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Rocket-Hire Talent Assessment Market Overview 2014-2015

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Rocket-Hire Talent Assessment Market Overview 2014-2015

  1. 1.                               Talent  Assessment  2014/2015:   Market  Analysis,     Vendor  Classification,   and  Market  Opportunity     October  2014         CREATED  BY:   Charles  A.  Handler,  Ph.D.   President/Founder   Rocket-­‐Hire  LLC   www.Rocket-­‐Hire.com   T H O U G H T   L E A D E R S H I P   I N   T A L E N T   A S S E S S M E N T
  2. 2. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  2     A B O U T   T H E   A U T H O R     Dr.  Charles  Handler  is  a  thought  leader,  analyst,  and  practitioner  in     the  Talent  Assessment  and  human  capital  space.    Dr.  Handler  is  the     only  analyst  in  the  Talent  Assessment  space  with  technical  training  in   psychometrics  and  experiencing  in  the  development  and  implementation   of  global  Talent  Assessment  systems.         Through  his  prolific  writing  for  media  outlets  such  as  ERE.net,  his  work     as  a  pre-­‐hire  assessment  analyst  for  Bersin  by  Deloitte,  and  worldwide   public  speaking,  Dr.  Handler  is  a  highly  visible  futurist  and  evangelist  for   the  Talent  Assessment  space.  Throughout  his  career,  Dr.  Handler  has   been  on  the  forefront  of  innovation  in  Talent  Assessment;  applying  his   sound  foundation  in  psychometrics  to  helping  drive  innovation  in   assessments  through  the  use  of  gaming,  social  media,     big  data,  and  other  advanced  technologies.       Since  2001  Dr.  Handler  has  served  as  the  president  and  founder  of     Rocket-­‐Hire,  a  vendor  neutral  consultancy  dedicated  to  creating  and     driving  innovation  in  Talent  Assessment.    Through  his  work  with     Rocket-­‐Hire,  Dr.  Handler  has  served  as  a  strategic  advisor  with  virtually   every  large  assessment  provider  as  well  as  a  large  number  of  start-­‐ups   entering  the  space.    Dr.  Handler  has  also  worked  extensively  with  end   users  of  Talent  Assessment  systems  such  as  Intuit,  Wells  Fargo,  KPMG,   Scotia  Bank,  Hilton  Worldwide,  and  Humana,  helping  them  to  create  and   implement  their  assessment  strategies.       Dr.  Handler  holds  a  M.S.  and  Ph.D.  in  Industrial/Organizational   Psychology  from  Louisiana  State  University.  
  3. 3. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  3   Executive  Summary  ..........................................................................................    4     Overview  of  Report  Sections  ............................................................................    5     Part  I:  Talent  Assessment  Market  —  Size  and  Growth  ......................................  9     Figure  1-­‐  Talent  Assessment  Within  HCM  ........................................  10     Table  1-­‐  Recent  M&A  in  Talent  Assessment    ....................................  13     Part  II:  Talent  Assessment  Market  —  Vendor  Classification  Scheme  ..............  16     Figure  2-­‐  Four  Quadrants  for  Classifying  Vendors  ...........................  19     Part  III:  Market  Opportunity    ..........................................................................    23     Conclusion  ........................................................................................................  28     Sources  ............................................................................................................    31       TABLE  OF  CONTENTS  
  4. 4. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  4     Executive  Summary     Why  is  This  Briefing  Important?:       Talent  Assessment  is  a  Different  Animal     Talent  Assessment  is  a  rapidly  growing  and  often  misunderstood  segment  of  the  HR   Technology/Human  Capital  Management  (HCM)1  market  that  has  tremendous  potential  for   continued  growth.         Talent  Assessments  differ  from  many  other  areas  within  HCM  because  they  are  highly   specialized  scientific  tools  that  are  created  and  curated  by  experts.    Their  development  and   refinement  is  an  ongoing  process  that  is  data  intensive.  Developing  a  solid  product  offering  in   this  space  requires  a  good  deal  of  time  and  customer  data.     While  the  complexities  of  Talent  Assessment  have  caused  it  to  be  misunderstood  by  those  not   trained  in  its  technical  aspects,  the  value  of  Talent  Assessments  to  end  users  is  well   documented.  There  is  an  increasing  amount  of  evidence  that  companies  with  solid,  well-­‐ executed  Talent  Assessment  programs  outperform  those  who  don’t2 .       Unfortunately,  most  end-­‐users  lack  the  understanding  and  experience  required  to  reap  the   value-­‐add  of  Talent  Assessments.    In  our  experience,  most  Talent  Assessment   programs  are  clumsily  executed  bolt-­‐ons  that  seem  more  like  afterthoughts   than  true  strategic  initiatives.    However,  this  is  slowly  changing  as  the  adoption  of   integrated  talent  management3  continues  to  grow.       The  HCM  industry  is  marked  by  consolidation  and  ongoing  integration4 ,  as  providers  acquire   new  technologies  that  will  provide  the  componentry  needed  to  support  integrated  talent   management.  Talent  Assessment  is  an  area  that  is  not  highly  built  out  within  most  larger  HCM   suites,  but  of  late  there  has  been  a  great  deal  of  interest  in  assessments  by  providers  who  are   building  out  new  product  suites.         Due  to  its  highly  specialized  nature,  the  fastest  way  for  HCM  vendors  to  add  assessment   functionality  is  via  partnering  with  or  acquiring  Talent  Assessment  providers  who  have  content,   customers,  and  data.    This  is  consistent  with  the  overall  pattern  of  consolidation  that  marks  the   industry.    Mature  Talent  Assessment  products  have  very  large  margins,  making  acquisition  a   preferable  option  for  larger  providers  with  mature  distribution  channels  because  it  allows  them   to  own  the  entire  revenue  stream.        
  5. 5. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  5     O v e r v ie w  o f  R e p o r t   S e c t io n s     Having  established  the  importance  of  Talent  Assessment  as  a  key  practice  within  HCM,  this   briefing  highlights  the  value  and  expected  growth  of  Talent  Assessment  via  the  following:     Section  I:  Market  Size  and  Growth     Section  I  of  this  report  provides  a  market  overview  supporting  a  position  that  the  Talent   Assessment  market  will  undergo  strong  growth  in  2015.    However,  we  believe  that  the   most  significant  increases  in  market  size  will  occur  closer  to  2020-­‐  as  critical  new   technologies  mature.  Section  I  of  this  briefing  provides  the  following  details  around  the   Talent  Assessment  market:     § Estimated  Market  Size  (2014-­‐2015)   • $3  billion  –  across  both  Talent  Acquisition  and  Talent  Management   • $1.25  billion  –  within  Talent  Acquisition  alone   § Estimated  Market  Growth  (Talent  Acquisition  and  Talent  Management  combined)   • 5-­‐10%  in  2014/15   • 15-­‐20%  by  2020  –  with  growth  to  approximately  $5  billion   § Key  Drivers  of  Growth     • Market  consolidation  and  increased  distribution  channels   • Integrated  talent  management  (e.g.,  linking  pre-­‐  and  post-­‐hire  data)   • Social  sourcing  as  an  emerging  and  much-­‐needed  area   • Increasing  focus  on  analytics  to  drive  ROI   • Globalization   • Niche  vendor  specialization       Section  II:  Market  Classification     While  it  is  hard  to  ignore  the  impact  the  evolution  of  HCM  is  having  on  Talent  Assessment,  it  is   important  to  understand  that  Talent  Assessment  is  its  own  industry  that  has  been  steadily   growing  for  almost  50  years.    There  are  literally  hundreds  of  vendors  operating  in  this  space,   many  of  whom  have  been  highly  profitable  for  decades.      
