Quant Tools Costing
Transcript of Quant Tools Costing
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FIRM STRATEGY-HUMAN RESOURCESTRATEGY RELATIONSHIPFirm Strategy
Human Resource Strategy
Growth/Expansion
Retrenchment
Diversification
Mergers, Acquisitions
Differentiation
Low-Cost Producer
Luxury/High Quality
Aggressive Hiring, Training,Promotions
Layoffs, Terminations, EarlyRetirement
New Corporate Staff Configuration,
Promotions, Training, Hiring
Corporate Acculturation, Hiring orLaying Off
Staff Reconfiguration, Layoffs,Reassignments
Decentralized Hiring and Training
Cost Reduction, Wage Cuts,Efficiency Improvements
Hiring Highly Skilled Personnel,Training, Special Compensation
Plans
Divestitures
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DEFINITIONQuantitative approach to managementrequires that decision problems bedefined, analyzed, and solved in aconscious, rational, systematic, and
scientific manner- based on data,facts, information, and logic- and noton mere whim and guess.
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QUANTITATIVE TOOLS
Accurate
Have no Biases
Helps in positioning the actualperformance
Has an internal locus of control
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TOPICS
Increasing Validity of Interviews.
Yield Ratio and Implication. Measuring Job Satisfaction.
Manpower Planning/Turnover Indices.
Costing
HR Audit.
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RECRUITMENTAND
SELECTION
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RELIABILITY & VALIDITY Validity-It refers to what a test or
selection device measures and how well
it measures it. Reliability-The extent to which interviews,
tests, and other selection tools yield
comparable data over a period of time
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Procedure:
1. Frame questions as per requirement.
2. Rate each item of the test according to criteria. *0 = not necessary on the job
1 = useful on the job
2 = essential to the job
3. Apply the content validity ratio.
NeN / 2
CVR = N / 2
Ne = the number of panel members who give the item a rating of essential to thejob ((.e. 2).
N = total number of experts
CVI = average of CVRs
4. Calculate the content validity index.
ESTABLISING CONTENTVALIDITY OF QUESTIONS
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INCREASING VALIDITY OFINTERVIEW
Source: C.H.Lawshe; A quantitative Approach to content validity, PersonnelPsychology.
TEST ITEMS Judge 1 Judge 2 Judge 3 Judge 4
1 0 0 1 12 2 2 2 23 2 1 1 14 2 2 2 25 2 2 2 2
*0 = not necessary on the job1 = useful on the job2 = essential to the jobNe N / 2CVR = N / 2CVR item 1 = (0 2) / 2 = - 1.0 delete item
CVR item 2 = (4
2) / 2 = 1.0 retain itemCVR item 3 = (1 2) / 2 = - 0.5 delete itemCVR item 4 = (2 2) / 2 = 0.0 delete itemCVR item 5 = (4 2) / 2 = 1.0 retain itemCVR for retained items (1.0 + 1.0) / 2 = 1Content Validity Index (CVI) = average of CVRs.
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Number of Judges Required Content
Validation Ratio5 .99
8 .75
10 .6215 .49
30 .33
TABLE 11.3:REQUIRED LEVEL OF CONTENT VALIDATIONRATIO TO REACH STATISTICAL SIGNIFICANCE AS AFUNCTION OF THE NUMBER OF JUDGES.
