9 Ways to Avoid Adverse Impact in Your HR Practices

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Despite your best efforts, your HR practices may be unfair to certain groups of people. To eliminate unfairness as much as possible, it’s important that you can recognize adverse impact. In this article, we’ll take a closer look at adverse impact; what is it, and why it is important to avoid. We’ll also share 9 ways to avoid adverse impact on your HR practices. Here goes!

Contents
What is adverse impact? A definition
Why it is important to minimize adverse impact
9 Ways to avoid adverse impact in hiring and recruitment
1. The four-fifths rule
2. Conduct a thorough job analysis
3. Write inclusive job descriptions
4. Use structured employment interviews
5. Share best practices
6. Use an interview guide
7. Use valid assessments
8. Create a solid promotion policy
9. Avoid adverse impact in layoffs
FAQ

What is adverse impact? A definition 

In the US, the EEOC (Equal Employment Opportunity Commission defines adverse impact as follows: “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 can occur in various employment practices including hiring, learning and development, promotion, transfer, and performance appraisals. It can happen in one specific part of, for instance, the selection process, or during the entire practice. 

Most of the time, adverse impact is an unwanted or unanticipated consequence of an employment practice. An often-named example is that of a company conducting background checks for one group of candidates (A) but not for another (B). 

While they may honestly believe that there is a logical reason for this practice, it can result in adverse impact if it turns out that more qualified candidates from group A are eliminated following this background check and that more candidates from group B are hired.    

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Why it is important to minimize adverse impact 

There are various reasons why it is important to try and avoid adverse impact in your HR practices as much as possible, including:

  • To build a more diverse and inclusive workforce. Research shows that more diverse companies are more likely to have better financial returns. Diversity also drives innovation; a study by HBR found that companies with an above-average diversity had 19% higher innovation revenues and 9% higher EBIT margins. 
    The same thing goes for inclusion. A 2018 Deloitte report found that organizations with inclusive cultures were, among other things, six times more likely to be innovative and agile: they see more angles on potential problems, imagine smarter solutions, and detect the biases in what they’re creating.  
  • To ensure fair hiring practices. Without a fair and unbiased hiring process, you won’t be able to build a diverse workforce or attract candidates from all walks of life.
    This is why it’s important to detect and minimize adverse impact in your recruitment activities; doing so will help you in providing each candidate with a fair chance, regardless of their age, gender, background, ethnicity, religion, race, and sexual orientation.
  • To comply with (local) legislation. Compliance with equal employment opportunity laws may not be the first thing that comes to mind, but avoiding adverse impact simply is a legal obligation.
    In order to avoid lengthy and costly lawsuits that can damage your organization, your hiring practices should, therefore, be compliant with local laws. 

9 Ways to avoid adverse impact in your HR practices

1. Understand the four-fifths rule

In order to avoid adverse impact in your employment practices, you first need to understand when there’s considered to be a case of adverse impact. In the US, they’ve adopted the Uniform Guidelines on Employee Selection Procedures for this. These Guidelines aim to ‘establish uniform standards for the use of selection procedures by employers and to address adverse impact, validation, and record-keeping requirements.’

The Uniform Guidelines have established a way to determine whether or not there is adverse impact in an employment procedure; the 4/5ths or 80 percent rule. Put simply, the selection rate of protected groups – which include race, sex, age (40 and over), religion, disability status, and veteran status – should be 80% or more of the selection rate of non-protected groups to avoid adverse impact against the former. 

SHRM does a great job explaining how to calculate adverse impact, here’s a simple example:

Calculating adverse impact example

The image shows that you should, for example, calculate this when you’re selecting people for termination. Other situations in which you should apply the four-fifths calculation method can be when candidates move from the first to the second interview round or when you’re making promotion decisions.

2. Conduct a thorough job analysis

Before a job advert gets posted, an objective job analysis needs to be done. In order to avoid adverse impact in your job analysis – and then in other employment practices like the ones mentioned below – it is crucial that your selection criteria are always directly related to the job in question and nothing else.  

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Job analysis data
Three primary types of job analysis data: work activities, worker attributes, and work context.

Ideally, a job analysis is conducted by a combination of employees, (hiring) managers and/or recruiters and HR professionals. The goals of a job analysis can vary but include:

  • Providing input for the job description (which specifies the requirements for a new position, including the required skills, role in the team, personality, and capabilities of a suitable candidate)
  • Worker training. Once knowledge, skills, abilities, and other characteristics are identified, the training need can be identified and employees can be trained. 
  • Performance appraisal. The job analysis provides input for the performance appraisal of the individual performing the job. 
  • Worker mobility. Job analysis is useful to identify the knowledge, skills, abilities, and other characteristics required for a role, which can then be matched with an internal hire. 

3. Write inclusive job descriptions

The way your job adverts are written, meaning the words and language used in them, have a direct impact on the people you attract – or don’t attract.

An augmented writing tool like Textio uses data and machine learning to help companies optimize their job adverts (and all their other written communication). As such, it can help you choose language that appeals to, for example, candidates who highly value inclusion. It can also help you ensure your job adverts are appealing to a wide variety of people.

