4 ways to reduce adverse impact in your workplace

January 2, 2022 Updated: October 2, 2023 11 min read

Minimizing adverse impact: 4 steps to a more diverse workplace

You have consistent recruitment procedures, you don’t discriminate against applicants, and you follow all employment laws to guarantee equal treatment and opportunity in hiring. There’s no way there could be discrimination in your hiring process, right?

Well, not exactly. Unfortunately, even hiring practices that seem fair on the surface can have discriminatory effects.

While direct discrimination is often obvious, indirect discrimination isn’t always so easy to spot—yet its impact on the candidate screening and selection process is just as significant. Since discriminatory hiring practices are often unintentional, it’s vital that talent acquisition and HR leaders learn how to recognize and address adverse impact in hiring.

In this blog post, we’ll explore what is adverse impact, share adverse impact examples, discuss the consequences of adverse impact, and provide recommendations on how to reduce adverse impact in your organization’s hiring process.

What is adverse impact?

The U.S. Equal Employment Opportunity Commission (EEOC)—the federal agency responsible for enforcing laws that make it illegal to discriminate against protected classes of candidates—offers this definition of adverse impact:

“A substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, sex, or ethnic group.”

Adverse impact—also known by its legal term, disparate impact—is the biased or negative effect that a discriminatory hiring practice may have on one of any protected groups. Under the laws enforced by the EEOC, it is illegal to discriminate against a job applicant or employee because of:

  • Race
  • Color
  • Religion
  • Sex (including pregnancy, sexual orientation, and gender identity)
  • National origin
  • Age (40 or older)
  • Physical or mental disability
  • Genetic information (including family medical history)

From pre-employment assessments and interviews to promotions and even performance reviews, disparate impact can occur at any stage of the hiring or employment process. Since adverse impact is typically unintentional and found in hiring practices that appear neutral on the surface, addressing adverse impact requires a clear, strategic focus on creating an equitable candidate experience.

Examples of adverse impact

A well-known adverse impact example comes from the 1971 U.S. Supreme Court case, Griggs vs. Duke Power. In the landmark case, plaintiff Willie Griggs and twelve other African American employees of Duke Power sued their employer. By requiring employees to produce a high school diploma or pass a general intelligence test as a condition of employment, the plaintiffs argued that the screening process violated Title VII of the Civil Rights Act of 1964 and unfairly impacted African American applicants.

In the case, the Supreme Court determined that the tests given by Duke Power were artificial, unnecessary, and had an adverse impact on Blacks. Although the motive behind the hiring test may have had nothing to do with racial discrimination, the court ruled that it was nonetheless a discriminatory practice and therefore illegal. In its ruling, the Supreme Court held that employment tests must be specifically related to job performance.

As seen in the Griggs vs. Duke case, pre-employment tests can lead to adverse impact if not carried out properly. If an employer requires that all applicants pass a physical strength test, for example, does the test disproportionately screen out women? In 2016, the EEOC sued railroad operator CSX Transportation for sex discrimination over its requirement that job applicants pass physical tests. The EEOC found that the tests effectively locked out women from dozens of job types because women failed the tests at a higher rate than men—but the testing requirements were not found to be job-related or consistent with business necessity.

Another adverse impact example can frequently be found in job postings. A job description specifically stating that you are seeking a candidate with 5-10 years of experience, for example, may seem like a great way to clarify the role is not an entry-level position. But by putting an upper limit on work experience, it also implies that you may not be open to candidates with more than 10 years of experience, even if they’re qualified for the job. The result? You’ve effectively eliminated many older candidates over the age of 40.

Even employee referral programs—widely considered to be a top source of quality hires—can have an adverse impact on minority candidates. In fact, a study by PayScale.com found that employee referrals benefit whites nearly two and a half times more than they benefit minorities (70 percent vs. 30 percent).

Consequences of adverse impact

Adverse impact, like unconscious bias, results in a lack of workforce diversity. When minority candidates are screened out based upon factors that are not job-related, qualified talent is overlooked and fewer diverse candidates are hired. Hiring practices that disproportionately exclude minority candidates also impact your employer brand—and diminish your ability to attract and retain diverse talent.

When adverse impact exists, an organization may also be vulnerable to legal charges of discrimination. In 2015, for example, Target Corporation agreed to pay $2.8 million after an EEOC investigation found reasonable cause to believe that three pre-hire employment assessments used by Target had an adverse impact on minority applicants. The pre-hire assessments, the EEOC found, disproportionately screened out applicants for exempt-level professional positions based on race and sex. The tests were not sufficiently job-related and consistent with business necessity the EEOC found.

Why do we measure adverse impact?

Discussing issues of bias and inequality in the workplace can be uncomfortable, but it’s critical for HR professionals and business leaders who want to build a more diverse, inclusive workforce. And the only way to ensure accountability in improving diversity hiring practices is to measure adverse impact.

By measuring and taking steps to reduce adverse impact in your recruitment process, you can:

Promote fair and equitable hiring practices

The responsibility of every recruiter and talent acquisition professional is to hire the best candidate for the role, regardless of the candidate’s race, gender, or any other personal characteristic. Every applicant deserves an equal opportunity to show their abilities and potential throughout the hiring process. By minimizing adverse impact, you can offer all candidates a level playing field and ensure you hire the most qualified candidate for the role.