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High
Low
JobBehaviors
Low HighSelection procedure scores
D: False
negatives
A: True
Positives
B: FalsePositives
C: Truenegatives
Satisfactory
Unsatisfactory
Pe
rformance
cu
toffscore
Unqualified Qualified
Selection ratio
Baserate
Selection cutoff score
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Validity Correlation Analysis after Cut Scores is
lowered
Satisfactory
Unsatisfacto
ry
Job
Perform
ance
Lo
w
Test
score
0 50 70
D
E
C
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Validity Correlation Analysis after Cut Scores is
raised
Satisfactory
Unsatisfacto
ry
Jo
b
Perform
ance
Lo
w
Test
score
0 50 70
D
E
C
A
B
High98-100
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Employee Testing and Selection(Highest 20%) 57-64 97
(Next highest 20%) 51-56
84
(Middle 20%) 45-50 71
(Next lowest 20%) 37-44
55
(Lowest 20%) 11-36 29
0 20 40 60 80 100
TestScores
Chances in a hundred of being rated a high performer; and %
of high performers found in each test score group
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Joined : 20 : 10yR =50%
Offered : 50 : 20yR :40%
Interview 100 : 50yR = 50%
Tested : 200 : 100yR = 50%
Short listed 2000 : 200yR =10%
YIELD RATIO
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Table 10.4: Hypothetical Yield Ratio for Five Different Recruitment Sources
Local
University
Renowned
University
Employee
Referrals
Newspaper
Ad
Executive
Search Firms
Resumes
generated200 400 50 500 20
Interview offers
accepted175 100 45 400 20
Yield ratio 87% 25% 90% 80% 100%
Judged
acceptable
100 95 40 50 19
Yield ratio 57% 95% 89% 12% 95%
Accept
employment
offers
90 10 35 25 15
Yield ratio 90% 11% 88% 50% 79%
Cumulative 90/200 10/400 35/50 25/500 15/20
Yield ratio 45% 3% 70% 5% 75%
Cost $30,000 $50,000 $15,000 $20,000 $90,000
Cost per hire $333 $5,000 $428 $8000 $6,000
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MAN-POWER PLANNING
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A HYPOTHETICAL TRANSITIONAL MATRIXFOR AN AUTO PARTS MANUFACTURER1993 1996(1) (2) (3) (4) (5) (6) (7) (8)Sales manager .95 .05
Salesrepresentative
.05 .60 .35
Sales apprentice .20 .05 .30
Assistant plantmanager
.90 .05 .05
Productionmanager
.10 .75 .15
Productionassembler
.10 .80 .10
Clerical .70 .30
Not in organization .00 .20 .50 .00 .10 .20 .30
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BOWEY TURNOVER INDEXPurpose: Reflect the stability of manpower index of an org as
compared to industry.
Formula:1) Sum of month served by staff currently employed * 100
2) Sum of possible months in service by full staff
e.g:
Workstation requirement of workers: 20
Pattern of Turnover
Persons Months Possible months
5 * 24 = 120 20 * 24 months : 480 (2)5 * 12 = 60
10 * 6 = 60
240 (1)
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Entry Cohort Original
strengthNumber surviving to end of year after engagement
Year 1 Year 2 Year 3 Year 4 Year 5
A 40 35 28 26 22 20
B 32 25 24 19 18 17
C 48 39 33 30 25 23
D 38 32 27 24 22 19
E 42 36 30 26 23 21
TOTAL 200 167 142 125 110 100
Averagesurvival rate 100% 83% 71% 62% 55% 50%
TABLE 24.1: SURVIVAL RATE ANALYSIS
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HR AUDIT Debate still in infancy
Efficient and economic use of resources
Increased attention to contribution ofemployees
Wastage and attrition cost
Job satisfaction of employees
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SOURCE COST PERRECRUIT cost per recruit (SC/R)
SC/R =AC = AF + NC / R
AC = advertising costs, total monthlyexpenditure
AF=agency fees, total for the month
NC=no-cost applicants, walk-in, nonprofit agencies etc
R=total recruits
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SEPARATION COSTS
1.Exit interview = cost for salary and
benefits of both interviewer anddeparting employee during the exitinterview.
2. Administrative and record keepingaction
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REPLACEMENT COSTS
1 Advertising for job opening.
2 Pre-employment administrativefunctions and record keeping action.3 Selection interview.4 Employment tests.
5 Meetings to discuss candidates(salary and benefits of managers whileparticipating in meetings).
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TRAINING COST Booklets, manuals and reports. Education =$240/days for new employees salary and
benefits x 10 days of workshops, seminars, orcourses.
One-to-one coaching = ($240/day/new employee+ $240/day /staff cost or job expert) x 20 days.
Salary and benefits of a new employee until he or shegets up to par = $240/day for salary and benefits x20days.
Source: Cost for a US Company 2002.
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