The truth behind Downsizing and Recessions: are all the effects negative?

Indeed the prospects for retaining one's job has been difficult in the recent past due to the bleak economic situation among other contingent factors,whether it be manufacturing sector firms such as Tata steel or financial giants like UBS.  This article aims to analyse reasons behind why firms downsize, its effect, and key factors to take into consideration when it comes to laying off workers. 

Why do firms downsize? 

·         Everyone in the market does so
·         financial reasons          Cut costs, especially overheads
·         Increase adaptability
·         Speed up decision-making
·         Focus on companies’ key competencies
·         Increase productivity
·         Outsourcing
·         Improve shareholders’ equity

     Why do firms engage in downsizing NOW?

·         Competition intensified on the global scale
·         Product life cycles decreased, thus need fast responses
·         Diverse customers’ needs require a more agile response
·         Escalating employee benefit cost
·         Automatizing happened
·         Bottom line performance essential,due to takeover threat and the need to cut costs
·         Some managers believe that downsizing is a good strategy to become profitable
·         Growth of contracting services triggered outsourcing
·         Employees require more flexibility and the traditional long term attachment of an individual to an employer is no longer popular

The effects of downsizing

    Effects on the firm’s bottom line -The research evidence is mixed.

According to Wyatt, 1/3 of companies saw increase in profits after the layoffs as much as expected, less than ½ said that cuts reduced expenses as much as expected. Bases on AMA research, those firms who cut jobs first reported an increase in profits and decrease after a short period of time. However, no causal relationship between downsizing and profit was proved. In general studies suggest that financial effects of downsizing in the SR and LR are negative.

One possible reason for not finding causal relationships is that layoffs are not accompanied by significant permanent changes. Layoffs are simply there for a short period of time, with positions being filled again after some time.

Another set of studies state that the way layoffs are implemented will determine the effect on firm’s financial performance. Long term improvement can be observed if cuts are combined with asset restructuring, strategic changes, or changes in organisational structures. The effect is particular vivid when prior to introduction of the cuts had deteriorated performance in comparison to competitors in the market. In other words, downsizing has a positive effect on long term performance only if it is part of the fundamental change in an organization’s strategy, structure, culture and/or work arrangements. 

It is unclear that downsizing boots productivity. According to National Bureau of Economic Research found that plants that increased employment as well as productivity contributed almost as much to overall productivity growth in the 1980s as the plants that increased productivity as the pants that increased productivity at the expense of employment. Productivity depends on differences between companies, not cut offs. According to AMA, achieving quality and productivity improvements in conjunction with downsizing depended significantly on the amount of training activity in which firms engaged following the job elimination.

    Employee Morale and Attitudes

      Cuts have negative effect on employee morale and attitudes. They cause distrust, demotivation, loss of valued employees, stress and overwork by the stayers. All of those have immediate and long term affects. In addition to increased turnover, voluntary departures and increased disability claims. The reason for the above is that those employees who stayed feel that they will be next to be fired, this demoralises them, makes them stressed, cause chronic fatigue and as a result can get sick.

    Downsizing in work environments that emphasize creativity

      Cuts are very distractive for such firms. Cuts cause job insecurity. Insecurity causes lack of creativity and risk-taking. Also, downsizing diminishes the stability of workforce and their speed and effectiveness in communicating. Although these effects can disappear with time, immediate effects are still painful. Loss of employees also destroys the existing relationships within group as well as some external connections fired employees had.

Who leaves: Downsizing and Workforce Quality

Sometimes some of the most able employers leave. The reason for this can be that firms tend to first rely on voluntary quits and thus offer generous terms for the leavers. In turn, those who choose to leave are those who believe they can get a good job elsewhere which will tend to be the better employees.

However, employers can choose who leaves. Nonetheless, the survivors will still feel the threat of being fired and may quietly searching for new job. Of course, the better the employee is, the more likely that those efforts will bear fruits in the form of an outside job offer and hence non-volunteer downsizing program may result in some voluntary quits, which will tend to be concentrated among the more able.

What is more, employees can affect their own termination decision. If good terms are offered for leaving, they might fear that in the future this will not be the case.Thus they will attempt to leave immediately by for example, refusing restructuring reassignment, which protects him/her from termination. Adverse selection can happen, because the best employees will tend to choose to leave.

