Estimating the Determinants of Employee Performance

Abstract

Employers often wish to know whether the factors used in selecting employees do in fact allow them to choose the most qualified applicants. Because the performance of those not chosen is not observed, sample-selection bias is a likely problem in any attempt to "validate" employee-selection criteria. With minor modifications, the recently-developed techniques for dealing with sample-selection problems can be used in this context. Using data on applicants for first-line supervisory positions and ratings of on-the-job performance of those hired, ordinary least squares estimates of the determinants of performance are compared with maximum-likelihood estimates which correct for selection bias. The correction for selection bias produces some appreciable improvements in some variables' coefficients, though the corrected estimates remain "insignificant" at conventional levels. Differences in the firm's stated and actual hiring criteria are also noted.