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Standard Deviation Use in the Business World

Catherine Mixson, Lourdes Uranday
March 8, 2015
QRB/501
Instructor Erica Woods

Standard Deviation Use in the Business World

Standard deviation is a statistical measure which uses the square of each deviation from
the mean of a set of values. This statistical measurement shows how data are spread above and
below the mean. The standard deviation can also be interpreted through its relationship to the
normal distribution of data sets. (Cleaves, Hobbs, & Noble, 2012 Chapter 7 Business Statistics).
Within this paper, Team D will provide several examples of how the standard deviation is used in
the business world by providing abstracts of studies and research of standard deviations.
Abstract 1- Standard Deviation in Human Resources
Human Resources is an area that utilizes standard deviations for a variety of items such
as wage data, demographic data of employees and hiring practice data. In the study by Mayer

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(1982), Mayer researched several criteria companies used for selecting personnel to determine
whether job performance could have cost savings during the selection process. His research
figured the standard deviation of salary and job performance data. One of his final appraisals
evaluated the recruitment process of bank tellers.
Purpose of the Study
The purpose of the study was to determine the value of human resources in the
organization by estimating the standard deviation of job performance in terms of dollars to the
selection criteria in the hiring process. When comparing the studies presented utilizing human
resources; or personnel resources used in the study, to accounting dollar figures assigned to
organizational standards such as absenteeism, turnover and levels of job satisfaction, the study
determined the possible dollar savings for the organization.
The Research Questions
To determine whether the appropriate criteria were used for the study that would present
valid data to determine the standard deviation, several questions were asked during the research.
Some of the questions included in the study were 1) Are the benefits obtained from a decision
evaluated in the same way for each person or are different values used for each candidate?, 2) Is
the decision about each individual made independently or interrelated?, 3) Is each individual
assigned to just one of the available treatments or may the person be assigned to multiple?, 4)
Does the information used have only one variable or multiple variables?, and 5) Are decisions
final or can further information be requested prior to making a final candidate decision (Mayer,
1982). Because the selection criteria varied, it was important to establish the criteria up front to
determine the correct formula to calculate the standard deviation in the selection process.
The Hypothesis of the Study
It was difficult for Mayer to determine specific cost savings because there were so many
criteria available for evaluation, or many variables that can be measured or compared. One

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example noted was tenure was not a considered factor in determining long term cost savings.
Estimating the costs and benefits of a companys selection criteria, for example estimating the
standard deviation for job performance, was a major problem with the study.
The Main Findings of the Study
The study determined that the standard deviation of job performance was between 40%70% of the candidates annual salary and that the accounting data did not fit a normal distribution
and was positively skewed. Additionally, in the bank teller study, it was determined that the
quality of applicants was the best criteria to determine who was selected for the training
program. Composite ratings, final test scores from the training program and performance
effectiveness were the top three criteria for selecting candidates.
Abstract 2- An Uncommon Deviation
Purpose of study
This article is looking to establish a clear way to manage risk when it comes to
investments and business transactions. There are many questions as to what is needed in order to
do this, from risk models to comparing risk and deviation. This article looks deep into the theory
of risk and what it can do to change ones perspective and actions in the business sense.
Research question
Who thinks about standard deviation when risk is involved? This question is looking
deeper into the original idea that risk can be measured by comparing the risk and deviation.
Hypothesis
When looking into the way that people manage and invest it will become clear that there
is no one correct way to do business. Everything changes and will be different based on the
simple fact that the numbers will never be the same in any situation.
Main findings of the study
The article continues on about how the advantages could outweigh the risks, and the
various ideas on how to manage that risk. It talks about the investor(s) needing to be aware of
what it is they are investing in and what the possibilities are in all areas. The article closes with
some thoughts on how to manage the risk in a world were risking is necessary and if you want to
move forward in anything risk is always going to be there. Being risking requires knowledge of

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the subject, knowledge of the market you are entering into, and managing the risks in a way that
you continue to have control over what it is you are doing. Minimizing the risk in a risky
business is key.
Conclusion
After review of the articles Team D highlighted it is clear that in business uses deviation
in all forms. It can focus on numbers dealing with personnel costs and rate changes or it can
focus on investments and stocks. Standard deviation can take many forms and be portrayed in
many different ways, however it has become clear that it plays a big role in how people get there
facts and figures along with how they read them and in some cases use them for forecasting. We
as a team have learned the importance of this is all the forms it may take and the impact it has on
business as a whole.

References
An uncommon deviation. (2011, 10). ProQuest, (), .
Retrieved from http://search.proquest.com.contentproxy.phoenix.edu/docview/89211018?
pq-origsite=summon
Cleaves, C., Hobbs, M., & Noble, J. (2012). Business Math (9th ed.). Retrieved from The
University of Phoenix eBook Collection database.
Mayer, R. S. (1982). AN EVALUATION OF ALTERNATIVE METHODS OF ESTIMATING THE
STANDARD DEVIATION OF JOB PERFORMANCE TO DETERMINE THE UTILITY
OF A TEST IN A FIXED-TREATMENT SEQUENTIAL EMPLOYEE SELECTION

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PROCESS (Order No. 8306916). Available from ProQuest Dissertations & Theses Full
Text. (303084774). Retrieved from http://search.proquest.com/docview/303084774?
accountid=35812