Utility Analysis

Wayne F. Cascio

Utility analysis is a tool for decision making. It is the determination of institutional gain or loss (outcomes) anticipated from various courses of action, after taking into account both costs and benefits. For example, in the context of human resource management, the decision might be which type of training to offer or which selection procedure to implement. When faced with a choice among alternative options, management should choose the option that maximizes the expected utility for the organization across all possible outcomes. We consider alternative methods for assessing the utility of employee selection as well as employee training. In the context of selection, the utility of a selection instrument or battery of instruments is the degree to which its use improves the quality of the individuals selected beyond what would have occurred had that instrument or battery of instruments not been used. Quality, in turn, may be defined in terms ...

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