  6. 6. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  6     Understanding  the  Talent  Assessment  marketplace  is  difficult  because  it  is  extremely   fragmented.    There  are  many  types  of  Talent  Assessment  tools  and  there  is  great  variation   amongst  vendors  when  it  comes  to  methodologies,  product  quality,  and  product  maturity.       In  order  to  better  understand  the  differences  between  these  vendors,  Section  II  of  this  report   provides  a  two-­‐part  classification  scheme.    It  is  important  to  note  that  we  have  chosen  not  to   use  assessment  type  (i.e.,  personality  testing,  assessment  centers,  etc.)  to  classify  vendors.    This   is  because  the  majority  of  vendors  offer  a  variety  of  tools,  many  of  which  are  highly  similar.    We   believe  what  truly  differentiates  vendors  is  their  methodology  and  use  of  technology.    Our   classification  scheme  includes  the  following  key  elements:     1.  Quadrants     We  provide  a  scheme  centering  on  the  manner  in  which  vendors  manage  the  tradeoff  between   speed  of  implementation  (e.g.,  “fluidity”)  and  predictive  accuracy  (e.g.,  “power”).    These  two   parameters  are  used  to  define  four  quadrants  that  support  a  visualization  of  the  current  and   future  state  of  the  Talent  Assessment  market  (see Figure 2, page 19).    This  scheme  clearly   identifies  the  potential  impact  of  advances  in  technology  and  assessment  science  on  the  ability   to  quickly  deploy  highly  accurate  assessments.     2.  Categorization  Scheme     We  suggest  that  vendors  can  be  placed  into  three  basic  categories  based  on  their  core   methodologies  and  approaches.  These  include:     A. Consulting  Firms  —  Low  Fluidity,  High  Power  —  Represent  the  most  traditional   manner  in  which  Talent  Assessments  have  been  deployed.    These  are  high-­‐touch   firms  that  rely  on  professional  services  to  support  and  implement  Talent   Assessments.  Firm  types  within  this  category  include:       • General  HR  consulting  firms   • Talent  Assessment  consulting  firms   • Developers  of  custom  assessment  content     B. Product  Firms  —  Fluidity  and  Power  both  range  from  high  to  low  —  Represent  the   largest  area  within  the  current  market.    These  firms  use  a  variety  of  approaches,  all   of  which  center  on  reducing  the  professional  services  required  to  implement  and   support  assessments.  These  firms  represent  the  highest  degree  of  variation  in   methodology  and  product  quality,  making  differentiation  difficult.  Firm  types  within   this  category  include:       • Test  publishers  
  7. 7. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  7     • Solution  providers   • Providers  of  specialized  assessments     C. Technology  Firms  —  High  Fluidity,  High  Power  —  Represent  market  opportunity  via   the  ability  to  support  rapid  precision  at  scale.    These  are  firms  that  are  creating   change  and  disruption  within  the  space  via  a  blend  of  technology  and  psychology.     Firm  types  within  this  category  include:     • Measurement  innovators   • Integrated  HCM  platform  providers     • Predictive  social  sourcing  providers     Note:  This  report  does  not  name  specific  vendors  within  categories  or  quadrants.    This   information  is  available  via  separate  engagement  with  Rocket-­‐Hire.         Section  III:  Market  Opportunities       Talent  Assessment  methods  have  been  relatively  resistant  to  technological  change,  but  new   technologies  are  slowly  entering  the  space  and  creating  growing  tension  between  the  old  and   new.    Technology  is  creating  great  opportunity  for  disruption  in  some  segments  of  the  Talent   Assessment  market  (e.g.,  sourcing  and  social  recruiting)  while  others,  such  as  executive   assessment  and  custom  built  assessments,  are  likely  to  change  much  more  slowly.    While   revenues  from  traditional  assessment  tools  will  remain  a  significant  factor  in  the   growth  of  the  market,  there  is  a  shift  coming  in  which  technology  will  drive   incremental  growth  via  its  ability  to  increase  precision.    We  identify  the  following  five   areas  as  representing  the  most  significant  opportunities  over  the  coming  five  years  (and   beyond).     § Optimized  sourcing  –  The  sourcing  process  is  broken  and  the  friction  that  exists  is   detrimental  to  the  overall  goal  of  making  good  hires.    Socially  driven  sourcing  platforms   that  use  both  AI  and  psychometrics  represent  the  most  significant  growth  area  within   the  talent  acquisition  (and  Talent  Assessment  space).     § Embedded  psychometric  measurement  –  HR  technology  providers  will  begin  to  figure   out  that  outsourcing  Talent  Assessment  to  a  third  party  vendor  is  both  expensive  and   unwieldy  and  will  increasingly  seek  to  own  their  own  assessment  content.    Larger  HCM   providers  will  continue  to  integrate  assessment  at  deeper  levels.    When  coupled  with   advanced  analytics,  embedded  Talent  Assessments  will  allow  new  levels  of  predictive  
  8. 8. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  8     insight  that  can  be  translated  directly  into  the  metrics  needed  to  support  strategic  and   tactical  business  operations.     § Interactivity  and  gamified  psychometric  assessments  –  Engagement  is  becoming  a   critical  driver  of  success  in  the  hiring  process  and  beyond.       § Driving  Precision  at  Scale  –  There  is  significant  opportunity  for  transactional  Talent   Assessment  products  that  use  technology  to  drive  mass  customization.    SMBs  represent   a  large,  and  mostly  untapped,  potential  market  for  this  type  of  assessment.         § Niche  Based  Simulations  –  There  is  tremendous  value  in  simulating  unique  work   environments  to  support  measurement  and  prediction.    Specialized  simulations  have   value  for  both  talent  acquisition  and  talent  management.          
  9. 9. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  9     Part  I:   Talent  Assessment  Market  —  Size  and  Growth     While  Talent  Assessment  is  its  own  industry,  its  use  as  a  key  component  in  a  variety  of  HR   related  processes  ties  it  directly  to  the  HCM  market.    Understanding  the  market  size  and   expected  growth  of  the  Talent  Assessment  industry  first  requires  understanding  its  place  within   the  context  of  the  larger  market  into  which  it  is  nested  (i.e.,  the  HCM/HR  Technology  market).       Growth  of  the  Human  Capital  Management/HR  Technology  Market     Talent  Assessment  is  a  subset  of  the  Human  Capital  Management  (HCM)  space.    While  this   space  is  dominated  by  SaaS  based  providers,  most  Talent  Assessment  is  not  sold  as  software   largely  due  to  two  factors,  the  technical  (i.e.,  scientific)  complexity  of  implementing  it  and  the   lack  of  technology  development  capabilities  amongst  most  of  the  mature  vendors  in  the  space.     Talent  Assessment  continues  to  evolve  however,  and  it  is  increasingly  becoming  viewed  as  a   SaaS  offering-­‐  joining  it  more  closely  to  the  overall  global  HCM  market.         The  global  HCM  market  continues  to  grow  as  it  supports  the  movement  of  HR  technology  from   an  administrative  role  to  a  strategic  one.    Estimates  of  the  market  size  for  global  HCM  vary   somewhat  but  all  identify  it  as  a  large  and  growing  industry.    For  instance:     § Gartner  sizes  the  HCM  market  at  $8.3  billion  in  2014  and  $8.8  billion  in  20155 .       § According  to  IDC  Research6 ,  the  global  HCM  market  is  expected  to  grow  8  percent   annually,  hitting  $13.5  billion  in  2017.   § According  to  Bersin  by  Deloitte  this  market  grew  by  17%  in  2013  and  is  now  over  $5   billion  in  size7 .        
  10. 10. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  10     Talent  Management,  Talent  Acquisition,  and  Talent  Assessment       Talent  Assessment  is  part  of  the  talent  management  and  talent  acquisition  areas  within  global   HCM  (see  Figure  1).         Figure  1:  Talent  Assessment’s  Position  Within  the  HCM  Market                                                       Talent  Assessment  is  relevant  across  all  areas  of  talent  management,  serving  both  as  a     pre-­‐hire  predictive  tool  (for  talent  acquisition)  and  a  post-­‐hire  tool  to  support  employee   development  and  succession  planning  (for  talent  management).           Increased  movement  by  HCM  technology  providers  to  support  integrated  talent   management  is  setting  the  stage  for  the  value  of  Talent  Assessments  as  link  that   unifies  pre  and  post  hire  talent  processes.    The  talent  management  industry  has  also   grown  quite  rapidly  in  lockstep  with  the  overall  HCM  industry,  and  has  seen  significant   investment  and  growth  across  key  areas,  such  as  performance  management,  talent  acquisition,   and  learning.
