Making applicant do somethign under pressure is one thing. Interpreting the result is another one. Seniors should have no problem passing early screening even without any preparations. More interesting part starts when one is given the challenge. Here I assume the challenge is not some programming language quiz, but a small nice problem, like one from ACM ICPC, but scaled to the interview event. It may be even under-defined to see is the candidate knows how to ask questions.

I also assume there will be enough challenges at work as well.