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Recruitment & selection: Hiring the right workers. 1. The supply side of the labour market 2. Screening: Hiring the right workers 3. The availability of workers 4. Staffing policy in international businesses. Motivation. Recruitment & selection

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recruitment selection hiring the right workers
Recruitment & selection: Hiring the right workers
  • 1. The supply side of the labour market
  • 2. Screening: Hiring the right workers
  • 3. The availability of workers
  • 4. Staffing policy in international businesses
motivation
Motivation
  • Recruitment & selection
      • ‘…organisations now appreciate that their survival depends on the quality of their people..’
  • Search & selection are costly
      • Direct costs
      • Indirect costs
the supply side
The supply side
  • 1. Human capital model
    • Understanding the educational (& training) investment decisions of workers (& firms)
    • Costs & benefits arise over time
    • Incremental decision over time
    • Decision rule: invest if expected discounted future stream of benefits > …costs
slide4

Fig 1 Investment, income streams & the rate of return

W

e

f

W(T)

d

c

W(M)

g

W(O)

Kt

a

b

t1

t2

t0

Age (time)

figure 2 actual rates of return
Figure 2 Actual rates of return

Psacharopoulos (1994)

the measurement determinants of rates of return
The measurement & determinants of rates of return
  • (a) Net Present Value
  • (b) Internal Rate of Return
  • (c) Earnings functions
    • Problems: data; omitted variable bias, selection bias

- Education & experience always statistically significant

2 signalling
2. Signalling
  • Human capital model:
    • Education causes worker productivity to rise
    • Correlation versus causation
  • Alternative view – signalling & screening
screening
Screening
  • Why don’t all workers invest in a high level of education?
  • Evidence: HC versus screening – ability bias
    • (a) include IQ and schooling in wage equation
    • (b) analysis of identical (monozygotic) twins
    • (c) instrumental variables
    • (d) analysis of the self employed
3 screening hiring the right workers
3. Screening: Hiring the right workers
  • Empirical support for Human capital model
  • Firms: Selecting skill standards
    • General principle
hiring standards
Hiring standards
  • Thus:
  • Alternatively:
the production technology
The production technology
  • 1. Production is independent across workers
  • 2. Workers’ productivity depends on the skills of other workers
hiring workers
Hiring workers
  • How many workers to hire?
    • ‘The firm should continue to hire workers so long as the increment to profit brought about by hiring the worker is positive.’
  • Should firms hire risky workers?
    • If they have the same expected value
    • If expected value is less
2 the availability of labour
2. The availability of labour
  • Search process- See Figure
  • Agents have imperfect information
      • quality of jobs (w)
      • location
  • Information on a worker
      • Inspection
      • Experience
decisions
Decisions
  • (i) Choice of search technology
      • internal v. external sourcing
  • (ii) Choice of search intensity
      • no. of applicants to interview
      • time - interviewing, testing, etc.
  • (iii) Decision rules
      • sequential search
      • optimal stopping rule - reservation payoff
stop searching hire
Stop searching & hire
  • If zz*
  • If z < z*
  • Reservation payoff, z*
      • z* = -c + (f\  + r)((z*))
reservation payoff z
Reservation payoff, z*
  • Z* = Z*(c, f \ r, q + p - w)
  • Firms are more selective if
      • applicant arrival rate increases
      • costs of search decrease
      • quality of match increases
4 staffing policy in international businesses
4. Staffing policy in international businesses
  • Types of policy
    • (a) Ethnocentric policy – key management positions filled by parent-country nationals
      • E.g. Procter & Gamble, Philips, Matsushita, Toyota
    • (b) Polycentric approach
      • Host-country nationals staff subsidiaries
      • Parent-country nationals – key positions at headquarters
4 staffing policy
4. Staffing policy
  • 3. Geocentric approach
    • Recruit the best people for key jobs regardless of location & nationality
  • Staffing policy should be consistent with company strategy