The HR department is trying to fill a vacant position for a job with a small talent pool. 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 resumes, but some doubt about fit always lingers when a decision to hire or not is to be made.

a. What is the Type I and II decision error costs?

b. Which decision error is more likely to be discovered by the CEO?

c. How does this affect the HR manager's hiring decisions?

a. What is the Type I and II decision error costs?

A Type I error cost will happen if the organization hires a person whose fitment is questionable. As a result, the organization may be forced to let go of the new employee honorably. This can prove to be costly. The process of releasing the new employee, recruiting, and hiring another one can lead to a lot of expenses in terms of effort, resources, and time. This is the error cost for this type of error.

A Type II error is one that happens when an organization is overcautious in the hiring process and, as a result, loses the opportunity to hire a qualified candidate. This is especially expensive if the expertise in the required field is limited, and the candidate instead goes to work for the competition.

b. Which decision error is more likely to be discovered by the CEO?

Type I is more likely to be discovered by the CEO. However, if the CEO interacts one on one with the candidates, they might discover Type II as well. Type I is more discoverable because it is easier to tell whether the qualifications of the candidate are suitable for the job. However, Type II is harder to tell since an individual can have a strong work ethic and weaker qualifications on their resume, which may be outshined by those of individuals with stronger resume qualifications.

c. How does this affect the HR manager's hiring decisions?

Both errors should influence the HR manager's decision not only to be based on resume qualifications but also on personality and character. They should strive to understand the individual a little bit more before they hire them to avoid error costs in the future that could lead to losses for the business.