With 75% of an advisory firm's expenses having something to do with its people, many owners use personality tests and other assessments to help them hire the right people.
Dana Anspach, founder of Sensible Money in Scottsdale, Ariz., uses the Kolbe Corp. tests with her staff. She recently relied on it to come to the conclusion that the person she had been interviewing for a new marketing position wasn't the right fit.
“We were looking for someone who could get quickly to the bottom of an issue, and Kolbe showed she wasn't it,” she said. “She was detail-oriented just like the rest of us.”
Ms. Anspach also uses the Kolbe Index, which measures one's natural approach to problem solving, to help figure out which of her employees are best suited for different tasks.
“It's been valuable for helping us get along,” said Ms. Anspach, who received special training in 2011 to be able to understand and use the results the $40 Kolbe online test produces.
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Kolbe is a popular assessment tool with advisers — a few others include the Dominance, Influence, Steadiness, Conscientiousness (DISC) test; the 16 Personality Factor Questionnaire; and the Caliper Profile. Corporate America has long been a fan of the Myers-Briggs Type Indicator, which was created to interpret how people see the world and make decisions.
The DISC tool helps measure the way people communicate and can match which types of people will work well with individuals of different styles, for instance distinguishing introverts and extroverts. The 16PF Questionnaire aims to identify personal qualities that influence the way a person works in different settings, such as pegging someone as a risk-taker. The Caliper Profile measures 25 or more personality traits that relate to how individuals perform on the job, such as identifying someone who might get bogged down in the details and may need hard deadlines.
CHARISMA COUNTS
Lew Zeidner, chief operating officer of Accredited Investors Inc. in Edina, Minn., said with candidate interviews, “a lot is simply charisma.” So the firm uses psychological testing to delve into how people will do work.
“When you ask someone, 'Are you a good team player?' no one ever says no,” Mr. Zeidner said.
Accredited Investors' 37 employees, including 22 advisers, have a strong group culture the firm wants to retain, he said, so it has worked with an industrial psychologist to build tests that target how people work best on problem solving — in a group or individually.
People costs — everything from compensation and training to payroll taxes — made up about 75% of the expenses at an average advisory firm last year, according to the
InvestmentNews 2014 Financial Performance Study of Advisory Firms.
Twice Accredited Investors decided not to heed red flags the testing found and hired the individuals anyway. Both times, that ended up being the wrong decision and those employees were dismissed within a year.
“The wrong hire is really costly and it goes beyond the financial costs,” Mr. Zeidner said. “It has a cost in terms of client relationships, because every time you change a contact person there's a trust bump.”
Caleb Brown, founder of New Planner Recruiting, said his firm uses both DISC and Kolbe assessments to evaluate whether young planners will be a match for open positions at different advisory firms. He also uses the tests to help firms figure out the best roles for the people they already have.
RIGHT PERSON, WRONG SEAT
“For firms trying to grow by 20% a year, the biggest lever they can pull is their people,” Mr. Brown said. “Lots of times people think that they have the right people, but they're not in the right seats.”
Mr. Brown, though, cautions against depending solely on these tools for hiring decisions.
“They are not the gospel,” he said, noting “there's an art” to interpreting and understanding the results.
In fact, Bob Corlett, founder of recruiting firm Staffing Advisors, said managers should consider their gut feeling about someone when hiring, and should recognize that test results aren't a guarantee the person will work out.
“They're not a 'get out of jail free' card,” he said. “What worries me is when they're used to take away the manager's responsibility for hiring.”
All the different personality and psychological tests also require that someone at the firm be able to understand what those assessments do and don't tell about a candidate, he said.
“Few smaller employers take the time to validate the instrument and take the time to learn about it,” Mr. Corlett said.
