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Utility Analysis& Professional Qualifications in Test Administration
BPS Level A and Level B (intermediate) courses
Assessment in the Workplace
Overview What is Utility Analysis (UA) ? Traditional UA framework : SDy and costs of
selection Practical Example Issues in UA Alternative UA framework : Boudreau et al (1997) Level A and Level B (Intermediate) M21 Seen Paper
What is Utility Analysis ?‘a family of theories and measures designed to describe, predict
and/or explain what determines the usefulness or desirability of decision options and to examine how information affects decisions’ (Boudreau, 1991)
Can be applied to selection processes, training, compensation, performance assessment, and internal staffing
Evolved to provide tools for better describing and communicating impact of HRM and Occ. Psy. interventions on organisational goals.
Traditional UA framework for utility analysis of new selection technique
Top-down
hiring
Applicant Ability to Performance Value of
Pool Predict Intervention
New
Intervention
Fundamental Processes in UA
The relationship between predictors and criteria (represented by ‘r’)
The nature of the criteria, represented by SDy
The nature of the selection process, represented by Z
The nature of the implementation process, represented by C.
‘The expected increase in output is directly proportional to the predictive validity of the test’ (Brogden, 1946)
Brogden’s equation :Yearly saving
per employee = (SDy x rv x Z) - [costs of selection]
selected (£/$,etc)
where :
SDy = standard deviation of value in performance
rv = predictive validity coefficient of the test
Z = mean standard score of all applicants (selected and rejected) on the test
Costs of Selection = administration costs per selected employee multiplied by the number of employees selected
Hence, for the amount saved for N selected employees, staying with the company for T years :
Total savings = [N x T x (SDy x rv x Z )] - (costs of selection)
How much more is a good worker worth than a poor worker (i.e. SDy)
Schmitt and Hunter (1982) : 2 assumptions
The value of a worker to a company is directly proportional to that worker’s performance (output) when the worker’s performance is measured on some criterion relevant to the company.
If performance is normally distributed, then the value of performance should also be normally distributed.
When SDy is large vs when SDy is small
If SDy is large (high) : then employees vary a lot in how much they are worth to the company ...
If SDy small (low) : then investment in selection is of less value, as there is less discrimination possible amongst workers
( >>> random selection ?!)
The costs of selection
[ N.B. costs include costs of assessing those who are rejected as well as those that are selected ]
Costs must include all costs (i.e. labour time, materials, selection programme development costs, etc.)
If the cost of assessing each applicant is C and SR (selection ratio) is the proportion of applicants selected :
Costs per selected applicant = C / SR.
Costs of selection = (costs per selected applicant) x (number of applicants selected)
Examples of Utility Analysis Results
Schmitt & Hunter’s estimates of predicted savings due to large scale implementation of improved selection methods :
Use of Computer Aptitude Battery by US Federal Government : $64,000 per selectee, over 9 years.
In US Federal Government selection, replacement of ability tests and work sample tests by less valid predictors would lead to losses of $3.12 billion (job tryout) to $15.8 billion (age) per year.
General improvements in the Philadelphia Police Force (5000 employees) : $18 million/year
General improvements in selection - US National Economy $87-$152 billion/year.
Practical ExerciseOld Selection Test
SDy = $30,000, rv = 0.2, Z = 1.0
Costs per selected employee = £1,000
10 people (N = 10) selected who stay on average 4 years (T = 4)
New Selection Test
SDy = $30,000, rv = 0.4, Z = 1.0, N = 10, T = 4
Costs per selected employee = £2,000
Calculate the total savings (larger figure = more saved) for the ‘old’ test and the ‘new’ test.
Should the old or the new test be used ?
Special Issues To what extent can the validity reported for a test in a manual be
applied to your selection context (Validity Generalisation & synthetic validity)
‘Real life’ issues not considered by ‘traditional’ utility analysis• Inflation (selection costs need to be adjusted)
• Variable costs of employees
• Taxation (of additional profits)
• Lost investment elsewhere
• Number of good candidates available?
• Do not overlook the old selection system (typically assume validity is zero).
• The real ‘worth’ of improved selection
Boudreau et al (1997)
Actual Hiring
Method
Applicant Ability to
Pool Predict
current aspects of VALUE
interventions new performance OF
intervention(s) INTERVENTION
Boudreau et al (1997)
Multivariate validity over time (the ‘Black Box’ of validity)
• temporal stability of validity
• multidimensional criteria (the nature of SDy) Using employee movement to represent multiple criteria The interaction between multiple predictors and multiple
criteria The ‘Black Box’ of Z Is maximising organisational performance (££££’s) always
an organisation’s main objective ?
Professional Qualifications in Test Administration
BPS ‘Certificates of Competence in Occupational Testing’
BPS website - for level A and level B (int.) ‘General Information Packs’ (http://www.bps.org.uk)
Is it worth me taking these additional courses? Course dates and costs - see MSc noticeboards Course content & structure
• Level A : Ability tests, aptitude tests, interest inventories
• Level B (Intermediate) : Hogan’s Personality Inventory (HPI)
• Both 3 days (9am-5pm), with pre- & post-course work