Human Resource Management - Hiring and Recruitment (A mix of theory and computational examples)

Essay by khjenks May 2004

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Human Resource Management - Hiring and Recruitment

· Trade-off between highly-skilled and less-skilled workers

· In equilibrium, the wage spread between high and low quality workers would be large enough that no firms hiring low-quality would switch to high-quality and vice versa

· This happens at a national level, but firms must decide on high-quality or low-quality worker

· The quality and qualities of workers should fit the firm's strategy, culture, technology and environment

· For example, Toys R Us is a large-volume, low-cost, no frills firm, hence would not want to attract the same sales personnel as a high-quality toy retailer such as Schwarz

· But, must adhere to the general rule that a firm must choose the type of labour that minimises cost per unit of productivity

· The most cost-effective labour is the type that has the lowest ratio of salary to output

· Use ratios as more comparable than absolute differences

· Once a firm has determined the type of desirable worker, must determine hiring strategy

For example, can hire a machine, or another secretary

Machine: Costs £500/month and produces 6,000 pages per year

Secretary: Costs £800/month and produces 12,000 pages per year

Machine: 9,600/12,000 = 0.8

Secretary: 6,000/6,000 = 1

Employ the secretary, as benefits are greater per unit of cost


Machine: 12,000/9,600 = 1.25/page

Secretary: 6,000/6,000 = 1/page

Employ the secretary, as benefits are greater per unit of cost

Marginal Revenue Product

· As more people are hired, the value of each worker to the firm falls - principle of diminishing marginal productivity

· The firm should continue to hire workers as long as the increment to profit brought by hiring the worker is positive

Output increases associated with adding one worker, so long as the value of output from an additional worker...