Direct estimates of SDy and the implications for utility analysis

Abstract

Utility analysis suggests that human resources policies can have an economically significant impact on business organizations. Confidence in such conclusions, however, requires an accurate estimate of SD y . This article provides a validity check on prevailing subjective methods of SD y estimation by directly estimating SD y from unique field data. Using both simulated and field data, the range of potential bias associated with predictor unreliability in regression analyis is illustrated, and how to calculate corrected values is shown. The methodological problems of directly estimating SD y with organizational data is discussed, and a range of estimates for SD y is provided. Direct estimation of SD y yielded values ranging from 74% to 100% of mean salary, which are considerably greater than conventional subjective judgments. (PsycInfo Database Record (c) 2025 APA, all rights reserved)