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The Value of Assessment: Prediction Validity and Business Impact

This newly compiled research summary (drawn from 17 research studies, across 142 organizations) illustrates that DDI assessments are unparalleled in producing the intelligence and business outcomes that organizations seek. DDI simulations and job-related assessments are highly predictive of not only job performance, but also performance improvement—and ultimately lead to a series of high-value outcomes that positively impact both individuals and businesses. At DDI, we have:
  • Conducted thousands of leadership job analyses representing almost every leader role—across all industries—from frontline supervisor to CEO; and
  • Assessed hundreds of thousands of leaders from around the globe, including more than 25,000 executives, and conducted many studies on the predictive validity and business impact of our efforts.

Warning: Not all assessment systems are created equally.

High-impact assessment is not only the tool itself, but also its application and whether it achieves the business objectives your organization is facing.

Assessment systems are most effective when they have:

  • Validity—Reliable, predictive tools are employed.
  • Clear Purpose and Communication—Assessment purpose (i.e., development versus selection) is clearly established, and outputs are used in a disciplined, consistent manner.
  • Positive Participant Experience—Participants encounter a process that draws them in and makes them feel steadily more engaged and excited by both the process and the outputs.
  • Great Feedback—Individuals and management receive feedback that adds new insight and improves decision making about development and deployment of talent.
  • A Focus on Key Actions—The assessment uses precise methods for evaluating the specific behaviors for key actions associated with each competency.
  • Management Support—Managers and executives are given tools and clear guidance in order to play a valuable, continual role in the development and engagement of participants.
  • Business Analytics—Detailed diagnostics are created to enable foresight into emerging business scenarios and reduce risk by evaluating leadership capabilities with respect to critical business needs.
  • Sustained Development—Clear development plans enable the application of learning; great plans become infectious throughout teams and organizations.
  • A Strong Connection to Business Context—Assessment must move beyond evaluation of competencies to generate intelligence on each leader’s readiness to drive business priorities (e.g., innovation, global market growth).

THE IMPACT OF DDI LEADERSHIP AND EXECUTIVE ASSESSMENTS

Defining a fair, accurate, and efficient process is the entry cost for implementing leadership assessment systems. The impact of these processes is measured in four areas: predicting performance, informing, and engaging participants, catalyzing development, and driving business impact.

1. PREDICT LEADER PERFORMANCE AND GROWTH

Organizations use assessment to make crucial promotion or selection decisions. They look to assessment to be able to predict performance and success.

Leadership Performance—The statistical validity of DDI assessments across organizations and industries is consistently in the highest range of predictive power.* DDI assessments are powerful predictors of leadership performance.

Performance Improvement—Across three organizations and more than 1,100 executives, high scorers improved performance significantly more than low scorers.

Leadership Potential—Across four studies and more than 1,200 leaders and executives, results show significant relationships between assessment scores and potential ratings.

Career Progress—Across studies, high scorers are consistently more likely to be promoted.

2. INFORM & ENGAGE PARTICIPANTS

Assessments build positive energy and inspire individuals to look closely at their leadership capabilities and take an active role in their own personal development and growth.

Across 43 organizations and more than 400 leaders, 98% report that the assessment improved their view of their organization.

Standard DDI post-assessment surveys (N=5000+) show that participants:
91% Feel signifcantly more valued in the organization after completing the assessment.
85% Would recommend their organization to other leaders.
90% Find the process valuable for development.
90% Learn new things about themselves based on the assessment.
78% Are more likely to stay with the organization after completing the assessment.

CATALYZE DEVELOPMENT ACTION

Assessment acts as a catalyst for improving leadership performance and accelerating growth.

Skill Improvements: Across six organizations and more than 1,200 executives, assessment participants made significant improvements in areas including:

  • Interpersonal Skills
  • Leading Others
  • Managing Personality Shortcomings
  • Promotability

Positive Impact from Development: In a study of 119 executives across 22 organizations, those who make the most developmental progress are significantly more likely to receive higher performance ratings, larger compensation increases, and promotions.

Routine DDI Client Impact Research (post-assessment) Demonstrates:

Receptivity to Feedback: Executive sponsors report that 98% of executive participants have demonstrated increased receptivity to feedback.

Development Energy: Among executive sponsors, 89% report that the assessment process added positive energy to the development process in their organizations, and 87% say that post-assessment activities receive strong management support.

Better Diagnostics: 92% of managers report that the process helped them better understand leaders’ strengths and development opportunities.

Development Action: Participants write development plans (95%); schedule development meetings with managers (95%) and mentors (95%); and create high-impact development plans (75%).

4. DRIVE SUSTAINED BUSINESS IMPACT

Organizations realize positive business impact through assessment.

Routine DDI Client Impact Research (post-assessment) Demonstrates:

Business Intelligence: 87% of executive sponsors report that they gained business-relevant insights about the assessed leaders, and 75% report making better business decisions about talent.

Objectivity of Talent Evaluations: 82% of executive sponsors view the process as increasing the objectivity of the organization’s talent decisions.

DDI Client ROI examples:

Global Defense Contractor: Achieved at least two ready now leaders for 80% of all critical positions; significant increase in diversity in senior leadership; an increase in the successful internal promotion rate (from 30 to 70%).

Automotive Dealer: 100% improvement in financial performance and significantly higher customer satisfaction among high scorers in the assessment process.

Automotive Rental: High performers in the assessment process had higher Net Promoter customer satisfaction scores; higher year-over-year productivity growth; and in locations where managers showed above average improvements in leadership behaviors, transactions (28%), productivity (18%), and revenue (26%) all increased.

Global Chemicals Manufacturer: 90% of leaders participating in the assessment process made successful transitions into roles with greater responsibility.

Large Health System: 450% ROI in assessment-based developmental achievements conducted as outcomes of the process.

Large Retailer: Store managers identified as “ready” outperformed “not ready” district managers by nearly $13 million per year and realized 10% higher overall sales.

5. GROW FINANCIAL VALUE

Organizations with leaders who perform well in assessments show stronger bottom-line financial gains.

In two separate studies, including 2,961 assessment participants at senior executive and CEO levels from 62 companies, significant relationships were found between assessment results and financial performance.

Profitability: Organizations whose executives scored higher in decision making and execution-focused competencies (e.g., Operational Decision Making, Driving Execution, Leading Change) showed significantly higher levels of net profit and return on assets than their industry competitors.

Revenue Growth: Performance in three competency clusters associated with executive communication, mobilizing people, and influencing with diplomacy was significantly predictive of revenue growth over a five-year period.

Summary

DDI assessments create business value right down to the bottom line. But be warned, it is not simply about using predictive tools. It is the effective application of those tools that results in positive reactions, sustained development action, and faster growth that produces the most powerful gains. Science must meet practice to arrive at approaches that work.

Building assessment systems that have business impact requires a balanced approach and a research program that considers all of the outcome areas shown above. DDI assessment center implementations have been shown to predict performance, engage participants, and catalyze development action.

These outcomes pave the way for DDI clients to realize what they set out to achieve at the launch of their assessment initiatives: business impact and financial growth.

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