Higher cost, lower validity and higher utility: Comparing the utilities oftwo tests that differ in validity, costs and selectivity

Traditional approaches to comparing the utility of two tests have not syste matically considered the effects of different levels of selectivity that ar e feasible and appropriate in various selection situations. For example, em ployers who hope to avoid adverse impact often find they can be more select ive with some tests than with others. We conducted two studies to compare t he utilities of two tests that differ in costs, validity, and feasible leve ls of selectivity which can be employed. First, an analytical solution was conducted starting with a standard formula for utility. This analysis showe d that for both fixed and variable hiring costs, a higher-cost, lower-valid ity procedure can have higher utility than a lower-cost, higher-validity pr ocedure when the selection ratios permissible using the two procedures are sufficiently (yet realistically) different. Second, using a computer simula tion method, several combinations of the critical variables were varied sys tematically to detect the limits of this effect in a finite set of specific selection situations. The results showed that the existence of more severe levels of adverse impact greatly reduced the utility of a written test wit h relatively high validity and low cost in comparison with an assessment ce nter with lower validity and higher cost. Both studies showed that the cons ideration of selectivity can yield surprising conclusions about the compara tive utility of two tests. Even if one test has lower validity and higher c ost than a second test, the first may yield higher utility if it allows the organization to exercise stricter levels of selectivity.