Adverse Impact in Hiring

adverse impact in hiring

Employee hiring can be a complex and confusing activity. Firms are expected to avoid discrimination in hiring against minorities and women, for both ethical and legal reasons. There are some basic principles that guide firms, assuring that their hiring procedures are fair to everyone. This begins by understanding adverse impact in hiring.

Fair Hiring

Fair hiring is about providing equal opportunity to all groups of people who apply. This means focusing, not on numbers of employees hired from different groups, but on the percentage of employees hired out of the number who applied for the various groups.

Suppose Jane owns her own firm and over the past two years has hired 20 white employees and 10 black employees. Does this mean that Jane has discriminated against blacks because she has hired half as many? Not necessarily. What matters is not the raw numbers but the percentage of each group hired out of the number who applied. Suppose Jane had 40 white applicants and 20 black applicants during this time period. In this case the percent hired of each group is the same—50%. This suggests that Jane is not discriminating because white and black applicants have the same chance of being hired.

Adverse Impact in Hiring

Adverse impact recognizes that percentages might not always be exactly the same just due to chance. In Jane’s case what if she had only 9 qualified black applicants in the past two years, so the percentage of black hires was only 45% compared to 50% for whites? Adverse impact says that the minority group’s percentage should be at least 4/5ths of the majority. In this case Jane’s threshold for adverse impact is 40% of the black applicants. If she hired 45%, she has not violated the 4/5ths rule, and her hiring practices did not have adverse impact. But what if she had hired only 6 blacks? In that case the hiring percentage for blacks would have been only 30%, meaning her hiring practices had adverse impact against them. Does this mean Jane was unfairly discriminating? Not necessarily.

Adverse Impact Is Not Discrimination

Once it is determined that hiring practices have adverse impact, we need to go further to investigate the reasons to see if discrimination is occurring, either intentionally or unintentionally. This involves three steps.

  1. Determine which hiring practices produce adverse impact. Assessments, background characteristics, and interviewer judgments can all contribute to adverse impact. For example, what if Jane requires a bachelor’s degree, and the minority group in question is less likely to have that degree? Can the absence of a degree account for the difference in hiring percentages?
  2. Is the hiring practice “job relevant”? This means demonstrating that whatever is producing the adverse impact is related to job performance and contributes to the firm’s bottom line. In Jane’s case, is a bachelor’s degree essential to performing the job? If she is hiring accountants, it might be reasonable to expect new hires to have a college degree in accounting. If she is hiring account clerks, this requirement might not be reasonable, and it would be an unfair requirement for hiring.
  3. Is the hiring practice necessary? Even if a hiring practice that produces adverse impact is job relevant, is there an alternative that works just as well that does not have adverse impact? For example, sometimes prior job experience can substitute for a college degree. Jane might find that applicants who have 4 or more years working in her industry do as well on the job as individuals with college degrees, and there might not be a difference in experience between her minority and majority applicants. In that case she should modify her practices to reduce adverse impact.

Determining Job Relevance

Best practices in hiring focus on the job relevance of their hiring practices so that firms attract the best talent. This begins by determining the necessary Knowledge, Skills, Abilities, and Other Characteristics or KSAOs for each job, and then using selection practices to assess those KSAOs in applicants.

  • Knowledge: What a person knows, such as knowledge of local construction codes for an electrician or knowledge of drug interactions for a pharmacist.
  • Skills: What a person is able to perform on the job. A carpenter has skill in using hand tools, and a computer programmer has skill in writing computer code.
  • Abilities: An individual’s capacity to learn knowledge and skills. Hand-eye coordination is an essential ability in professional athletes.
  • Other Characteristics: These are anything else that is job relevant, such as attitudes, personality, and values. A good salesperson has an outgoing and warm personality.

The KSAOs for a job are determined by means of a job analysis, which is a study a firm conducts for that purpose. A job analysis usually involves surveying employees and/or supervisors about the job to determine the KSAOs involved.

Matching KSAOs from Jobs to People

Once the KSAOs for a job are identified, hiring practices can be chosen to assess the same KSAOs in job applicants. There are many ways to assess KSAOS, such as.

  • Background Information: This might include formal training (e.g., college degree), certifications, and prior job experiences.
  • Interviews: Structured interviews can be designed to assess many KSAOs through the use of standardized questions asked of each applicant.
  • Psychological Assessments: These are tests that are given to assess a wide range of KSAOs
  • Work Samples and Simulations: Applicants can be asked to perform tasks for a job under standardized test conditions. For example, applicants for a carpenter position can be asked to construct something.

Applicants whose KSAOs best match job KSAOs would be most likely to be successful, and should be the ones hired. Of course, firms should always keep an eye out for adverse impact in hiring so if it does occur, they are prepared to deal with it appropriately.

For more on this topic, check out my book: Industrial and Organizational Psychology.

Photo by Christina Morillo from Pexels

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