Ensure the legal defensibility of your hiring process

As seen in the adverse impact examples above from Target and CSX Transportation, organizations must be able to prove that their candidate selection process is fair and does not discriminate against any protected groups. By proactively preventing adverse impact in your hiring process, you can protect your business by reducing the likelihood of potential litigation.

Improve diversity and inclusion

The business value of workplace diversity and inclusion is undeniable. According to Boston Consulting Group, organizations that have more diverse leadership see 19 percent higher revenue. And Glassdoor research reveals that 76 percent of job seekers say a diverse workforce is important when evaluating companies and job offers. By reducing adverse impact, organizations can improve diversity hiring and build a more inclusive workplace.

How is adverse impact measured?

Conducting an adverse impact analysis may sound complicated, but there’s actually a pretty simple method for it. By comparing the selection rates of various groups—using a guideline known as the four-fifths rule—organizations can easily measure adverse impact across the hiring process.

The four-fifths rule

The Uniform Guidelines on Employee Selection Procedures—which were issued to help employers make equitable employment decisions—suggests a “four-fifths” test as a criterion for adverse impact. The Uniform Guidelines state:

“A selection rate for any race, sex, or ethnic group which is less than four-fifths (4/5) (or eighty percent) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.”

In practical terms, this means that to avoid adverse impact, the selection rate of protected groups should be at least 80 percent of the selection rate of non-protected groups. It’s also important to note that the four-fifths rule applies to every stage of the hiring process. The number of candidates you move forward with at each point in the hiring cycle—from initial screen to interviewing to final hire—should be proportional to the previous stage.

Minimizing adverse impact in your organization

Now that you know how to identify adverse impact, how can you address it in your hiring process? Here are four practical ways to reduce unconscious bias, ensure EEOC compliance, and avoid adverse impact in the candidate recruitment and selection process:

1. Identify objective job selection criteria

To ensure your employment selection process is fair for everyone, start by conducting a thorough and objective job analysis. As part of this analysis, you should identify the specific skills and competencies that are essential to performing the job in question successfully. By having objective selection criteria upon which each applicant will be evaluated—and ensuring the criteria is directly related to job performance—you’ll reduce the likelihood of unconscious bias creeping in and impacting hiring decisions.

2. Conduct an adverse impact analysis

To determine whether adverse impact may be present in your employee selection procedures, calculate and compare selection rates using the four-fifths rule. To get you started, this SHRM article has a great step-by-step process for determining adverse impact, along with sample calculations.

As an example, if 20 men apply and you hire 8 and 10 women apply and you hire 2, the selection rate for men is 40 percent and the selection rate for women is 20 percent. Comparing the male selection rate (40 percent) with the female selection rate (20 percent), you see that the selection rate for women is 50 percent of the rate for men. Since 50 percent is less than four-fifths (80 percent), adverse impact against female applicants is indicated.

3. Write inclusive job descriptions

The job description is your first opportunity to create a more inclusive hiring process—so choose your words wisely. The language you use in your job descriptions has a huge impact on your ability to attract diverse job applicants.

Use gender-neutral language and avoid words and phrases that can subconsciously turn off candidates from minority groups. Words and phrases seen in job postings like “ninja,” “dominate,” and “work hard, play hard,” tend to repel female candidates and older candidates. Also take a close look at the job requirements and identify which ones are truly “must-haves” and which ones are “nice-to-haves.” According to a Hewlett-Packard internal report, for example, men apply for a job or promotion when they meet only 60 percent of the qualifications, while women apply only if they meet 100 percent of them. Don’t give qualified, underrepresented talent another reason to self-select out.

4. Use structured employment interviews

Broadly speaking, there are two types of employment interviews: structured and unstructured. And to minimize adverse impact in the interview process, you’ll want to make sure your hiring team is using structured interviews. By ensuring each candidate is asked a standardized set of questions, structured interviews introduce more objectivity into the hiring process, help eliminate interviewer biases, and provide a more equitable interview experience for candidates. Research has also shown that structured interviews are up to twice as effective at predicting job performance than unstructured ones.

Standardizing interviews with an AI-powered video interview solution like Clovers can also help organizations conduct more effective structured interviews. It enables hiring teams to keep biases and guesswork out of hiring decisions, improves diversity hiring, and ensures the best person for the role is hired.

Transform your hiring process with an intelligent interview platform

Diversity hiring has become a top priority for most organizations today—and for good reason. Building a diverse, inclusive workforce is critical to attracting top talent, ensuring employee satisfaction and retention, and improving innovation and the bottom line. With the four practical strategies described, organizations can more effectively recognize and reduce adverse impact in the hiring process to create an equitable candidate experience for all.

And when it comes to hiring, nothing has a bigger impact on candidate selection than the interview. That’s why delivering a fair, consistent interview process is vital to hiring the best-fit candidates and mitigating adverse impact. By developing an inclusive interviewing process—supported by an intelligent video interview solution like Clovers—organizations can deliver fair, impactful interviews that result in diverse and engaged teams.

Ready to eliminate adverse impact in the interview process?

Schedule a demo or try for free for 30 days to learn how Clovers’ intelligent video interview solution can help you reduce unconscious bias in the hiring process and deliver inclusive, equitable interviews for all.

Doug Leonard

Doug is constantly working to make the hiring process more objective, insightful, and informed. As a trusted leader in the recruitment industry, Doug is always ready to guide candidates and companies to (and through) a person-first hiring experience.

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