  11. 11. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  11     Talent  Acquisition     Talent  Acquisition  is  a  subset  of  talent  management  that  is  seeing  a  disproportionate  increase   in  growth  and  investment  when  compared  to  other  areas  of  talent  management.    This  is   because  talent  acquisition  is  the  area  of  talent  management  that  is  best  suited  for  disruption  by   new  technologies.    For  instance,  social  and  mobile  technologies  are  having  a  profound  impact   on  recruiting  and  sourcing.    Advanced  souring  technologies  are  providing  a  gateway   to  the  rapid  development  of  social  based  recruiting  and  applicant  tracking   functionality,  providing  the  entire  recruiting  process  with  an  increasingly  sharp   set  of  new  teeth.    Beyond  these  advances,  Talent  Assessment  will  continue  to  play  a  key  role   in  all  phases  of  the  talent  acquisition  process  because  it  introduces  a  science-­‐based  toolset  that   can  have  a  measurable  impact  on  quality  of  hire.         Talent  Assessment  Market  Size     While  there  is  significant  reason  to  believe  Talent  Assessment’s  value  as  a  key  component  of   HCM,  there  is  little  published  information  available  about  its  market  size.    The  reasons  for  this   include:   § Few  Talent  Assessment  companies  are  public  –  in  fact,  the  majority  are  very  small   § Vendors  who  sell  Talent  Assessments  often  sell  a  range  of  other  products  so  revenues   from  assessment  are  hard  to  isolate   § The  Talent  Assessment  market  is  very  fragmented  –  there  is  huge  variation  in  product   type  and  quality  and  it  is  difficult  to  define,  break  down,  and  track  the  market     Published  estimates  of  market  size:   § According  to  CEB  (in  2012)  -­‐  Talent  Assessment  is  a  $4  billion  global  market  growing   annually  at  seven  to  ten  percent8 .     § According  to  Bersin  by  Deloitte,  the  size  of  the  market  (in  2012)  was  approximately     $2  billion9 .     Rocket-­‐Hire’s  estimates  of  market  size:   § We  estimate  that  the  overall  global  market  for  Talent  Assessment  in  2014  and  2015   across  both  Talent  Acquisition  and  Talent  Management  is  likely  somewhere  around     $3  billion.  
  12. 12. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  12     § When  focusing  on  Talent  Assessments  used  pre-­‐hire,  we  feel  the  market  is  around     $1.25  billion  —  or  slightly  less  than  half  (around  40%)  of  the  overall  market  for  Talent   Assessments.     While  there  is  higher  volume  of  usage  for  pre-­‐hire  assessments,  post  hire  assessments  have  a   higher  price  per  unit  and  are  often  easier  for  vendors  to  sell  because  they  tap  into  larger   budgets  (i.e.,  learning  and  development),  are  less  scrutinized  for  their  ability  to  deliver  ROI,  and   come  with  fewer  concerns  over  legal  compliance.       Breaking  Down  the  Pre-­‐Hire  Talent  Assessment  Market     Given  the  fragmentation  of  the  pre-­‐hire  assessment  market,  the  simplest  way  to  break  down   the  market  is  by  firm  size.       § Large  firms  —  The  largest  7-­‐10  firms  account  for  about  $450  million  (or  slightly  more  than   one-­‐third  of  the  entire  market).    These  are  mostly  established  firms,  with  global  presence   and  mature  distribution.    Note  that  SHL,  by  far  the  largest  global  provider  of  Talent   Assessments,  had  revenues  over  $200  million  in  2012.     § Medium  firms  —  There  are  15-­‐20  firms  that  account  for  about  $500  million  (40%  of  the   total  market).    These  are  established  firms  that  are  often  global  and  use  leveraged   distribution  to  drive  profits  while  keeping  overhead  low.    This  also  includes  the   assessment  practices  of  larger  professional  services  firms  (i.e.,  AON-­‐Hewitt,  Mercer,  PWC)   and  HR  consulting  organizations.     § Small  firms  —  There  are  well  over  100  small  firms  that  account  for  about  $300  million  in   revenue  (or  about  25%  of  the  market).    This  segment  is  a  catch  all  that  includes  small   content  development,  smaller  consulting  firms,  specialty  vendors  (i.e.,  skills  tests,   simulations,  etc.),  and  start-­‐ups  that  are  not  generating  any  revenues  at  present.    This   area  of  the  market  presents  significant  opportunity.      Many  smaller  firms  are  niche  players   that  either  have  innovative  blends  of  science  and  technology  that  will  be  disruptive  and   drive  rapid  adoption  or  have  solid  products  but  lack  good  distribution  channels.                  
  13. 13. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  13     Expected  Market  Growth  for  Talent  Assessment     We  expect  to  see  significant  growth  in  this  market  over  the  coming  years  due  to  the  following   trends:     § Market  consolidation  and  partnerships  open  distribution  channels  –  We  believe  that  this   will  be  the  #1  trend  that  will  drive  the  market  in  2015.  Larger  firms  with  complimentary   products  and  significant  distribution  are  able  to  offer  their  existing  client  base  Talent   Assessment  as  an  additional  value  added  product.    The  sales  cycle  for  Talent  Assessment   is  unusually  long  (and  growing  longer),  so  leveraging  existing  client  relationships  makes  a   great  deal  of  sense.  The  fastest  way  in  will  be  to  ride  the  coattails  of  vendors  who  already   have  a  trusted  relationship,  a  foot  in  the  door,  or  an  existing  master  services  agreement.       Given  the  technical  nature  of  Talent  Assessments  and  the  time  needed  to  build  a  mature   Talent  Assessment  product,  it  makes  more  sense  to  purchase  assets  than  it  does  to  build   new  ones.    This  position  is  supported  by  the  following  noteworthy  M&A  activity  in  the   space  over  the  past  five  years  (as  summarized  in  Table  1,  below).       Table  1:  Recent  M&A  in  Talent  Assessment     COMPANY   ACQUIRED   YEAR   DEAL  SIZE   Mercer   Censeo   2009   NA  –  $3-­‐5  million  (est.)   Symphony  Technology   Group  (PE)   First  Advantage  (testing  assets  –   not  whole  company)   2010   $265  million   CEB   SHL   2012   $660  million   CEB   Valtera   2012   NA  –  $5-­‐10  million  (est.)   IBM   Kenexa   2013   $1.3  billion   PeopleMatter   PeopleClues   2013   NA  –  $3-­‐5  million  (est.)   Korn  Ferry   PDI   2013   $80  million  with  $15  million  earn  up   Infor   PeopleAnswers     2014   NA  –  $100-­‐150  million  (est.)   Wiley   Profiles  International   2014   $51  million   Hay  Group   Talent  Q   2014   NA  –  $5-­‐10  million  (est.)         § Integrated  talent  management  provides  a  framework  for  uniting  pre-­‐  and  post-­‐hire   functions  —  The  maturation  of  HCM  products  is  providing  a  significant  platform  for  the   continued  uptake  of  Talent  Assessments.    An  increasing  number  of  HCM  suite   providers  are  finally  turning  their  attention  to  the  value-­‐add  that  a  unified   assessment  process  has  across  entire  talent  lifecycle.  Expect  to  see  HCM   providers  begin  to  solidify  their  assessment  strategies  over  the  course  of   2015.  
