Two of the most common questions I am asked about online screening tools are: “Who is going to emerge as the financial leader in the online screening and assessment market and what will they do in order to generate their revenue?” and… “What is the size (in dollars) of the online screening and assessment industry?” While I am usually able to answer most questions I am asked with confidence, I always have trouble fielding these two particular questions. I’m not afraid to openly admit that I am unable to even begin to answer the second question. I will leave that headache to a full-time financial analyst. But I do think I can do a pretty good job of answering the first one and this article is where I will make my first public attempt to do so. I’m hoping that my answer to question #1 will help some analyst somewhere to come up with a better answer to question #2, so I can offer a better answer then the ever-unpopular “I don’t know.” Why Is Question #1 Hard To Answer? So who is going to emerge as the leader in the online screening marketplace, and how will they generate revenue? There are several reasons this question is difficult to answer. They include:
- Market fragmentation. The market is very fragmented. Assessment has found a home in many different places, making it hard to view the market as one whole entity. The varied way in which different companies use screening and assessment tools as part of their product offerings makes comparing related revenue like comparing apples to oranges. Assessment is just one product for some companies with many other revenue streams.
- Economic uncertainty. This one pretty much goes without saying. I think we all clearly understand the impact this factor plays on any financial prediction to be made, especially when it comes to staffing-related functions. No one is going to make a dime off of these tools unless there is hiring to be done.
- The embryonic nature of this field. It is important to put the current state of online hiring in perspective. The analogy I like to use is the Wild West. We are still very much in the earliest stages of exploring how screening and assessment will fit into the staffing process. Things are wide open right now, and in my humble opinion, you haven’t seen anything yet. What you see five years from now will probably be pretty amazing, the five years after that will be even more amazing, and five years after that… you get the picture.
- Steep learning curve. This is somewhat related to point #3, but slightly different. One of the reasons that the growth of technology-enabled assessment tools has been so slow is that many people haven’t fully grasped their complexities. These complexities have many facets, including the difficulties associated with understanding legal compliance issues or the psychometrics needed to develop quality assessment tools, the fact that choosing the right assessment tools for a particular job is an art, and the lack of a basic understanding of the value of using scientific tools to make predictions.
- Business-related changes. This point is also related to point #3. As with any other emerging area, the present landscape is constantly shifting as big companies acquire smaller companies in an attempt to build more market share. These types of deals have a huge impact on the bottom line of the companies involved, and the right deal can easily take a small player in the space with high-quality tools from being a mom-and-pop shop to a source of huge amounts of revenue.
- Unwillingness to share. For right now, the main reason why it is hard for me to answer this question is because no one will provide me with the information I need to answer it. In doing the research for our “Buyer’s Guide to Web-Based Screening and Staffing Assessment Systems,” we quickly found out that companies were not willing to share any type of financial information. It was not easy for us to find these answers via independent research because most assessment companies are privately held. In the few that are publicly held, online assessment is usually just one small part of the overall business. It is hard for me to resist the temptation to dub companies with impressive tools as the financial leaders in the space, but in reality I am not sure this is the truth.
