Definition of Local Validity Study:
Performing a local validity study is a powerful way to validate a pre-employment test. Most organizations using pre-employment tests often rely on general validity evidence provided by test publishers to demonstrate the validity of the test. However, whenever possible, companies should seek to verify that the test in question is valid for the precise position for which the company will use it. To ensure this is the case, companies can perform local validity studies within their organizations by administering the test to their current employees.
For instance, if a company wants to see if an aptitude test is a valid test for its financial analysts, the company can administer the test to its current employees in that role and then compare their test scores with some measure of their job performance. If the current financial analysts’ test scores are significantly correlated with their job performance, then the aptitude test would be valid for that position within that organization.
Local validity tests demonstrate the correlation between two variables (in this case, test scores and performance) across a large group of individuals. This means that local validation studies require large sample sizes. Smaller companies or companies that don’t already have a lot of incumbent employees in a particular position will not be able to perform local validity studies within their organizations. As an alternative, they can turn to validity generalization, relying on the "transportable validity" from test publishers who have demonstrated the validity of a specific test within widely applicable employment settings.