Ohio State University Extension Fact Sheet

Ohio State University Fact Sheet

Community Development

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Selecting Employees for Small Businesses:
Doing it Right the First Time

CDFS-1383-97

Small Business Series

James Lindner
Chris Zoller

As described in the Small Business Series FactSheet, Filling a position in a Small Business, selecting an employee is the last step in employing qualified applicants after a sufficient pool of applicants has been drawn and potential employees have been interviewed (Lindner & Zoller, 1996; Zoller, 1996). The basic objective (see Table 1.) of a selection plan is to select those applicants most likely to meet desired performance standards of a particular business (Buford, Bedeian & Lindner, 1995). Two basic selection strategies are available: multiple hurdle and compensatory.

The multiple-hurdle approach is job specific. This approach subjects applicants to a number of selection procedures, or "hurdles," each of which must be cleared before an applicant progresses to the next step. A second approach, called the compensatory approach, allows all applicants to progress through the entire selection process. Instead of being screened out by any one selection procedure, the applicant is evaluated on a composite score of assessments where low scores in certain areas may be offset by high scores in other areas. This approach provides an opportunity for applicants to be placed in a variety of jobs (Holley & Jennings, 1983). Whatever strategy is used, if any selection procedure or hurdle has disparate impact on women or minorities, it must be job-related.

Small businesses that have a variety of employment vacancies and numerous job applicants will find it is easier to manage the selection process and track the applicant flow data needed for EEO documentation when a multiple-hurdle approach is used. This approach is recommended in most situations.

Certain steps are taken to process applicants for jobs. In general, the basic progression moves from the general to the specific. In the early stages the "hurdles" are low, because the objective is to develop and classify a pool of applicants for various job openings. During the latter stages, the process seeks to match applicants with specific jobs; consequently, the hurdles become higher with each step.

Table 1. Systemizing Personnel Selection

The selection process can be systemized to a greater degree than is commonly believed. This process can begin with the understanding of eight commonly overlooked facts about selection.

  1. Past Performance-The single most important indicator of how a candidate will perform on a job is how he or she has performed in the past.

  2. Selection Procedures-Effective selection should include testing, interviewing, and reference checking. None of these procedures should be relied on solely or given disproportionate weight.

  3. Negative Factors-Selection must be a "search for the derogatory." Success on the job is a product of many factors, but failure may be the result of only one.

  4. Motivation and Personality-Most failures on the job are not because of a lack of skills, which can be taught, but a lack of motivators or an inappropriate personality.

  5. Personal Bias-In many cases, what are perceived as strengths (ability to get along with everyone, work long hours, etc.) are actually weaknesses. Well-intentioned biases may make the hiring official favor the wrong applicant.

  6. Assumptions-There have been marked changes in what people expect from their jobs. Salary and security, once paramount, have been replaced by job satisfaction, responsibility, recognition, sensitive supervision, and related wants.

  7. Knowledge-Not knowing what to look for in making selection decisions may cause serious errors. Take advantage of what is known about factors which measure job performance, how to measure them.

  8. Using Tests-Employers agonize over whether applicants cheat on tests. They should worry more about their own misuse of tests. Tests should be job related and administered by qualified professionals. Results should be kept confidential and the results shared with the applicant.

Source: Arthur A. Witkin, Commonly Overlooked Dimensions of Employee Selection, Personnel Journal 59 (July, 1980), 573-575+.

The Selection Process

To ensure that applicants are properly matched with jobs, most small businesses use a sequence of selection techniques. When internal applicants are being considered, there is usually no need to make pre-employment inquiries, conduct background investigations, or require the completion of an application form. When external pplicants are considered, however, the complete process is followed. The remainder of this fact sheet explains the selection process by examining in detail the most important selection techniques.

Pre-employment Inquiries

A certain amount of information is needed on all job applicants for a small business to manage the selection process in an orderly and systematic manner. This information is developed through pre-employment inquiries and falls into two basic categories. The first category is general information to be used for such things as identification, classification, and record keeping. The second category relates to the suitability of an applicant for a particular job.

