WHY CAPITAL-BUDGETING TECHNIQUES ARE SUITED FOR ASSESSING THE UTILITY OF PERSONNEL PROGRAMS - A REPLY TO HUNTER, SCHMIDT, AND COGGIN (1988)

In a recent article, Hunter, Schmidt, and Coggin (1988) criticized the use of capital budgeting techniques for evaluating the utility of human resource programs (such as selection programs; Cronshaw & Alexander, 1985). Hunter et al. claimed that such methods are often conceptually and logically inappropriate and that use of these methods may have unintended negative consequences for organizations. Although we agree with Hunter et al.'s argument that no single correct definition of utility exists, three of their arguments have logical and empirical shortcomings. It is demonstrated that capital budgeting theory remains a useful framework from which to represent the utility of human resource programs to organization decision makers.