After completing this chapter, you will be able to answer the following questions: How can I reduce interviewing and hiring costs for my firm? Should credentials be required when hiring? Should the skills of my workers change if my firm increases its investment in capital equipment? Should my firm adjust pay on the basis of performance? How would I implement a probationary hiring system? | Chapter 2: Recruitment 1 11/13/2014 Chapter 2: Recruitment Screening Job Applicants Credentials Informativeness of Credential Cost of Obtaining the Credential Return on Investment in the Credential Learning a Worker’s Productivity Screening Bankers Screening is more profitable when the test is more effective. Screening is more profitable when the stakes are higher. For Whom Is Screening Profitable? Probation Implications of Probationary Screening Signaling Who Pays and Who Benefits? Education as a signal Signaling More Formally: Separating and Pooling Equilibria Which Type of Firm Is More Likely to Use Signaling? 2 11/13/2014 Chapter 2 – Recruiting 3 After completing this chapter, you will be able to answer the following questions: How can I reduce interviewing and hiring costs for my firm? Should credentials be required when hiring? Should the skills of my workers change if my firm increases its investment in capital equipment? Should my firm adjust pay on the basis of performance? | Chapter 2: Recruitment 1 11/13/2014 Chapter 2: Recruitment Screening Job Applicants Credentials Informativeness of Credential Cost of Obtaining the Credential Return on Investment in the Credential Learning a Worker’s Productivity Screening Bankers Screening is more profitable when the test is more effective. Screening is more profitable when the stakes are higher. For Whom Is Screening Profitable? Probation Implications of Probationary Screening Signaling Who Pays and Who Benefits? Education as a signal Signaling More Formally: Separating and Pooling Equilibria Which Type of Firm Is More Likely to Use Signaling? 2 11/13/2014 Chapter 2 – Recruiting 3 After completing this chapter, you will be able to answer the following questions: How can I reduce interviewing and hiring costs for my firm? Should credentials be required when hiring? Should the skills of my workers change if my firm increases its investment in capital equipment? Should my firm adjust pay on the basis of performance? How would I implement a probationary hiring system? 11/13/2014 3 Screening Job Applicants 11/13/2014 4 Concept Definitions Adverse Selection: The tendency of contracts (agreements) to attract the wrong participants Self Selection: Occurs when contract terms discourage inappropriate participants * Screening: Application of criteria that are correlated with desired outcomes 5 11/13/2014 5 Key Question Question: How do we design a hiring and compensation scheme that minimizes adverse selection and encourages self selection? Toolset: Screening Probation Measurement Wage structure 6 11/13/2014 6 Hiring Standards 11/13/2014 7 Screening v. Risky Hires To avoid hiring “lemons,” we can also screen candidates . Sanford Bernstein analysts: intensive screening via credentials, tests, psychometric evaluations, interviews risky hires more relevant if there is high upside potential screening more relevant when the issue is avoiding downside risk Most screening methods are disappointingly .
