Assessment tools are increasingly being used by organizations to evaluate their employees’ knowledge and skills, interests, values, personality, work ethic and work styles to ensure a proper fit not only in a particular job role but also within the organization’s culture. But how can you be sure assessments will be useful and cost-effective for your organization?

Companies can measure the Return on Investment (ROI) of employee assessments in many different ways, but the basic formula for any organization is relatively simple:

ROI (Percentage) = (Total Benefits - Total Costs) x 100 / Total Costs, where

Total Benefits include money saved by the company, capital generated, and everything else that adds to the bottom line, both directly and indirectly. For example, if the use of assessments during the hiring process reduces turnover, savings would include the cost of replacing an employee (potentially up to 150% of their annual wages) multiplied by the number of bad hires avoided.

Total Costs include development costs, loss of work time, materials required, administration and coordination costs, promotion costs, meals/ refreshments, and cost of job coverage. Online courses will include certain additional costs like pre-production, graphics, servers, post-production, web development costs. When using online assessment tools, these costs could be as low as a few hundred dollars or less per employee.
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