More than 20% of Indian youth between the ages of 15 and 24 years are “seeking or available for work,” according to 2011 census data. In other words, some 47 million young Indians are unemployed. At the other end of the spectrum, employers across various sectors are searching for the right talent. For brothers Himanshu Aggarwal, 35, and Varun Aggarwal, 31, this massive gap represents an opportunity to not just build a profitable business but also to make a social impact.

In 2007, the Aggarwals co-founded Aspiring Minds, a talent evaluation and employability assessment company with propriety technology, under the mentorship of Tarun Khanna, a professor at Harvard Business School. Their reasoning was simple: Most employers use proxy measurements — like a college pedigree or geographical region — to assess the employability of potential employees. However, new ways of learning have upended that model. For instance, online classes taken through MOOCs (massive open online courses) wouldn’t necessarily be reflected in proxy measurements. “A standardized employability test, on the other hand, can help jobseekers to showcase their abilities to prospective employers,” says Varun, CTO of the company. Adds Himanshu, who is CEO: “We want to democratize job opportunities and provide a level playing field for candidates.”

At the “Reimagine Education” conference held at Wharton this month – organized by the schools SEI Center in collaboration with QS (Quacquarelli Symonds), a U.K. based consulting firm – Aspiring Minds’s model came in for unexpected praise. Several participants noted that the company’s assessment model represents a radical departure because it does not focus on what educational institutions are teaching. Instead, it concentrates on skills and capabilities that employers seek in potential employees. By creating an assessment model based on employers’ expectations, Aspiring Minds lets students skirt traditional educational institutions and gain the knowledge they need from MOOC platforms such as Coursera or EdX. “Students are able to bypass the university system,” one participant said, “and they can exploit the big mismatch between supply and demand. This represents true business model innovation. It is shaking up India’s education market.”

Khanna, who is co-founder-investor and advisor to Aspiring Minds, points out that while a lot of money is being invested all over the world in training workers, not much is being done to monitor the effectiveness of the various initiatives. “A strong assessment mechanism can make sure that any resource that society puts into the talent ecosystem is used efficiently and has a multiplier effect,” Khanna notes.

The company’s flagship product is a computer adaptive test known as AMCAT, which stands for Aspiring Minds Computer Adaptive Test. It comprises several modules and assesses skills including English language proficiency, aptitude and learnability, personality, managerial competencies and domain knowledge across various industries such as IT & IT-enabled services, banking, financial services, insurance, retail and hospitality. The test has been designed to run on a low configuration infrastructure with or without Internet access and can be taken online, at the company’s assessment centers, on school campuses and at corporate locations. Companies can also customize the test for specific roles within their organizations.

“We want to democratize job opportunities and provide a level playing field for candidates.” –Himanshu Aggarwal

“AMCAT assesses a candidate’s employability quotient, identifies the sectors and roles [the employee] is suitable for and also [identifies] skills he or she needs to improve for different job profiles. This helps the jobseekers as well as the companies,” says Himanshu, a graduate of the Indian Institute of Technology Delhi, who worked at Network Appliances in the U.S. before starting Aspiring Minds. Varun, a graduate of the Massachusetts Institute of Technology who has worked at STMicroelectronics, adds: “One of the ways we validate the test is by getting industry inputs. We run the test on current employees, get their on-the-job performance data and correlate the two to predict what kind of test results a person needs to have to be successful in a particular role.”

Industry Links

Rituparna Chakraborty, co-founder and senior vice president at staffing services firm TeamLease, says that Aspiring Minds is on the right track. Without a link to different industries, she says, the assessment would be ineffective. However, the linkage should also ensure that the assessment is refined on an ongoing basis based on how actual worker performance evolves. “For any employability assessment to be effective, there has to an ecosystem through which actual delivery or performance at the workplace of the [person being assessed] becomes an input to the constant evolution of the tool,” Chakraborty notes. “Any transmission loss between the changing needs for skills and output breeds ineffectiveness, making most assessment tools redundant over a period of time.”

