?
  • What sort of budget would be feasible, and what is the most cost-effective way of operating such a centre?
  • Should all methods be used or only some of the most appropriate methods?

Objectives

The following are the possible objectives for setting up an assessment centre:

  • Immediate objectives:
    • To fill some of the positions in the immediate future and to make sure that competent people are selected to man these positions
    • To boost the competencies of some or all critical groups of managers by providing them insights into their competencies and competency gaps, and simultaneously providing competence development opportunities
  • Long-term objectives:
    • To create a system of competency assessment and promote a competency culture that would keep the organization competitive and world-class.
    • To build competencies of individuals with a view to creating more efficient and effective employees, teams and units
    • To minimize or reduce biases in assessment, and ensure the best fit of employees with their job profiles.
    • To ensure that the right people are identified and placed for the right jobs, and employee potential is identified, developed and utilized to the fullest extent possible in the organization

Establishing an assessment centre is an investment. It will give adequate returns if it is seen as a long-term investment, is carefully planned and patiently executed. Ambitious short-term aims such as using a centre merely for an objective employee assessment is likely to lead to problems and issues rather than beneficial returns. Sometimes, organizations may be guided by a prevailing sense of frustration. Such frustration may be due to past mistakes or current mismatches or “incompetencies”. While assessment centres cannot undo past mistakes, they could do much in terms of creating a competency culture.

An assessment centre helps to make completely objective decisions. Assessment centres certainly make employee promotions and placement decisions more scientific. Their principal contribution is to create a competency culture rather than mere best-fit decisions. Continuous competency-building is a loftier aim than short-term promotion decisions.

Starting population and coverage

Starting from the top management levels is the ideal thing to do because every competent person placed in a top-level position can make a lot of difference to the organization. It is most important to have competent managers at the top level. Top management promotions as designed about a decade ago by SBI and the banking sector are a good example. All the chief general managers, managing directors and deputy managing directors of SBI and its associates are selected through an improvised assessment centre that uses essentially two methods for promotion decisions: leaderless group discussions and individual interaction sessions. These are done over one to two days of assessment centre activities. The assessors consist of experts from the field of management; the secretary of banking; the deputy governor, RBI; one nominated board member; and the chairperson and managing director. Past performance appraisals are considered as inputs.

Some organizations, however, may have difficulties doing this. The top management is not always very receptive to this method. Sometimes, top-level managers are either insecure or consider it improper that an assessment centre’s inputs should be respected more than their seniority. Also, some argue that by the time a person reaches a senior position, she/he has already been tested and has passed through several interviews, and, therefore, it is unfair and even unnecessary for her/him to be subjected to such assessment. Often the top management does not realize that it is not being subjected to assessment, but actually the senior managers who are to occupy the top management positions. Clarifying some of these points may help some organizations to move ahead. One of the major difficulties in starting at the top is to develop appropriate tests and methods for the competencies identified by the top management. Another associated problem is finding suitable assessors for them.

An alternative is to start with the middle management. This means that the assessment centre is started for middle-level positions that are being considered for senior managers. The senior levels for which the potential appraisal decisions are to be made may deal with deputy general managers, additional general managers and general managers (GMs). In some cases these may include senior managers. There may be more than one level. There could be some differences in task structures. For example, heads of departments and GMs require two different sets of competencies. They could both be classified as senior managers. The GMs may not exactly fit into the top management category. Dealing with the middle management is generally easier than assessing the top management. As the top management gets involved as assessors and with respect to other decisions, assessment centres for middle-level managers indirectly helps train the top management.

A third alternative is to start with the junior management, that is, to begin assessing junior managers for their competency in handling middle-level positions. This is the easiest to do and also yields long-term gains. It amounts to building talent for the future.

Whatever the starting point, at some point, all strategic roles may need to be covered if a competency-based culture or performance culture is to be established.

