2nd August 2011

Evidence of ROI from Occupational Psychology Interventions

Organisations tell us that they want to see return on investment and to recognise the benefits they accrue from working with occupational psychologists. We have examined the impact on business results in five key areas. The most obvious benefits are qualitative e.g. increased motivation; however there are also considerable quantifiable benefits to profitability and bottom line outcomes from the work conducted by occupational psychologists. In this article, we explore some of the evidence for quantifiable benefits gained through Assessing Talent; Building Leadership; Coaching for Performance; Uniting Teams and Developing Positive Organisational Climate.

Assessing Talent

Most of us will be aware of the rigorous 12 week assessment process Lord Alan Sugar puts his prospective employees through before awarding the successful candidate a job. By employing the services of occupational psychologists, employers could get a robust assessment in one day. Businesses employ the services of occupational psychologists in the area of assessing talent in order to ensure they are selecting the best candidates for available posts. Tests are used to measure the ‘maximum performance’ an individual can reach under standard conditions, thus helping predict future job performance.

There is a myriad of evidence highlighting the benefits of using psychometric testing during assessment. This includes advantages such as attracting the best staff; making selection more objective; and helping to build teams, by selecting the best mix of individuals. Most large organisations are aware of this and use psychometric assessment as part of their recruitment processes; however some organisations may shy away from the idea of spending money on recruitment. Yet if they were aware of the potential costs of not using occupational psychologists in this area, they are likely to change their minds.

Utility Analysis is a process used to calculate the effectiveness of various management techniques and efficiencies in monetary terms. This has shown Systematic Staff Selection to be one of the most cost effective techniques.

Calculations are complex and unique to specific organisational factors. It has been estimated that the use of systematic selection techniques increases productivity of selected individuals, in financial terms, by an average of 40% of their salary. This varies from 20% for operational roles up to over 60% for senior roles. Therefore, if 10 middle managers, on £50K for example, are selected via an assessment centre they are likely to yield a financial benefit to the organisation of £250K per annum (i.e.: 50% of £50K x 10)

Naturally there are costs to weigh against this (the initial costs of selection, the variable costs associated with increased turnover, financial inflation over the period, the corporation tax to be paid on increased profit) but this remains a compelling argument.

Indeed, at Impact Consulting Psychologists, we have had much support from clients who recognise the financial benefits of using our services, and we are not alone in this. Kimberly-Clark found the cost of recruiting the wrong graduate would be equivalent to £37,000 per individual , furthermore Hogrefe reported that Nottingham City Transport saved £154,350 when they adopted a standardized testing process and used psychometric tests to assess candidate suitability for the role of bus driver.

Critical Thinking is one area of competence which is well recognised regarding its importance in a work context.

With globalisation and the fast pace of business, employees at all levels are having to deal with increasingly complex information. They have to make effective and quick decisions. Good decisions require paying attention to the most pertinent information, asking the right questions, and recognizing the difference between factual information and assumptions; this is critical thinking. Pearson Group found that training 25 managers or professionals in critical thinking would yield $720,000 a year.

Occupational Psychologists worth their salt will stay up to date with any research or development in the area of assessment. The psychometrics they use should be relevant to whatever job they are asked to help recruit for. There is no doubt that this gives companies who use occupational psychologists in this area a competitive edge.

Building Leadership

Occupational Psychologists work to bring out the very best in organisational leaders.
Many leaders realise that investment in leadership training and development is an investment in the future of an organisation.

Many of the benefits associated with leadership development include factors such as an increase in staff morale, better ability to develop a clear vision for the organisation, increased creativity etc. Many studies have also found quantifiable results.

Hiscox, a leading specialist insurance company provided a leadership development programme and demonstrated a 693 % return on investment. Benefits included more open and frequent communication, improved performance management and honest conversations with staff. There were also positive behavioural and cultural changes.

Leadership development efforts at a Fortune 100 high technology company provided clear qualitative benefits and in quantitative terms, the median value per participant was a ROI of 150%

The evidence strengthens the argument that leadership development and learning transfer is at the heart of future competitiveness for all organisations.

Coaching for Performance

Occupational Psychologists provide coaching on a one-on-one or team basis, providing an invaluable source of support and development for clients. We work within clear codes of practice including the code of practice of the British Psychological Society, the Association for Coaching, and the Society for Coaching Psychology, to ensure that clients are provided with a high quality professional service, offering reassurance for clients.

There is an increasing amount of evidence to highlight the benefits clients experience from coaching. In a study conducted by the Association for Coaching (2004), 58 % of people who invested in coaching reported better people management and 53% of people reported increased job motivation. While 48% of coachees stated improved work life balance and 42% reported improved job motivation.

In the same study, the Association for Coaching found that 38% of coach purchasers reported that coaching re-engages individuals and leads to increased productivity.

The World Health Organisation (WHO) has estimated that depression will be the number one health problem by 2020. Indeed, £17 billion per annum is lost to business through sick leave and absenteeism. Good coaching would help prevent these shocking outcomes.

Uniting Teams

Occupational Psychologists help enhance team effectiveness through a combination of diagnostic and developmental approaches. They analyse how teams work together strategically and operationally and often use development tools to promote understanding and appreciation of similarity, difference and personal styles.

Research in relation to the use of personality assessment in a team development context highlights the benefits to teams. Some reported benefits include improved communication, better conflict management and more effective problem solving and decision making. Indeed effective communication between team members is associated with better mental health within the team.

Members of teams that work well together experience lower levels of stress; are more effective and innovative, therefore more productive, which creates more profit in organisations.

Braham pointed to a recent study her firm had conducted on work they’d done with American Express. This showed that the blended sales team training programme led to increased sales among staff, equating to a 1599 % return on the cost of the course

Developing Positive Organisational Climate

Occupational Psychologists work with organisations to help develop their internal capacity to be as effective as possible. Current economic pressures are creating previously unseen levels of anxiety within business, creating highly stressful working environments. Research demonstrates that impaired work efficacy associated with mental health problems costs £15.1 billion a year, which is almost twice the estimated annual cost of absenteeism (£8.4 billion)

Stressful working environments encourage negative behaviours and invite excessive managerial control. Indeed, within the NHS, The Department of Health has estimated that the cost of bullying is over £325 million per year
Occupational Psychologists can help reverse the ‘downward spiral’ of stress and negative behaviour in order to create a positive environment for developing sustainable approaches to performance management.

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