  14. 14. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  14       § Investment  in  start-­‐ups  and  new  technologies  is  creating  a  disruptive  force  —Traditional   Talent  Assessment  vendors  have  a  poor  track  record  with  the  use  of  technology  and  have   struggled  mightily  with  innovation.    The  mature  vendors  in  the  space  have  felt  little   pressure  because  they  remain  highly  profitable  doing  things  the  same  way  they  have  been   done  for  decades.    The  real  innovation  in  this  space  is  coming  from  a  host  of  start  ups  and   early  stage  companies  that  are  blending  advanced  technologies  and  Talent  Assessment   content  to  create  new  tools  that  will  eventually  replace  more  traditional  Talent   Assessments.       § Psychometrics  supercharges  social  recruiting  —  Sourcing  and  recruiting  will  be  the   highest  growth  area  within  HCM  over  the  coming  years.    There  is  tremendous  friction  in   the  sourcing  space  due  to  the  imprecision  of  current  methods  for  matching  people  with   job  opportunities  to  which  they  are  best  suited.    The  targeted  delivery  of  qualified   candidates  reduces  the  friction  in  the  entire  hiring  process  by  increasing  the  probability  of   successful  hires.    The  combination  of  psychometrics  and  AI  within  SoLoMo10   (social,  local,  mobile)  technologies  is  set  to  fundamentally  change  talent   acquisition  by  pushing  the  value  of  Talent  Assessments  further  up  the   funnel  where  their  cost  is  folded  into  sourcing  budgets.     § Increasing  focus  on  analytics  plays  to  Talent  Assessment’s  strengths  —The  movement  to   create  new  tools  that  leverage  big  data  and  analytics  to  support  decision-­‐making  are  a   dream  for  the  Talent  Assessment  industry.    Talent  Assessment  tools  are  designed  to   support  predictive  decision-­‐making.  The  ability  to  show  the  value  of  Talent  Assessments   as  decision-­‐making  tools  requires  a  commitment  to  providing  job  performance  data  from   those  who  have  been  assessed.    It  has  traditionally  been  hard  to  obtain  such  data,  making   it  very  hard  to  show  the  value  of  Talent  Assessments.    A  rapidly  increasing  number  of  end   users  of  assessments  are  creating  internal  HR  analytics  functions  whose  job  it  is  to  collect   and  curate  data.    At  the  same  time,  HR  technology  providers  are  adding  their  own   analytics  functionality  to  platforms  that  collect  both  pre  and  post  hire  data.    When   combined  with  advanced  analytics,  the  ownership  of  data  across  the  entire   employee  lifecycle  supports  an  entirely  new  level  of  sophistication  in   business  intelligence.      These  things  are  setting  the  stage  for  the  vendors  of  Talent   Assessments  to  demonstrate  the  value  add  their  tools  can  provide  and  fuel  the  continued   optimization  of  their  products.     § Closing  gaps  in  preparedness  around  talent  requires  good  measurement  tools  —   Certainly  CEOs  realize  the  value  of  talent  to  achieving  their  mission.    But  the  general   consensus  is  that  they  are  unprepared  to  meet  the  talent  challenges  that  will  define  the   success  of  their  businesses.    Recent  surveys  of  business  leaders  by  PWC11  and  Deloitte12   both  identify  major  gaps  between  the  perceived  value  of  talent  and  the  readiness  of  
  15. 15. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  15     organizations  to  manage  it.    Talent  Assessment  is  an  essential  tool  for  closing  these  gaps   and  as  such,  it  will  continue  to  gain  interest  from  business  leaders  over  the  coming  years.     § Underserved  areas  still  exist  —  Expansion  into  areas  that  remain  underserved  by  Talent   Assessment  tools  has  the  potential  to  drive  significant  profits.    These  include  SMB  and   managerial  professional  jobs,  both  of  which  suffer  from  a  lack  of  innovative  tools  and   methodologies.    This  is  because  in  both  cases,  most  of  the  tests  used  are  off  the  shelf  and   are  not  dialed  in  to  specific,  localized  job  requirements.    Technology  is  allowing  providers   the  ability  to  create  more  targeted  tests  that  can  be  delivered  transactionally,  filling  a   huge  need  when  one  considers  the  massive  number  of  persons  employed  by  SMBs  and/or   are  in  professional  managerial  roles.       § Niche  players  are  thriving  –  Talent  Assessment  remains  a  cottage  industry  populated  by   many  smaller  shops  that  have  distinct  specializations.    Many  vendors  in  the  space  serve   well-­‐developed  niche  markets,  either  by  vertical  (i.e.,  healthcare)  or  by  technology  (i.e.,   simulations).    These  companies  will  experience  upticks  over  the  course  of  2015.     § Talent  Assessment  is  a  global  business  –  While  the  most  profitable  Talent  Assessment   firms  are  based  in  the  US  or  UK,  Talent  Assessment  is  used  worldwide.    There  remains   tremendous  opportunity  for  increased  use  of  Talent  Assessments  in  emerging  markets.     While  US-­‐based  firms  have  had  trouble  charging  Western  prices  for  assessments  in   developing  nations,  the  opportunity  for  scale  is  greater  than  in  the  West.       Expected  Market  Growth       Rocket-­‐Hire  believes  that  the  overall  Talent  Assessment  market  will  experience  growth  of  only   5-­‐10%  in  2015.    However,  we  expect  a  significant  uptick  in  the  range  of  15-­‐20%  over  the  coming   five  years  as  new  technologies  find  their  way  into  the  space  and  distribution  channels  continue   to  open  up.    Based  on  the  very  real  and  present  trends  outlined  in  this  briefing,  we   expect  the  overall  Talent  Assessment  market  to  top  $5  billion  by  2020.     Our  estimates  are  also  based  on  the  fact  that  the  existing  market  for  assessments  is  not  even   close  to  meeting  the  total  addressable  market  for  these  tools.    At  present  assessment  is  likely   used  for  much  less  than  half  of  the  50  million  total  hires  made  in  the  US  yearly13 ,  leaving   tremendous  space  for  additional  uptake.    When  one  considers  that  over  50%  of  all  workers  in   the  US  are  employed  by  SMBs,  simply  adding  wider  use  of  assessments  within  this  segment  will   provide  scale  that  will  lead  to  significant  increases  in  market  value.     Due  to  SMB  opportunities,  increased  investment  in  talent  acquisition  technology,  and  increased   focus  by  HCM  vendors,  we  believe  that  the  pre-­‐hire  Talent  Assessment  market  will  experience   the  most  growth  (vs.  the  post-­‐hire  market)  over  the  coming  5  years.    We  estimate  this  market  
  16. 16. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  16     for  pre-­‐hire  assessments  to  grow  to  well  over  $2.5  billion  by  2020  and  move  past  post-­‐hire   Talent  Assessment  to  represent  over  50%  of  the  overall  market  for  Talent  Assessments  by  2020.      
