Review Questions for LIR 545 1st Half Exam Fall 2007

  1. How can a firm cut down on undesirable applicants and reduce interview costs?
  2. How can we reduce the cost of hiring?
  3. What is the relationship between skill level and the capital/labor ratio?
  4. Your firm is conducting search for a chemical engineer with 5 to 10 years of experience. Thirty-two engineers applied for the position. Preliminary screening of resumes revealed that twelve applicants appear to be qualified. All of these candidates reside out of state. Mr. Thrifty, a hiring committee member, does not want to offer any reimbursement of travel. Mr. Halfway suggested that it will make sense to promise that the applicants who will be denied the job will be reimbursed for travel expenses, while, the person who is offered the job will not receive reimbursement for his travel. Ms. Quarter suggested that you promise to reimburse the candidate who is hired, but no one else. Ms. Full wants to reimburse travel for all candidates. How do you decide?
    5.
  5. Screening new workers is an expensive process. It is not unusual for costs involved in hiring a professional to reach as much as 50% of her annual salary. By increasing the time and resources involved into interviewing a prospective candidate a firm can get a more accurate signal regarding her ability. Which of the following are likely to result in increase expenditures on screening each prospective employee? Explain your answer.
    6.
        1. A new government regulation that makes it more difficult to fire workers
        2. An industry wide wage increase
        3. An increase in the rental cost of capital employed by a firm
  6. Widget Services inc. is a high turnover low wage employer of unskilled labor. Most workers who join Widget do not plan to stay with the firm for more than a few months. Traditionally the only screening mechanism employed by Widget was a five-minute telephone interview. Widget is blessed with a plentiful applicant pool. Typically Widget receives ten to twenty applications for a job opening. New human resources VP, Mr. Screening, feels that five-minute phone interviews do not give adequate information for selecting among over 10 applicants. He argues that Widget is turning down a lot of good applicants and occasionally hires really bad ones. He argues that the wages offered by Widget are adequate and do not need to be changed, however, he wants to abandon the phone interviews in favor of one day on site interviews. Assuming that prospective applicants have no private information about their ability and value to Widget, what impact will this have on the number of applicants? On the average quality of applicants? On the quality of new hires?
    7.
  7.  
    8. Explain the important considerations in determining how much training to offer to your workers.
  8. Explain why a company might be willing to pay for the training of its workers.
  9. Which workers are likely to have the most steep age-earnings profiles?

  10.  Hiring on the basis of any individual characteristic can lead to statistical discrimination.

      1. Explain the basis for this statement. (8 points)  Give an example of a characteristic that is not usually associated with discrimination that could be used during hiring that could lead to statistical discrimination. (2 points)
      2. If the characteristic is not a group identity (minority status, disability status, etc.) for a group that is covered by U.S. discrimination laws, what would be required for use of the characteristic to lead to possible legal discrimination under U.S. discrimination laws? (5 points)
      3. Suppose that the characteristic is not membership in a covered group.  If the court holds tht there is a basis for a suit against the employer, what must the employer do to defend against the suit? (5 points)
      4.  
        1. If the employer makes a positive defense against the suit, how might it be possible for statistical discrimination to still exist?  (Hint:  we covered two major reasons) (6 points)
        2. What would you look for as evidence for these reasons? (4 points)

  11.  There is a slight trend in the private sector to bring back testing as a method of choosing workers from a pool of candidates.  This is partly based on research that shows that personal interviews are poor predictors of worker quality.

a.        Under what conditions might a group of potential employees challenge the use of the test? (6 points)

b.       How could the employer show that the test was a necessary business practice? (6 points)

c.        How could the potential employees still challenge the test if the employers are able to meet their burden of proof in (b)? (6 points)

d.       If the employees are successful in the their challenge in ( c ), what would you expect to observe among groups of employees at the firm? (6 points)

e.        Why might the results in ( c ) support the use of different cutoffs for offers to different groups? (6 points)

  1.  Major Japanese firms appear to do much more pre-employment screening and testing of applicants than firms in other countries. Japanese firms are also apparently more willing to have explicit policies never to institute a general layoff and to guarantee "lifetime" employment. Explain how these personnel policies support the business strategy of "just-in-time" manufacturing.

  2. What are the major characteristics that need to be considered in defining a job?

  3. Indicate the most important benefits of using teams.   Indicate the most important costs of using teams.  What are the most important factors in team design?
  4. Under what conditions should firms have flatter hierarchical structures?

  5. Explain how hierarchical structure of firm decision making is related to the types of errors that can occur in this decision process. What kind of structure will generate the most innovation?

  6. You are asked to give a talk about the advantages and disadvantages of raiding other firms for talent as opposed to growing your own.  You decide to focus on three components:  the “winner’s curse”; “option value” and “specific training.”  You need to explain these to your audience and show how they influence this choice.

  7. Explain how the length of a probationary period might be expected to differ for the following differences: (5 points each)
    1. Data entry clerks versus secretaries.
    2. When most applicants are young as opposed to when most of the applicants are more mature.
    3. When there is training on the job as compared to when there is almost no training.
    4. When workers know more about their own abilities than can be judged by management during hiring as compared to when this knowledge can be judged equally by both.

  8. What are the major considerations that determine how often you do performance evaluations and how much effort you expend in doing the evaluations?

  9. What are the major considerations that determine how often you do performance evaluations and how much effort you expend in doing the evaluations?

  10. What are the pros and cons of using a forced distribution for performance evaluations?

  11. Compare broad versus narrow quantitative performance evaluation instruments on the following:

    1. Riskiness to the worker

    2. Distortion of incentives

    3. Openness to manipulation

    4. Connection with the amount of discretion that is given to the worker on the job