Employee Screening: Theory and Evidence

Abstract

Arguably the fundamental problem faced by employers is how to elicit effort from employees. Most models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking. But there is another option that relies on heterogeneity across employees, and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring. This should be especially useful in work systems where monitoring by supervisors is more difficult, such as teamwork systems. We analyze the relationship between screening and monitoring in the context of a principal-agent model and test the theoretical results using a national sample of U.S. establishments, which includes information on employee selection. We find that employers screen applicants more intensively for work ethic where they make greater use of systems such as teamwork where monitoring is more difficult. This screening is also associated with higher productivity and higher wages and benefits, as predicted by the theory: The synergies between reduced monitoring costs and high performance work systems enable the firm to pay higher wages to attract and retain such workers. Screening for other attributes, such as cognitive ability, does not produce these results. ABSTRACTArguably the fundamental problem faced by employers is how to elicit effort from employees. Most models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking. But there is another option that relies on heterogeneity across employees, and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring. This should be especially useful in work systems where monitoring by supervisors is more difficult, such as teamwork systems. We analyze the relationship between screening and monitoring in the context of a principal-agent model and test the theoretical results using a national sample of U.S. establishments, which includes information on employee selection. We find that employers screen applicants more intensively for work ethic where they make greater use of systems such as teamwork where monitoring is more difficult. This screening is also associated with higher productivity and higher wages and benefits, as predicted by the theory: The synergies between reduced monitoring costs and high performance work systems enable the firm to pay higher wages to attract and retain such workers. Screening for other attributes, such as cognitive ability, does not produce these results.

Multi-Unit Ownership Strategy in Franchising: Development of an Integrative Model

“…Owing to the heterogeneity of potential franchisees in their entrepreneurial capabilities, the franchisor uses the higher specific investments of MUF as a screening device to attract franchisees with high entrepreneurial capabilities and a low propensity to act opportunistically. The latter also results in less monitoring during the contract execution period (Huang & Cappelli, 2006). As mentioned earlier, MU franchisees as area developers have to undertake higher specific investments than SU franchisees.…”

Neo-Taylorism at Work: Occupational Change in the Post-Fordist Era

“…4 The introduction of teams into unskilled and assembly work, however, brought worker selection back into high relief, while also co-opting the regulatory effect of peers on worker effort (see Taylor [1903Taylor [ /1911Taylor [ /1912Taylor [ ] 1947). Team-based production relies heavily on normative control, with firms recruiting significantly on the basis of whether prospective employees are likely to meet expectations (Huang and Cappelli 2006). Hiring frequently involves elaborate, multi-stage testing and orientation procedures including psychological profiling, multiple interviews, and team scenario exercises aimed at excluding applicants deemed unlikely to conform (Graham 1995).…”

Does the Growth in Higher Education Mean a Decline in the Quality of Degrees? The Role of Economic Incentives to Increase College Enrolment Rates

“…In consequence, the screening model is often used as a theoretical basis to decrease public spending on education (Quiggin 1999). Huang and Capelli (2001), Bedard (2001) and Weiss (1995) o¤er some empirical evidence of the model and of the importance of higher education for employers.…”