    Downsizing and society

Job loss has profound negative effect for the displaced employees and their families. This adds to the social cost of downsizing.

Research showed that unemployment and job loss also leads to criminality, drug/alcohol abuse, domestic violence, separation and divorce, decline in health, depression, suicide, children’s’ well being.

However, there are potentially positive effects on community, such as: layoffs promote superior matching of workers to jobs and increased dynamism and risk taking in the economy, thereby fuelling economic growth. Also new jobs are created and compensate for the downsizing and outsourcing.

The moral of the story....

      Downsizing is likely to work better when it is part of a well conceived general strategy of restructuring the firm and its workforce.This happens because downsizing programmes that go beyond the layoffs and pursue underlying organisational problems or try to exploit real opportunities are more likely to address the real problems or successfully exploit the real opportunities.Also the survivors of the downsizing campaign are not likely to reduce their morale and loyalty if downsizing serve a purpose.  Employers, it is useful to explain employees why cuts are happening!

Must you downsize?

      Family-like cultures will suffer more because of downsizing than other types of firms. Firms that depend on good relationships with the surrounding community and that loom larger on the local labour market will also find downsizing more costly. Firms in a tight labour market will face a stronger adverse selection problem in terms of who departs and thus on the community and on the psychological state of the survivors.

     

     Technology and work organisations: when the tasks are interdependent, downsizing tends to be more disruptive, both economically and socially. With respect to business strategy, organisations that seek competitive advantage from continuous improvement or by transferring knowledge gained in one product, service, or division to another part of the firm will tend to suffer most from the knowledge losses wrought by downsizing.

     Organizations, with seniority-based protections may stand to gain less economically from downsizing, because the layoffs will disproportionately hit workers with lower seniority, who are presumably are making less money. Also organisation needs to consider its benefit plans employees have.

      Need to consider alternatives, such as wage cuts, hours adjustment, job transfers, reassignment of work across plants, etc…

     factors to consider about firm’s ability to downsize:

a)Inventory policy (if firm is able to store inventory workers can produce for inventory)

b)    The extent of uniformity in its operations across work sites (if uniformed, can relocate workers for needed work)

c) The extent to which it has cross trained workers

d)    Extent of vertical integration (if high, can relocate workers where there is demand for them)

How to downsize if you must: process considerations:

     The following can reduce the adverse effects of downsizing:

1)  Explain workers the reason for downsizing

2)  There should be extensive communication before, during and after cuts.

3)  It should be clear to employees that you have given due consideration to alternatives to downsizing.

4)  The process should be perceived as embodying distributing and procedural justice.

5) The process should be kind to the leavers. However, don’t over do, can cause uncontrolled voluntary departures.

6)  There should be support services for the “survivors”. Such as – good sense of where the firm is headed after the layoffs are done, intensive retraining, resocialisation, etc…

     Massacre or drip-drip-drip?

Dramatic or gradual?

Local labour markets may be better able to absorb the discharged workers if they are discharged gradually. This can reduce the adverse effects on the local community.

However, those who have suffered through the downsizing tend to believe that a “get it over with in one fell swoop” is better.

According to AMA, dislocative effects associated with layoffs abate considerably after the first year following the downsizing. And beneficial effects from lay offs appear only after some time after they occurred. Thus, by moving boldly and rapidly, companies may minimize the long-term psychological damage and also perhaps achieve a more pronounced and rapid increase in shareholder equity.

     Across the board or targeted lay offs?

Targeted lay offs lead to internal political activity aimed at redirecting the ax at some other target. Such political activities are particularly destructive, when a firm’s culture and technology emphasize cooperation and collegiality. Thus, targeted is too painful, especially for managers who are supposed to solve the occurred issues among employees.

Regarding the across the board layoffs, the issue of distributive injustice may occur. Units that are performing exceptionally or that have disciplined efforts keep their headcount down and thus should be reduced less. Thus, across the board downsizing will also score low on procedural justice because of the arbitrariness and inflexibility of the targets.

What is more in companies where departments are interdependent everyone will feel intense loss of friends and colleagues. Also cutting on all the departments will push employees to think that management doesn’t have a clear plan on what should be done.

