Key Ideas
Utility analysis is often viewed _____ by practioners.
Negatively
143 people applied for a job. 4 people were hired into the job. What is the selection ratio?
0.03
What does SDy stand for and how is it defined?
Standard Deviation of Employee Productivity in Dollars = the dollar value difference between good and poor workers' productivity
What is the utility analysis equation?
Expected dollar gain from selection = Ns * rxy * SDy * Zx – NT * C
Utility analysis is often expressed in what units?
Dollars
The percentage of successful employees identified through a valid test depends on what three factors?
Validity coefficient, selection ratio, and base rate
What is Schmidt and Hunter’s Rule?
SDy is rouhgly 40% of the average salary for the job
Ns=5, rxy=0.30, SDy=$20,000, Zx=0.50, NT=20, C=$40. What is the expected dollar gain from selection?
$14,200
What is utility analysis?
The overall usefulness of a selection measure or selection system
What do low base rates suggest?
Difficulty identifying qualified workers with the current system
If the average annual salary is $76,986, what is the SDy?
$30,794.40
A firm selects 8 employees using an assessment center (rxy = 0.40). The SDy is $25,000 and the average applicant test score is Zx = 0.30. However, the assessment center costs $600 per applicant, and 50 people participate. Calculate the expected dollar gain.
−$6,000
What is the purpose of utility anaysis?
To translate research findings into concepts and terms that management can understand and use to make decisions
The base rate of success is 0.20, the selection ratio is 0.05, and the validity is 0.10. What is the expected percent of sussessful new hires?
26%
What are the names of the notable figures on utility from 1965?
James Naylor, Lester Shine, Hubert Brogden, Lee Cronbach, and Goldine Gleser
Company A wants to choose between two selection methods.
Method 1:Ns = 10, rxy = 0.20, SDy = $18,000, Zx = 0.40, NT = 40, C = $60
Method 2: Ns = 10, rxy = 0.35, SDy = $18,000, Zx = 0.25, NT = 40, C = $150
Which method yields a higher expected dollar gain?
Method 1
What are the assumptions of utility analysis?
(1) Linear relationship between the criterion variable and the predictor variable (2) Normally distribution of job performance scores (3) Top-down selection (4) Job offer acceptance
The base rate is 0.70. The selection ratio is 0.60. The validity is 0.25. What is the expected percent of sucessful new hires?
76%
A worker in the 84th percentile is worth how much more per year than the average worker making $54,657 per year?
$21,862.80
A company expects to hire 12 employees using a multi-stage testing system. The SDy for top performers is estimated at $30,000, but only 70% of the expected gain actually materializes due to role constraints (so use 0.70 × SDy in calculations). Selected applicants’ average Z score is Zx = 0.60. Testing costs vary: The first stage is given to 100 applicants at $25 each while only 50 applicants move to the second stage at $200 each. Both hurdles each have a validity of rxy = 0.50. Compute the total expected dollar gain after adjusting SDy and including both stages of testing costs.
$378100
Calculations
Hurdle 1:
50*21000*.60*.50 – 100*25 = 315000 – 2500 = $312500
Hurdle 2:
12*21000*.60*.50 – 50*200 = 75600 – 10000 = $65600
Total:
$312500 + $65600 = $378100