Adverse Impact: What Is It, Why It Matters, and How to Avoid Selection Bias

Bob owns a mid-sized engineering firm. In the past year, he hired 20 men but only 5 women for technical positions. Does this mean there is a problem with Bob’s selection processes? This might be the case, but it should be considered that what is most important is not the numbers hired, but the selection bias against some groups over others, such as men over women.

To understand selection bias, we need to look at the concept of adverse impact, which has to do with the percentage of people hired from each group of applicants. In Bob’s case, we would be comparing the percentage of female applicants hired to the percentage of male applicants hired.

Supposed in the past year, Bob hired 20 out of the 80 men who applied for a position with his firm. During the same period, he hired 5 of 20 women who applied. In this case, the percentage of men and women hired were both 25%, so there would be no adverse impact.

What is adverse impact in the context of the selection bias?

Adverse impact recognizes that you can’t always keep the percentages exactly the same, so it allows for some leeway. The four-fifths rule sets a threshold for adverse impact that the group in question (women for Bob) would have a hiring rate that is at least 4/5^th of the rate for the comparison group (men for Bob). That means Bob could have hired as few as 20% (4/5^th of 25%) of the female applicants and not had an adverse impact.

Adverse impact is generally the first step considered in a potential selection bias case. If a hiring practice has no adverse impact, it can be considered to be in compliance with hiring procedures. If an adverse impact occurs, it does not automatically mean that there is a problem with the selection process. You would have to dig deeper into hiring practices to make that determination.

If in Bob’s case there was an adverse impact, the next step would be for him to be sure that the selection procedures being used are based on job-relevant factors. A selection process and procedure that have an adverse impact can be used if its use leads to more effective functioning of the firm or can be shown to be a business necessity. This means that the element of the selection procedure that is causing adverse impact can be directly shown to contribute to hiring individuals who are better able to perform on the job.

Psychological tests, especially those that measure cognitive ability (IQ), can have an adverse impact against certain minority groups. The use of those tests, or other aspects of the selection procedure, can be justified if the evidence supports their use. Generally, this means conducting validation studies, which are research studies on employees that show how individuals who score higher on job skills tests (or other selection devices) perform their jobs better. For example, a study might show for a group of sales representatives that those who score high on a sales assessment test do in fact sell more product.

There are 4 Types of Selection Bias

Confirmation Bias – is when an interviewer forms a distinct opinion about a candidate based on a minute piece of information such as the college they attended, before the actual interview.

Effective Heuristic – is when an interviewer makes decisions based on one-dimensional characteristics and not important ones such as problem-solving skills.

Expectation Anchor – is when the interviewer believes that the candidate is more suitable for the job than others, which puts a mental block on the interviewer during subsequent interviews.

Intuition – is when an interviewer makes a judgment on the basis of his or her “sixth sense”, and he intuitively rejects all other candidates.

If a firm finds that their selection process is having adverse impact against a group based on gender, ethnicity, or some other characteristic, the following steps are recommended.

How to avoid selection bias?

1. Carefully examine the selection process to see where the adverse impact is being introduced. Is it at the time of initial screening of applicants? Is it at the point of interviewing?
2. For each position, there should be a job analysis, which is a study that determines the KSAOs (knowledge, skill, ability, and other characteristics) needed for the job. To argue that a selection device is a business necessity, a job analysis will provide important support.
3. Once the point of adverse impact is identified, check to be sure that bias isn’t being inadvertently introduced. For example, is Bob requiring a particular certification that most women do not have that is not linked to critical KSAOs?
4. There should be validation evidence linking whatever selection devices are used to employee performance and/or other vital business outcomes. This typically means conducting a study on a group of employees to show that those who do well on the selection device perform better on the job.
5. Consider if changes in the selection process can reduce adverse impact without sacrificing the quality of selection. Sometimes this means introducing a new selection device, for example, using a psychological test to measure ability rather than relying on the judgment of an interviewer who might have biases, even unintentional ones. Valid skills assessment tests for employment are also tools to be used.

Every firm should try their best to avoid adverse impact through the use of sound HR selection practices. If it occurs, however, be prepared to defend your practices by following these steps. A sound selection system will not only minimize legal problems, but it will enable the hiring of the best people for your organization. It is a sound investment that is well worth making.

What hiring practices do you use to prevent employment discrimination and lawsuits?