     Layoffs, seniority and age
Age (more experience vs more years of potential service)
If company decided to cut on the older workers, it should consider early retirement programmes to avoid the adverse selection and appearance of age discrimination.If loyalty is important – don’t lay off older workers. Moreover, lawsuits can occur is the case of a particular discrimination occurs (i.e. age, sex, etc). Layoff should be based on more than just age!

Dealing with the community (reputation concerns)

      Firm needs to think how to help local community as well as its ex-employees. I.e. subsidize re-training, etc. However, the amount of effort depends on the interest of your organisation to be a “good citizen” of the affected locales.

Conclusion:

     Use cost and benefit analysis and weight your decisions properly

     Lay offs have profound effect on the firm, managers, employees and local community.

     There is shortage of the solid research confirming the positive impact of downsizing on profits nd productivity.  Also it is not fully understandable how to downsize properly.

     Need to think about how, why and who

     Managers should make a rational informed decision and communicate it to employees.

     If downsizing is followed by outsourcing, companies need to make sure that the process is effective and makes sense (i.e. doesn’t lead to hiring the laid off workers as consultants). 

An interesting read on the role of incentives in the wake of the financial crisis

Joseph Stiglitz Testimony: Banks Have Failed 'Their Basic Societal Mission'

http://www.huffingtonpost.com/2010/01/22/joseph-stiglitz-testimony_n_433119.html

A word on CULTURE

Culture has a profound impact for managers of MNC's- An international firm's activities will undoubtedly be affected by cultural factors. Read this article if you're looking for a deeper understanding and insight into how culture affects your firm's international operations. 

Reflect back and think again: Have you taken the factors below into account when setting up shop outside your home country?

      Culture, although a broadly defined concept can be described as “the knowledge, beliefs, art, law, morals , customs and other capabilities of one group distinguishing it from other groups.”

-the question of difference between cultures is not as important in an international business context as is what happens when those cultures interact.   Many a time facile generalisations can be made with reference to what countries are best known for, a world where the French are the cooks, the Swiss are the organisers , the Italians are the lovers and so on it goes. In actuality, this is not necessarily the case. One would expect a german investment banker to share a lot in common with a British person of the same profession, than he would have in common with a german contractor, who is in fact his own compatriot.

In today’s world we live where cultural divergence between society has become much smaller. However on the contrary, due to globalisation, culture has become an even more issue in terms of the “need to preserve” and be aware of how different societies operate.

Culture, according to Huntington, can be both a source of cohesion among members as well as a point of friction between them and others.  Members of the same culture feel united, however cultural differences can cause friction, in particular when they are not respected.

It is challenging for firms to transplant practices from one country to others where they hope to seek a significant and sustainable competitive advantage. As such it is essential for managers of international firms to take the impact of culture into account when taking action whether it be based on business strategy or the decision to branch out to a new foreign country, as culture affects relationships, decisions, management styles, and transactions. Culture also plays a key role in international alliances and mergers, corruption and entrepreneurial behaviour.

We need to think about the cultural differences that shape managerial and leader attitudes when developing multinational management programs. for example, British managers value autonomy and individual achievement while Indian managers may emphasize more on culture and traditions. Hence as a result managers need to be familiar and understand other cultural norms to promote greater diversity. 

There are four relevant factors to take note of when assessing the impact of culture:-

-Firstly, cultural stereotypes refer to those individuals whom which authors often derive generalisations about societies from. They are an importance force in international business. For instance, they influence how headquarters and subsidiary staff perceive each other. 

-Secondly, self-reference criterion refers to how one may judge the behaviour of others, based on ones own cultural traits. For instance, bribing is acceptable to some in countries like India, or gender inequality is built into patterns of behaviour in Yemen. Often when interacting with other cultures, individuals and firms use their own culture as an anchor.

-The third factor relates to cross cultural literacy, whereby understanding others behaviour and making allowances when other behaviour differs from yours.

- Lastly, acculturation alludes to modifying your behaviour to make it compatible with that of others.

     --> Culture is correlated both with language and with religion.

•     Language: differences in language structure, use of slang and the meaning of nonverbal language gestures. These are just a few of the challenges that language differences present for managers. E.g. pepsi in china “comes alive” translates to “bring your ancestors back from the dead”. Such connotations are important for managers to consider when making decisions to move to new markets. 

