Question

The HR department is trying to fill a vacant position for a job with a small talent pool. Valid applications arrive every week or so, and the applicants all seem to bring different levels of expertise. For each applicant, the HR manager gathers information by trying to verify various claims on the candidate's résumé, but some doubt about “fit” always lingers when a decision to hire or not is to be made.

Suppose that hiring an employee who is a bad fit for the company results in an error cost of $900, but failing to hire a good employee results in an error cost of $200 to the company. Although it is impossible to tell in advance whether an employee is a good fit, assume that the probability that an applicant is a “good fit” is 0.4, while the probability that an applicant is a “bad fit” is 1−0.4=0.6 . Hiring an applicant who is a good fit, as well as not hiring an applicant who is a bad fit, results in no error cost to the company.

For each decision in the following table, calculate and enter the expected error cost of that decision.

	Good Fit	Bad Fit
Decision	p=0.4	p=0.6	Expected Error Cost
Hire	Cost: 0	Cost: $900	?
Do Not Hire	Cost: $200	Cost: 0	?

Suppose an otherwise qualified applicant applies for a job.

In order to minimize expected error costs, the HR department should ______( HIRE/NOT HIRE) the applicant.

Answer 1

Expected error cost of hiring a bad fit= Error cost * probability of hiring a bad fit

Expected error cost of not hiring a good fit= Error cost * probability of not hiring a good fit

We shall now apply the formula : Expected error cost of hiring a bad fit = 900 * 0.6= $540

Expected error cost of not hiring a good fit= 200 * 0.4= $80

Question part 2--- Yes, the HR department should hire an otherwise qualified applicant since he/she is able to meet all the requirements of the job role. This means that he/she has the neccesary expertise or skills which is identified. A person's physical disability must not come in the way of hiring process if the candidate meets the requirements of the specified job role.