Reference no: EM133623584

Explanation of Case:

After winning $2 million in the New England lottery, 32-year old Randy May found an investment opportunity in a small business to develop a continual stream of earnings for his future. After much deliberation, May decided on opening a chain of ice cream shops in the Cape Cod area, one on Nantucket, the other on Martha's Vineyard, and two more on the Cape. Once the construction process was underway, Randy then had to figure out how to staff the shops. He determined that 50 employees total were needed to staff all four locations. Each employee would be paid $8 per hour, equaling $16,000 in income over the course of a year.

Unfortunately, being new to this process, Randy did not know how to handle this type of human resource (HR)/staffing process. He consulted with two professionals that he knew personally. Both individuals suggested utilizing the interview process, but one of the consults also suggested utilizing a work sample test in addition to the interview process. The interview process would cost $100 per applicant; the work sample would cost $150 per applicant.

However, when looking at the validity, the work sample would be more valid coming out at r=.50. If selecting the method that would result in a validity of .50, the average score on this selection measure would be z=.80, which is the standard deviation among the mean. Given all of this information Randy came to a crossroads, unsure of how which selection measure would be best for his company, budget, and overall goals.

Questions:

1. How much money would Randy make using each selection method?

2. If Randy can use only one method, which should he use?

3. If the number of applicants increases to 200 (more applications are coming in every day), how will your answers to questions 1 and 2 change?

4. What limitations are inherent in the estimates you have made?