  17. 17. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  17     Part  II:   Talent  Assessment  Market  —  Vendor  Classification  Scheme       A  Fragmented  Market     It  is  difficult  to  easily  understand  and  classify  the  Talent  Assessment  market  because  it  is  highly   fragmented.      The  main  reasons  for  this  fragmentation  include:     § Broad  definition  –  There  is  absolutely  no  “market  standard”  for  what  a  Talent  Assessment   is  or  should  be.  Even  within  the  boundaries  of  accepted  conventions,  there  are  literally   hundreds  of  ways  that  one  can  measure  or  assess  talent.    In  many  cases,  methodologies   may  expand  outside  the  boundaries  of  what  has  traditionally  been  labeled  as  Talent   Assessment.       § Variation  in  methodologies  –  “Talent  Assessment”  is  a  term  that  covers  a  wide  range  of   vendor  methodologies.    The  term  “methodology”  refers  to  the  manner  in  which  the   assessment  content  is  configured,  deployed,  and  evaluated.    Methodologies  are  most   commonly  not  bound  to  any  one  type  of  content.    For  instance,  personality  testing  can  be   implemented  using  a  number  of  different  methodologies.    The  methodology  used  by  a   vendor  is  a  major  determinant  in  their  ability  to  support  accurate  decision-­‐making.    It  is   often  difficult  for  those  not  trained  in  the  technical  aspects  of  Talent  Assessment  to   differentiate  between  the  methodologies  available,  a  fact  that  makes  it  more  difficult  to   understand  the  market  as  a  whole.         § More  new  vendors  –  The  market  continues  to  expand  at  a  relatively  rapid  pace.    There   are  significantly  more  firms  now  than  there  were  a  decade  ago.    Most  new  firms  are   focused  on  leveraging  technology  to  enhance  the  ability  to  quickly  create  highly  accurate   tests,  thereby  disrupting  the  market.    There  are  relatively  few  new  vendors  who  are   entering  the  market  with  a  business  model  that  relies  on  traditional  methodologies.         § Talent  Assessment  is  getting  absorbed  into  other  offerings  –  While  there  are  many  new   firms  emerging,  established  firms  continue  to  be  absorbed  by  larger  companies  seeking   both  content  and  an  established  customer  base.    Consolidation  in  the  marketplace  and   the  injection  of  Talent  Assessment  into  ancillary  HR  technologies  (e.g.,  ATS,  360  degree   feedback,  sourcing)  make  it  more  difficult  to  directly  track  the  direct  role  of  Talent   Assessment  in  generating  revenue.     § Talent  Assessment  cuts  across  both  talent  acquisition  and  talent  management  –  TA  and   TM  are  very  different  functions  and  the  manner  in  which  Talent  Assessment  is  sold  and   used  can  differ  dramatically  between  them.    Tracking  the  market  for  assessment  requires  
  18. 18. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  18     understanding  the  differences  between  Talent  Assessment  across  both  TA  and  TM.    This  is   not  an  easy  task.           Talent  Assessment  Vendor  Classification     This  report  provides  a  two-­‐part  classification  model  that  can  be  used  to  differentiate  and   classify  Talent  Assessment  vendors.    It  is  important  to  note  that  our  model  does  not  use   assessment  type  (i.e.,  personality,  assessment  center,  etc.)  to  classify  vendors.    Many  vendors   offer  a  range  of  assessment  types  that  are  similar  in  nature,  making  content  a  poor  method  of   differentiation.    Instead  our  scheme  uses  two  heuristics.     First,  we  provide  a  quadrant-­‐based  scheme  that  places  vendors  according  to  their  ability  to   manage  the  tradeoff  between  ease  of  implementation  (referred  to  as  “Fluidity”)  and  accuracy   of  their  solutions  (referred  to  as  “Power”).    Secondly,  we  support  the  quadrant  scheme  with  a   simple  categorization  model  that  facilitates  the  placement  of  vendors  within  quadrants  based   on  their  implementation  approach  (i.e.,  methodology)  and  use  of  technology.         Note:  This  report  does  not  include  the  names  of  specific  vendors  within  the  classification  scheme.     This  information  is  available  via  a  direct  engagement  with  Rocket-­‐Hire.       Categorizing  the  Market  –  A  Quadrant-­‐Based  Scheme     Fluidity  vs.  Power     The  effective  use  of  Talent  Assessment  requires  the  management  of  many  tradeoffs,  all  of   which  boil  down  to  one  key  focus-­‐  balancing  the  time  and  expense  required  to  achieve   predictive  accuracy.    Traditionally,  achieving  higher  levels  of  accuracy  requires   more  time  and  expense  in  the  development,  configuration,  and  implementation   of  an  assessment.           While  more  traditional  assessment  methodologies  focus  almost  entirely  on  driving  precision  via   a  very  labor  intensive  model,  technology  and  market  demand  for  less  expensive,  easy  to  deploy   tools  have  led  to  the  development  of  methodologies  designed  to  increase  the  speed  and  ease   with  which  an  assessment  can  be  implemented.    No  matter  what  specific  type  of  assessment   content  is  involved,  vendors  are  continually  searching  for  the  formula  that  will  support  both   ease  of  implementation  and  accuracy.         The  wide  range  of  different  approaches  to  the  tradeoff  between  speed  and  accuracy  has   resulted  in  the  development  of  a  significant  number  of  differing  methodologies.    In  many  cases   a  focus  on  speed  results  in  a  methodology  that  deviates  from  core  best  practices.      On  the  other  
  19. 19. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  19     hand,  traditional  best  practices  based  methodologies  can  drive  high  levels  of  accuracy  but   require  a  great  deal  of  time  and  expense  to  configure  and  implement.     Our  classification  schema  (see  Figure  2)  is  comprised  of  two  parameters  —  fluidity  and  power   —  that  create  four  quadrants.    These  key  parameters  are  defined  as:     § Fluidity  –  The  ease  and  speed  at  which  an  assessment  can  be  deployed.    Fluidity   represents  the  labor  intensiveness  of  a  vendor’s  methodology  for  configuring,   implementing,  and  evaluating  an  assessment.     § Power  –  The  predictive  accuracy  of  the  assessment  (AKA,  validity).    Power  represents  the   extent  to  which  the  assessment  measures  things  that  it  is  supposed  to  and  can  deliver   outcomes  that  create  value.       Figure  2  –  Talent  Assessment  Quad  Scheme      
  20. 20. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  20       The  Four  Quadrants  In  Our  Model  Include:     Quadrant  1  –  High  Fluidity,  High  Power     è  Disruption  and  the  Future  of  Talent  Assessment   Vendors  in  this  space  are  using  technology  and  assessment  science  to  disrupt  the  market  by   offering  tools  that  are  both  fluid  and  powerful.    This  is  the  quadrant  will  continue  to  expand  as   vendors  find  ways  to  support  the  ability  to  quickly  drive  precision  at  scale.     Quadrant  2  –  High  Fluidity,  Low  Power   è  A  Crowded  Space   This  quadrant  is  crowded  as  many  vendors  offer  products  that  lead  with  ease  of   implementation  but  sacrifice  predictive  accuracy.      Vendors  in  this  quadrant  vary  quite  a  bit   based  on  their  methodologies.    It  is  often  difficult  for  consumers  to  understand  the  difference   between  vendors  in  this  quadrant  and  those  offering  solutions  of  higher  quality.             Quadrant  3  –  Low  Fluidity,  Low  Power   è  Dead  Zone   There  are  almost  no  vendors  working  in  this  space,  few  vendors  fit  this  model  as  it  represents   the  intersection  of  two  undesirable  parameters.    Vendors  in  this  quadrant  have  little  of  value  to   offer  and  should  be  avoided.       Quadrant  4  –  Low  Fluidity,  High  Power   è  Traditional  Methods   This  quadrant  includes  vendors  who  take  a  careful,  more  handcrafted  approach  to  ensuring   that  Talent  Assessments  are  “dialed  in”  precisely  for  a  given  client  situation.    Even  with   currently  available  technologies,  driving  high  levels  of  accuracy  requires  a  good  deal  of  effort.     This  quadrant  will  remain  filled  with  strong  offerings  and  represents  the  core  of  the  market  at   present,  but  will  slowly  erode  as  technology  continues  to  drive  change  in  methodologies  and   the  market  moves  towards  Quadrant  1.       Vendor  Categories  –  Placing  Vendors  in  the  Quad  Scheme     Given  the  number  of  methodologies  and  ways  in  which  Talent  Assessment  can  be  sold,  it  is   difficult  to  create  clearly  defined  vendor  categories  into  which  vendors  can  be  cleanly  placed.     However,  in  an  effort  to  simplify  the  classification  process,  we  present  a  simple  categorization   structure  that  includes  three  categories  that  are  not  mutually  exclusive  (many  vendors  fit  into   more  than  one  category).         Note  that  our  categorization  model  does  not  focus  on  the  specific  type  of  content  sold  by  a   vendor  (i.e.,  personality  tests).  Outside  of  niche  vendors  specializing  in  only  one  type  of  
  21. 21. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  21     assessment  content,  we  feel  that  assessment  type  does  not  provide  the  ability  to  truly   differentiate  vendors.    We  feel  that  vendors  are  best  differentiated  via  the  process  by  which   their  content  is  deployed  (e.g..,  methodology)  and  the  use  of  technology  to  support   deployment.    The  remainder  of  this  section  summarizes  our  placement  of  each  firm  type  within   the  quad  scheme  (this  information  is  depicted  in  Figure  2).     A. High-­‐Touch  Consulting  Firms     Quadrant  3  –  Low  Fluidity,  High  Power     While  many  Talent  Assessment  methodologies  require  some  consultation,  firms  in  this   category  are  differentiated  because  they  lead  with  a  high-­‐touch  approach  marked  by  a   heavy  reliance  on  professional  services.       Talent  Assessment  has  traditionally  focused  on  a  heavy  level  of  engagement  between   provider  and  consumer,  thus  this  category  is  comprised  of  firms  that  use  more  traditional   methods.    These  methods  require  consultative  partnerships  with  clients  and  often  sync  with   the  development  of  people  processes  across  a  wide  range  of  scenarios.    High-­‐touch  firms   focus  on  the  development  of  strategy  with  their  clients  while  also  providing  the  services   needed  for  execution  (i.e.,  the  development,  implementation,  and  evaluation  of  customized   Talent  Assessment  tools).       There  are  three  types  of  vendors  found  within  this  category:     1. General  consulting  firms  with  an  HR  practice  area  –  Large  consulting  firms  often   create  and  use  Talent  Assessment  as  part  of  the  toolset  needed  to  serve  their  clients.     Talent  Assessment  is  rarely  the  only  tool  these  companies  provide  to  their  clients,   rather  it  is  part  of  a  more  comprehensive  partnership.     2. Talent  Assessment  consulting  firms  –  These  firms  consult  only  on  Talent  Assessment.     They  often  use  a  core  set  of  tools  that  are  customized  for  clients.    These  firms   heavily  leverage  professional  services  when  working  with  their  clients.    Most  of   these  firms  have  an  I/O  psychology  background  and  use  more  traditional   methodologies.     3. Developers  of  custom  assessment  content–  These  firms  develop  bespoke   assessments  for  clients.    They  focus  less  on  strategy  and  more  on  the  test   development  process.    These  firms  often  specialize  in  the  development  and   maintenance  of  certification  exams,  licensure  exams,  and  knowledge  tests.          
