A critical reanalysis of Hunter, Schmidt, and Coggin's (1988) 'Problems and Pitfalls in Using Capital Budgeting and Financial Accounting Techniques in Assessing the Utility of Personnel Programs.'

Article Abstract:

Hunter, Schmidt, and Coggin (1988) criticized the application of capital budgeting techniques to the evaluation of personnel programs. The argued that many of these methods are often conceptually and logically inappropriate, that they may be logically inapplicable with unintended consequences, and that there is no single correct definition of utility. Three problems with Hunter et al.'s argument are discussed in this article. First, Hunter et al.'s presentation of capital budgeting is inconsistent with widely recognized capital budgeting methods, such as discounting, for the evaluation of personnel programs. Second, Hunter et al. used unrealistic examples constructed to facilitate their critique. Third, Hunter et al.'s argument encourages continued imprecise measurement and presentation of the costs and benefits of personnel programs. In the aggregate, such arguments serve to narrow, rather than broaden, the perspective of personnel psychology. (Reprinted by permission of the publisher.)

Analysis, Capital investments, Business budgets

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Empirical distributions of range restricted SD (subset x) in validity studies

Article Abstract:

The Schmidt-Hunter validity generalization procedure (Schmidt & Hunter, 1977) uses a hypothetical distribution of range restricted standard deviations and the expected value obtained from that distribution. In this article we investigate 12 empirically derived distributions, using the General Aptitude Test Battery, Law School Admissions Test, and Scholastic Aptitude Test validity studies. These empirical distributions of range restricted standard deviations are compared with both the assumed distribution used in most validity generalization research and with those few other empirical distributions reported in the literature. The findings are discussed in terms of differences in setting and ways these empirical results could be used in validity generalization analyses. (Reprinted by permission of the publisher.)

Testing, Examinations, Test validity, Statistics, Statistics (Data), Ability, Aptitude tests

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Why capital budgeting techniques are suited for assessing the utility of personnel programs: a reply to Hunter, Schmidt, and Coggin (1988)

Article Abstract:

In a recent article, Hunter, Schmidt, and Coggin (1988) criticized the use of capital budgeting techniques for evaluating the utility of human resource programs (such as selection programs; Cronshaw & Alexander, 1985). Hunter et al. claimed that such methods are often conceptually and logically inappropriate and that use of these methods may have unintended negative consequences for organizations. Although we agree with Hunter et al.'s argument that no single correct definition of utility exists, three of their arguments have logical and empirical shortcomings. It is demonstrated that capital budgeting theory remains a useful framework from which to represent the utility of human resource programs to organization decision makers. (Reprinted by permission of the publisher.)

Methods, Capital budgets

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