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Hire Right

When Eric Brotman started the Brotman Financial Group, a small advisory firm in Timonium, Md., three years ago, he required job applicants to take personality tests. After spending about a $1,000 on the exams, including a consultant to administer and evaluate them, he learned the hard way just how valuable they are. Three of the five employees he has hired did well on the test he gave them and have

When Eric Brotman started the Brotman Financial Group, a small advisory firm in Timonium, Md., three years ago, he required job applicants to take personality tests. After spending about a $1,000 on the exams, including a consultant to administer and evaluate them, he learned the hard way just how valuable they are. Three of the five employees he has hired did well on the test he gave them and have worked out splendidly. The other two did poorly and soon left his business.

“All I can say is that the two times I ignored the results it made my life more difficult,” says the 35-year old certified financial planner.

Hiring employees is a tough task no matter how much help an employer has. But, say advocates of testing, which is a $400 million business, finding good people who'll stay can be made a lot easier using a personality test. Unicru, a test publisher in Beaverton, Ore., says using its test reduces turnover by 24 percent. The results were similar to other findings. The Harvard Business Review has published the results of Caliper, a test publisher based in Princeton, N.J., which found that 28 percent of test-evaluated employees left their jobs compared to 57 percent of nontest-taking employees.

Replacing all those extra employees will, according to experts, cost employers 25 percent to 150 percent of the departing employees pay.

“It's too expensive to hire the wrong person,” says David Hanson, an advisor who heads First Harbor Group in Houston and spends about $300 a year on assessments for hiring. “Anything we can do to help us build the right team is worth it.”

It's no wonder, then, that small advisors like Hanson and Brotman, as well as much bigger firms are using them. One larger company to do so is Securities America Financial in Omaha, Neb. Two years ago it introduced a new staffing process for its 1,700 representatives, requiring all candidates being seriously considered for jobs to take two personality assessments. In all, according to a 2005 survey of independent advisory firms conducted by the Financial Planning Association, SEI Advisor Network and Moss Adams, a majority of firms indicated for the first time that they used some form of assessment for hiring purposes. By comparison, 30 percent of all U.S. corporations use personality tests.

Nor are independents the only ones using the tests. According to Herb Greenberg, CEO of Caliper, a growing number of other types of financial service companies have also started using these tests for hiring, including Oppenheimer, Pershing and Lord Abbett.

At the same time, financial advisors need to be careful about the tests they use and how they use them. While it's unclear exactly how many companies produce tests, according to some estimates, there are hundreds of them — all unregulated. What's more, a company can open itself up to discrimination charges if it uses the assessments incorrectly.

Tests, Tests and More Tests

Assessments generally fall into a few categories. Some measure more-general traits, including qualities like decisiveness, introversion and assertiveness. The DiSC, which Brotman uses, is one example. It measures what are called behavioral preferences by categorizing test-takers along the four dimensions its acronym represent: Dominance, Influence, Steadiness, and Conscientiousness. For example, a high-scoring “D” is a hard driver, direct and assertive.

Other tests, like Profile XT, the Predictive Index and Viewpoint, are more specifically geared to behavior on the job, measuring work styles or traits as they are exhibited at work and providing what's called “job matching.” That generally means the characteristics of a job and the qualities of the ideal candidate for the position (attentiveness to detail, say, or ability to work in a group) are defined. Then, the assessment provider designs a benchmark for measuring and scoring responses to questions geared to the answers of the optimal employee, ensuring a better match between job requirements and candidates' answers.

Assessments, which generally are offered online or on paper, also differ according to how detailed the final analysis is. Some provide little more than simple scores, while others generate lengthy personality profiles. In addition, some companies provide phone consultation with psychologists who can discuss reports in more depth. Or they may have training for people in the firm on how to evaluate results. Costs also vary widely, from as little as $15 or so for a relatively uncomplicated, off-the-shelf assessment to hundreds, or even thousands, of dollars for a more comprehensive test evaluated by a psychologist or consultant.

What makes advisors look into using assessments in the first place? In some cases, it's because they've had bad luck with their hiring. Others, like Brotman, were told about them by their consultant. More frequently, however, they simply heard about them being done at other firms.

