Theory and Practice for the use of Cut-Scores for Personnel Decisions

Cut-scores are commonly used in industrial personnel selection, academic selection, minimum competence certification testing, and professional licensing, using simple and multiple-person/multiple-job category decision paradigms. Previous approaches have proposed cut-score solutions in a variety of applications using threshold, normal ogive, linear and discrete utility functions. This paper considers these results by investigating conditions on the posterior, likelihood and utility functions required for setting a cut-score in a Bayesian decision approach. Generalizing and extending results of Lehmann, Karlin, Ferguson and others, it is shown that cut-scores are appropriate in a wide range of applications, but they are less than universally appropriate. Following this, a general paradigm and computational algorithm for cut-score solutions is developed under the assumption that the conditions for a cut-score have been satisfied.