Imagine losing half of your employees every year to turnover. For many multifamily companies, that's a stark reality, according to the National Multi Housing Council. Even worse, the relationship was probably doomed from the start. Researchers at Harvard Business School found that more than 75 percent of turnover could be traced back to poor hiring practices.
That's the bad news. The good news? Employers can improve their odds of choosing the right employee by adding personality assessments to their hiring processes. This not only reduces turnover, but increases productivity and improves the bottom line–not to mention keeping some consistency for residents at the property level.
After all, it truly is expensive to hire, and sometimes unfortunately fire, someone. The U.S. Department of Labor estimates that replacing an employee costs an average of 30 percent of the employee's first-year earnings. The actual financial impact, however, includes advertising and recruiting for the position, loss of revenue, and, in some cases, wrongful termination cases.
And then there's the productivity drain. "The new hire who has the hard-skill set to do the job but whose values, mindset, and/or personality do not mesh with existing employees will ultimately create sufficient distraction to divert the attention of superiors, peers, and subordinates," notes Lori Marcoux, president of Seattle-based Extraordinary Learning, an organizational and individual development and coaching firm. "They focus on him or her, not getting their jobs done."
But multifamily companies that use pre-hiring personality evaluation typically have lower than average turnover. For instance, Richmond, Va.-based United Dominion Realty Trust has been doing personality assessments for 10 years and currently reports a company-wide turnover rate of just 34 percent.
Assessment can stabilize even high-churn positions like property management and leasing. AvalonBay Communities has watched turnover at its property-manager level drop from 35 percent in 2004 (just after testing was begun) to 25 percent today.
"Turnover is a combination of multiple factors," says David Alagno, director of employment for AvalonBay, an Alexandria, Va.-based public apartment REIT that owns or holds interest in 160 apartment communities in 10 states and the District of Columbia. "But if you do a better job selecting up front, you'll have a better opportunity to keep those good employees around."
The Missing Link
Psychological testing isn't new. "An early example was Henry Ford, who in 1914 started a Sociological Department which investigated the home life of employees for unacceptable behavior, such as drunkenness," explains attorney Margaret Hart Edwards of San Francisco law firm Littler Mendelson. "The tests became more common when they began to be used extensively by the U.S. military, primarily to identify people unsuited to combat. After World War II, there was a substantial increase in the number and variety of employers in private industry who were using various forms of pre-employment psychological tests."
Personality testing works well because it provides information that's hard to get in the standard hiring process.
"The employment interview and resume review often provide employers with only what applicants want employers to know about them," says Jim Beaty, chief scientist for PreVisor, a Roswell, Ga.-based developer of employee selection technology.
But the most important information is what the employer wants to know about the applicants, such as:
- Is the applicant likely to be committed to the work and the employer, even when the work gets tough?
- Does the applicant view customers as important and valuable or a necessary evil?
- Can the applicant exercise good judgment and make smart decisions?
- Does the candidate work well in teams or possess the ability to lead them?
- Can the applicant be a problem solver and set priorities?
"Many companies have discovered that the key to making a good hiring decision is less based on talents and skills and more on fit," says John Challenger, CEO of employment consulting firm Challenger, Gray & Christmas in Chicago. "For most jobs, there are lots of candidates with backgrounds that would qualify them for the job. Personality assessments allow you to look at the common traits of successful people and test applicants for those."
Baseline assessments come in two forms. The first, best?practice?based profiles, are based on traits and behaviors that are generally accepted as "successful" for particular jobs, such as sales or management. They can be helpful indicators but don't account for differences in corporate culture that can significantly impact actual performance.
The second are organization-specific profiles. These are based on shared traits of employees who are performing well with a particular company. This takes into account the cultural nuances of each enterprise and may be a more accurate indicator of a person's success in a particular corporate environment.
Discover Top Performers
United Dominion, which owns and operates 270 apartment communities in 17 states, works with PeopleAnswers to create "ideal profiles" of current staff members by giving them an assessment test and including performance data from their managers.
"In this data, we see two things: where top performers are similar and how they are different from bottom performers," says Steve Dusenbury, a senior consultant for the Dallas-based developer of Web-based assessment tools. Knowing the shared traits of successful employees allows recruiters to screen for them.
"We used this data to create statistically relevant profiles for our main jobs," says Susan Northcutt, UDRT's director of talent development. "Now we can use it with all candidates except the most entry-level maintenance or service jobs, which have a skills test instead."
Applicants take an online test including questions related to cognition, behavior, and culture. Their scores are rated against the ideal. "This helps raise red flags of whether the person will be a fit or not," Dusenbury notes. "In interviews, this data helps you understand who the person really is. Some people are great interviewees but not good employees, and vice versa. This can help you figure that out."
At many firms, personality assessments are gaining popularity because they're accurate and cost-effective. Of course, tests vary in price, depending on the provider and other factors such as head count, position rank, or quantity of candidates. Some, like PreVisor, charge between $20 and $70 per candidate. Others, such as PeopleAnswers, offer unlimited use at a flat rate based on head count.
And, because personality tests have proven to be very good predictors of performance, many users want to use them exclusively. That's unwise, AvalonBay's Alagno says.
"A lot of your operational people will want you to use the tool to tell you yes or no whether you should hire [someone]," he says. "I tell them this is part of the decision-making process, a data point. It's just an additional layer of screening. It's not going to tell you whether someone can lease apartments, but it will tell you if they want to."
–Margot Carmichael Lester is a freelance writer in Carrboro, N.C.
Resident Files: Pass the Test
Follow these tips to avoid taking testing too far.
Keeping residents happy and units moving requires more than leasing agents and property managers with good office and sales skills.
But in your quest for assessing personality and a genuine desire to make people happy, it's important to be aware of legal issues around testing.
"The boundaries of what psychological testing is legal and what is not are not fully defined," notes Margaret Hart Edwards, an attorney with the Littler Mendelson Law Firm in San Francisco. "Some tests are more risky than others."
To reduce your chance of being sued over a personality test, Edwards recommends the following:
- Carefully examine the purpose, history, and scope of any test contemplated before putting it into use. Do not use a test that goes beyond a precise defensible job-related purpose, or which will exclude persons from employment based on protected disabilities.
- Do not use a test with discriminatory questions. For example, does the test ask questions about religious beliefs, political ideology, or sexuality? It is better to avoid tests that intrude into areas that considered very private, such as dreams, sexuality, and other deeply personal topics.
- If the test appears to be medical, do not administer it to applicants.
- Find out how will the test be scored and who does the scoring. Has the test been validated as an accurate assessment tool for the job in question? Make sure that any tests are used in an even-handed manner.
Because the bar for personality tests is constantly shifting, Edwards says, "employers should obtain expert employment law advice before implementing a testing program."