EMPLOYEE SELECTION FOR SMALL BUSINESS OWNERS: THE INFLUENCES OF THE UNIFORM GUIDELINES AND COURT DECISIONS Edward, Ph.D. McKendree College Business Division 701 College Road Lebanon, IL 62254 (618)-537-4481 ABSTRACT The Uniform Guidelines on Employee Selection Procedures (1978) were promulgated with large businesses in mind in order to affect large numbers of employees as rapidly as possible. However, the employee selection validation procedure advocated by the Equal Employment Opportunity Commission, criterion related validity, is one that small business owners are unable to use due to statistical restraints and the lack of personnel with the esoteric knowledge of validation procedures. These restrictions, coupled with court decisions such as Albemarle Paper Company v. Moody in which the United States Supreme Court ruled the test validation guidelines issued by the EEOC were to be given "great deference" by lower courts, have left small business owners with one practical and potentially legally defensible approach to employee selection. This paper briefly mentions the advantages of valid employee selection procedures, followed by a detailed description of the Uniform Guidelines on Employee Selection Procedures (1978), relevant court cases, and a case study describing the validation of a small business employee selection test by the author. INTRODUCTION The importance of small business to the U.S. economy was well summarized by Siropolis (1986), who wrote: ... more than 99 percent of the nation's 16 million businesses are small-even if we define a small business as one that employs fewer than 100 rather than 500 .... Further evidence of its vitality is the fact that small business employs roughly half of the nation's workforce (pg. 8). In addition, Siropolis (1986) listed numerous other reasons for the importance of small business to the U.S. economy, such as the higher return on equity small manufacturers earn than large manufacturers, the innovation found in small businesses as evidenced by small businesses accounting for half of all major inventions in the last 30 years in the U. S., and the dependence of large businesses on small businesses as both suppliers and purchasers. These economic facts indicate that small business in the U.S. is the paramount force for economic growth and the creation of jobs, as noted recently: Small businesses are the principal job creating sector of the economy during recessions and expansions" ("The State Of", 1985, pg. 246). Further evidence of the economic importance of small business has recently been published: Employment gains in small-business dominated industries in construction (18.9 percent), finance, insurance and real estate (12.7 percent), and services (12.6 percent) are impressive when compared to the gains made in similar, large business dominated industries. In construction, the small business ted industries had employment gains of 18.9 percent, while the large business industries showed an employment loss of 10.6 percent. The relative strengths of the small business gains in wholesale and retail trade are also significant ....Small firms with fewer than 100 employees... generated 52.6 percent of net employment growth from 1976 to 1982. ("The State Of", 1985, p. 17-21). One can add to this the reliance of the U.S. government on small businesses, as evidenced by the federal government purchasing almost 29% of its of goods and services from small businesses in 1983 ("The State Of", 1985). EMPLOYEE SELECTION An area of vital importance within small business management is the area of employee selection. An increasing awareness of the importance of employee selection has been noted: "Nearly 40% of surveyed employers are using more prehiring testing of job candidates than they were five years ago" ("Prehiring Tests", 1986, p. 17). The importance to the U.S. economy of employee selection in a small business is due both to the fact that small businesses create the majority of new...
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