  22. 22. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  22     B. Blended  Approach  –  Product  Firms         Quadrants  1,2,  and  3     These  quadrants  represent  the  most  crowded  segment  of  the  market  and  differentiating   the  vendors  found  within  can  be  difficult.    Firms  in  this  category  take  a  more  transactional,   productized  approach  that  focuses  on  reducing  the  time  to  deploy  assessments.    Due  to  the   complexities  associated  with  Talent  Assessments,  product  firms  often  must  support  their   offerings  with  a  full  slate  of  professional  services.    Vendors  in  this  category  are   differentiated  from  consulting  focused  firms  because  any  professional  services  required  to   support  their  products  don’t  center  on  customization  of  assessment  content.       There  are  three  types  of  vendors  within  this  category:     1. Test  publishers/transactional  solutions  –  Includes  firms  that  create  discreet  tests   that  measure  specific  traits  or  are  packaged  for  a  specific  job.    This  area  includes   traditional  vendors  who  have  been  selling  the  same  basic  content  for  decades.    Most   vendors  in  this  category  offer  solid  products  that  have  been  proven  to  work.    Despite   the  quality  associated  with  it,  the  test  publisher  model  is  starting  to  fade  as  an   increasing  number  of  firms  have  been  purchased  for  their  content  and  integrated   into  larger  entities.    There  are  also  an  increasing  number  of  companies  offering   transactional  solutions  for  sale  directly  with  no  human  intervention  or  consulting  to   support.    Both  test  publishers  and  transactional  sellers  are  increasingly  focused  on   supporting  the  SMB  market.     2. Solution  providers  –  At  present,  this  is  the  largest  area  within  the  entire  Talent   Assessment  space.    There  are  a  rapidly  increasing  number  of  companies  offering   technology  based  assessment  platforms  that  can  be  used  to  quickly  and  easily   support  implementation.    This  is  one  of  the  main  entry  points  into  the  market  as   firms  continue  to  create  technology-­‐based  solutions  that  attempt  to  be  both  highly   fluid  and  highly  accurate.    Most  of  these  firms  are  product  focused  and  any  required   consulting  services  focus  on  supporting  the  product  rather  than  creating  custom   content.    There  is  a  tremendous  amount  of  variation  within  this  category  –  making  it   hard  for  non-­‐experts  to  differentiate  the  quality  of  a  given  vendor.       3. Providers  of  specialized  assessments–  This  area  includes  firms  that  provide  a  highly   specialized  assessment  product  or  solution.    Many  of  these  providers  offer  highly   specialized  tools  (i.e.,  call  centers,  job  specific  simulations,  etc.),  or  work  exclusively   within  an  industry  vertical.          
  23. 23. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  23     C. Technology  Firms  –  Leading  with  True  Innovation         Quadrant  1     This  category  includes  firms  that  were  created  around  technology  as  opposed  to  a  specific   Talent  Assessment  method  or  model.    These  firms  are  using  combinations  of  assessment   content,  AI,  mobile,  social  and  big  data  to  create  a  new  brand  of  measurement  products   that  represent  a  departure  from  traditional  methods  and  products.     There  are  three  types  of  vendors  within  this  category:     1. Measurement  innovators  –  Includes  companies  using  Talent  Assessment  as  the  core   of  a  market  offering  that  is  disruptive  or  highly  novel.    This  includes  a  range  of  firms   that  may  use  AI  and  big  data  based  solutions  to  predict  job  success.    Some  of  these   firms  use  non-­‐traditional  approaches  such  as  neuroscience  based  assessments  or   games.     2. Integrated  platform  providers  –  This  is  a  rapidly  growing  area  within  Talent   Assessment  that  includes  HR  technology  and  HCM  providers  who  are  adding   assessment  functionality  in  combination  with  analytics  to  drive  new  levels  of  insight   around  talent.     3. Sourcing  and  predictive  matching  tools  –  There  are  an  increasing  number  of   providers  that  are  using  psychometrically  based  tools  to  support  enhanced  sourcing,   moving  assessment  outside  of  the  funnel  in  an  effort  to  reduce  the  friction  that   plagues  this  area.    These  providers  are  creating  talent  marketplaces  in  which   assessed  candidates  are  matched  with  job  openings  based  on  a  combination  of  both   AI  and  psychometric  data.    Sourcing  is  also  well  suited  for  the  use  of  social  data  and   connections  to  support  a  more  quality  focused  sourcing  process  that  is  a  win-­‐win  for   candidates  and  employers  alike.    This  is  an  area  where  we  expect  to  see  the   significant  growth  and  innovation  over  the  coming  years.      
  24. 24. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  24     Part  III:     Market  Opportunity     This  section  frames  market  opportunity  via  a  summary  of  trends  and  technologies  that  will   create  disruption  within  the  Talent  Assessment  space.    It  closes  with  the  identification  of  the   five  areas  that  represent  the  most  significant  market  opportunities  for  Talent  Assessment  as  we   move  towards  2020.     Trends  and  Technologies     Trends  Limiting  Strong  Growth  2015–2017     While  the  overall  outlook  for  Talent  Assessment  in  2015  is  favorable,  the  following  trends  will   continue  to  limit  the  size  of  market  increases  over  the  coming  few  years.         § Assessment  continues  to  be  a  hard  sell  at  the  enterprise  level  –  Traditionally  long  sales   cycles  are  getting  even  longer.    Most  end  users  still  don’t  understand  the  value   of  Talent  Assessments  and  will  continue  to  put  it  off  as  secondary  to  the   adoption  of  new  systems  such  as  Applicant  Tracking  Systems  (ATS).    As  HCM   providers’  Talent  Assessment  strategies  mature,  uptake  at  the  enterprise  level  will   increase  significantly.     § Assessment  is  becoming  commoditized  –  The  proliferation  of  new  vendors  entering  the   space,  the  difficulty  of  fielding  quality  solutions  at  scale,  and  the  consolidation  of  Talent   Assessment  into  larger  HCM  systems  are  threatening  to  commoditize  the  industry.    This  is   driving  prices  down  and  creating  increased  confusion  amongst  consumers.     § The  value  of  Talent  Assessment  will  remain  obscured  by  lack  of  quality,  reliable   performance  data  –  To  truly  show  the  value  of  Talent  Assessment,  its  relationship  to  key   performance  indicators  must  be  demonstrated.    End  users  will  continue  to  struggle  to   provide  the  data  needed  to  clearly  show  the  ROI  of  their  assessment  programs.  As   vendors  provide  improved  tools  and  processes  for  better  collection  and  curation  of   performance  data,  dramatic  increases  in  the  predictive  accuracy  of  assessments  will  result   and  the  uptake  of  assessments  will  increase.       § Assessments  still  look  (mostly)  old  fashioned  –  Change  is  slow  to  come  to  the  assessment   industry.    While  the  coming  year  will  see  the  continued  rise  of  new  start  ups  with  fresh   ideas,  it  will  take  some  time  for  their  products  to  mature.    The  norm  in  the  industry   is  still  tests  that  are  not  user  friendly  and  often  receive  push  back  from  end   users  who  feel  it  is  a  sandbag  in  the  workflow  of  the  hiring  process.  
