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Budgeting for Assessments
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One of the most difficult aspects of using assessment lies in gaining an understanding of the various pricing models associated with it. This understanding is critical when it comes time to budget for an assessment program. Even if your organization has experience using assessment, budgeting can be a very difficult issue.
Budgeting for assessment can be hard because of the following:
The remainder of this article provides some basic information that I hope will shed a bit of light on assessment-related budgetary concerns. What this article does not do is provide specific benchmarking information that will allow you to magically understand how much you should budget for using assessment.
Consumers of assessment understand some general rules about assessment and pricing:
With the above in mind, there are three key areas of best practices related to the use of assessment impact pricing models.
There are two key factors related to set up: doing the work required to understand key job requirements and technology system configuration.
The work needed to verify that the assessment content is job-related and the set up of the technology system are often inexorably linked, such that there is one “set up fee” that includes all the work needed to get the assessment process up and running. For example, using an off-the-shelf test from a vendor with a modern, robust candidate management system is getting to be less and less expensive. Set-up fees for this type of package usually range from $1,500 to $5,000.
As the complexity of the implementation goes up, these fees can often rise sharply. First is the level of technology integration required, with deeper implementation requiring much deeper pockets. Second is the level of due diligence related to understanding key job requirements.
If a full job analysis is required, you may pay north of $10,000, depending on the scope of the initiative. Conversely, using an off-the-shelf tool can be extremely cheap. Just remember that you get what you pay for and that taking the time to do a more in-depth job analysis can have tremendous value because it contributes to legal defensibility and also serves as a critical foundation for a variety of other HR activities.
This area involves charging for the test content or for the use of a system that collects a variety of different types of predictive data from applicants. There are a variety of different models related to test/system usage. Understanding them is critical when working on setting assessment budget.
The most common models include:
This involves the work done to “close the loop” and evaluate the effectiveness of the assessment used. Unfortunately, this area is often not a concern for many organizations because they do not take the time to do this type of work.
This may be one of the biggest mistakes when it comes to budgeting, because evaluating assessment ROI is the only way to demonstrate that the use of assessment is paying for itself.
Such demonstrations are critical for understanding budgeting and for providing the ability to obtain more budget for the continued usage of assessment.
There are two types of charges that relate to evaluating assessment:
In general, the trend in assessment is moving toward commoditization. Prices are dropping because assessment is getting easier to use off the shelf and is becoming more tightly integrated into other staffing-related products such as job boards and applicant tracking systems. This is good news for many folks because it also supports availability of quality assessment to the middle market, where it was not previously affordable.
In days of yore, assessment came in two basic flavors: direct off-the-shelf or highly customized. In both cases, the revenue was related to the professional services required to ensure the assessment was properly configured, created, and evaluated.
In most cases, each local assessment implementation was customized and was costly due to the sheer volume of work that was required to set up, maintain, and evaluate the assessment process. The good news is that technology has allowed us to move toward models that involve fewer professional services while allowing for increasingly higher quality assessment content.
While reduction in professional services can be a good thing, just remember that you get what you pay for and that using a system directly off the shelf is likely to yield less-accurate results than creating an optimized assessment.
One of the other new trends that helps to bridge the gap between off the shelf and customized assessment is what I call “light customization.” This involves the use of standard “blocks” of content that can be stacked to help optimize the relevance of assessment without requiring the development of fully customized content.
I feel that this offers the best compromise between optimal configuration and quick implementation. This type of system is usually much cheaper than the old model for assessment while often delivering almost equal results.
The final answer of how much one should budget for the use of assessment is, “it depends.” I wish I could provide some hard-and-fast guidelines, but costs for assessments depend on a multitude of factors including how much customization you need; the level of technology required; the level of job you are assessing for; the applicant volume you plan to experience; and the level of follow-up evaluation you plan to use.
Do not skip out on the proper evaluation of assessment, even if it does add extra cost. Evaluation is critical because this is a central part of understanding ROI and provides the data needed to build a business case for the use of assessment tools.
Once you have implemented and evaluated an assessment process, you will have a much better starting point for the development of next year’s budget. Live and learn.