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Tips To Address Adverse Impact For Better Recruitment Of Talent

Proper representation and equity are not easy to implement due to some inherent difficulties, like selection bias. Nevertheless, the law specifies the proper representation, and companies could operate within its bounds without sacrificing the spirit of the laws regarding inclusion, equity, and diversity

We enact laws to ensure diversity and inclusion in the workplace and that discrimination based on class, gender, nationalities and race, and others are things of the past. So there is significant progress in our fight for equity, equality, inclusion, and diversity. Nevertheless, we must relegate to the dustbin of history all those discriminatory practices.

However, proper representation and equity are not easy to implement due to some inherent difficulties, like selection bias. Nevertheless, the law specifies the proper representation, and companies could operate within its bounds without sacrificing the spirit of the laws regarding inclusion, equity, and diversity.

If hiring remains below what is prescribed by law, you have an “adverse impact” on certain groups.

What is an adverse impact?

As the name indicates, adverse impact is the negative effect of a hiring system against a particular class or group of people, what we call “protected class.” They suffer from “adverse impact” if, due to the nature of the selection process itself, companies do not hire sufficient numbers from them as mandated by law.

The threshold is known as the four-fifths rule. It means the group with the lowest hiring rate must not go below 80% of the group with the highest selected rate. Going below the threshold means that there is already an adverse impact.

In itself, it is not problematic or even against the law. However, going under the threshold means that there are some underlying problems regarding inclusion and diversity.

The importance of adverse impact to talent acquisition

The adverse impact harms companies who want to acquire more talent. The inherent selective bias may preclude the company from hiring those who have talent but belong to the protected class. Some qualifications that may have no bearing in work could discriminate against certain people, precluding the company from using available talents for its benefit.

If it remains unchecked, the adverse impact may affect diversity and inclusion in a company. In addition, it may lead to further discrimination and further exclusion of the members of the protected class. It may severely affect the overall fight for inclusion and diversity and negatively impact company productivity and image.

Therefore, companies must address the adverse impact to gain benefits by hiring people from those belonging to the protected class.

Avoiding the adverse impact

The company must implement measures to avoid the adverse impact. Among these are the following:

Strict implementation of the four-fifths rule

There is a reason for this rule: to ensure proper representation of the protected class in the workplace. The company must ensure that they implement and they meet the requirement as much as possible. Having the correct numbers and representation is one of the surest ways to avoid the adverse impact.

Consequently, if the company has difficulties meeting the said number, there might be underlying problems regarding the hiring and selection process. For example, there might be a selection bias inherent in the process, which precludes hiring those who belong to the protected class. Or, there might be some discriminatory policies still in place.

Review the hiring process

There is the real possibility that selection bias is inherent in the hiring process itself. If there is an adverse impact on the company for an extended period, the hiring process itself might be responsible and reviewed. Maybe there are some requirements and qualifications that preclude the hiring of those members of the protected class.

The hiring process must be responsive to the company’s needs and comply with hiring those who belong to the protected class.

Properly document the process.

Take a hard look at the process and study it to look for some clues that may indicate some problems and point to some solutions. For example, the hiring process details may reveal the problems that are neglected or barely noticed by the company when hiring applicants.

For instance, some physical qualifications or medical exams might preclude the hiring of women and people with specific disabilities. Therefore, these qualifications must be reviewed and ensure that they must be responsive to the company’s needs and the laws regarding employing those who belong to the protected class.

Take a look at passing rates.

There might be indeed a few applicants from the protected class who passed or qualified. However, having few applicants means fewer people from the protected class that will work in your company. That indicates profound problems that may go beyond the adverse impact.

Overall, the company might have adverse impact issues but has general issues about discrimination, exclusion, and lack of diversity and inclusion, even as it hires people from the protected class. Again, either the hiring process suffers from a selection bias, or the exams and qualification tests preclude hiring people from the protected class.

The law itself is clear about it. In this regard, the company must justify the reasonableness of the qualifications and hiring process or modify its process and qualifications. A company that is for diversity and inclusion must undoubtedly opt for the second option without being unreasonable.

Review the workforce composition

IF the number of the protected class hovers just around the threshold of above-below 80 percent of the highest number, it may not indicate that much of a problem. More so if you consider the employee turnover rate. However, the threshold is the minimum, and though there may be no problems following the law, it already indicates a deeper issue the company must address.

A company that actively promotes inclusion and diversity must have the minimum requirement and have a far greater representation than what is prescribed by law. Reviewing the current composition of the workforce and its composition in the past will reveal the extent of representation the protected class has in a company.

Judging from it then, the company will know the extent of its compliance in avoiding adverse impact and its overall commitment to diversity and inclusion. A momentary hovering below eighty percent during a specific period is alarming but not indicative of systemic problems. However, a constant hovering below a significant or long period indicates a far, worse, and systemic problem.

We can look at the instances of layoffs, for instance. Though the hiring process itself may not discriminate against the protected class, layoffs may be different. Data and statistics about layoffs then could be a significant indicator that may result in adverse impact. Employee turnover may also indicate discrimination. The company must address those issues.

Training your personnel

Nothing beats having the right people deal with significant problems. It will be best to have personnel that may address the adverse impact and other related problems. Ensure that you have the right people adequately trained and have the expertise to help your company deal with the problem and implement policies to avoid adverse impact.

Measuring the adverse impact

Measuring the adverse impact is as exact as it can be. The four-fifths rule states that in the selection process, among those hired, the ratio of the lowest group to the highest must not go below 80 percent. Going below this means you have an adverse impact against that group.

The need to measure the adverse impact

Companies must measure adverse impact because they must comply with the law and promote diversity and inclusion in the workplace. Finally, adverse impact affects the company, especially in recruiting and having talent. Having an adverse impact will severely affect a company’s pool of talented people and dedicated workforce.

A company must follow the law and promote social good, justice, and harmony if it wants respect from its employees and wants the workforce to be productive. Failure to comply hurts the workforce’s morale, resulting in demoralization, high employee turnover rate, and low productivity.



How to avoid Adverse Impact?

  • Strict implementation of the four-fifths rule
  • Review the hiring process
  • Properly document the process.
  • Take a look at passing rates.
  • Review the workforce composition
  • Training your personnel

Adverse Impact

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About the author

Susanne Ricee

Susanne Ricee is the Diversity and Inclusion Specialist and Researcher at Diversity for Social Impact. Sue brings over 15 years of HR and Diversity, Equity, Inclusion consultation experience.
Sue's previous experience includes Microsoft, Target, and Kraft. Sue is also the manager of Diversity Leadership Directory