Because all selection practices are "tests," even preliminary requested information must be job related. At this stage, inquiries should be limited to obvious items and resulting decisions should be justifiable. For example, assume that an applicant is asked to indicate educational attainment and areas of study. No one would likely question a decision not to refer an applicant who had completed only the tenth grade to a management position. On the other hand, rejecting the same applicant for the position of custodian because of an arbitrary high school diploma requirement would be difficult to justify.

It is usually illegal to request data that directly reveal racial, ethnic, or religious characteristics, and an employer's wanting this information for a selection decision would be questionable. The variety of areas in which discrimination may occur is broad. This type of information is normally collected from application forms, background investigations, and initial screening interviews. Each of these tools will be discussed briefly.

Application Forms

Application forms are the most widely used selection device. A completed form is the dated record of a potential employees interest in a position vacancy. An application form serves as profile of the applicant for classification, screening, and record keeping. If a perspective employee is subsequently hired, the information it contains becomes the basis for the employee's personnel record. Major divisions of an application form include identification, employment status, employment record, education record, specialized training, military record and references.

One pitfall that many small businesses tend to make is requesting too much information on an application form. Although application forms are normally standard, the jobs in a particular business may vary greatly; thus, items relating to one job may be irrelevant for others. Moreover, forms may contain items that are clearly questionable from a legal point of view.

A supplemental application form (SAF) is a relatively new selection device pioneered by Richard E. Biddle of Biddle and Associates, a fair employment consulting firm. An SAF is so-named because it supplements an organization's general application form. An SAF is designed as an application form for one job classification, allowing many items to be included that would not otherwise be appropriate. For example, an SAF for a retail sales position with customer service responsibilities could have a section for the applicants to describe their background and experience in working with customers. For the position of Office Manager, a candidate could be asked to respond to questions related to the operations of a business office.

There are a number of advantages in using SAFs as selection devices. One of the most important is job-related applicant self-screening. If a person is a candidate only after completing an SAF, applicant-flow statistics are likely to be more reliable and more favorable, because they will not include individuals who are obviously unqualified. Another positive feature of SAFs is the evaluation of education and experience by type and content. This evaluation is easier to defend than the traditional method of requiring a minimum number of years of experience or education, and it accomplishes the same legitimate need. Finally, SAFs provide a basis for determining whether an applicant can perform a job's physical requirements without discriminating against otherwise qualified applicants on the basis of gender and physical disabilities.

A final note on application forms concerns data regarding race and gender of applicants for use in computing and reporting appropriate statistics. The EEOC allows a detachable or separate survey form where an applicant can provide data regarding race, religion, gender, national origin, and age. This form should indicate that the data are kept solely for EEO purposes and will be kept from other application materials. Employment decisions cannot be made on information provided on this form. Although collecting this information may seem paradoxical in view of the previous discussion, the fact is that not having the data on record is not considered a valid excuse for failing to provide required reports.

Initial Screening

In some cases, an interview may be held shortly before or after an individual has completed an application form. This brief interview is called an initial screening interview and helps to determine the advantage to be gained by either the applicant or the organization maintaining contact (Mathis & Jackson, 1979). This interview is used to determine whether an individual's qualifications are likely to match any of a small business' present or projected job openings. Typical areas covered in this interview are job interests, career goals, location desired, salary expectations, and availability.

A structured interview is the best method. The interviewer should be supplied with a list of items that require short answers and limit questions to areas similar to those listed above. Even this type of interview has EEO implications. If the response to an item is one which might cause problems, an interviewer might be better off not having heard it.

Background Investigations

Background Investigations involve collecting and using information concerning an applicant's past performance, health, character, personal activities, and education. This information is supplied by persons other than the applicant. There are several types of background checks that can be done by an employer: credit checks, criminal record checks, driving records, past employer checks and reference checks. The principal source of such information is a reference check.

Regarding legal restrictions, background checks are a type of selection test, and information sought must be job related. Standards of information should be applied uniformly within any job classification. If one item is grounds for denial of a job to one person, it should be the same for any other person who applied for the same job. Background checks should be documented to prove that decisions were based on relevant information. In that background checks tend to have an adverse impact on minority applicants, job applicants should be given a chance to explain poor references (Deland, 1983; Sewell, 1981).

