Many CUs Don't Believe In The HR Tools They Use

Credit union executives continue to use traditional employment tools, like job interviews, despite having lost confidence in their effectiveness, according to a new study released by the Filene Research Institute.

At the same time, executives have been slow to embrace newer, alternative methods, including personality and turnover tests, even though managers express more confidence in them, the author of the study suggested.

"Human Resource Testing: What Credit Unions Should Know," by researcher Murray R. Barrick of Tippie College of Business at the University of Iowa, examines in the new study which employment tools get the best results and how credit unions can make the most of them.

Barrick surveyed 300 CUs as part of his research and found that managers have little confidence in the predictive ability of more traditional selection tools.

For example, fewer than 40% of CUs believe that interviews help to predict high performers, and fewer than 20% reported that interviews help to reduce turnover.

Compare that to the 73% of respondents currently using personality tests who said they believe such tests are effective in predicting high performers.

Among those using turnover tests, 60% reported they are effective reducing turnover.

The development of these kinds of tests has occurred mostly in the last 10 years, according to the analysis.

Barrick found that effective tests are readily available, inexpensive and legally defensible.

Among the newer selection tools Barrick discusses in the monograph are intelligence tests, math ability tests, personality tests, customer service tests, honesty tests and turnover tests.

But the tests aren't foolproof. There are four conditions required to fully realize these benefits, according to Barrick:

* The credit union must be able to be selective in who it hires.

* The selection tool used must predict actual job performance.

* Performance variability must be greater than zero. (If all applicants would have the same job performance level, nothing is gained by hiring the best.)

* Credit unions must retain the high-performing employees they hire.

The Barrick study provides insights into each of these newer selection tools, and information on their cost, validity, and EEO and other legal concerns. The tools are suitable for both entry level and management positions.

When selecting managers from a pool of internal candidates, the CU has information on prior perfomance and work experience, but the way a candidate has done in one job at the CU doesn't always predict how that person will do in a new job. As a result, some of the same personality and other tests can be an important tool when hiring from within, as well.

"The implications for credit union senior management and HR directors are clear," said Bob Hoel, executive director of the Filene Research Institute. "This important research gives them the background necessary to improve their human resource selection methods. Effective employee selection tools can be a tremendous asset to the credit union both in the short term and later, when retention becomes a key component of the human resource strategy. Testing is critical to identifying individuals who will be highly productive front-line, back-room, and managerial employees. Credit unions can realize potential gains in productivity by using more of the rigorous selection tools discussed in this paper."