Recruitment

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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

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Motivation

• Recruitment selection
• organisations now appreciate that their
  survival depends on the quality of their
  people..
• Search selection are costly
• Direct costs
• Indirect costs

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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 gt costs

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Fig 1 Investment, income streams the rate of
return
W
e
f
W(T)
d
c
g
W(M)
W(O)
Kt
b
a
t1
t2
t0
Age (time)
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Figure 2 Actual rates of return
Social rates of Return Private rates Of return
Country Secondary Higher Secondary Higher
Australia 16.3 8.1 21.1
Canada 10.6 4.3 20.7 8.3
Denmark 7.8 10.0
France 14.8 20.0
Germany 6.5 10.5
Great Britain 9.0 7.0 11.0 23.0
Italy 17.3 18.3
New Zealand 19.4 13.2 20.0 14.7
Spain 8.6 12.8 10.2 15.5
US 10.0 12.0
Psacharopoulos (1994)
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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

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2. Signalling

• Human capital model
• Education causes worker productivity to rise
• Correlation versus causation
• Alternative view signalling screening

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Screening

• Why dont 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

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3. Screening Hiring the right workers

• Empirical support for Human capital model
• Firms Selecting skill standards
• General principle

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Hiring standards

• Thus
• Alternatively

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The production technology

• 1. Production is independent across workers
• 2. Workers productivity depends on the skills of
  other workers

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Fig Interdependence in output of two types of
workers
No. of graduates employed
100 110 120 130 140 150
Output
100 63.10 66.81 70.39 73.85 77.21 80.47
110 64.93 68.75 72.43 75.99 79.45 82.81
120 66.64 70.57 74.35 78.00 81.55 85.00
130 68.26 72.28 76.15 79.90 83.53 87.06
140 69.80 73.91 77.87 81.70 85.41 89.02
150 71.26 75.45 79.49 83.41 87.20 90.88
No. Of SL
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The production technology

• 3. Interdependence between workers interaction
  with capital

Output Labour cost Capital cost Total cost Cost/Output
Old machine
Skilled 4 40.00 5.00 45.00 11.25
Professional 6 64 5.00 69.00 11.50
New machine
Skilled 8 40.00 11.00 51.00 6.38
Professional 12 64.00 11.00 75.00 6.25
Skilled W5.00 Professional W8.00
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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

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2. The availability of labour

• Search process- See Figure
• Agents have imperfect information
• quality of jobs (w)
• location
• Information on a worker
• Inspection
• Experience

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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

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Stop searching hire

• If z ? z
• If z lt z
• Reservation payoff, z
• z -c (?f \ ? r)(?(z))

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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

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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

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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