Business Chosen: Thai Food Specialist Outlet

Generally, it is more useful to consider higher validity coefficient. But HR professional cannot simply
rely on this. The additional pieces of information which needs to considered even before committing
the decision are as follows:
1) Adverse impact: Level of adverse impact by work sample needs to be examined. It may have
a negative impact on individuals because of sex, race, etc. When an adverse impact is noted, changes
in measurement techniques is must.
2) Selection ratio: Selection ratio is direct index of how constrained company can be in hiring,
i.e. with higher selection ratio higher the constraints. 1 This can affect selection assessment method as
selection ratio is inversely linked with utility. 2 Randy can aim to improve this so that he can have
chances to identify more specific job performance between candidates.
3) Cost of hiring error: Given case present Randy in a financial crunch condition. He needs to
maximise efficiency in new staff with minimum cost to company. This needs to be ascertained before
assessment selection method.
4) Investment amount and Status of construction: The given case did not mention exact
amount of investment from $2 million into new business. This needs to be ascertained. Also, no of
shops on two islands is not clearly defined. Selection assessment are affected by these factors.
Moreover, information related to construction/renovation of shop needs to be examined before
determining the best selection method. All these affects in the sense that it creates a pressure on
choosing accuracy and urgency of selection assessment methods.
5) Assessment on qualification of ideal candidates : Randy needs to clearly identify
combination of skillset which he requires in his targeted 50 staff member. The following needs to be
ascertained in this regard:
 Workforce age
 Skill level of applicants
 Expected Salary of applicants
 Experience level of applicants
 Expected tenure of the selected group

1
Staffing organization by Herbert G Heneman pg 561
2
https://www.analyticsinhr.com/blog/utility-analysis-roi-selection-methods/
  Environmental context of the business.
To analyse choice of selected method we have used three approaches
 Economic Gain Utility Theory
 Interpretation of validity coefficients guidelines3
 Cost of hiring error
A) Economic Gain Utility Theory
Scearnio1
Parameters Interview Work Sample Test Comment
Assumption in
T 1 1
years
Nn 50 50
Rxy 0.3 0.5

Sdy 11444 1144 Assumed same

Zs 0.35 0.3 Assumed same

Na 100 100
Cy $100.00 $150.00
Utility -$4,852.00 -$6,420.00 Interview is better

Table1
Parameters Interview Work Sample Test Comments
T 1 1
Nn 50 50
Rxy 0.3 0.5
Sdy 2694 2694
Not Given.
Zs 0.5 0.5 Keeping Same for
both
Na 100 100
Cy $100.00 $150.00
Work Sample is
Utility $10,205.00 $18,675.00
better

3
https://hr-guide.com/Testing_and_Assessment/Reliability_and_Validity.htm
4
40 percent of base pay which is assumed to be Rs 10000.Hence SD is assumed to be random value between
1000 and 5000. Source: Utility Analysis: A tool for Quantifying the Value of Hospitality Human Resource
Interventions by Michael Sturman pg. 7 Source of Salary: Glassdoor review
5
Given selection ratio is high. A higher selection ratio implies lower value Zs. Hence the random value is
assumed between 0.1 to 0.5 Source: https://www.analyticsinhr.com/blog/utility-analysis-roi-selection-
methods/
 Scenario2
Table 2
Thus, analysis using utility function leaves us in dilemma as which method is better as shown above in
Table1 and Table2.

B) Interpretation of validity coefficients guidelines

The following table helps us to understand the guidelines of interpreting validity coefficients6
Validity coefficient value Interpretation

above .35 very beneficial

.21 - .35 likely to be useful
.11 - .20 depends on circumstances
below .11 unlikely to be useful

Now in a scenario where selection ratio is high & positions do not require a great deal of skill 7 one may
accept a selection method that has validity consideration” like to be useful”. Here the same case applies and
we can move with interview method (value is 0.30). The cost variation of $50 more for work sample method
may not be worth the slight increase in validity. Moreover, low wage offered by Randy gives him very less
option in deciding upon difference in candidates. Other factors like inexperienced HR department 8, new
entrants into business, puts a constraint pressure to optin for interview method.
C) Cost of hiring error
Parameters Interview Work Sample Test
No of People likely to succeed
1510 25
after Selection9
No of People not succeed after
3511 25
selection
Loss Incurred $3,500.00 $3,750.00

6
https://hr-guide.com/Testing_and_Assessment/Reliability_and_Validity.htm
7
This is our assumption
8
This is our assumption as Randy is taking help from Prof and his friend.
9
= Correlation between predictor and job performance* No of applicants selected
10
15= 0.3*50
11
= Correlation between predictor and job performance* (No of applicants selected- No of People likely to
succeed after Selection)
Thus, we observed that cost of hiring error is less in case of interview method in comparison to work
sample method.
On the basis of above three analysis we can infer that Randy should go for interview method rather work
sample on the following grounds
 Cost of hiring errors is less
 Value of validity coefficient is within acceptable limits
 Low Wage Policy by Randy
 Inexperienced HR management and new entrants into business.
 Low skill requirement.
 Standard deviation and tenure data missing.
 Validity coefficients given represents average validities and not for ice cream store selection
process. Hence not reliable.

Business Chosen: Food delivery Service

Business Plan: Randy to fulfill workforce requirement of delivery boys for giants like Swiggy, Zomato,
Uber Eats
In this business model the number of applicants is usually high as this profile does not require any
specialized qualifications. Since the number of applications is high, selection ratio goes low and
subsequently value of Zs goes high.

Parameters Interview Work Sample Test Comments

T 1 1
Nn 50 50
Rxy 0.3 0.5

Sdy 4068 4068

Zs 0.712 0.7
Na 40013 400
Cy $100.00 $150.00
Work Sample is
Utility $2,714.00 $11,190.00
better
In such a business we analyses two methods

12
Higher Zs value due to higher number of applicants and lower selection ratio
13
Assumed no of applicants is 400
Thus work sample comes to better method in a different business context.