• Religion: dictactes adherants’ way of life, therefore very important for international managers to understand any religion affecting their employees and customers alike. For instance, in muslim countries, a restaurant operator must respect that during the period of Ramadaan, lunchtime deals and operation may be irrelevant, as the majority of customers will be fasting, and it may be more lucrative to offer traditional buffet dinners after dark.

When we consider the above correlates in the context of culture, it poses communication and coordination challenges within the MNE but diversity is also a source of strength because it brings about different and new opinions and ideas from which the firm can benefit.

     -->When we consider culture, there are multiple systems for classifying national cultures, including those by Schwartz, GLOBE and Hampden Turner. The framework introduced by Ronen and Shenkar shows that it is possible to cluster countries according to the relative similarities of their cultures.

-However a widely used framework to take into account is the ideas bought about by Hofstede - analysing the impact of culture on the conduct of activities related to international business.Hofstede studied 100,000 IBM employees throughout the world and made observations along 5 key dimensions. i

     By means of using Hofstede’s research it is useful to international managers because they can:

-adopt relevant leadership styles
-develop a corporate culture that is more likely to be adopted by workers.
-managers can use these ideas to make better informed decisions in strategy formulation. 

  Distinction between corporate culture(CC) and national culture(NC):

Corporate culture: is the culture adopted, developed and disseminated by a company. It is of vital importance for instance for an MNC that adopts a global strategy and uses corporate culture as an integrator of its various units.

Note that corporate culture can vary from national culture- e.g Honda, although a Japanese automobile manufacturer, it deviates from the “typical Japanese firm” as it is said to be more traditional and open to change. Nonetheless, corporate culture is a lot more superficial than national culture, as the imprints on the latter alone reside in deeply embedded values, while national culture is formed through early socialisation.

In conclusion: it appears that corporate culture is embedded in national culture but is also notably different. CC is less deeply imprinted than national culture. Essentially CC is and add on to NC, which overlays the basic cultural patterns.

      -->Identifying other layers of culture:
-Ethnicity: e.g. In Asia, Chinese have long constituted much of the business elite in countries such as Thailand and Malaysia. Such variations need to be recognised by the MNCs as they can affect issues, ranging from consumption patterns to employee relations.

-Industry: cultures vary from sector to sector. E.g. in the technology sector, people are generally informal, flexible and innovative. It is probably the most “global” industry in terms of people having shared values and interaction.
     -Demographics: education, age, seniority affect differences in values, although not differences in practices. E.g. studies found that new generation of Chinese mangers are considerably more individualistic and adhere less to Confucianism than the previous generation.

-Ideology: less stable layer of culture. E.g. Maoist ideologies in China provided much of the beliefs and values in the country from the mid 1950 to mid 1970s.

In conclusion: these various layers of culture affect MNE strategy and operations in both the home and host countries.

Taking everything above into account, it is important to bear the below points in mind:

-     culture does not have a profound and equal impact on each and every division of the company. It is more sensitive in certain departments such as HR, Marketing and sales. It is much less eminent in practices such as R&D, production and IT. Nonetheless, a firm wants to exploit “best practices” and generate “some sensitivity” toward culture.

-culture does not explain EVERYTHING, particularly uncertainties. It is essential for managers to avoid making culture a “residual variable” (i.e. using culture to explain ambiguities). Overplaying the role of culture can have adverse outcomes. For instance, blaming poor sales in a new region on cultural differences may mean that managers miss the real picture behind weak revenues (e.g. incorrect pricing strategy, economic factors, etc).

Overestimating the impact of culture can have detrimental outcomes. For instance, Japan overplayed the role of culture in their economic success and as a result failed to make the governance and structural changes that could have salvaged them from a decade of stagnation. Thus, it is always important to consider in any context of uncertainty, the impact of non-cultural environmental variables.

All things considered..............

      respecting and working with cultural differences provides opportunity for sustainable long terms gains, as long as the manager avoids making culture the residual variable. A sound knowledge of culture is what will permit an international manager to comprehend questions like “what will work where?” correspondingly the managers will have  a better understanding of what buttons to press to yield optimal outcomes and which ones to avoid.   

