The Economic Benefits of the ESQ2
Of all the available selection tools, psychological tests have been found to be one of the most valid and cost effective means for identifying the most suitable applicants for the job (Schmidt & Hunter, 1998). Indeed, when properly conducted, selection testing can save companies hundreds of thousands of dollars each year. For example, Hunter and Schmidt (1984), using extremely conservative assumptions, calculated that the U.S. gross national product could be increased between $80 and $100 billion (in 1981 dollars) if selection testing were introduced throughout the workplace. Clearly, an organization can realize substantial benefits through the use of the ESQ2. As the figure below indicates, 86% of the counterproductive workers failed the ESQ2 by obtaining a score of 50 or lower.
The following are the key counterproductive behaviors that can cost an organization hundreds of thousands of dollars annually:
Theft
On average, 44% of all inventory shrinkage is due to employee theft. Employees tend to steal significantly more than shoplifters. In fact, 20% to 40% of employees in the retail, manufacturing, supermarket, restaurant, and healthcare industries report a history of theft.
How the ESQ2 can help
- 83% of people who engaged in any theft failed the ESQ2’s theft scale
- People who failed the ESQ2’s theft scale reported stealing nearly 8 times more often than people who passed the ESQ2’s theft scale
Absenteeism
There are several costs associated with absenteeism in the workforce, including loss of productivity, customer dissatisfaction and costs associated with a temporary replacement. Some individuals claim to be sick when they simply feel like a vacation day. Chronic absenteeism is prevalent in today's society. In 1998 about 4% of full-time workers in the United States, and more than 6% of full-time workers in Canada were absent from work (CCH Unscheduled Absence Survey; Statistics Canada).
How the ESQ2 can help
- People failing the ESQ2’s Unauthorized Sick Days scale falsely call in sick 5 times more often than people passing the scale
- The ESQ2 successfully identified 90% of people who falsely call in sick several times a year
Alcohol & Substance Abuse
The US Board of Labor estimated the total cost of employee substance abuse falls between $75 billion to $100 billion per year. The prevalence of on the job alcohol and drug abuse is alarmingly high. Ten percent of employees consume more than five glasses of alcohol in a workday, and approximately 70% of drug users are employed (Williams-Harold, 1998).
How the ESQ2 can help
- Compared to people who passed the ESQ2’s alcohol and substance abuse scale, people who failed it reported engaging in twice as many problematic substance-related behaviors (e.g., coming to work with a hangover, using substances on the job)
- Over 70% of people who had just a single incident per year were identified by the ESQ2; nearly 94% who had a problem more than once were identified; 100% of multiple offenders were identified
Safety Violations
The Insurance Research Council estimates that over 3 million employees experience on-the-job injuries per year. While insurance protects businesses from the costs associated with medical bills, Safety Services of CyperComp state that the costs not covered by insurance are four to five times higher. The following are examples of how these uninsured costs indirectly affect the productivity and profits of an organization:
- employee wages (e.g. wages to the injured employee and their replacement);
- repairing damaged equipment or products;
- time invested in investigating the accident and filling out paperwork;
- overtime by other employees and supervisors to compensate for the loss of production;
- the costs associated with a possible lawsuit (e.g. lawyer's fees, settlement, bad publicity).
How the ESQ2 can help
- People who failed the ESQ2’s safety scale reported nearly 12 times as many safety violations compared to people who passed the scale
- 84% of people who reported breaking any safety violations would have failed the ESQ2’s safety scale
Turnover & Job Satisfaction
A high turnover rate will result in unnecessary loss of both resources and reputation. In an example from the healthcare industry (a hospital with 200 beds employing 1200 persons with a turnover rate of 2% per month) Cascio (2000) calculated that the cost of replacing 288 employees per year was $2,888,295.52 when all sources of costs were analyzed. The common sources of these costs are:
- Recruitment of replacements
- Lost productivity associated with the interim period before a replacement can be placed on the job and the time required for the new worker to get up to speed on the job
- Costs of training, including supervisory and coworker time spent in formal training
How the ESQ2 can help
- People failing the ESQ2’s commitment and job satisfaction scale are more than 3 times more likely to say that they will probably look for a new job in the next year (compared to people who pass the ESQ2’s commitment and job satisfaction scale)
- Highly satisfied employees were nearly twice as likely as unsatisfied ones to pass the ESQ2’s commitment and job satisfaction scale
Loafing
A dollar value can be placed on the cost of loafing to the employer using utility analysis (Cascio, 2000). First, it is assumed that an employee's total compensation value per hour is $31.20, the average total compensation for all full-time workers in private industry as of March 2009 according to the Bureau of Labor Statistics. Based on this level of compensation, utility analysis indicates that an employee who loafs for approximately 20% of an eight hour shift will cost an employer approximately $32,448 per year. If ten such employees were retained over a 5-year period, the total cost is $1, 622, 400. Stated differently, using the ESQ2 to identify and eliminate potential loafers from an applicant pool can result in substantial cost savings to the employer.
How the ESQ2 can help
- In retail, people who loaf several times a year are less than half as likely as non-loafers to pass the ESQ2
- In a call center, 98% of people who reported loafing several times a year would have failed the ESQ2’s loafing scale, making them 30 times less likely to pass than people who never loaf
Lateness
How the ESQ2 can help
- People failing the ESQ2’s lateness scale report being late over 6 times more often than people passing the scale
- People with a lateness problem (who show up late several times a year) were half as likely to pass the ESQ2’s lateness scale compared to people without that problem
Conclusion
According to the Society of Human Resource Management more than 50% of potential employees misrepresent themselves on their job applications. It is therefore the organization's responsibility to ensure the hiring of productive, dependable employees. The ESQ2 can save an organization both time and money by making their employee selection processes more efficient and effective.
