Case Study: ASSESSMENT INCORPORATED
Leading sports retail chain reduces turnover rate by almost 60 percent.
Overview of the Problem
A major sporting goods retailer was experiencing experienced problems with turnover of its sales associates. High levels of turnover were disruptive to the organization’s ability to maintain adequate levels of product knowledge amongst its staff. This lack of product knowledge significantly hurt sales of more sophisticated running shoes and exercise equipment, 2 items that accounted for a majority of the company’s revenue. The company felt that there were a variety of reasons for the levels of turnover they were experiencing with a their failure to hire persons who believed in the company’s mission and who were able to work effectively under the pressure of a 100% commission sales structure.
Description of the Solution
Assessment Inc. created a selection system aimed at helping this client to effectively reduce turnover and stabilize their sales force with individuals who believed in the corporate mission and were willing and able to perform under the company’s compensation structure. This was accomplished via a 3 pronged approach.
First of all Assessment Inc. worked with the retailed to develop a recruiting solution that focused on the company’s brand and its values. Assessment Inc. helped our client to strategically place this recruitment message in front of persons who shared these same values.
Secondly, Assessment Inc. created a new selection system for our client. This system included a variety of assessments aimed at helping to identify applicants who shared the values on which our client’s business was built. Secondly, this selection system evaluated each applicant’s ability to work within a pay structure that does not provide any base salary and in which they must rely on entrepreneurialism and resilience.
Finally, Assessment Inc. created a simulation in which applicants who passed the above assessments were given specifications for several models of running shoes and then were required to help a variety of different customers to choose the best shoe for their needs. This simulation tested ability to quickly learn product specifications and match them to customer needs as well as ability to provide high levels of customer service during the sales process.
Discussion of the Result
After the above program had been in place for one year, Assessment Inc. helped our client to evaluate the impact of our 3 pronged solution on the company’s bottom line. First we examined reductions in overall turnover amongst sales associates based on use of our assessments. Specifically, overall turnover in 2000 (prior to using Assessment Inc.) was compared to the 12 month period between July 2001 and August 2002 (after our assessments were implemented). As can be seen in Figure 1, there was a dramatic reduction in overall annual turnover following the implementation of our solutions, with turnover dropping from 74% in 2000 to 37.5% in 2001-2002. It is clear that those hired in 2001-2002 who were in the Red, not recommend area (or bottom 25th percentile) had a significantly higher turnover rate than those who scored in the Yellow (25-50th percentile) and Green, recommend (top 50th percentile) areas of the Tenure scale (see Figure 2).
In addition, Assessment Inc.’s selection system was shown to have a long-term impact on employee retention. As outlined in Figure 3, of employees who were hired using our assessments and remained with the company for 1 year or more, 69.2% scored in the Recommend area of the Tenure scale, compared to 26.9% and 3.8% in the Caution and Not Recommend areas, respectively.
As you can see, the annual turnover rate dropped 36.5% after the client began
using the hiring system created by Assessment Inc. The real meaning
of these figures comes in an analysis of the annual cost benefit of using
our assessment battery to hire retail associates. Our results are based
on the following assumptions were used: (a) The client hired 3000 hourly
employees in 2000; (b) the use of the Assessment Inc battery reduced turnover
by 36.5% in 2001-2002; and (c) it costs the client $3000 to hire and fully
train each employee [note: assumptions (a) and (c) were based on estimates
by the company's Human Resources department]. Based on these assumptions,
the 2001-2002 turnover-related savings that resulted from using our selection
system was $3,285,000 (or 3000 hires x 36.5% x $3000).
The analysis provides consistent and solid support that Assessment Inc.’s
solutions are effective predictors of key business outcomes for sales associates
at this retail sporting goods chain.
What Did We Learn?
The value of Assessment Inc.’s initiatives goes well beyond the immediate financial impact noted above. We helped our client to learn that effective hiring is more then just using one specific test. Instead, the way to really add value is to fully understand the objectives that will impact the bottom line and to create a system that is aimed at fulfilling these objectives. In the present case, achieving reduced turnover meant understanding the values that drive successful sales persons within the client company and setting up selection systems that will attract persons with these same values. Secondly, understanding the workstyles of applicants relative to those required for success allowed our client to systematically hire applicants who shared these values, thus greatly increasing the fit between persons and the job in question.