Executive Summary
Professor Murray Barrick of the University of Iowa’s Tippie College of Business uses the latest and best research on employee selection tools to provide a guidebook for credit unions to increase employee performance and to retain the employees they want to keep. Barrick finds that effective tools are readily available, inexpensive and legally defensible. Effective hiring leads to marked improvement in job performance – improvement that results in greater economic value to the credit union.
Four conditions are required to fully realize these benefits. First, the credit union must be able to be selective in who it hires. Second, the selection tool that is used must predict job performance. Third, the variability in job performance must be greater than zero. That is, if all applicants after being hired would have the same level of job performance, then nothing can be gained by hiring the best. And fourth, to realize maximum value from effective hiring, employers must be able to retain the high performing employees they hire. Conditions of employment and challenge inherent in the job are two of the most important predictors of employee tenure on the job.
More valid types of selection tools include intelligence tests, math ability tests, personality tests, customer service tests, honesty tests, and turnover tests. This study provides insights into each of these newer selection tools, and provides information on their cost, validity, and EEO and other legal concerns. The tools are suitable for both entry level and management positions. In addition, Barrick covers additional tools specific for the selection of managers.
What is this research about?
Barrick surveyed 300 credit unions as part of his research. The survey revealed that credit union managers have little confidence in the predictive ability of more traditional selection tools. Research literature consistently finds substantial differences between the effectiveness of the most commonly used and the least commonly used selection tools across many different types of organizations.
Some credit unions report having EEO and other legal concerns about using some types of selection tests. However, experience indicates that employers can deal effectively with these concerns by using tests that measure characteristics relevant to the job and that have been validated by credible research as effective
predictors of these characteristics.
The development and use of these tests to predict employee performance and turnover has occurred primarily in the last ten years. This monograph discusses what conclusions can be drawn from that research, what types of tests are available, what information those tests provide, what they cost, and how they can be applied. In addition, it describes how those tests can be most effectively used, what benefits they can provide, what legal issues these methods raise and how they should be handled, and how the position level and type of job affects how the tools can be used effectively
What are the credit union implications?
Selecting managers is a particularly important decision, due partly to the impact a manager has on the credit union. Fortunately, when considering among a pool of internal candidates, the credit union has information on prior performance and work experiences. However, there are instances where prior performance and work experience do not predict performance in the new job.
Managerial selection is critical to the development of a successful employee team. To assist in the managerial selection process, human resource professionals have developed a variety of more sophisticated tools to further refine the decision-making process. Structured interviews, personality tests, and cognitive ability tests are also valid predictors of managerial performance. Using at least three or four of these selection tools makes hiring a successful manager more likely. And hiring better entry-level employees greatly increases the pool of talent available for future promotions.
This report contains important research for any credit union striving to improve its human resource selection methods. Effective recruiting tools can be a tremendous asset to the credit union both at the time of hiring and later, when retention becomes a key component of the human resource strategy. Human resource testing is critical to increased individual productivity, which in turn leads to increased organizational productivity. Credit unions can fully realize potential gains in productivity by using more of the rigorous selection tools discussed in this paper.
