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Recruiting Criteria in Banking Industry according to Analytical Hierarchy Process - Ahp Method

Prof. Dr. Marjana Merkac Skok, Prof. Dr. Marijan Cingula and Domagoj Cingula, dipl.inf. focus on the recruiting criteria in the banking industry emphasising the Analytical Hierarchy Process Method. The article shows the possibility of choosing between more than one alternatives to meet the basic criteria required for the employment of fast transaction operatives.

IntroductionAnalytical Hierarchy Process ConclusionQuellen & Literaturverzeichnis

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1. Introduction

Very popular and world widely spread method, Analytical Hierarchy Process, is used in almost every case from a business or private life, wherever there are several alternatives, and each of the alternatives has certain criteria that usually are not of equal importance (Yu, 2002). It does not mean that anyone who uses this method will always make the best decision, but the method certainly has a strong support for selecting the best alternative. Employment sector in banking institutions opens up competitions in which large number of interested applicants occurs. The largest number of candidates appeared for the position of fast transactions operative since such jobs provide employment opportunities for the greatest number of different profiles of potential candidates. Therefore, testing for this position is very complicated, time consuming, and after elimination of inappropriate candidates very difficult selection process is followed, especially if a large number of candidates satisfy in all tested categories.

Number of different areas that are tested is given, during the interview communication and other skills are observed, but the final selection of the ideal ones represents demanding part of the whole process, especially if there is a large number of candidates who have similar or even almost the same characteristics and test results. This paper will show the possibility of using the Analytic Hierarchy Process or AHP method in choosing between more than one alternative to meet the basic criteria, which are required for employment at the workplace of fast transactions operative. Mathematical rating, or the final result expressed numerically (Yuen, 2009), does not have to be the main support, but represents a very good guideline for a final decision making, seemingly complicated process will be simplified and precise separation of the best candidates from average and poor will be visible.

2. Analytical Hierarchy Process – Ahp MethodIntroductionMerkac Table 1

Analytical Hierarchy Process is method which was developed in the 1970s by Thomas L. Saaty, American mathematician, while he was working at the Wharton School of Business. The method is based on comparing pairs of alternatives, each with each, where decision maker expresses the intensity, the weight preference of one alternative over other within the essential criteria. This method can be easily implemented in any area and helps the process of decision making in various situations (Skibniewski, 1992). Decision maker defines the importance of certain criteria and ratings for each criteria may also be under his authority. Therefore all defined components and terms can be more or less subjective. When retail banking institutions are hiring a candidate to position of fast transactions operative, ratings are subjective, but are obtained as a result of detailed research. Subjective in this case is which criteria is more important than another, level of its domination over another, and that same decision has still support in following certain patterns and rules of practice. Table 1. shows the Saaty‘s scale which is used to determinate the importance or domination of one criteria over another.

Saaty‘s scale represents the fundamental scale for pair wise comparisons, which is shown and calculated in one of the following paragraphs.

2.1. Criteria and hierarchical model

The first step of the Analytical Hierarchy Process is to establish the criteria and the creation of a hierarchical model. After that, each of the selected criteria is compared with each other by its importance. Evaluation of criteria importance gives decision maker the weight of certain criteria, i.e. the importance of each criteria in total, and final results analyses may be finished. For a candidate who will be employed as a fast transactions operative, six criteria will be tested and observed through a written exam and interview: informatics, accuracy, speed, communicating skills, banking, English.

Informatics:
Although this job position demands usage of the bank‘s software that candidates do not yet know, and their learning is quite easy, general IT knowledge represents a foundation for them to adjust to those program tools. Occasionally, or even quite often, managing the operating system, MS Office tools and Internet or e-mail applications are needed. Possession of other listed skills, i.e. criteria, is not of much help if the candidate cannot use a computer and is fully incompetent to learn basics quickly. Therefore, this criteria is placed on top of the priority list. This criteria is rated through four levels:

  • satisfying (0,25)
  • above average (0,75)
  • average (0,5)
  • extraordinary (1,00).
    (values assigned to each grade are shown)

Accuracy:
The precision or accuracy is very important because operatives perform a large number of transactions in every shift, serving a large number of clients, so large amount of data is being entered almost constantly. Since the verification time of the entered data accuracy is mostly limited, because of more than few reasons (crowd, quick service, etc.), accurate entries must be achieved in reasonable time period. Accuracy is, for example, more important than speed, which can be very quickly gained during the work and is rated through three levels:

  • satisfying (0,33)
  • above average (1,00)
  • average (0,66)

Speed:
Measured speed is the one that is necessary to successfully perform the job, i.e. keyboard using speed (with an emphasis on its numerical part), as well as basic orientation in space with handling basic equipment and documents. Speed will be measured by the number of basic operations performed during the given period of time. Successful candidates are rated through four levels:

  • satisfying (0,25Merkac Picture 1
  • above average (0,75)
  • average (0,50)
  • extraordinary (1,00).

