Can you quantify the savings associated per employee per year when using a psychological assessment? The answer is yes!
The science behind this calculation is known as Utility Analysis and has been around for a long time. In the late 1940s,
Brogden came up with a definitive model for calculating the financial beneficial or value as a result of using assessment.
In its most simple terms, utility analysis refers to how much money a company can save if they use a valid and reliable method in
their selection process, versus none (Potter, 2022). If an employer selects a worker which is more productive than another, they
will subsequently make more money. So, by using a selection method which is valid and reliable, the productive worker is more likely
to be selected, and more money is to be made.
Brogden's Utility Analysis model (1946) provides a quantified method for estimating the cost saving per employee per year when valid
assessment techniques are implemented. The graph below shows the difference in worker productivity expressed as the number of Standard
Deviations (SD) from the Mean. Research has shown that the difference between a poor (-1SD) and good (+1SD) worker is 40% of the salary.
The net result of this research is a rather scary looking equation into which we can plug various values and come up with our projected saving. The equation uses:
- r = validity coefficient of the assessment
- SDy = 40% of the worker’s salary
- Z = mean standard score of successful candidate(s) (performance on the assessment)
- C = selection costs per applicant
- P = proportion of applicants selected (from pool assessed)
$$U_x_y={(r_x_y * SD_y * Z)} - {C/P}$$
Worked example of applying utility analysis:
If we look at this in relation to an average (Band 3, 0-1 years’ experience) nurse’s position with a salary of £20,330:
Using the BeTalent Strengths Questionnaire which has a predictive validity of 0.33, we can calculate the amount the hiring
organisation could save if they strive to recruit a “good” candidate which is 1SD above the mean, and has 5 candidates with
a cost of £45 per person.
Using the equation: (r x SDy x Z) – (C/P) this would suggest that using the BeTalent Strengths Questionnaire would result in
a saving of: (0.33 x £8132 x 1) – (£45 / 0.2) = £2458.56
Therefore, compared to a method which has no validity (e.g., graphology), the company will save £2458.56 per employee per
year by using the BeTalent Strengths Questionnaire.
Fortunately, we've done the hard work so you don't have to. We conducted predictive validity analyses using our products to predict
the future performance of individuals who answered them. Then for each product, we took the highest correlation from each scale and averaged them.
All you need to do is to select which Zircon product you are interested in and enter a base salary level.
We'll then calculate the projected savings for both a 'Good' and 'Excellent' candidate.
Just enter your values in the fields below: