· 5 min read · Features

Psychometrics Risk management: Risky business

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Volatile behaviour by employees can cost a business millions of pounds, which could explain why a psychometric tool to predict the risk some staff represent is gaining credence.

The words 'employees are our greatest asset' trip off most HR directors'tongues so regularly the phrase barely gets noticed any more. So why dothey persist in using it? Is it because the cliche is true, or becauseit is what colleagues expect to hear? Maybe it is a bit of both. Butsurely it is more honest to admit that staff are less your greatestasset and possibly your greatest threat.

Some organisations believe normal measures of 'risk' (absenteeism andillness) no longer cut it. Far more serious, they believe, is thevolatile behaviour of some staff that can have a destabilising effectcosting businesses untold millions each year. This year's stock-marketcrash, worsened by Societe Generale Bank employee Jerome Kerviel'sdecision to 'act alone' to recover losses of 3.4 billion (fourtimes larger than the amount rogue trader Nick Leeson lost, which led tothe collapse of Barings Bank), dramatically shows how unpredictableworker behaviour can have disastrous results. Although most staff willnot be in a position to lose money on this scale, the dangers ofdecisions made under stress can be dramatic. In some cases they canendanger safety (see later) and, according to a report by law firm FieldFisher Waterhouse, two-thirds of bosses admit their emotions can affecttheir sense of perspective in areas such as disputes.

A branch of psychometrics is emerging precisely to predict the 'risk'some staff represent. It is called Behaviour Risk Management. It isbased on traditional psychological theory but, according to itsdevelopers, it is beginning to have wider appeal.

Andrew Hill, director of talent management at consultancy Chuimento, isone provider who believes employers should understand what he calls"personal management and the potential for risk". Its methodology splitspeople into 'risk types' including extroverts, introverts andintuitives. "Research proves extroverts employed as drivers are threetimes more likely to have accidents," he says. "Extroverts are generallymore risk-taking by nature. We've also found that there is adisproportionate number of intuitives among managers - which is oftenwhy things don't get done. The point is that people's personalities aregenerally fixed throughout life, and when the stress hits, individualswill revert to type. The worst possible combination is the introvertedintuitive. They will not tell people about things when they start to gowrong."

Psychometrics has long been used to assess personalities (the commontest being the Hogan, which measures openness, conscientiousness,extrovertism, agreeableness and neuroticism). But using risk analysis topredict future behaviour, (for possible exclusion from some roles), hasa certain science-fiction ring about it - think Minority Report, thefilm where people were arrested for crimes they were 'going' to do,rather than ones they had already committed. Hill does not see it as'personality discrimination'. "It already exists for many roles," hesays. "Extroverts are usually sought for sales jobs, for example. Thisis just taking it further, and applying it to whether this or thatmanager should be promoted to a role where risk has to be handled."

Chuimento has been using risk analysis as part of management developmentfor Shell. Here, a cavalier attitude to risk - such as when and when notto shut an oil station down - can be the difference between life anddeath. It costs 9 million per day to have a platform offline, sothe decision needs to be a bold one. Hill describes it as coachingpeople "not to fight their personality type, but understand they mayneed another view before taking decisions."

Bill Hester, a chartered occupational psychologist, agrees, saying HRmust narrow the odds, and that "the more risky a job, the more riskanalysis an HR manager will need to see". He argues, however, that toomuch emphasis can be put on personality traits. "Behaviour is also afunction of the environment people are working in. There are integritytests, which establish emotional stability, but I would argue these onlyaccount for up to 10% of variability in behaviour." He suggests the bestpredictor of future behaviour is past behaviour. So is there any realconsensus?

Ian Newcombe, head of assessment operations at Kenexa, says: "Theproblem with using psychometrics to assess suitability fordecision-making roles is that often it is the rule-breakers who are themost successful. Psychometrics works superbly for large groups, but isunlikely to identify one person as any more or less likely than another(with the same traits) to present a risk."

Penny Moyle, head of innovation at psychometrics company OPP, has madethe study of personality her main interest. "What is clear is thatpeople don't just develop new traits when they come under pressure;existing ones get magnified. The problem is, companies don't oftenproduce an emotional map of jobs. They're very good at producing jobdescriptions, but not emotional ones. Bosses should be looking atpeople's resilience under pressure."

While investment bankers and oil platform managers might seem to benatural candidates for risk analysis, whether this assessment willfilter down to more rank-and-file employees is debatable. Newcombe sayshe is "sceptical as to how it can apply to the office". However, OPP isnow working with a major high-street retail brand that is putting allits shop-floor staff through assessments about how they handlepotentially stressful situations.

Other companies are also finding their own solutions. Call-centreoperator The Listening Company has spent the past year developing apsychometrics-based 'listening test' that breaks people down into typesof listeners. Managing director Neville Upton says all operators havebeen through it, and are matched accordingly to different types ofclients/callers.

"We're not saying staff are good or bad listeners, but that people havefour distinct traits: they are either intuitive listeners (people whorespond with new ideas); directive listeners (they listen for the thingsthat help people do stuff); evaluative listeners (they listen to add totheir own body of knowledge); and facilitative listeners (they want toknow more about a person). People gravitate to those they like listeningto and away from those they do not. Clearly, people who fake beingattentive or talk while others are talking risk alienating people andaffect the business."

The 20-minute test was developed by Tom Japp, president of the Centrefor Enabling Leadership, who says it is 80%-85% accurate. It is nowbeing commercially offered to external companies at the recruitmentstage.

The whole point about risk analysis is that it is just that - a risk.Some want to have less than others, which begs the question: can youreally risk not to look into this too?

IS MOTIVATION DANGEROUS?

Does what motivates us affect how much of a risk we present at work?According to James Bywater, consultant at SHL: "Our motivators say asmuch about the organisation and managerial style as it does about yourown personality." So far so good. So what does a motivationpsychometrics test say about me?

I took SHL's 'MQ' (motivation questionnaire) test, which comprises 144questions. First the good news. According to Bywater, I am highlyprincipled. "As a journalist, it's good to see you have high standards,enjoy a challenge, and want to be stretched," he says. "You are probablykeen to see an alignment of your own values with those of yourorganisation. You like being part of a team and you are less botheredabout structures, work systems and elements that constrain yourcreativity." It all sounds good.

However, Bywater says I am driven by "fear of failure and the need forpraise and personal growth". He adds: "You are also likely to becomedemotivated by anything that affects your work-life balance. Materialreward is also a high driving factor." Will this affect my attitudes totaking decisions at work? "Motivation tests show what it is around youthat makes you motivated," he explains. "Some people are just moremotivated than others, full-stop, but there is overlap intopersonality.

Societe Generale trader Jerome Kerviel can be used as an example toexplain the psychology of accidents. For some people, it's not thatthey've gambled and lost, but the fact they've lost the ability to seethemselves as gambling in the first place." Peter Crush, deputy editor,HR.