Considering Level of Analysis

1. Considering Level of Analysis Measuring performance at company level Instructor: Prof. Ph.D. K. Hattrup Speaker: Quirin Seitenberger 04.12.2002

2. Structure • Introduction • Productivity • Utility Analysis Quirin Seitenberger

3. Introduction • Performance in organizations is always a multilevel phenomenon • Three different levels of performance: • Individual level • Group level (or team level) • Organizational level • Performance is also cross-level with top-down and bottom-up effects Quirin Seitenberger

4. Individual level • Easiest to measure and to change  many psychologist just consider this level • But also the individual level is influenced by other levels, e.g. due to a bad team leader or wrong company politics • No more details, because this issue will be discussed more thoroughly in further seminar lectures Quirin Seitenberger

5. Group (or team) level • Team performance often measured by simply appraising the performance of individual members and then aggregating this information at the team level • Problems: different performance levels of team members due to different job descriptions, social loafing, two members working in different directions ... • Remember Steiner‘s classification of group work (social psychology) Quirin Seitenberger

6. Organizational level • Whenever appraising performance at a lower level, we hope to affect performance at the organizational level • But how to measure (or what is) organizational performance ... • Two examples of measuring performance (or its improvement) at the organizational level: • Productivity • Utility Analysis Quirin Seitenberger

7. Productivity • Definition: “Productivity is how well a system uses its resources to achieve its goals.“ (Pritchard, 1992) • But: do not confuse performance with productivity (performance is only the aggregation of behavior relevant for the organization`s output!) • Productivity also includes factors like cooperation, coordination and availability of needed resources Quirin Seitenberger

8. Measurement issues • Purpose of measuring productivity is to improve it through the behavior of the individual in the organization • Scope: Include all important functions (e.g. quantity and quality) • Controllability: the measures must be under the control of the personnel (e.g. otherwise motivation will decline) • Range of application: applicable to almost any type of work Quirin Seitenberger

9. Measuring Organizational Productivity (Examples) • Rowe: Worker at the department level do brainstorm ideas for ways of measuring productivity. Afterwards an overall index is built by aggregating all departments according to its importance. • Tuttle: Top-down approach where the objectives of the unit are first identified by management. Then top managers and their subordinates meet and discuss, how well the objectives are met. Quirin Seitenberger

10. The link between productivity and performance • How can individual performance improve productivity? • Major components of performance must fit into the goals of the organization (e.g. what should supervisors be able to do?) • Considerable degree of goal consensus between the individual and the supervisor (and the manager) Quirin Seitenberger

11. The link between productivity and performance • Job design should be oriented on the organizational goals to achieve the best match possible • Knowledge, skill, and ability requirements that determine performance in a job family should be thoroughly investigated • Matching people to jobs, that means to measure relevant individual differences as good as possible Quirin Seitenberger

12. Utility Analysis • Utility analysis is a tool for translating psychological interventions into terms other people understand • It mainly produces euro-based estimates • But factors like administrative efficiency, benchmarking data, fit with organizational culture, etc. are often ignored • The goal is to help decision makers organize costs and consequences in a systematic manner Quirin Seitenberger

13. Calculation • Brogden-Cronbach-Gleser model:utility  gains  costs • Gains are the product of 4 parameters:N  number of individuals selectedrxy  validity coefficient between scores on the selection device and a measure of j.p.Sdy  standard deviation of a euro-valued measured job performance or outcomemeanZ  average standardized score on the selection device Quirin Seitenberger

14. Calculation • Costs:product of the number of applicants multiplied by the fully loaded cost of recruiting, processing, and assessing each applicant • Researchers have tried to refine various components, especially Sdy Quirin Seitenberger

15. Findings • Application has produced a lot of data indicating that selection programs pay off immediately • Arnold et al. (1982): use of a physical ability test for steelworkers could double output among new workers • Additionally, the more employees and multiple year tenure, the bigger are utility estimates Quirin Seitenberger

16. Factors affecting managerial reactions • Only presenting a final euro estimate is not likely to affect anything • Instead, managers will ask for the source of the euro-based estimate • One problem is the difficulty to understand Sdy ... • Direct involvement in the estimation process engenders both commitment to and understanding of it Quirin Seitenberger

17. Literature • Campbell, J.P., & Campbell, R.J. (1988). Industrial/organizational psychology and productivity: The goodness of fit. In J.P. Campbell & R.J. Cambpell (Eds.), Productivity in organizations. San Francisco: Jossey-Bass. • Jayne, E.A., & Rauschenberger, J.M. (2000). Demonstrating the value of selection in organizations. In J.F. Kehoe (Ed.), Managing selection in changing organizations. San Francisco: Jossey-Bass. • Pritchard, R.D. (1992). Organizational productivity. In M.D. Dunette & L.M. Hough (Eds.), Handbook of I/O Psychology (3, 443-471). Palo Alto, CA: Consulting psychologists Press Quirin Seitenberger