Chapter 2: Recruitment

Question 1

What is a false positive error?

Answer 1

Failure to reject a poor employee

Question 2

What is a false negative error?

Answer 2

Failure to hire a good employee

Question 3

What kind of jobs really concern about hiring false positives?

Answer 3

Surgeons, Doctors, Pilots, etc.

Question 4

What kind of jobs really concern about failing to hire false negatives?

Answer 4

Startup companies, etc.

Question 5

What is adverse selection?

Answer 5

the tendency of contracts (agreements) to attract the wrong participants

Question 6

What is self selection?

Answer 6

occurs when contract terms discourage inappropriate (unwanted) participants

Question 7

What is screening?

Answer 7

application of criteria that are correlated with desired outcomes

Question 8

What are commonly used credentials in application process?

Answer 8

• education (degree, quality of school/program)
• job experience

Question 9

What are the criteria for a good (useful) credential?

Answer 9

• correlated with actual job performance
• obtaining the credential is relatively easy for well-qualified people but very difficult for poorly qualified people
• rewards for obtaining the credential are not large enough to induce the low-ability type to obtain

Question 10

The screening method is more effective when it is…

Answer 10

• more accurate, cheaper
• more selective, a smaller fraction passes the screen & is employed
• more discriminating

Question 11

When should you invest more resources in careful screening?

Answer 11

• the screening method (test) is more effective
• the stakes are higher

Question 12

When are the stakes higher during the screening process?

Answer 12

• wage is higher
• the downside of hiring a poor candidate is worse
• the upside of hiring a good candidate is better
• the employees are expected to work at the firm for a long time

Question 13

What is probation?

Answer 13

• an alternative for when the screening methods are imperfect
• the most accurate screen is actual job performance

Question 14

What are the downsides of Probation?

Answer 14

When termination costs are high, the benefits from probation are reduced significantly

Question 15

What is an alternative form of Probation?

Answer 15

Temps

Question 16

When are temps a better alternative?

Answer 16

When termination is costly or difficult

Question 17

In terms of Signaling, how would an employer structure a job offer to encourage the most talented to apply? Use W1 and W2.

Answer 17

• W1 must be low enough to discourage low-skilled workers but high enough to attract high-skilled workers who are confident in passing probation
• W2 must be sufficiently attractive to motivate high-skilled workers to complete probation successfully

Question 18

What type of firms are more likely to use signaling?

Answer 18

• Jobs where skills are most important
• Little information available about job applicants