What is Utility? Utility Analysis
Utility Utility Analysis
→
➢
Index of Utility
➢
→
➢
FACTORS THAT AFFECT A TEST’S UTILITY →
Psychometric Soundness
→
→
→
→
→
➢
Cost
➢ Economic
HOW IS A UTILITY ANALYSIS CONDUCTED?
➢
➢ Noneconomic
Expectancy Data
Benefits
→
➢
➢
Taylor-Russell Tables
➢
→
, Test’s Validity
➢
concurrent validation
Selection Ratio procedures
Brogden-Cronbach-Gleser Utility Formula
E.g., If there are 50 positions and 100
applicants, then the selection ratio is 50/100,
or .50.
Base Rate ➢
E.g., If a firm employs 25 computer ➢
programmers and 20 are considered
successful, the base rate would be .80.
→
→
→
→
Naylor-Shine Tables
→
𝐒𝐚𝐯𝐢𝐧𝐠 = (n)(t)(r)(SDy )(m)
𝐂𝐨𝐬𝐭 𝐨𝐟 𝐭𝐞𝐬𝐭𝐢𝐧𝐠 = (# of applicants × cost per applicant)
Savings – Cost of Testing
E.g., Suppose we hire 10 auditors per year, the average person in
→ this position stays two years, the validity coefficient is .30, and the
average annual salary for the position is $30,000, and we have 50
applicants for 10 openings. Thus,
n = 10; t = 2; r = .30; SDy = $30,000 x .40 = $12,000
m = 10/50 = .20 = 1.40 (converted using standardized table)
➢ cost of testing = 50 applicants x $10
(10) (2) (.30) (12,000) (1.40) – (50) (10) = $100,300 of savings
Utility Utility Analysis
→
➢
Index of Utility
➢
→
➢
FACTORS THAT AFFECT A TEST’S UTILITY →
Psychometric Soundness
→
→
→
→
→
➢
Cost
➢ Economic
HOW IS A UTILITY ANALYSIS CONDUCTED?
➢
➢ Noneconomic
Expectancy Data
Benefits
→
➢
➢
Taylor-Russell Tables
➢
→
, Test’s Validity
➢
concurrent validation
Selection Ratio procedures
Brogden-Cronbach-Gleser Utility Formula
E.g., If there are 50 positions and 100
applicants, then the selection ratio is 50/100,
or .50.
Base Rate ➢
E.g., If a firm employs 25 computer ➢
programmers and 20 are considered
successful, the base rate would be .80.
→
→
→
→
Naylor-Shine Tables
→
𝐒𝐚𝐯𝐢𝐧𝐠 = (n)(t)(r)(SDy )(m)
𝐂𝐨𝐬𝐭 𝐨𝐟 𝐭𝐞𝐬𝐭𝐢𝐧𝐠 = (# of applicants × cost per applicant)
Savings – Cost of Testing
E.g., Suppose we hire 10 auditors per year, the average person in
→ this position stays two years, the validity coefficient is .30, and the
average annual salary for the position is $30,000, and we have 50
applicants for 10 openings. Thus,
n = 10; t = 2; r = .30; SDy = $30,000 x .40 = $12,000
m = 10/50 = .20 = 1.40 (converted using standardized table)
➢ cost of testing = 50 applicants x $10
(10) (2) (.30) (12,000) (1.40) – (50) (10) = $100,300 of savings