Credit checks may be useful when filling a position that involves financial responsibilities. There are two ways to do a credit check. Investigative consumer credit reports are the most detailed and include interviews with family and friends of the prospective employee: the applicant must be informed in writing and consent given before this type of investigation is performed. Consumer credit reports are the most used type of credit check. This type of credit check involves requesting a credit report from a third party credit agency. Written notification is not required.

Criminal checks are useful when filling a position that requires close, unsupervised contact with the public or children. Many states have laws pertaining the rights of employers to secure and use criminal records in making an employment decision. Small businesses wishing to conduct criminal checks of potential employees should check with their state's Department of Labor before proceeding with this type of background check.

Previous employment checks have been the topic of much discussion lately. Once considered an essential element in checking the background of an applicant, previous employment checks are going "out-of-favor" with many small businesses. The possible negative consequences of a business becoming liable for the defamation of former employees has resulted in many businesses developing "say nothing" policies. Most businesses are likely to only offer information on a former employee's dates of employment and positions held. However, this type of limited information is useful and small businesses should obtain it when possible.

Driving records checks are useful when a position requires the use of a company vehicle or if the employee is required to use their own vehicle. Employees should check the driving record of prospective employees who will be using company vehicles. Employees should verify applicants who are required to use either a company vehicle or their own vehicle have a valid driver's license.

Reference checks are both an intuitive and systematic process that includes a wide range of job-related issues, such as performance on previous jobs and the ability to work with people. Checking references may appear to be a simple matter, but it is one of the least understood aspects of the selection process. The contacts that should be made depend on the nature of a job; in any case the references listed on an application blank are not always useful. Applicants tend to list only those people who are likely to praise their job performance.

The best references are obtained in person, where there is a chance to see whether nonverbal behavior matches what is said. If such a meeting cannot be arranged, telephoning is the next best alternative.

For references to serve as indicators of future performance, the people who provide them must be knowledgeable. Rarely can one person provide a complete picture of an applicant's strengths and weaknesses. One person may know why a prospective employee quit a job, another about work habits, and yet another about academic performance. The key point to remember is that when questionable information surfaces, an investigation should be pursued until the issue is resolved.

Work Sample Tests

A trend in selection is to allow applicants to perform activities that closely approximate those they will actually perform on a job. These tests may be part of the supplemental application form or they may be administered during an interview. Performance on the test is assumed to represent an applicant's performance in an actual job situation.

Interviews

The final hurdle in the selection process is usually the interview. The interview is designed to determine how well an applicant will perform if hired. Like a pencil-and-paper test and other selection procedures, the interview is a type of "test" and must meet the standards of job relatedness and nondiscrimination. Detailed information on interviewing is covered in the Filling a Position in a Small Business fact sheet.

Summary

The basic objective of selection is to hire those candidates with a high probability for job success. A multiple hurdle plan is the best selection strategy. Selection hurdles or tests include pre-employment inquiries, application forms, initial screening interviews, background investigations, work sample tests, and interviews.

Buford, J. A., Jr., Bedeian, A. G., Lindner, J. R. (1995). Management in Extension (3rd ed.). Columbus, Ohio: Ohio State University Extension.

Holley, W. H., & Jennings, K. M. (1983). Personnel Management: Functions and Issues (2nd ed.). Hinsdale, IL: Dryden, 148.

Lindner, J. R., & Zoller, C. (1996). Recruiting Employees for Small Businesses: A little planning goes a long way, Extension FactSheet: Small Business Series, Columbus, Ohio: Ohio State University Extension.

Mathis, R. L. & Jackson, J. H. (1979). Personnel. St. Paul: West, 178.

Deland, R. (1983). Reference Checking Methods, Personnel Journal, 62, 458-463. See also Sewell, C., (1981). Pre-Employment Investigations: The Key to Security in Hiring, Personnel Journal, 60, 376-379.

Zoller, C. (1996). Filling a Position in a Small Business, Extension Fact Sheet: Small Business Series, Columbus, Ohio: Ohio State University Extension.


All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.

Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.

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