Improving the Process

Richard Moran, an advisor in Torrance, Calif., with six employees, for example, is typical. About six years ago, after talking to several other advisors about their success using various assessments, he decided to give it a shot.

“I'm always curious about ways to do things better,” he says. He investigated a few possibilities and decided on an assessment from Caliper, which cost him $125 for each test, because he liked the relatively lengthy reports they provided.

Now, for example, when hiring people to fill jobs completing trades, he looks for candidates who score high for ability to act quickly as well as possessing an attention to detail — a combination of traits he hadn't thought about before. According to Moran, the move has paid off handsomely in stepped-up productivity and fewer mistakes.

“We used to have a lot of documents put through that weren't 100 percent completed. Then, they'd come back and slow things down,” he says. “That doesn't happen anymore.”

Moran had a pretty easy time pinpointing the right assessment. With hundreds of possibilities to choose from, however, it isn't usually that simple. The first step is deciding what traits are important to look for in a candidate. If it's general behavioral style, then DiSC might be the right choice. On the other hand, if the test administrator is looking for how a candidate might perform specific job duties, then something on the order of the Profile XT could be a better choice.

For the assessment novice, it's probably a good idea to hire help in the assessment-selection process. Many firms also use outside experts to advise them on how best to interpret results. Brotman, for example, pays his business consultant, who is also his coach, $175 an hour to go over assessment responses with him, and also to discuss results with employees.

Not every candidate gets tested. Moran, for example, starts with 40 resumes, then asks three finalists to take an assessment, which usually takes about two hours to complete.

There are legal considerations to consider, though, in giving personality tests. By law, these tests can't have a “disparate impact” on protected classes of people, i.e., specific ethnic groups. The Equal Employment Opportunity Commission standard, according to legal experts, is the “four-fifths rule”: Each protected class must pass an assessment at a rate that is at least 80 percent of the rate scored by nonprotected classes.

Employers also have to be sure tests are suitable for hiring purposes. In a recent case that is applicable to hiring situations, according to Joseph Schmitt, a partner and employment specialist with Halleland Lewis Nilan & Johnson in Minneapolis, an employee sued his employer when he was rejected for a promotion after an assessment usually used to test for abnormal personality traits showed that the individual might be emotionally unstable. One helpful step: Check whether the assessments have been validated by at least 20 to 30 studies, thus proving they're applicable to the same population you're interested in.

In addition, some experts feel that certain assessments should not be used for hiring. That's especially true for the Myers-Briggs test, since it wasn't designed to be a hiring tool and doesn't include the kind of validity studies some other tests do.

“It should not be used for selection purposes,” says Dee Newson, assessment manager for Raymond James & Associates in St. Petersburg, Fla.

Ultimately, however, even the best assessments shouldn't play too important a role in the hiring process. “It's one component of the decision,” says Kirk Hulett, senior vice president of strategy and practice management for Securities America. “You need to weigh the results of the assessment along with those of the interview and the candidate's background and experience.”


An increasing number of advisors are also using personality assessments to help with the task of managing employees — everything from team building to pinpointing individual employees' strengths and weaknesses.

“In the past two years, we've seen much more prevalent use of assessments for staff development,” says Rebecca Pomering, a principal of Moss Adams, a Seattle-based accounting and consulting firm specializing in financial advisors.

When it comes to employee management, reps generally employ assessments in a few ways. In some cases, they survey their own work styles and personalities, use that information to see how their approaches mesh — or clash — with their employees' and figure out how to interact in a more effective way.

Robert Bolen is a case in point. For several years, he found himself regularly having to repeat instructions to his two staff members and wondering why they weren't working on something he'd asked them to do. Then a year ago, Bolen, who heads Bolen Asset Management in Franklin, Tenn., gave his employees a personality assessment he'd recently taken called the Kolbe, which evaluated test-takers for their work styles. (Cost: $35 a test). It turned out that while he was a Quick Start, someone who made decisions quickly, they were both Fact Finders, methodical types who needed a lot of information before acting. And, he'd simply been communicating with them in the wrong way.

Almost immediately, Bolen changed his approach, trying to be more patient and offering better explanations when giving instructions. The result: fewer mistakes and a more pleasant working environment.

Says Bolen: “It's definitely been a productivity enhancer.”

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