Preemployment Honesty Testing: Current Research and Future Directions

By John W. Jones | Go to book overview

conservative cost-effectiveness estimates indicated an average potential net savings above and beyond the cost of testing of $24.22 per applicant through the use of the PSI, with savings in individual industries ranging from $10.62 to $43.76 per applicant. In addition, the total dollar value of all theft admissions for applicants who were not recommended for hire on the PSI equaled $2.07 million in comparison to $98.00 for the PSI-recommended group.

In addition to the traditional financial accounting--based cost-benefit analysis, companies can also turn to utility analysis, a more statistically oriented approach. A utility analysis is intended to determine the potential increases in work force productivity that can be anticipated to result from the use of a job-related, reliable, and valid personnel screening procedure. Hence, utility analysis refers to the overall usefulness of a selection system. Given the inherent validity of the selection procedure and the expected range of performance of the typical "good" employee who meets the standards of the test, the incremental dollar value of this person's performance can be estimated with utility analysis. These estimates are made by incorporating such concepts as test validity, applicant selection ratios, and the standard deviation (or range) of employee performance for a particular position into a series of relatively complex, regression-derived formulas. In essence, utility analysis can provide an estimate of the quality of the individuals who would be selected using a valid personnel screening device.

A great deal of research has been conducted on the use of utility analysis (see Cascio & Ramos, 1986; Schmidt & Hoffman, 1973; Schmidt, Hunter, McKenzie & Muldrow, 1979 for reviews). Studies examining a variety of industries have indicated that utility analysis is a valid and effective method for estimating the institutional gain anticipated to result from the implementation of a personnel selection program.

A utility analysis recently conducted by Werner ( 1988) for a major fast food chain using the Schmidt and Rauschenberger formulas ( 1986) indicated a substantial average gain in productivity of $1,188 per employee per year when the PSI was incorporated into the selection procedure. Taken as a whole, the company intended to hire 500 employees per year for these positions. The anticipated gain in productivity due to the use of a validated integrity assessment instrument would have been over $594,000 per year for the total group of applicants. Once the costs incurred through testing were subtracted, the results indicated that by using the PSI as part of the selection procedure, at a cost of $9.50 per applicant, the estimated gain in productivity would be approximately $1,178 per employee per year and over $589,000 for the entire group of 500.


CONCLUSION

Integrity assessment programs are necessary to reduce employee theft and crime. Internal theft often goes undetected, and many companies are likely to rationalize the loss that they experience to bookkeeping errors and shoplifting. Because most internal theft is undetected, true estimates of the impact of this

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