Attempting to Answer Question #1 In the interest of maintaining my objective and unbiased stance, I am not going to name any specific names when attempting to answer this question. Instead I am going to talk about what it will take to be a leader in this space moving forward and about some of the things I think will generate the most revenue for assessment-related companies in the future. These are not micro-focused ideas, such as adding a new interview product or creating a partnership with another company. Rather they are macro-focused issues that outline what I feel will be significant trends in the industry. I feel that screening/assessment plays a critical role in all of these trends because it can add value well beyond that of any other type of tool available. This is because the value of scientific measurement and prediction relative to a set of key work-related attributes (i.e., competencies) is the only way to create the technology-enabled decision-making tools needed to recruit, select, and manage a global workforce. Here are some of the areas that will allow assessment vendors to generate the most revenue in the future. End-to-End Solutions The fragmentation in the marketplace should clearly indicate the need for some consolidation. It is often difficult for an assessment company to offer the most effective solution possible when attempting to use their tools in isolation. Rather, it is often the case that the most effective solution requires the stringing together of several different types of tools in order to develop a system in which the whole is greater than the sum of its parts. This requires a strategic, systems-thinking mentality that is not well served by the purchase of fragmented service offerings. The trend will definitely be one in which companies gravitate to a place where they can offer constellations of related services. This may come about via alliances or mergers and acquisitions, or by companies making tools from scratch. But the end result will be several larger companies that see the big picture and are able to offer services to support the ability to deliver the tools their clients need to execute this picture. Assessment plays a critical role in this process because it is the tool that provides users a standardized, validated way to measure critical competencies throughout the entire hiring and employment cycle. The Creation of Career Networks Presently, assessment plays almost no role in the process of sourcing talent. This is a real shame because this is where the volume lies. When it comes to making money off of assessment tools, volume is one of the key factors. I feel that job boards will eventually begin to see the value of assessment tools both, as a value-added service for the job seeker and as a way to help employers source talent more effectively and efficiently. This is a good thing and should represent the first new “killer app” employed by job boards since they began in the mid ’90s. The assessment vendors who are chosen to provide the tools needed to help job boards evolve into career networks will be the real winners in the future. (For more information please see my earlier article on this subject.) Tying Work-Related Assessments to Pop Culture Sound like a crazy notion? Think again. If I have anything to say about it, the future of the entire selection process will be driven by interactive assessment tools that use scientifically proven content to anchor realistic, game-type simulations. This notion presents serious ramifications. We have seen first hand how enticing and challenging games actually give rise to communities of users who share common interests related to the game. There is no reason why a game that actually measures work-related competencies would not have the same appeal. The development of such a game and its deployment into the hiring process (possibly as part of a career network) could be a major windfall for whatever company is willing to take the financial burden of its development. Global Workforce Management In keeping with the discussion of macro trends, global workforce management deserves mention. By global workforce management I am talking about a slate of related services that are tied together by the use of common assessment tools and metrics in order to help organizations continually optimize their workforce. While assessment will certainly play a key role in this process, it is the related idea of using technology to gather metrics about a myriad of aspects related to efficient sourcing, deployment, and the management of an entire workforce (assessment is one of these aspects) that will represent a serious opportunity for revenue generation. One of the biggest obstacles faced in this area is in the mindset of the potential purchasers of these systems. At the present time the value of metrics is only just beginning to gain some traction. Soon enough, the real visionaries will begin to see the same value in workforce-related metrics that other functional areas saw decades ago ó that is, the use of technology-related measurement and feedback systems to help optimize key organizational functions. Once this cultural change has occurred, the demand for assessment will increase greatly ó because without assessment, any effort at global workforce management will be sorely lacking. Back Down to Earth Okay, enough of my pie-in-the-sky rantings and ravings. In the here and now, assessment vendors who offer a wide variety of quality tools, support these tools with a process or methodology that requires their clients to make a commitment to best practices and metrics, and make innovative use of technology should be able to turn a profit. Indeed, there are many vendors who are doing so and are being rewarded quite nicely. Also, it is important for me to note that there is definitely room in the marketplace for vendors of all shapes and sizes to make a go of it. After all, mid-sized and smaller companies need help too. There is enormous potential for profit via the creation of simple tools to help companies in this market segment benefit from effective hiring decisions. In the end, the number-one thing that will ensure profit is a set of good assessment tools, a vision of how to use technology to use these tools in a new and innovative way, and a clear understanding of who will benefit most from the use of these tools. Last Week to Participate in the Online Screening Survey! Rocket-Hire and ERE are currently conducting our second annual “Online Screening and Assessment Usage Survey.” The data we collect from this survey will help to provide members of the ERE community with important data about trends in the usage on online screening and assessment tools. We plan on reporting our findings in an upcoming ERE article. Visit www.rocket-hire.com/survey to take our brief survey and register for a chance to win a free copy of the Rocket-Hire Buyer’s Guide. As always, all results will be kept completely confidential.