The Increasing Cost of Mishires
Because payroll constitutes about half of the budget for most companies, selecting employees is best seen as an investment. For each salary dollar spent, we hope for a return of several times that amount based upon that individual's contribution to the enterprise. From this perspective, it is essential to consider how high the cost can be for hiring the wrong person.
Fortune 500 companies estimate the cost of mishiring to be between two and four times the person's salary. Consider the impact of a bad hire: lost business and business opportunities, angry customers, low morale, low productivity.
The Best Predictors Of Job Performance
Most hiring managers use a variety of techniques for evaluating a candidate for employment and comparing them to other candidates. These may include background checks, reference checks, discussion with previous employers, review of education and training, college grade point average, biographical data, psychological testing, and, almost always, one or more face-to-face interviews.
Surveys commonly find that most hiring managers attach the greatest weight to the interview, despite its well-documented shortcomings. What is surprising to most people is that psychological testing is a better predictor of job performance than any other single measure.
The table below is taken from a landmark study in one of the most respected psychological journals. Though similar results have been obtained in a number of other similar studies, the Hunter and Hunter study is certainly the most widely known and most frequently cited.
PREDICTOR and its VALIDITY COEFFICIENT
Psychological testing: 53%
Biographical data: 37%
Reference checks: 26%
College grades: 11%
Age: - 1%
From: Hunter, J.E., and Hunter, R. F. 1984. Validity and utility of alternative predictors of job performance. Psychological Bulletin, 96, 72-98.
As can be seen, psychological testing outranks all other factors in predicting ultimate job performance.
Most striking is the very low validity coefficient for interviewing.
Obtained from http://www.computerpsychologist.com/tcp2000/news2.htm