Image source: thearticulateceo.typepad.com

Employers, are you implementing the correct selection method(s)?

Read this post if you are deciding on which selection methods to implement in recruiting the most suitable candidate(s) for a job! Beware- although, a lot of text and theoretical evidence provided, this post highlights some of the key advantages and drawbacks of certain selection methods. Enjoy! 

INTERVIEWS

-most commonly used selection method. Regarded as the single most effective selection method for groups ranging from managers to semi and unskilled workers. (IRS Employment Review 2004).

Types of interviews:

-One on One interview-  relatively informal, encouraging rapport, generates more frank and open discussions.  However suffers from interviewer bias (i.e. Halo and Satan effects), low levels of reliability and lack of coverage of the subject matter. Usually interviewers make their minds up about the candidate in the first few minutes and spend the rest of the interview trying to justify their decision.

-Small Group/Tandem interview-  2-3 people interview one person, making their judgement on the basis of the same interaction. E.g. line manager and the HR specialist explore technical job elements and key competencies sought after.

-Panel Interview- different parts of the organisation consist of the panel, eliminates bias to some extent (HOWEVER- can still be an issue because some panel members exert a sizeable influence over the decision, yet this is often hidden and covert).

Structured interviews are seen as a means to improve reliability and validity of selection decisions (Cooper). Several features differentiate them from traditional interviews: i.e. questions should be developed from the job analysis, each candidate should be asked standard, though not necessarily identical, questions; and a systematic scoring procedure is used (preferably on a behaviourally anchored rating scale).

Key advantages/arguments for structured interviews:
1. Tied into the job analysis and competency profiles

2. Increased focus on job related questions

3. Multiple interviewers

In order to reduce gender/race bias, applicants asked same questions, in same order and answers are rated in a systematic manner.  However such methods may not be suitable to senior decision makers because they prefer to avoid rigid, fixed and standardised processes. Further issues are that reliability is improved but validity issues remain. E.g. some individuals may be very good at impression management tactics ( Posthuma et Al) articulating their achievements and plans with ease but poor at putting these into effect.

-DIS: criticised for unacceptable levels of reliability, poor predictive validity and low sensitivity, legal issues (bias, equal opportunities for all in terms of race, gender, age.) the drawbacks of interviews can be overcome if it is implemented in conjunction with other methods.

-ADV: relatively cheap, two ways interaction process between employer and applicant.

If interviews are generally rated low on validity, why does it remain a popular selection method???
-there appears to be some generalised intuitive appeal about seeing people “in the flesh” before extending them a job offer. (Muchinsky)

-Applicability: interviews are highly applicable to all job types. It is their universal applicability in fact, that contributes to its high frequency of use.

-It is not advisable (due to low validity) to solely base decisions depending on interviews only. If we could only find a way of minimising the key problems of interviews e.g. bias, impression management techniques,etc. then it would be revealed just how good a judge of human talent interviews are.

-Fairness: studies have found that minorities and women receive lower evaluations than non-minorities with comparable credentials. However the nature of such studies make it risky to generalise. Furthermore interviews criticised about being highly subjective. i.e. The nature of the interview process itself, skills of the interviewers.  Interviewers have a tendency to select candidates who display attributes that they regard as important, or behave/look like others whom they may have positive feelings for, or who say something early in the interview with which the interviewer agrees (Taylor). Further Bias issues are recency effects whereby the earlier candidate clouds proper current assessment of the candidate at hand. Such fairness issues can be overcome by a panel of assessors or by structured interview techniques.

-Costs of interviews: relatively inexpensive but we need to consider costs in terms of: travel expenses of job candidates, the number of interviewees, group interviews with high ranked company officials can make it an expensive method. Furthermore the time that interviewers spend evaluating candidates outside of their regular work presents and opportunity cost. It is usually advisable to reduce the list of candidates for an interview via some other method of evaluation prior to the interview stage of assessment.

Selection testing 

-Tests enhance levels of validity.

-The type of test used will vary according to occupational group.

-HR practitioners recognise the limits of their own expertise and know when to seek advice on test usage and from which suppliers. (Acting beyond their own professional competence can have serious consequences).