  25. 25. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  25       § Increasing  pressure  for  mobile  assessments  remains  unmet  –  Talent  Assessment  is  still  a   research-­‐science  based  discipline  that  remains  conservative.    While  all  the  big  providers   have  some  mobile  offerings,  there  remains  trepidation  around  the  equivalency  of  mobile   assessments  to  more  traditional  methods.    On  top  of  this,  changes  in  mobile  technologies   are  happening  very  fast.    Eventually  new  item  modalities  will  be  created  that  are  in  sync   with  mobile  capabilities,  we  expect  this  is  still  several  years  out.         Looking  Towards  2020     As  we  approach  2020,  the  trends  below  will  have  a  significant  impact  on  the  Talent  Assessment   market  and  will  be  largely  responsible  for  the  additional  market  growth.    These  are  the  trends   that  will  shape  the  future  of  the  Talent  Assessment  space.     § HCM  suite  providers’  offerings  mature  –  Talent  Assessments  will  be  much  more   mainstream  by  2020,  creating  more  market  penetration  for  providers  and  driving   significant  increases  in  revenues.    Growth  will  come  via  HCM  providers’  ability  to   support  integrated  talent  management  with  predictive  data  and  analytics   that  will  support  insight  that  is  directly  linked  to  business  operations  and   strategy.     § Increasing  number  of  non-­‐traditional  predictive  tools  compete  with  Psychology  based   Talent  Assessments  –  Predicting  success  in  hiring  is  no  longer  the  sole  domain  of  I/O   Psychologists.    There  are  a  growing  number  of  non-­‐psychological  tools  that  are  being   touted  as  scientifically  sound  ways  to  model  hiring  success.    These  are  mostly  AI  based   predictive  tools,  but  also  include  neuroscience  based  assessments.    We  can  expect  to  see   growing  tension  between  the  traditional  ways  and  advanced  technologies  that  threaten   to  marginalize  them.         § Increasing  focus  on  “fit”  –  The  ability  to  determine  the  level  of  “fit14 ”  between  the  values   of  applicants  and  those  of  employers  is  a  universally  popular  idea.    At  present,  its   execution  has  been  limited.    Increased  mobile  and  social  recruiting  technologies  using  AI   and  crowdsourcing  combined  with  psychometrics  will  provide  a  winning  formula.         § The  candidate  voice  will  begin  to  force  a  change  –  Increased  social  connectivity  is  placing   bottom  up  pressures  on  companies  to  adapt  or  die.    Increasing  pressures  on  corporations   to  view  their  hiring  process  as  an  extension  of  their  corporate  brand  will  force  a  change.     The  candidate  experience  for  Talent  Assessment  is  notoriously  poor  and  companies  are   slowly  putting  pressure  on  assessment  providers  to  create  a  better  candidate  experience.        
  26. 26. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  26     § SMB  market  for  assessments  begins  to  heat  up  –  Quality  transactional  tools  that  can  be   quickly  targeted  for  specific  jobs  or  populations  will  continue  to  become  available.    The   ability  to  leverage  taxonomic  tools  such  as  O*NET15  to  localize  and  optimize  assessment   content  will  help  assessments  become  more  widely  used.     § Social  and  AI  forever  change  sourcing  –  Social  job  matching  is  pushing  Talent  Assessment   up  the  funnel16 -­‐  making  it  easier  to  leverage  the  benefits  of  quality  psychometrics  to  help   job  seekers  find  jobs  (and  vice  versa).     § Credentialing  begins  to  mature  –  There  is  no  doubt  that  credentialing  will  be  a  major   force  in  the  future  of  hiring  and  that  credentials  will  be  at  least  partially  based  on   assessments.    The  coming  changes  in  learning  and  the  higher  education  system  will   demand  it.    Once  LinkedIn  and  Facebook  field  trusted  badging  systems,  everything  will   change.  The  ability  to  use  digital  merit  badges  to  verify  important  information  will  be  the   deathblow  to  traditional  methods  such  as  resumes.       § Interactivity  moves  closer  to  mainstream  –  Gamification  is  already  starting  to  be  a   significant  pressure  in  the  assessment  industry.    There  are  still  significant  measurement   issues  with  games  and  simulations,  but  they  are  on  the  forefront  of  research  in  the  space   and  it  is  an  eventuality  that  assessments  will  become  more  interactive  as  time  goes  on.       Technologies  On  Which  Change  Will  Be  Built     These  are  the  ingredients  that  will/are  bring  change  to  the  Talent  Assessment  landscape  by   allowing  assessments  to  be  shorter,  more  accurate,  more  engaging,  and  more  socially   connected.     § Crowdsourcing/Collective  intelligence   § Machine  learning17   § Gamification   § Mobile  technology   § Sentiment  Analysis18   § Speech  recognition/text  to  speech   § Supercharged  AI  &  Analytics   § Natural  language  processing19   § Writing  content  analysis   § Content  authoring  systems    
  27. 27. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  27     Summary  of  Major  Talent  Assessment  Market  Opportunities     All  of  the  trends  and  information  summarized  in  this  report  suggest  that  there  will  be  an   increasing  opportunity  for  Talent  Assessment  as  a  revenue  engine  for  a  variety  of  different   types  of  business.  While  traditional  methods  will  remain  lucrative  due  to  their  high   profit  margin  and  history  of  success,  there  is  tremendous  opportunity  for   disruption  within  the  Talent  Assessment  space.    This  disruption  will  leverage  the  use  of   technology  and  science  to  simultaneously  drive  both  speed  (e.g.,  Fluidity)  and  accuracy  (e.g.,   Power).         The  increasing  ability  of  technology  to  increase  fluidity  and  power  of  Talent  Assessment  has   placed  us  on  the  edge  of  a  major  shift  in  the  field.    The  future  of  the  space  will  be  defined  not   by  I/O  psychologists,  but  rather  by  multi-­‐disciplinary  collaboration  between  psychologists,   sociologists,  data  scientists  and  computer  scientists.  The  increased  role  of  analytics  and  hard   data  within  HR  practices  will  drive  new  levels  of  insight  that  will  raise  the  bar  for  accountability   amongst  Talent  Assessment  vendors,  forcing  them  to  adapt  or  die.         Based  on  our  thorough  review  of  the  Talent  Assessment  market,  opportunity  and  growth  will   center  around  the  following:     § OPTIMIZED  SOURCING  –  The  existing  sourcing  process  has  been  broken  since  the  days   of  the  first  job  board.    There  is  a  tremendous  amount  of  friction  in  the   sourcing  area  and  a  tremendous  amount  of  value  to  be  extracted  via   reducing  it.    The  highest  growth  area  within  the  overall  market  will  center  on  the  use   of  socially  based  sourcing  tools  that  combine  AI,  psychometric  measurement  tools  and   advanced  predictive  analytics.    The  data  collected  in  the  sourcing  process  will  continue   to  have  value  across  the  entire  employee  lifecycle,  driving  increased  value  for  those  who   can  support  both  pre  and  post  hire  needs.    Moving  psychometrics  to  the  sourcing  area   will  also  support  the  value  of  psychometrics  without  all  the  adoption  hassle  currently   marking  the  enterprise  sales  of  Talent  Assessments.     Keywords:  Fit,  cultural  fit,  social  job  matching,  social  sourcing,  talent  communities       § EMBEDDED  PSYCHOMETRIC  MEASUREMENT  –  HR  technology  providers  will  begin  to   figure  out  that  outsourcing  Talent  Assessment  to  a  third  party  vendor  is  both  expensive   and  unwieldy  and  will  increasingly  seek  to  own  their  own  assessment  content.     Ownership  of  content  provides  an  economic  advantage  creating  pure  profit  once  the   sunk  cost  of  obtaining  content  has  been  paid  off.    Ownership  of  content  also  ensures   more  control  over  how  assessments  are  delivered  and  complete  ownership  of   assessment  data.    Data  ownership  is  significant  because  it  allows  more  latitude  in  the  