An assessment centre for high-fliers

A few organizations have shown interest in identifying high-fliers who can be put on a fast track. Assessment centres can be a good way to identify them. However, given the Indian business environment, it is recommended that such fast-tracking should be used sparingly and the scope to join the fast track should be open all the time. Even if a person does not make it in the first test, she/he should be allowed more chances.

Even those absorbed into the fast track should be put through an assessment centre each time they are to be considered for promotion. It is recommended that such fast tracks should be started at senior levels and for young managers.

Structuring the assessment centre

Assessment centres requires the following facilities:

  • An assessment centre hall that can accommodate about 15–20 participants at a time, with individual workstation arrangements and special arrangements to seat assessors; other arrangements like video recording
  • Two interview rooms with recording facilities
  • Personal computers for all participants to work on various exercises
  • A data bank of tests, questionnaires and other test items, including inaskets, management games, simulations, and so on.
  • Video-audio recording and playing facilities

Most firms have excellent training facilities and training centres. Assessment centres can be located in these centres whenever appropriate. However, they have to be treated independently of the training centre or function. Potential appraisal and assessment centre efforts should be headed by one of the top people (such as director). The director (HR) is best suited to handle this. She/he could be assisted by a general manager who would play a major role in establishing the centre with the help of external consultants. A task force or a steering committee could be constituted to guide and monitor this effort. This could be called the‘potential development task force’.

Methodological choices

There are many methods available for use in assessment centres. Some of them are more objective, but also more time-consuming and expensive. While multiple assessments lead to objectivity, using too many methods would also increase sophistication, costs and time investments. A balance is required. Table 7.1 gives some details of the advantages and disadvantages of these methods in different organizational contexts. Appropriate choices should be made.

Hurconomics of Assessment and Development Centres (ADCs)

The hurconomics of ADCs can be assessed in terms of their costs and returns.

ROI on ADCs

How much does it cost to conduct an ADC? Normally, in an ADC, one trained assessor is needed for every two to three assessees. A one-day ADC means one day of assessment and the second day for feedback. Most ADCs for senior managers are of two days’ duration and the feedback is received on the third day. The following are the approximate costs of an ADC:

  1. Cost of tools (normal tool rates from standard vendors from the UK, the USA or Europe = $100 per tool per candidate. So, 12 candidates × 4 tools × $100 =$4800 (around 2 lakh).
  2. Assessor time = 3 days × 4 assessors × 10,000 to 50,000 = 1,20,000 to 6,00,000 (1.2 lakh to 6 lakh).
  3. Participants’ time (assuming that their CTC ranges from 10 lakh to 50 lakh): 2 days × 12 assessees × 4,000 to 20,000 = 96,000 to 4,80,000 (1 lakh to 5 lakh; If CTC is 1 crore it may go up to 10 lakh).
  4. Centre costs (physical infrastructure, including the hotel or guest house expenses for assessors and assesses): 12 assessees + 4 assessors + 2 administrative staff × 2 days × 1,000 = 36,000 (non-residential); 12 assessees + 4 assessors + 2 administrative staff × 2 days × 5,000 (residential) = 1,80,000 (1.8 lakh).
  5. Miscellaneous costs like travel and other support material for 18 people = 18 × 5,000 = 90,000.

 

TABLE 7.1 Mix of methodologies for top, senior and middle managers

 

Total cost = 2,00,000 + 1,20,000 (6,00,000) + 96,000 ( 4,80,000) + 36,000 (96,000) + 90,000 = 5,42,000 to 14,66,000 (5.42 lakh to 14.66 lakh).

Thus, the cost of an ADC for 12 people may range from 5 lakh to 15 lakh.

The question to ask is: What are you getting out of the ADC? To answer this question, one could resort to an indirect answer: What is the cost of having the wrong person recruited or promoted to the position for which the ADC is being conducted? What if the position is that of a manager with a CTC of 10 lakh versus that of a GM or VP with a CTC of 50 lakh?