-Cognitive tests are designed to measure mental ability. They measure degree of knowledge/skill a person has. Secondly, tests of general intelligence are designed to assess the “capacity for abstract thinking and reasoning within a range of different contexts and media.” The third set of cognitive tests measure spatial abilities, such as verbal/numerical ability.

-Issues:
i. The CIPD and the BPS worry about the emergence of disreputable providers and untrained assessors who don’t know how to interpret the results of the tests.

ii. Worries tests could discriminate against certain groups of people, particularly ethnic 

minorities and women (Schmitt and Chan)

iii. When firms are facing financial difficulties they may be encouraged to take short cuts in the use of tests/ inconsistencies in their usage

iv. Used in isolation, tests are not particularly good indicators of job behaviour (Newell et Al) because strong situational pressures lead to alternative solutions in practice.

Personality tests

-Common types of personality questionnaires are the SHL Occupational Personality Questionnaire (OPQ) and the Myers-Brigg Type indicator.

-evidence that these are cross cultural and each dimension i.e. Extraversion, Neuroticism, openness to experience is associated with success across diverse occupations i.e. customer service, sales, managers.

-they are believed to be associated with motivation

-in past reviews there is little evidence for the validity of PT’s HOWEVER,
validities for managerial positions may be greater than these semi-skilled and skilled occupations. Motivation and interpersonal skills are likely to be more relevant for managerial and professional jobs compared to jobs at lower levels. (evidence- Bentz, 1984).

Work Sampling

-can have high predictive validity and high face validity e.g. Useful when nature of job is typing test for clerical work, practice calls for call centre staff, behind the wheel tests for motor licences.

-Robertson and Smith (2001)- of other selection techniques, work sampling offers the highest likelihood of success, closely followed by intelligence tests and structured interviews.

-very appropriate method as there is a high degree of correspondence between content of the work sample and the job content. However mainly useful in jobs which involve mechanical components. Not very applicable to jobs such as social workers or receptionists. 

-issues- very expensive (Salary, training) in terms of time, resources etc.

-another issue is that they can more accurately assess a candidates current capacity to perform a job as opposed to the capacity to learn the job.

-Although actual performance between subgroups tend to be small, the potential for bias exists on performance rating (Guion, 1978)

-Costly to implement as they are administered individually, can take time especially when many candidates to be tested. If the work sample involves usage of existing tools/resources/equipment normally used in production, such forgone productivity is a cost.

Biodata

-Where candidates are asked about past accomplishments, family circumstances, tenure, promotions, etc. these information indicators are believed to be best predictors of future behaviour and performance. They are org and job specific, having low construct validity. (0.32 validity ranking, cooper)

-Data collection can be very intrusive- downside

-Fairness of bio data for different sub groups? E.g. postcode as an indicator. – Owens 1991 demonstrated biographical data could be used to group individuals with homogenous backgrounds and the validity of these sub groups could be established.

References

-widely used but very low validity (0.13, cooper). Validity can be improved if specific questions were asked regarding motivational/interpersonal skills specific to the job

-Assessment Centres
Check out my older post on Assessment Centres as a crucial selection method!

CONCLUSIONS

-An implicit assumption is that those who are hired make a difference to the welfare of an organisation. Many factors contribute to organisational efficacy, the calibre of the workforce being just one of them.

-Just having good people does not mean organisation success. However the converse is also true i.e. without good people it is difficult to imagine long term viability and solvency of any firm.

-Each method operates trade-offs between advantages and disadvantages. First, in order to enhance relevance of selection, it can be wise for a firm to combine various selection methods as long as the cost-benefit analysis is positive. Ultimately we come back to the key understanding: “At the outset, no single technique regardless of how well it is designed and administered is capable of producing perfect selection decisions that predict with certainty which individuals will perform well in a particular role” (Mick 2005).

-Second, it is worth taking into account the context when choosing among selection methods.  It seems that there is no best way of hiring employees.  The most discerning method varies depending upon the nature of work, a firm’s size, sector, country…

-Industrial psychologists are making major inroads into enhancing both the practice and science of selecting good people. Only time will tell....!


Image source : ewelinacim.blogspot.com

The basics behind Recruitment and Selection [Part 1]

    Key Question: What is it, and what factors should be taken into account when deciding on methods of employee selection?

