Efficacy of Selection in Firm's Recruitment Behavior.

AuthorMurti, Ashutosh Bishnu


Firms and job seekers are brought together for potential matches through their job search and recruitment activities. The recruitment and search activities help both parties to acquire information about each other and the more information they obtain prior to entering in to an employment agreement, the higher is the likelihood of a good employment match. The crucial role of information in the labor market has been recognized by Stigler (1962). However, despite a voluminous literature on job matching and organizational behavior in labor markets, we know less about the firms' recruitment strategies than about the job seekers' search strategies.

As Granovetter (1995:155) highlights: "While people are finding jobs, employers are finding people to fill them, and their behaviors, strategies, and purposes play a central but often neglected role in the process of matching people to jobs". The imbalance in research effort is explained more by a dearth of adequate data describing employer recruitment behavior than by the lack of scholarly interest. Indeed, labor economists, sociologists, psychologists and human resource management specialists have spent the last half-century exploiting the meager existing data sets in efforts to learn about employer recruitment behavior.

Several studies have analyzed the relationship between labor market thickness, firm location and worker/firm matching. Wheeler (2001) develops a model where capital and worker skill complements. In this model, thicker labor markets lead to higher productivity, greater wage inequality and higher returns to skill. He cites and generates empirical evidence that is consistent with all these ideas. Freedman (2009) looks at similar issues, with a focus on the software industry in a single (unnamed) state. He first derives a model where firm/ worker matches quality based on differences in the human resources packages offered by firms and variation in employee preferences. Empirically, he finds that agglomeration of software firms is associated with higher wages, bigger firms and less wage dispersion.

Although the enormous literature on employer recruitment has spanned more than six decades, dating back to some early empirical papers by Malm (1955), research in this area did not begin until the mid-1960s to early 1970s, with seminal work by Rees (1966), Rees & Shultz (1970) and Granovetter (1995). In economics literature, the stage was set by Stigler (1962), who emphasized the crucial role of information in the labor market. Rees (1966) explored the role of the recruitment choice as an information-generating device. More recently, Montgomery (1991) embedded social networks in an adverse selection model to analyze the effects of social networks on labor market outcomes.

Data Sources & Methodology

This paper focuses on the firms in India who search and select employees for job at global and local levels. The study started with identifying list of firms through Captiline database, the total number of firms present in the database is around 23,535 out of which 6,887 were present in multiple locations and 16,648 were at single location. The firms in India are distributed unevenly across location, concentrated in a few geographical units such as major urban agglomerations, in particular global cities (Saskia Sassen, 1991) such as Mumbai, Delhi, Bangalore and Hyderabad. The study moved with two global cities Mumbai and Hyderabad. The two cities were employed as separate groups to have proportional representation of firms across industries. After that random method was employed in selecting the firms within the group to avoid biases in the selection.

This research has six major phases: research design, pilot, data collection, validation, data entry and analysis. The research design is descriptive in nature. It involves sampling, designing survey instrument, identifying the samples, pilot test, final instruments, and interview of respondents. The research refrained from circumstances that obstruct the flow of engagements of employees in the work site. The statistically acceptable sample size was determined by employing Daniel (1999)1 method to compute the sample size. The sample size of 96 firms would suffice estimation with 10% margin of error. Following this, randomly chose firms from the list. Subsequently 101 interview schedules were completed.

Empirical Results

The search and selection of job seekers by firms help both parties to acquire information about each other and the more information increases the likelihood of a good employment match. Stigler (1962) recognized the crucial role of information in the labor market. Firms who witness vacancy and undertaken search process for prospective job seekers were asked what recruitment tool they use while recruiting for open positions (Table1). Interview is one of the most important recruitment tools for selection for managerial and non-managerial positions. Recruitment tools such as 'application forms', 'cvs and/or letters of application' 'references' and 'telephone interviews' are important in the process of recruitment for managerial open positions. In case of non-managerial selection 'telephone interviews', 'references', 'personality questionnaires' and 'general ability tests' are important tools for recruitment.

The firm will choose a job seeker who is expected to perform best in the job in question. It needs to minimize uncertainties by making use of different types of information. Certainty can be enhanced by the fact that the firm tends to have different rounds of selection in the process of recruitment. Given this premise, it is of interest to understand characteristics that firms take in account when choosing a job seeker to call for interview or work out first elimination characteristics.

Therefore, it is of interest to analyze which characteristics firm takes into account when choosing the person to be employed. Previous experience and education are surely two indicators of how well a person can be expected to do the job. Table 2 (Panel A) depicts the characteristics that firms believe as positive/ negative signals about potential productivity. The data contains only the number of persons with different characteristics for managerial and non-managerial workforce. Regarding the selection process itself, it may be suitable to start by looking at the characteristics which according to firms will make job seeker directly unsuitable for the open position, i.e. the characteristics which firm uses to eliminate the job seeker in the first round of the selection process.

It is not very surprising that many firms regarded lack of skills the company demands (84 per cent) and experience (52 per cent), as reasons to eliminate job seekers as not appropriate for open position. It is quite visible that education and experience are important "signals".

Low number of applicants with the required attitude, motivation or personality and too much competition from other employers are also common characteristics guiding elimination.

Another important aspect of the selection process is the decision to call a job seeker for an interview. Table 2 (Panel B) depicts characteristics that firms regard as most important, when deciding whether the applicant should be called for an interview or not. The characteristic such as 'experience' earned in 'job function at past work' and 'years of past work experience' account for 89 per cent and 65 per cent respectively. Only a few firms regard 'willingness to relocate', 'industry of past work experience', 'graduate degree area of study', 'language skills' and 'educational transcripts' as most important for the decision to call for an interview. The answers to this question seem to indicate that barriers for fresher to the labor market can be quite high.

To minimize the uncertainties associated with the decision to offer a job, the firms use such sources of information as given in Table 3, i.e. references from earlier employee, references from former employee, personal contacts, application papers and interviews with the applicant. The interview schedule also aims to find most important source of the information, which influences the choice of whom to hire. About 80 per cent for managerial and 69 per cent for non-managerial job opening firms regard the information collected from interview as very important for choosing the person they hired later on. Many firms also regard information gathered from application paper and referral from employees as the source of information having the greatest significance for managerial and non-managerial positions.

Interview schedule also aim to understand 'firm inform about job descriptions when selecting prospective job seeker'. Table 4 (Panel A) depicts firms providing information about job description or not. 81 per cent of the firms tend to provide information about job description. As job description covers the information related to job specification such as sequences of tasks necessary to perform the job. 19 per cent of the firms did not provide job description to the job seekers. Table 4(Panel B) depicts the information shared about job description at different stages of selection process. 65 per cent of the firms tend to provide information about job description before the interview and 23 per cent of the firms tend to provide information at the interview. Moreover, 12 per cent of the firms tend to provide information about the job description after selection of the job seekers. Table 4 (Panel C) depicts the firm's response about having policy for recruitment. 84 per cent of the firms said that they have...

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