ROI for Employee Selection Procedures

A recent study examined the utility of selection procedures for most white-collar jobs in the federal government. This study is set apart from standard utility analyses (where the value of a selection system is determined by estimations from statistical equations) by the fact that the researchers measured the outcomes of different selection procedures in an empirical manner, meaning that control groups were used. The purpose of this research was to determine the actual value of selecting a new cohort of employees using measures of cognitive ability (a.k.a. general mental ability, g, or IQ) versus selecting employees using evaluations of education and experience.

The researchers found that the employees that were selected using cognitive ability measures had a 9.7% increase in output over the traditionally selected employees. In other words, employees that were hired using measures of cognitive ability were 9.7% more productive on average than those that were hired using evaluations of education and experience alone. Also, this increase in employee output, or productivity, led to a 9% decrease in new hiring (this figure should be close to the above figure because if your workforce is almost 10% more productive, then only 90% as many employees would need to be hired in comparison). For the federal government, this 9% decrease led to a payroll savings of $272 million dollars for each year the new cohort of employees remained in their jobs. This savings comes from not having to hire more employees to get the same amount of work completed. This research shows the incredible value of using cognitive ability, as well as how that value translates to business-related outcomes such as ROI.

Overall, using cognitive ability (the same results, if not better, would be found using a combination of cognitive ability and other valid measures such as structured interviews) as a tool for employee selection leads to the following benefits:

• More work can be done by less people (reduced payroll costs)
• Less new hires are needed (reduced new-hire costs like training, selection, and recruitment)
• Improved performance and productivity with existing workforce (reduction of “poor performers”)

– Scontrino-Powell