The review article by Frank L. Schmidt and John E. Hunter, "The Validity and Utility of Selection Models in Personnel Psychology: Practical and Theoretical Implications of 85 Years of Research Findings,"[1] Psychological Bulletin, Vol. 124, No. 2, 262-274 sums up, current to 1998, a meta-analysis of much of the huge peer-reviewed professional literature on the industrial and organizational psychology devoted to business hiring procedures. There are many kinds of hiring criteria, such as in-person interviews, telephone interviews, resume reviews for job experience, checks for academic credentials, personality tests, and so on. There is much published study research on how job applicants perform after they are hired in a wide variety of occupations.[2]
EXECUTIVE SUMMARY: If you are hiring for any kind of job in the United States, with its legal rules about hiring, prefer a work-sample test as your hiring procedure. If you are hiring in most other parts of the world, use a work-sample test in combination with a general mental ability test.
The overall summary of the industrial psychology research in reliable secondary sources is that two kinds of job screening procedures work reasonably well. One is a general mental ability (GMA) test (an IQ-like test, such as the Wonderlic personnel screening test). Another is a work-sample test, where the applicant does an actual task or group of tasks like what the applicant will do on the job if hired. (But the calculated validity of each of the two best kinds of procedures, standing alone, is only 0.54 for work sample tests and 0.51 for general mental ability tests.) Each of these kinds of tests has about the same validity in screening applicants for jobs, with the general mental ability test better predicting success for applicants who will be trained into a new job. Neither is perfect (both miss some good performers on the job, and select some bad performers on the job), but both are better than any other single-factor hiring procedure that has been tested in rigorous research, across a wide variety of occupations. So if you are hiring for your company, it's a good idea to think about how to build a work-sample test into all of your hiring processes.
Because of a Supreme Court decision in the United States (the decision does not apply in other countries, which have different statutes about employment), it is legally risky to give job applicants general mental ability tests such as a straight-up IQ test (as was commonplace in my parents' generation) as a routine part of hiring procedures. The Griggs v. Duke Power, 401 U.S. 424 (1971) case[3] interpreted a federal statute about employment discrimination and held that a general intelligence test used in hiring that could have a "disparate impact" on applicants of some protected classes must "bear a demonstrable relationship to successful performance of the jobs for which it was used." In other words, a company that wants to use a test like the Wonderlic, or like the SAT, or like the current WAIS or Stanford-Binet IQ tests, in a hiring procedure had best conduct a specific validation study of the test related to performance on the job in question. Some companies do the validation study, and use IQ-like tests in hiring. Other companies use IQ-like tests in hiring and hope that no one sues (which is not what I would advise any company). Note that a brain-teaser-type test used in a hiring procedure could be challenged as illegal if it can be shown to have disparate impact on some job applicants. A company defending a brain-teaser test for hiring would have to defend it by showing it is supported by a validation study demonstrating that the test is related to successful performance on the job. Such validation studies can be quite expensive. (Companies outside the United States are regulated by different laws. One other big difference between the United States and other countries is the relative ease with which workers may be fired in the United States, allowing companies to correct hiring mistakes by terminating the employment of the workers they hired mistakenly. The more legal protections a worker has from being fired, the more reluctant companies will be about hiring in the first place.)
The social background to the legal environment in the United States is explained in various books about hiring procedures,[4] and some of the social background appears to be changing in the most recent few decades, with the prospect for further changes.[5]
Previous discussion on HN pointed out that the Schmidt & Hunter (1998) article showed that multi-factor procedures work better than single-factor procedures, a summary of that article we can find in the current professional literature, for example "Reasons for being selective when choosing personnel selection procedures"[6] (2010) by Cornelius J. König, Ute-Christine Klehe, Matthias Berchtold, and Martin Kleinmann:
"Choosing personnel selection procedures could be so simple: Grab your copy of Schmidt and Hunter (1998) and read their Table 1 (again). This should remind you to use a general mental ability (GMA) test in combination with an integrity test, a structured interview, a work sample test, and/or a conscientiousness measure."
But the 2010 article notes, looking at actual practice of companies around the world, "However, this idea does not seem to capture what is actually happening in organizations, as practitioners worldwide often use procedures with low predictive validity and regularly ignore procedures that are more valid (e.g., Di Milia, 2004; Lievens & De Paepe, 2004; Ryan, McFarland, Baron, & Page, 1999; Scholarios & Lockyer, 1999; Schuler, Hell, Trapmann, Schaar, & Boramir, 2007; Taylor, Keelty, & McDonnell, 2002). For example, the highly valid work sample tests are hardly used in the US, and the potentially rather useless procedure of graphology (Dean, 1992; Neter & Ben-Shakhar, 1989) is applied somewhere between occasionally and often in France (Ryan et al., 1999). In Germany, the use of GMA tests is reported to be low and to be decreasing (i.e., only 30% of the companies surveyed by Schuler et al., 2007, now use them)."
[1]
http://mavweb.mnsu.edu/howard/Schmidt%20and%20Hunter%201998%...
[2]
http://www.siop.org/workplace/employment%20testing/testtypes...
[3]
http://scholar.google.com/scholar_case?case=8655598674229196...
[4]
http://books.google.com/books?hl=en&lr=&id=SRv-GZkw6TEC
[5]
http://intl-pss.sagepub.com/content/17/10/913.full
http://www.economics.harvard.edu/faculty/fryer/files/Fryer_R...
[6]
http://geb.uni-giessen.de/geb/volltexte/2012/8532/pdf/prepri...