One of the most complex and fragmented parts of the talent management market is the world of employee assessments. Today two of the industry's largest companies in this space, Previsor and SHL Group, announced a merger, creating the largest global player in this very large, very fragmented market.
There are many types of employee assessments, including pre-hire assessments, leadership assessments, skills and personality assessments, and many forms of behavioral assessments. Each assessment "instrument" is typically developed by a scientist (this is the domain of IO Psychology) who validates that the assessment actually does create valid, repeatable, defensible results.
Most large companies purchase and use many forms of assessment for hiring, promotion, and leadership – and each assessment typically costs $10-100 or more per use. The assessment instruments are usually packaged as products, but are usually sold in groups with consulting added. An assessment firm will typically consult with a company to understand a particular job role's profile, specific competency requirements, behavioral and cultural needs, and other requirements and then customize the assessment for these requirements.
There are also many "types" of assessments: behavioral, skills-based, personality-based, simulation-based, adaptive, and very high-value face to face assessments. Because there is no "perfect way" to find the right person for any particular job, there is a huge history of scientific research which tries to validate the use of various assessment models for different job roles (e.g. sales, IT, general management, customer service, etc.).
Because this whole problem is quite complex, the market is highly fragmented with hundreds of companies. The largest players in the market include Previsor (which is the combination of ePredix, PDRI, Qwiz, Brainbench, TalentTechnologies, and several smaller companies), SHL Group (a highly science-based assessment company which is most widely known in Europe and Australia), Kenexa, Hogan Assessments, DDI, PDI, Profiles International, Vangent, and many other companies. Each of these companies has its own market niches, but few ever reach revenues greater than $75M.
We estimate that the entire market for such tools and consulting to be somewhere between $1.5-2 Billion, but more than 1/3 of this market includes custom consulting – since so many large companies purchase customized assessments for their own particular business needs.
Dynamics of the Assessment Market:
Assessments and IO Psychology is really like a secret weapon for HR departments. When well understood and used, assessments can double or triple the quality of hire for high-volume hiring processes. When used well for leadership and executive roles, assessments can have a huge impact on the hit-rate of leadership development. But since the market is somewhat scientific and arcane, many companies still do not fully understand how and why to use assessments – so there is still a lot of "snake oil" out there.
For example, in our soon-to-be published High-Impact Talent Acquisition research, we found that 64% of companies have some form of pre-hire assessment and around 32% use some form of behavioral interviewing or assessment. Yet only 25% have any well-defined job competencies for each particular role. This means companies are buying "off the shelf" assessments for many positions where they have not necessarily tailored the assessment for the competencies they need. Ultimately an assessment which fits well has a huge ROI, so one of the benefits of working with a company like Previsor is that they have hundreds of off-the-shelf assessments tailored to different roles and types of roles (e.g. there are many different types of sales positions).
In addition, since most companies are now global (and globalization is now one of the biggest trends in HR and talent acquisition), buying assessments can be quite difficult. How does an HR manager know, for example, if a well designed pre-hire assessment for a US-based retail employee would even work for a candidate in China? Companies like Procter & Gamble spend millions of dollars on their own research to understand global competencies for their particular roles. Addressing global roles is one of the big value propositions of the SHL-Previsor merger – together these companies have more than 1,000 validated assessments to sell – and many have been designed to meet the needs of employees in 50 different countries.
How this Changes the Assessment Market:
Here are a few details:
- Together the combined companies now have over $200M in revenues, more than 850 employees, and do business in more than 50 countries.
- The company will continue to do business as SHLPrevisor in the US and SHL outside of the US, building on their establish brands.
- The combined company remains private, but is highly profitable, with profits well over 20%.
- The combined company now has a global platform for business and product, enabling it to sell to global companies around the world.
- The company is clearly the biggest assessment provider in the market (approximately 55% of its revenues come from assessments, 30% from consulting, and the remainder from other sources) and claim its position as #1 in the world.
With a global platform like this, Previsor-SHL Group can probably outflank many of the smaller providers when selling to big, global companies. If the companies execute their merger well, they can call on the Senior VP of HR or Talent Acquisition at any large corporation and easily sell an end-to-end assessment solution which provides "people science" tools across the entire spectrum of talent management. This is not to say that there are not other players: companies like Kenexa, DDI, PDI, Hogan, Profiles, and others all have very high value solutions of their own – and will likely still compete for large engagements in highly strategic roles.
Assessments Are More Strategic Every Day
It is also important to understand that with the growing awareness of integrated talent management and the new talent management systems becoming implemented in many companies, the role of assessments is growing. Some of the big questions companies ask (e.g. Do we have people with the right potential to grow into the roles we need next year? How do we create a more "solutions oriented" sales force? What are the characteristics of our best leaders or customer service agents and how can we hire more of them?) are really problems of "people science."
A solution provider like Previsor-SHL has the ability to address some of these bigger organizational issues, and if the company executes well, can become a close strategic partner to its global clients.
We are just now completing a study of the prehire assessment market and look forward to giving you more information on this fast-growing space. This merger changes the whole makeup of the assessment market, and will hopefully create a "gorilla" which can advance the science and thinking of assessment in a very strategic way.