If it is the manufacturing sector, the opportunity cost of the manager is likely to be 1 crore and if it is an IT company it will be 40 lakh. For a VP, the opportunity cost will be 5 crore and for an IT company it will be 4 crore.

If you are to recruit a new person for this role you will incur a minimum expenditure of 20 per cent of the CTC, that is, 2 lakh to 10 lakh simply as a fee to the recruitment agency and, on top of that, the time lost by you, your HR staff and line manager.

If you recruit the wrong person to this position and six months later discover that she/he is not competent or wants leaves the company, the opportunity loss is 50 lakh to 2.5 crore in a manufacturing set-up.

If you find the right person, you are enhancing the chances of the person giving you a return on your investment through her/his contribution.

In case the person is an internal promotee by an ADC, you are ensuring that the competencies of all the 12 people are developed, and at least each one of them is made aware of her/his areas of strength and areas needing improvement. Even if each of them works on one strong quality or one weak quality what is the gain to the company?

What is the gain to the company if, after an ADC, three out of the 12 candidates strive to become better decision-makers or better communicators or learn to articulate a vision for their department better than before?

HR people should become sensitive to such gains and be able to convince their top management of the utility of such interventions. 5 lakh is not a large amount with which to discover the talent of 12 of your senior managers. There are likely to be some performance improvements as a result of ADCs.

Low-cost ADCs

In case you decide to design low-cost and high-return ADCs, you need to pose the question differently. On average, how much are you willing to invest as managerial time per candidate to assess her/his potential? Suppose your answer is 20 hours. Then it is possible to design a 10-hour ADC with additional 10-hour inputs from assessors.

If competencies are assessed, methodological choices can be made. My experience has shown certain tools to posses particular potential.

Achievement tests are useful. These test functional knowledge, analytical ability, strategic thinking, communication skills, presentation skills, creativity (convergent and divergent thinking tests), business acumen, business knowledge and aptitude. These tests are easy to administer, less time-consuming and more objective. Unfortunately their potential is the least utilized.

Interviews based on behaviour and demonstrated competencies are the next best. They are time-consuming but the time can be limited to an hour per candidate at junior levels and two hours at senior levels. With an appropriately designed biographic form, it is useful to get the best out of such interviews. The assessors should be experts in behaviour interviewing. Internal resources could be used as long as they are two levels above the candidate’s hierarchical position, and have no prior knowledge of the candidate.

Presentation exercises, case discussions, case analysis and leaderless group discussions are the next best. They are less time-consuming and yield reasonably objective data. Competency mapping should precede all such assessments.

In-baskets combined with interviews give good insights about the candidate’s approach to issues, decisions and problems.

They need to be appropriately designed. With a combination of these four techniques, it is possible to minimize the time of assessors as well as assesses and bring down costs.

On-line tests are becoming more common. If one is willing to meet the development costs, the benefits are innumerable.

References

Pareek, Udai and Rao, T.V., 1975 and 1998, Pioneering Human Resources Development: The L&T System, Ahmedabad: Academy of Human Resources Development.

Rao, T. V., 1975, ‘Role Set Based Assessment Centre Approach to Personnel Selection’, ASCI Journal of Management, 5(1), pp. 10–16.

Task Force on Assessment Standards, 1979, Standards and Ethical Considerations for Assessment Centre Operations, 1979, New Orleans: Task Force on Assessment Centres Standards.

Thornton III, G. C. and Byham, W. C., 1982, Assessment Centres and Managerial Performance, New York: Academic Press.

Thornton III, G. C., 1992, Assessment Centres in Human Resource Management, New York: Addison-Wesley.

Verghese, Susan, 1985,‘Crompton Greaves Experience’, in T. V. Rao and Pereira, D. F. Recent Experiences in HRD, New Delhi: Oxford & IBH.

Pareek, Udai and Rao, T. V. (1981) Developing Motivation Through Experiencing, New Delhi: Oxford & IBH, 1981