  28. 28. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  28     analysis  of  data  across  the  entire  employee  lifecycle,  thus  supporting  deeper  levels  of   insight  for  clients.    The  next  five  years  will  see  significant  increase  in  the   number  of  HR  technology  vendors  who  invest  in  owning  and  embedding   assessment  content.    Once  this  content  is  paid  off,  these  firms  will  be  able  to  drive   significant  increases  in  revenue  as  they  provide  their  owners  a  key  ingredient  in  using   data  to  show  direct  value  to  their  clients’  business  line.     Keywords:  Integrated  talent  management,  HCM  platform,  predictive  analytics,  data   warehousing,  employee  lifecycle       § INTERACTIVITY  AND  GAMIFIED  PSYCHOMETRIC  ASSESSMENTS  –  Engagement  is   becoming  a  critical  driver  of  success  in  the  hiring  process  and  beyond.    The  current   assessment  experience  is  looking  increasingly  old  fashioned.     Generational  pressures  will  demand  that  assessments  change  to  look  and   feel  similar  to  current  user  experiences.    The  space  is  wide  open  for  increases  in   engagement  around  the  measurement  experience.    We  can  expect  to  see  many  user   experiences  becoming  measurement  tools  via  the  ability  to  harvest  data  that  can  be   analyzed  and  interpreted  to  make  predictive  decisions.    Firms  that  can  create  engaging   tools  that  are  also  scientifically  sound  will  have  a  significant  opportunity  to  gain  market   share.         Keywords:  Engagement,  Mobile,  Social,  User  experience,  employment  brand,  social   data,  credentialing         § DRIVING  PRECISION  AT  SCALE  –  There  is  tremendous  opportunity  for  mass   customizable  transactional  Talent  Assessment  products.    The  inability  to  customize  an   assessment  for  a  given  situation  results  in  decreases  in  accuracy.    The  alternative  has   traditionally  required  significant  time  and  money  to  manually  calibrate  an  assessment.     Advances  in  AI,  job  taxonomies,  and  analytics  provide  the  foundation  for  a  new  breed  of   tools  that  support  both  fluidity  and  power.    These  tools  are  well  positioned  to  tap  into   the  SMB  market,  a  segment  that  has  been  largely  underserved  when  it  comes  to  quality   Talent  Assessment  products.     Keywords:  SMB,  O*NET,  transactional,  mass  customization,  individual  contributors         § NICHE  BASED  SIMULATIONS  –  When  it  comes  to  predicting  job  success,  work  samples   and  simulations  are  hard  to  beat.    However,  these  tools  are  often  very  expensive  and   are  unable  to  replicate  many  work  environments.    Advances  in  technology  are  allowing  
  29. 29. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  29     the  creation  of  work  samples  and  simulations  that  are  flexible  and  engaging,  while   remaining  relatively  inexpensive.    There  are  certain  niche  jobs  or  industry  verticals  (i.e.,   nursing,  financial  analysis,  etc.)  that  will  benefit  from  the  use  of  accurate  and  engaging   simulation  tools.    As  time  goes  on,  expect  to  see  more  simulations  that  serve  the  needs   of  both  hiring  and  training.    These  simulations  will  be  delivered  via  engaging  platforms   that  can  be  used  across  the  entire  employee  lifecycle.       Keywords:  Manufacturing,  work  sample,  industry  verticals,  serious  games,  authoring   systems,  branching  logic,  sentiment  analysis    
  30. 30. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  30     Conclusion     While  it  can  be  extremely  complex  in  its  execution,  Talent  Assessment  represents  a  component   that  has  significant  value  to  both  talent  acquisition  and  talent  management  platforms.    It  is   expected  to  be  a  high  growth  area  over  the  coming  years,  with  the  most  significant  growth   coming  as  technology  becomes  more  deeply  blended  with  the  science  of  psychological   measurement.    As  time  goes  on,  approaches  that  are  based  purely  in  psychology  will  fade  in   favor  of  a  range  of  new  methodologies.    The  most  significant  growth  in  the  use  of  assessments   will  come  in  two  areas.    The  first  is  sourcing,  as  AI  and  measurement  combine  to  reduce  the   friction  that  has  plagued  this  area.    The  second  is  via  their  integration  into  HCM  platforms  that   house  both  predictor  and  outcome  data.    Owning  both  data  streams  will  support  new  levels  of   business  intelligence  —  allowing  companies  deeper  levels  of  insight  into  the  value  of  their   human  capital.    
  31. 31. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  31     S o u r c e s       1  http://www.gartner.com/it-­‐glossary/hcm-­‐human-­‐capital-­‐management/     2  http://www.aberdeen.com/research/9003/rr-­‐assessments-­‐hcm-­‐hr/content.aspx     3  http://www.bersin.com/lexicon/Details.aspx?id=12860     4  http://www.slideshare.net/JeffMonk/human-­‐capital-­‐management-­‐software-­‐market-­‐ overview     5  http://pando.com/2013/08/14/the-­‐bubble-­‐around-­‐talent-­‐and-­‐human-­‐capital-­‐ management-­‐is-­‐too-­‐big/     6  http://www.idc.com/getdoc.jsp?containerId=241032     7  http://www.forbes.com/sites/joshbersin/2014/06/26/the-­‐talent-­‐management-­‐software-­‐ market-­‐surges-­‐ahead/     8  http://www.reuters.com/article/2012/07/02/corporateexecutiveboard-­‐acquisition-­‐ idUSL3E8I26DU20120702     9  http://www.bersin.com/blog/post/2012/07/Corporate-­‐Executive-­‐Board-­‐acquires-­‐SHL-­‐ Heating-­‐Up-­‐the-­‐Market-­‐for-­‐HR-­‐Services-­‐and-­‐Data.aspx     10  http://searchconsumerization.techtarget.com/definition/SoLoMo-­‐social-­‐local-­‐and-­‐mobile     11 http://www.pwc.com/talentchallenge     12  http://dupress.com/articles/human-­‐capital-­‐trends-­‐2014-­‐survey-­‐top-­‐10-­‐findings/     13  http://www.bls.gov/opub/ted/2014/ted_20140701.htm     14  http://www.ere.net/2004/05/20/the-­‐value-­‐of-­‐person-­‐organization-­‐fit/    
  32. 32. ©2014  Rocket-­‐Hire,  LLC  •  www.rocket-­‐hire.com   October  2014  |  32     15  http://en.wikipedia.org/wiki/Occupational_Information_Network     16  http://www.ere.net/2014/06/05/why-­‐social-­‐job-­‐matching-­‐will-­‐replace-­‐talent-­‐ assessment-­‐tests/     17  http://en.wikipedia.org/wiki/Machine_learning     18 http://en.wikipedia.org/wiki/Sentiment_analysis     19 http://en.wikipedia.org/wiki/Natural_language_processing