Utility analysis of character assessment in employee placement

Purpose: There has been a surge of interest in leader character and a push to bring character into mainstream management theory and practice. Research has shown that CEOs and board members have many questions about the construct of leader character. For example, they like to see hard data indicating to what extent character contributes to organizational performance. Human resource management professionals are often confronted with the need to discuss and demonstrate the value of training and development initiatives. The question as to whether such interventions have a dollars-and-cents return on the investment is an important one to consider for any organizational decision-maker, especially given the demand for increased accountability, the push for transparency and tightening budgets in organizations. The authors investigated the potential dollar impact associated with the placement of managers based on the assessment of leader character, and they used utility analysis to estimate the dollar value associated with the use of one instrument – the Leader Character Insight Assessment or LCIA – to measure leader character. Design/methodology/approach: The authors used field data collected for purposes of succession planning in a large Canadian manufacturing organization. The focus was on identifying senior management candidates suitable for placement into the most senior levels of leadership in the organization. Peers completed the LCIA to obtain leader character ratings of the candidates. The LCIA is a behaviorally based and validated instrument to assess leader character. Performance assessments of the candidates were obtained through supervisor ratings. Findings: The correlation between the leader character measure provided by peers and performance assessed by the supervisor was 0.30 (p < 0.01). Using the data required to calculate ΔU from the Brogden-Cronbach-Gleser model leads to an estimate of CAD $564,128 for the use of the LCIA over the expected tenure of 15 years, which is equivalent to CAD $37,609 yearly; and CAD $375,285 over an expected tenure of 10 years, which is equivalent to CAD $37,529 yearly. The results of the study also indicate that there is still a positive and sizeable return on investment or ROI associated with the LCIA in employee placement even with highly conservative adjustments to the basic utility analysis formula. Originality/value: Utility analysis is a quantitative and robust method of evaluating human resource programs. The authors provide an illustration of the potential utility of the LCIA in a selection process for senior managers. They assert that selecting and promoting managers on leader character and developing their character-based leadership will not only leverage their own contributions to the organization but also contribute to a trickle-down effect on employees below them.