The recent purchase of the global talent measurement consultancy PDI Ninth House — once a leader in its field — by search firm Korn/Ferry International is the latest move in a wave of consolidations that is fundamentally changing the talent measurement market. And there are some potentially serious implications for organizations in their ability to effectively identify and measure talent.
The vast majority of businesses that seek to measure the talent and capabilities of employees rely, at least to some degree, on external vendors. Historically, these vendors have been divided into two groups. On the one side, there are specialist psychometric and 360-degree feedback vendors — which primarily create and sell tests and tools. On the other side are general measurement consultancies — which do things such as run assessment centres and provide individual psychological assessments, but get involved in almost everything related to measuring and developing talent.
The past two years, however, have seen the market space radically changed by new entrants. In 2011, two of the biggest specialist psychometric vendors, SHL and Previsor, merged in a long predicted deal. Then, in mid-2012, a company previously unknown in the measurement space, the Corporate Executive Board, bought both the now giant SHL-Previsor and a respected general measurement firm called Valtera.
At the same time, search firms have been developing measurement businesses in an effort to diversify income. Korn/Ferry, in particular, has gone on a buying spree, acquiring personnel and a number of smaller businesses before their move for PDI. Other search firms, such as Heidrick & Struggles and Egon Zender, have followed suit, though they appear more focused on the organic growth of their existing measurement businesses.
The expansion of these firms has not just been about size. Their products and services have expanded as well. Traditionally, they operated at an entirely different price point to the specialist assessment and development consultancies, charging two to three times as much. Some still do this but many have launched new services and products priced to compete directly with the mainstream measurement market.
Finally, hovering on the edge of this picture are two groups. First, there are persistent rumours some of the big business consultancies, such as Deloitte or Bain, might try to move into the measurement market through a large acquisition. Second, there are the twin peaks of IBM and Oracle. In 2012, each completed a high-profile purchase of a company that combined a talent acquisition system (for managing recruitment processes) with measurement products (IBM purchased Kenexa and Oracle bought Taleo).
Whether these new entrants will be successful remains to be seen. For example, we know of many HR people who strongly believe search firms should not be given access to their talent and we suspect such reservations could ultimately limit these firms’ role in the market. Yet the new entrants are serious players and if the current trend continues, they may well become the largest too.
The current round of consolidation is undoubtedly overdue and promises to cohere what has historically been a fragmented market. It is something we welcome and see as good news for organizations, making it easier to navigate the market and choose which product and vendor to use.
Yet we also view the current round of consolidations with some concern. A noticeable trend amongst the new entrants to the market is the move to monetize the intellectual capital of measurement firms by promoting generic and global products.
With psychometric test publishers, this may be appropriate as they operate and add value through generic tests with big benchmarks. But for the more general measurement consultancies, it signals a fundamental shift in approach.
Our concern is that the intervention of new players without a long tradition — in what is a very specialist, technical arena — will bring with it a raft of generic, off-the-shelf, monetized products and services that look good but are not that effective.
Talent measurement all too often fails to have the impact it should on companies — but there are simple ways firms can rectify the situation. The risk for employers in this round of consolidation is that the task of making measurement work will only be made harder.
Shlomo Ben-Hur is an organizational psychologist and professor of leadership and organizational behaviour at IMD, a business school based in Lausanne, Switzerland. Nik Kinley is director of Talent Solutions in Surrey, United Kingdom. They are authors of the soon-to-be-released book Talent Intelligence: What You Need to Know to Identify and Measure Talent.