By Scott Mondore, Ph.D.
As is the case with many HR practices, the business impact of 360 (multi-source) assessments is rarely demonstrated in quantifiable terms. Organizational leaders often stop short, evaluating satisfaction with the 360 assessment process but missing the opportunity to link what is rated on 360 assessments to actual business outcomes. Looking only at satisfaction with the process devalues the 360 assessment in the eyes of executive-level decision-makers who, in lieu of a demonstrated return on investment, are likely to cut funding when faced with budget constraints. It also devalues the process for those receiving the 360—as they can view the experience as less-than-impactful or just an HR exercise.
Big opportunities exist to make this process more directly focused on business outcomes. Organizations can follow an approach to bring in business data and statistical rigor to identify the cause-and-effect relationship between the specific behaviors, competencies, skills and knowledge that were measured during the 360 assessment process and critical business outcomes (e.g. sales, profits, productivity). To demonstrate the link to business outcomes, first obtain the appropriate data at the appropriate level (e.g., manager level or workgroup level). This means that the 360 assessment data are measured at the same level and during the same timeframe as the business outcome data (for example, unit-level performance numbers). The data used should be function or workgroup-specific. For example, if “sales dollars” has been identified as a critical business outcome for the sales team, you will incorporate and statistically link the sales leader’s/rep’s 360 assessment data to the “sales dollars” outcome. Or if you are examining customer service satisfaction ratings as a business outcome, you will pull in just the 360 assessment data from the customer service centers and link this data to customer satisfaction. Using advanced analytics (e.g. structural equation modeling) as your methodology, you can identify which components of the 360 assessment (i.e., behaviors, knowledge, skills, and abilities) are key drivers of specific business outcomes for the various functions or workgroups being analyzed. Specifically, the results of the analysis indicate the differential impact that each of the competencies assessed using the 360 assessment has on the key business outcome (i.e., how much improvements on each competency will contribute to improvements in the overall business outcome). Discovering the competencies most responsible for business outcomes allows HR leaders to make data-driven decisions regarding where to invest developmental efforts and dollars and to demonstrate a return on these investments on the back end. The following case study exemplifies this process, highlighting the way in which multi-rater assessments can become critical business drivers.
The sales leadership at a small pharmaceutical company wanted to invest in the individual development of its specialty sales representatives and identify the critical skills needed to gain market share on its primary competitor. The company’s brand possessed a 23.3% share of the market. This particular market is relatively mature and the organization’s leaders were looking for a new commercial edge in an extremely competitive market. The following reveals the broader challenges facing the organization:
- Need to invest in the development of specialty pharmaceutical sales representatives
- Need to identify the critical skills for its sales representatives
- Need to grow market share in a competitive, mature market
- Need to better understand the ROI of organizational training investments
- Need to drive revenue growth
Based on the aggregated data set, we conducted an overall, systemic analysis using structural equation modeling (a sophisticated statistical technique with many advantages over multiple regression and correlation analyses). We examined sales representatives’ competencies as drivers of territory market share and script-writing volume, which was the primary business outcomes for sales representatives. Using this technique, manager and physician responses were statistically linked to the previous six-month territory market share and script volume for each sales representative. This analysis allowed the organization to prioritize individual behaviors that had a direct impact on the desired outcome (e.g., prescription writing, market share). The results of the linkage analysis are depicted below:
RETURN ON INVESTMENT
The systemic analysis allowed the sales organization to assess current sales representatives’ capabilities and prioritize training & development interventions. To address key needs in the areas of evidence-based selling, product and disease-state expertise, managed care expertise, and consultative selling skills, the organization implemented several training interventions at the organizational and individual levels.
Impact of Training Interventions-Behavior Change
The 360 process was executed again 18 months later. The table below depicts the competency changes found following the training interventions.
Impact of Training Interventions-Business Impact
Based on the improvements in competency ratings, it was estimated that the training interventions resulted in a $1.4 million impact on script volume. The average script volume went from 299 to 371 in the two-year period and market share improved. In addition to the impact on the organization’s training strategy, the results of the study were used to adjust the brand strategy of the product. Overall, the results of the 360 were found to have numerous applications and impacts throughout the organization.
Bringing Impact to Front-Line Leaders
As interesting as the analysis and case study are, the real impact comes from providing the 360 recipient with access to what their business drivers are in their 360 report. The drawback of traditional 360s is that the recipient gets a report of strengths and development areas—and that’s it! Two key components to drive real action are to 1) show them which competencies and behaviors have the biggest business impact and 2) provide them with action planning tips, online courses, best practices etc.
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Scott Mondore, Ph.D., is a managing partner of Strategic Management Decisions (SMD) and is the co-author of Investing in What Matters: Linking Employees to Business Outcomes and Business-Focused HR: 11 Processes to Drive Results, both published by SHRM. He can be reached at firstname.lastname@example.org.