Augmented writing
Your choice of words has an impact on the types of candidates that apply.

4. Use structured employment interviews

There are two kinds of interviews, the unstructured and structured interview. In a structured interview, a standardized set of questions is used. This provides the interviewer with a uniform method of recording information and standardizing the rating of the applicant’s qualifications hence minimizing the risk of adverse impact.

In scientific literature, the structured interview has proven to be almost twice as reliable as the unstructured interview (Schmidt & Hunter, 1998). The structured interview enables the interviewer to accurately compare candidates and to make the best decision purely on data.

Besides having standardized questions, a common method used in interviews is the STAR method. This method offers a structured way to retrieve information from the candidate. STAR is an acronym for Situation, Task, Action, Result.

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Using this method to test for the key competencies of the job is highly recommended. Indeed, asking multiple candidates the same question enables you to easily compare how much experience they have in these key competencies from their previous jobs.

5. Share best practices

In most companies, it’s likely that there is more than one person involved in the hiring process. In order to minimize adverse impact on your recruitment practices, you need to make sure that everyone is on board; the recruitment team, hiring managers, management, leadership, etc. and that you regularly share best practices on how to reduce adverse impact.

There are various ways to go about this, including:

  • Teach them about interviewer bias, how to spot it, and how to avoid it
  • Keep them up-to-date on the latest local employment laws
  • If you run into a case of adverse impact in your current hiring practices, make sure to share that information

6. Use an interview guide

An interview guide is a document that enables organizations to structure the way they conduct their candidate interviews. It helps interviewers to know what to ask about and in what order and it ensures a candidate experience that is the same for all applicants. 

The benefits of using an interview guide during the hiring process go beyond just structuring the interviews themselves. Other benefits include:

  • A structured process. When all interviewers follow the same steps in the same order this creates structure. This, in turn, reduces the chances of people forgetting to ask candidates certain questions or give them certain information. 
  • Candidate experience. Using an interview guide ensures all candidates get the same experience. Of course, not all interviewers are the same so there will always be a difference, but at least the process and questions are the same for everyone.   
  • Equal assessment. When you use the same interview method and ask the same questions to every candidate, you can also use the same scoring to assess them. This reduces the risk of bias in the interview process and helps you avoid adverse impact.

7. Use valid and defensible assessments

Using assessments in your selection process can be a great way to reduce bias and adverse impact. There are, however, a few things to be wary of:

  • Assessments have certain biases. Men, for instance, generally score better than women in numerical reasoning tests and women tend to score better than men in verbal reasoning tests.
  • Use (scientifically validated assessments). There are heaps of assessments out there but not all of them are validated.
    When you’re in the process of selecting HR technology, you can ask the assessment vendors on your shortlist how their assessments are designed and validated – has this been done with minimizing adverse impact in mind?
    Once you’ve chosen your assessment(s), it’s important to regularly analyze if any adverse impact occurs and if it does, to do something about it.
  • Combine different types of assessments. Use, for example, a General Mental Ability (GMA test, also known as an IQ test in combination with a work sample test and a personality test. In pre-employment assessment tools, it is often possible to combine (elements of) these various assessments in a single test for candidates.
Adverse impact

8. Create a solid promotion policy

Just like hiring decision, promotion decisions are also covered by employment and non-discrimination laws. In other words, your promotion practices should comply with, in the US, the Uniform Guidelines we mentioned earlier. 

A few tips to help you ensure that you avoid adverse impact in your promotion decisions:

  • Have a strong promotion policy in place. Among other things, your policy should include interview and promotion procedures, neutral selection criteria, and procedures for the internal communication of positions.
  • Have a solid performance appraisal process in place. A consistent performance appraisal process helps in making your employees understand where they’re at promotion-wise; they know what the performance requirements for promotion are, whether or not they qualify right now, why some of their colleagues were promoted, and what they’ll have to do if they want to be considered for a future promotion. 
  • Communicate. Last, but certainly not least, make sure your employees are well aware of your promotion policy and familiar with the process. Communicate each position internally before posting it externally, and support employees who didn’t get promoted.  
    Have a grievance procedure in place in case an employee feels wronged despite your best efforts. 

9. Avoid adverse impact in layoffs

Adverse impact can occur at any stage of the employee life cycle, including at the very end. If you need to let people go, for instance as a consequence of the COVID-19 pandemic, make sure that no protected groups are disproportionately impacted. 

Review your termination and layoff processes and use the four-fifths rule to determine whether or not there is adverse impact in one of these processes. If it turns out, for example, that older employees are being let go more than younger individuals, you’ll need to change your process in order to eliminate the adverse impact of your practice.    

FAQ

What is adverse impact?

Why is it important to avoid adverse impact?

There are various reasons why it is important to try and avoid adverse impact in your HR practices as much as possible: to build a more diverse and inclusive workforce, to ensure fair hiring (and other HR) practices, and to comply with legal requirements.

How to avoid adverse impact in HR practices?

There are different ways to avoid adverse impact in your HR practices, including: understanding the four-fifths rule, conducting a thorough job analysis, writing inclusive job adverts, creating a solid promotion policy, avoiding adverse impact in your layoffs, and using validated assessments.

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