Adverse impact refers to employment practices that seem to be neutral, but may be unfair to certain groups of people. It can occur in hiring, training, promotions, layoffs, and performance appraisals, despite the best efforts of an organization, according to the Society for Human Resource Management (SHRM).
Adverse impact can alienate certain groups of people, based on gender, age, ethnicity, religion, and sexuality. It’s usually caused unintentionally through hiring practices – even the most minute details of a hiring policy can create it. It puts members of certain groups at a disadvantage which can be a big liability.
A company that conducts background checks for one group of candidates but not another is just one possible example. Management may honestly believe there is a logical reason for it, but it can result in adverse impact if there are more qualified candidates eliminated from the group of candidates that all had background checks, with more hired from the group that didn’t.
Adverse impact is a negative in every situation or it obviously wouldn’t be adverse. It has the power to do a lot of damage to your business by hurting your ability to hire the best talent that encompasses a wide range of different types of people. So how do you avoid it?
It’s critical to understand what is considered to be a case of adverse impact in order to avoid it in the first place. The United States has adopted the Uniform Guidelines on Employee Selection Procedures which establishes uniform standards employers should use in their selection procedures. It can help determine whether or not there is adverse impact in employment procedures by using the 80 percent rule.
In basic terms that means the selection rate of protected groups, which includes age (40 and over), gender, race, religion, veteran, and/or disability status, should be 80 percent or more of the selection rate of non-protect groups.
Consider researching economic consulting firms in your area in order to have adverse impact analyses conducted on your company’s hiring, promotion, and termination practices, which can help identify potential areas of concern from both a practical and statistical standpoint. Economic consultants can provide best practice recommendations to mitigate your risk as you move forward.
Be sure that all your job descriptions are inclusive by using gender-neutral language. Avoid sending subtle messages about your ideal hire that can influence whether a potential candidate decides whether or not to respond.
Even language tends to skew male or female; for example, “ninja” or “rockstar” sends a signal that it’s a male-dominated work culture. Female-coded language includes words like “dedication,” “loyalty” and “understanding.”
Keep in mind that for every new requirement you add, you eliminate one more reason a qualified, but underrepresented talent would choose not to apply. Instead of requirement lists, you might focus on results, such as what you’d expect a month, six months, or a year down the road.
Structured interviews use a standardized set of questions so that the interviewer has a uniform way to rate the applicant’s qualifications which minimize the risk of adverse impact. Scientific research has proven that it is much more reliable for making good hiring decisions as it allows the interviewer to more accurately compare candidates.