Question

Suppose a company is deciding whether to purchase a motivational program from an outside company that claims to help improve employee morale and productivity. The company pilots the program and will decide to implement the program if there is evidence of a significant improvement in morale and productivity.

What is the Ho and Ha for this situation? What would it mean if you made a Type I error? What about a Type II error? Which error appears to be the more serious in this situation?

Answer 1

The null hypothesis, H₀ is that the motivational program does not improve employee morale and productivity.

The alternate hypothesis, H_a is that the motivational program does improve employee morale and productivity.

A type I error occurs when the null hypothesis is rejected when it is actually true. It is always equal to the level of significance chosen. In our case, it would mean NOT PURCHASING the motivational program when it actually would have helped employees.

A type II error occurs when the null hypothesis is accepted when it is actually false. In our case, it would mean accepting and PURCHASING the motivational program when it actually makes no difference to employee productivity.

In this situation, a type II error seems to be more serious. Making a type II error would mean we are spending money on purchasing the motivational program, and it is not making any difference to employee motivation and productivity.