Case Study - The High Cost of NOT using Pre-Hire Assessments in Hospitality

Seven managers selected for a demonstration program in early January were obviously excited as the training began. The hotels they managed had been selected because of relatively high turnover. These managers were among the best in the company, and they expected to get good results using the proven HiringSmart program for the properties they managed. The managers left the training with positive attitudes, eagerly anticipating the process.

Over the next three months, spot checks by telephone found the managers to be “pleased with the system.” They reported “seeing it begin to work.”

However, an audit of the results at the end of May told a different story. Some of the properties had used pre-hire assessments throughout the five months, but not for every hire. Three locations had entirely fallen out of the habit by late March, and one property had never even started using the assessments.

Reasons, explanations and excuses were plentiful. But ultimately it became clear: In a system where local managers enjoyed a great deal of autonomy, and no clear line of authority existed between corporate HR and the properties, managers would only ensure that the program was applied if they believed it was in their self-interest. Changes in habit or process required buy-in at a deep level by each manager.

Determined to convince both property managers and senior management that the assessment process would work (and hoping to make it a mandatory part of the company’s hiring), the Corporate HR department looked to the data for support. What they found should prove very interesting to senior management with profitability a major goal.

Where the assessments had been used in hiring, the new hire failures (they quit or were fired) were reduced by 36 percent by the end of May. Further analysis showed that at the locations not involved in the study, 51 percent of those hired between January 1 and May 31 had failed by the end of May. For the study locations, those hired without use of the assessments had exactly the same failure rate – 51 percent. For those hired using assessments as part of the hiring process, however, the failure rate was only 32 percent. These numbers probably underestimate the potential effects of the process since a larger share of the people hired with assessments were hired early in the year and had more time to fail. Still, a turnover reduction of more than one third represents a substantial opportunity to reduce costs.

System wide, with a calculated cost-per-failure of $3,500 or more, and an annual failure rate of over 141 percent among their 400 employees, the ability to reduce failures by 36 percent is a $714,000 per year proposition. Based on the costs of the proposed program, that number reflects a 1700 percent return on investment!

As the program continues over time, the expected improvement in the employee pool, and gains in customer service and productivity should provide additional improvements in profitability.