N.S. Raju, M.J. Burke, and J. Normand (1990) presented a new approach
to utility analysis that they claimed has the advantage of circumventi
ng the use of expert judges to estimate the standard deviation of job
performance in dollars sigma(y), or SDy). The present authors demonstr
ate that Raju et al.'s approach simply shifts the judgment problem fro
m that of estimating the standard deviation of the criterion (sigma(y)
) to that of estimating the coefficient of variation of the criterion
(sigma(y)/mu(y), or SDy/(Y) over bar). They also critique 3 arguments
advanced by Raju et al.: (a) that the most appropriate estimate of the
average value of employee job performance is average compensation, (b
) that the CREPID method and the 40% and 70% rules represent special c
ases of Raju et al.'s approach, and (c) that the practice of correctin
g the validity coefficient for criterion unreliability in studies usin
g F.L. Schmidt, J.E. Hunter, R.C. McKenzie, and T.W. Muldrow's ( 1979)
method results in overestimation of utility.