Communicating skills:
This position does not allow, either requires managing long and quality sales conversations, and therefore advanced communicating and sales skills are not necessary. Adoption of norms, standards and rules, such as greetings or common way of an institution communication, is still not quite enough. Ability to communicate is rated through three levels:

  • satisfying (0,33)
  • above average (1,00).
  • average (0,66)

Banking:
Each employee will learn a lot about banking business through internal training and during the trial, basic knowledge about banking products and transactions is still essential for potential candidates. Today‘s banking groups are almost inexhaustible source of various products, which were formerly not part of a banking business, and not knowing some basic facts and products greatly complicates the adoption of complete knowledge needed and learning of the product offer. Banking is rated through three levels:

  • satisfying (0,33)
  • above average (1,00).
  • average (0,66)

English:
Active usage of at least one world language represents some kind of standard in similar positions employment. English as one of the most common languages (especially when working with computers) is tested and rated through three levels:

  • satisfying (0,33)
  • above average (1,00).
  • average (0,66)

Other categories which are necessary for successful activity at this position are not measurable in the very beginning, but acceptance of certain rules and procedures can still be measured and observed in future, during the work. This primarily refers to the collection and storage of documentation and managing archive, but also to many other features that will show how well the employee performs his job, but only after a certain period of time. Such characteristics are not relevant for the employment, and therefore are not mentioned above. All mentioned criteria form the hierarchical model which is shown in Picture 1. This model shows all tested criteria that will be used for analyzing final results, each of them subdivided into several levels of success. The share of success of an individual criteria in total, due to the simplicity reasons, is divided evenly for each grade, depending on if the criteria is rated through three or four sub-levels, but this does not mean that experience and research cannot assign a different value and importance of each of the actual rating.

2.2. Criteria comparison using Saaty‘s scale

The next step includes comparing all tested criteria, each with each, and that is a basic step for later determination of each criteria importance. All values are definitions taken from Saaty‘s scale and are showing which criteria is dominating over other or otherwise. It is evident, from the table above, that Informatics has moderate importance over accuracy, strong importance over speed, communicating skills and banking, and very strong importance over English language. Other relations are very easy to understand too, and fractions are showing subordination of the criteria to compared one.

2.3. Criteria importance („weight“)

Determination of the criteria importance is the next step of the whole process. Calculation will be simplified by changing Table 2. values into decimal numbers, instead of fractions, and after that column sums are calculated. Row and column titles from Table 2. are deleted to simplify the Table 3.

It is necessary to create a new table or normalized matrix dividing each Table 3. element by the column sum from where the element was taken. For example, all elements from the first column are divided by 2.08, second column elements by 5.20 etc. Calculation of criteria importance is shown in Table 4.

Importance or criteria weight is finally calculated as a row average and since there are six criteria that are being considered we have to divide each row sum by 6. Now it is evident that accuracy, for example, has an importance equal to share of 23 % in the total. Informatics took the biggest share and its importance is 45 % among other criteria. Those and all other criteria weights are visible in Table 4.

Merkac Table 2

Merkac Table 3

Merkac Table 4

2.4. Analyzing results

The final phase of AHP method consists of analyzing results. Very good support for final analysis provides MS Excel. Test results and grades are assigned for each of the criteria both numerically and descriptively as it were already determined. Maximum for each tested category is 1 (100 %). All other rates and their share in maximum are shown in Table 5. – this time as helping cells that will be included in the Excel functions.

Merkac Picture 2The table shows that every candidate with maximum success in category „speed“ is rated as „extraordinary“. The candidate with 75 % of maximum effect in this category is rated as „above average“, „average“ is the one who reached half of the maximum effect, and one who reaches 25 % is „satisfying“. The effect of each tested criteria is evaluated, and then multiplied by the criteria importance (for a candidate who is rated as „average“ in „speed“, 0.5 is multiplied by 9 %). Achieved success in each category is now adjusted by the importance of those criteria, and total success for each candidate is a sum of all calculated values. Excel is used for all needed operations and for display simplification through the following steps. Create a table as it is shown in Picture 2. The first part of the table is used for data entry and the second part calculates all required values. Candidate names are reflected with usage of a simple cell copying formula. Rate entry is limited to the choice of one of the possible score for each criteria using the feature called „Data Validation“, where sub option „List“ lets us define all possible grades that are then added in drop down menu. Another useful sub option is called „Input Message“ where the instructions are used to help those who are filling the table. Complete table is shown in Picture 3. where all rates are given to each candidate and operations are automatized to calculate total score. To calculate the final score IF function is used, more specifically its derivative that is called „nested IF“. This is necessary because there are more than two options to rate the success in each category. This function checks selected rate, uses numerical value which is assigned to that grade to multiply it by the criteria importance. Row sum represents the ultimate success, or total score, for each candidate.

Merkac Picture 3

Merkac Picture 4

3. Conclusion

Complex real life cases are greatly simplified by using AHP method. Seemingly unsolvable problems are reduced to very clear conclusions. Making important decisions is everyday need in every business field and private life, and decision maker intuition often represents the only support tool. AHP method is a powerful support to any decision maker who has to choose the best alternative and its possibilities are almost unlimited. Depending on the case, effectiveness of the method can be questioned as well as wether used components are selected too subjectively or easily quantified and exact. Final result of this process does not have to be the actual choice between alternatives, but there is no doubt that it is a great help for decision maker (Beynon, 2002). This specific observed example and AHP method as a support for selecting the ideal candidate will clearly show which candidate is the best one. This does not mean that in practice the best candidate will also be the best employee. Human resources management can decide if the decision will be made using strictly the numbers or will numbers be used only for making shortlist and than some other parameters can lead to final choice.

Quellennachweis & Literaturverzeichnis