According to Chakraborty, “most assessments available today have the efficacy of a palm reader or an astrologer.” If they were effective, there wouldn’t be accidents in hiring decisions, she says. “Given the attrition levels all around, there is a definite need for employability assessment tests which, if not perfect, [at least] help us bridge the gap between promise and actual performance. The idea of assessment is to effectively match demand and supply. That can only happen if the process of evolving an assessment is dynamic.”

There are other challenges, too. Steven Stemler, professor of psychology at Wesleyan University in Connecticut and an advisor to Aspiring Minds, points out that the major drawback of many computerized adaptive tests (CATs) is that they do not let the examinee review and redo any answer. “The algorithm chooses the difficulty of the next item based on your response to the item you just submitted, so there is no turning back. In addition, one of the difficulties CATs encounter is that there has to be a very large item pool, particularly at the mid-level. Consequently, the cost associated with item development can be quite high.”

Ranga Subramanian, head of resourcing at HDFC Bank, notes that lack of adequate infrastructure in India is an added hurdle. “While computerized tests [can be] seamless in tier 1 and tier 2 cities, organizations with a pan-India presence may face problems in tier 3 and tier 4 cities and in rural areas. This may pose a challenge when it comes to standardizing the evaluation process.”

Aspiring Minds, which currently has a team of 300, has increased its reach to some 4,000 colleges across the country and has a client pool of more than 700 firms, including HCL Technologies, HDFC Bank, Tata Motors, Deloitte Consulting and Microsoft Research. Nearly two million candidates (typically entry-level jobseekers) have taken the AMCAT either individually, through their colleges or as part of a corporate recruitment process. Earlier, the eligibility for AMCAT was a graduate degree. In 2013, it was opened up to high school students for assessing vocational skills in different industries.

“Most assessments available today have the efficacy of a palm reader or an astrologer.” –Rituparna Chakraborty

In 2013, Aspiring Minds partnered with the National Skill Development Corporation (NSDC), a public-private partnership set up in 2009 with a mandate to “skill and up-skill” 150 million people by 2022, to create a technologically driven standardized test format known as TESLA. This test assesses blue collar/vocational jobs across a variety of roles including plumbing, electrical, agriculture, mobile repair,​ paddy farmers and tea-plantation workers. Aspiring Minds has received debt financing from NSDC’s Innovation Fund, which invests in organizations that develop disruptive and innovative solutions to address critical gaps in the vocational skilling ecosystem in India. The agreement with NSDC allows Aspiring Minds to access loans from NSDC on agreed milestones spread over three years, leading to the assessment of 3.3 million people over 10 years. ​Aspiring Minds expects to achieve this number in the next three years.

According to NSDC’s Mahesh Venkateswaran, principal-innovation and engagement, NSDC’s ecosystem for skill development requires “robust third-party assessment agencies that can develop innovative solutions for various sectors and demographics. Aspiring Minds is one of the earliest companies that took up this challenge.” Venkateswaran notes that while there are other companies offering assessment solutions, Aspiring Minds has developed “new assessment models to suit the changing Indian skill development landscape.” For example, the company has developed a tablet-based system to assess tea plantation workers for the agriculture sector skill council in the North Eastern State of Tripura and customized it to the language spoken by the workers. NSDC has a relationship with more than 20 assessment agencies, but Aspiring Minds is the only one it funds.

An Untested Concept

Looking back, the Aggarwals say that the biggest challenge in the initial years was to gain acceptance from stakeholders. “People understood training and placement and were willing to pay for them. They also understood paying for GRE and TOEFL [assessment tests for colleges admissions], but paying for an assessment of employability … was a new concept,” says Varun. Himanshu adds that many have the misconception that creating an assessment amounts to simply writing a list of questions. “We are doing cutting-edge work,” he notes. “Our tests are technology-driven and based on predictive analytics. We believe our commitment to technology and remaining ahead of the technology curve has helped us in developing the tests as well as on-the-ground execution.”