     What is recruitment?- The process which aims to attract suitably qualified candidates for a job (from which it is possible to select a competent person.)

      -Main elements to consider Pre Recruitment:

-Is there a case for recruitment? Job analysis (Stage 1) 

-analysis of the labour market (Stage 2)

Note:Must also take into account other contingency variables e.g. economic conditions

-Recruitment is sometimes regarded as the poor relation of selection. Decisions have to be made about whether or not to recruit, whom which source, the cost factor. Furthermore legal factors have to be kept in mind (e.g. design and wording of adverts and in online channels). If recruitment process generates insufficient applications or too many unsuitable ones, it will be expensive. Thus a cost effective recruitment method depends on factors specific to each organisation and to different types of vacancy. 
 
-Key methods- closed searches (i.e. word of mouth, recruitment agencies<81% in 2004>) , open searches (newspaper advert<87% in 2004>, employers website). All in all, without effective recruitment practices, there may be limited numbers of applicants to choose from.  
<!--[endif]-->

What is selection? -The application of techniques with the aim of selecting and appointing a competent person.



Methods of Selection?  

-Interviews

-Assessment Centres

-Psychometric testing

-Work Samples

-Bio Data

-Graphology

-References

(See Part 2 for more details on each of these methods-key advantages/limitations)

• In evaluating the effectiveness of  selection methods- Muchinshky's ideas are very useful:

1.validity analyses if the selection method is an accurate predictor job performance. Interviews are highly criticized for low levels of reliability, poor predictive ability, etc. For example work sampling is very high in validity when assessing competencies for jobs with mechanical components rather than service based components. It is also valid when predicting current ability to perform rather than ability to learn. Furthermore biographical data has a very impressive validity of 0.70 and can be implemented at minimal cost. Although a highly applicable method, it poses serious legal issues about privacy, hence perceived as unfair! This is an example that firms should also take into account of contextual conditions. Best to improve validity by conjoining many methods together.  

2. Fairness examines if the method suffers from any biases or discrimination such as age, gender or race.  

3. Applicability -can the selection method be applied to a wide range of job and applicant types?

4. Cost of method implementation- is it economical? There is little point in sunning a sophisticated and complex personality test if just one candidate applies for it or if it is for a temporary post. 

Paradigms of employee selection and their key assumptions:

-Psychometric paradigm (traditional approach)
-people don’t change much, static process.

-The main purpose of selection is to predict job performance.
-The best performers are the most suitable.
-The better the selection, the better the performance. 

-Person Organisation Fit-
-Organisations, jobs and business environment always changing.
-Organisation needs employees who develop and grow with them.
-Prime focus is on building up a mutually beneficial relationship for both parties- employers seek to recruit an all rounder and employees seek an environment that they will thrive in (opportunity for self and career developments)

-Social Process:
-individuals have to choose the organisation as much as the organisation has to choose that individual. Importance of a 2 way process.
-Applicants must be enticed enough by the company to apply in the first place and accept/reject a job offer.

  When it comes to selection, the main concepts in assessing usefulness of methods are validity (CONTENT and CRITERION) and reliability of the method.  

-Criterion Related Validity- refers to the relationship between a predictor or performance and a criterion of performance.

-Content Related Validity- Does the test test skills needed in a particular job?

   Employers must also take into account the cost of selection method Vs value of the role to the organisation/budget/finding the right person for the job. 

      In Conclusion:

-   HR planning and recruitment should not be treated as the poor relations of selection. Because of increased sophistication in the selection field, it is often forgot that without effective recruitment practices, there may be limited numbers of applicants from which to choose and this can impact on performance at later stages of the employment contract. 

            image Source : thecommonsenseshow.com

Read more and spread the knowledge!

More of my articles and insights are now available on: http://thehrcoffeepot.wordpress.com/category/guest-blogs/ 

If you're interested in finding out more about the link above, The blog features posts about Human Resources profession, challenges of the day, the business environment, and areas of interest interrelated to Human Resources. More specifically, it covers Human Resources & Social Media, Top HR Tips, HR Careers and guest blogs. 

Please feel free to leave your comments and suggestions. If you are interested in contributing to the guest blog above, please contact brendan@hrbusinessadvantage.com.au