Aspiring Minds has two revenue streams — jobseekers and the employers. While the co-founders are not willing to divulge numbers, they say the company became profitable in financial year 2009-2010 and has been doubling its revenue since then. Having tasted success in the Indian market, the Aggarwals are now looking to expand outside. They have recently launched in countries including the Philippines and Ghana and are running a pilot in the U.S. So far, the team has received funding of $500,000 from Khimji Foundation and another $2 million from Omdiyar Network. The company is now looking to raise a fresh round of funding for its overseas foray.

‘Winnowing Downthe Applicant Pool

Stemler notes that given the number of jobless people who apply for open position, there needs to be a mechanism to filter out those who are unqualified. Standardized tests provide an approach that allows for the direct comparison of large numbers of individuals on a known skill set. “Thus, it is an extremely effective tool for employers who are looking to winnow down the applicant pool,” Stemler adds. “Conversely, some of the subtests can be particularly useful for identifying individuals who will thrive in a particular employment context. For the jobseekers, the exams can be an especially useful feedback tool in pointing out their strengths and weaknesses.”

“Unless there are systemic level changes in the entire educational ecosystem, the employability assessment tests are only superficial bandages that don’t do much to improve the situation.” –Madan Padaki

But how tough is it to scale such a model while maintaining quality and credibility? Stemler says that automation is a key ingredient to scaling up this kind of business. “[Aspiring Minds has] the structure for running new validation studies with each client they add to continue to ensure the integrity of their product. The more partners they gather, the more interesting questions they can answer from a research perspective,” he says. “I believe the key to maintaining quality and credibility is to continue the high-quality research demonstrating that the products are valid predictors of successful employment.”

Puneet Kumar Pandey, associate vice president for talent acquisition group at HCL Technologies, notes that Aspiring Minds’s “intelligent analytics” sets it apart from other vendors offering similar products and services. “It helps us to identify the gaps in a candidate’s capability and knit together an up-skilling, as well as cross-skilling, plan. My biggest take away is that I can customize the test based on my business requirement.” Pointing out that Aspiring Minds has been HCL’s assessment partner for campus hiring across all lines of businesses during the past six years, Pandey says: “When we started our engagement, Aspiring Minds was more into assessments, but over a period of time they have evolved into providing brilliant analytics as well as industry trends that have helped us in formulating our fulfillment plans for the year.”

HDFC’s Subramanian says that Aspiring Minds is “more effective”othan other vendors because “it conducts internal benchmarking of talent and customizes the test to suit the demands of different organizations.” He adds: “In our experience with Aspiring Minds we have been able to achieve time efficiencies, as we now spend time evaluating candidates who successfully meet our competency criteria. The AMCAT Report also provides useful insights about the candidates, which are used [to ask further] probing questions to understand the candidate’s aptitude and attitude better.” Aspiring Minds has been associated with HDFC Bank for more than a year and 8%-10% of the bank’s total hiring is done through AMCAT.

Madan Padaki, co-founder of MeritTrac Services, a testing and assessment firm which he set up in 2000 and exited in 2013 (when he company was acquired by Manipal Global Education in 2007), offers another perspective. While he agrees that the employability assessment tests are effective from the industry or employers’ viewpoint, he says that that these tests are “incomplete” from the perspective of the jobseekers. “Employability assessment tests typically measure employability mainly in terms of IQ and aptitude,” Padaki notes. “But every individual’s employability lies at the intersection of three things — the IQ, EQ [emotional intelligence quotient] and AQ [the aspirations quotient].” Adding that most people look at the employability issue from a demand perspective, he says that “interventions are required more on the supply side.”

Last year, Padaki set up Head Held High Services (H3S), a skills development and job creation enterprise focusing on rural youth. He says employability should not only be about performance; it should also be about the potential. “Unless there are systemic level changes in the entire educational ecosystem, the employability assessment tests are only superficial bandages that don’t do much to improve the situation,” he adds.