Adverse Impact

How adverse impact practices in hiring can hurt your team.

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Adverse Impact

The goal of many hiring teams today is to mitigate bias as much as possible in the hiring process. However, despite best efforts, some hiring practices are still unfair to certain groups. To counter this unfairness, we have to look at and recognize adverse impact in the hiring process.


Adverse impact occurs in various hiring practices such as screening. However, it is important to note that the causes of adverse impact are varied, and most often, it is a result of unwanted or unanticipated consequences of the hiring process.

That’s why we’re going to look at adverse impact and what parts of the hiring process can cause unfair disadvantages to certain groups. From there, we go on to explore how we can mitigate this in the hiring practice to create a fairer and equal program for a more diversified workforce.

To this end, we will, in turn, explore adverse impact analysis. This is the practice of utilizing statistical review to determine when and where discrimination is affecting hiring decisions. One such practice we explore in this article is known as the 4 / 5ths rule - a selection rate of protected groups based on race, sex, age, and religion should be 80% or more to avoid adverse impact against these groups.  

Adverse Impact in Hiring

According to the U.S. Equal Employment Opportunity Commission, the definition of adverse impact is a substantially different rate of selection in hiring that works to the disadvantage of members of a race, sex, or ethnic group.

An example of an adverse impact in hiring is running background checks for a certain group of candidates and not another. Regardless of the reasoning, it may result in an adverse impact on the first group. This method is unfair to the first group and risks unfairly eliminating qualified candidates.

Adverse impact, also known as systemic discrimination, should be rooted out of the recruiting process.

In hiring, we can measure adverse impact across the hiring process as a whole or within a single step, like screening candidates, resume screening, and hiring assessment tests. In fact, it’s essential for the success of the modern company to measure adverse impact. According to a survey by the Boston Consulting Group in 2018, companies with above-average diversity enjoy a greater proportion of revenue from innovation, 45%. Contrast this with companies with below-average diversity, which only saw approximately 26% of revenue from innovation.

Although you may feel that your hiring practices are fair and discriminate against no one, this is a very real problem across industries. Unconscious bias is by no means malicious but is certainly present. Thankfully, there are a number of tools and techniques to combat this.

One such method is to offer a consistent interview process with standardized questions. On-demand phone interviews are perfect for this. The recruiter simply records a single interview which is then distributed to the candidates. As such, every candidate has an opportunity to approach the exact same interview.

Adverse Impact 4 / 5 Rule

When it comes to measuring adverse impact, a sound system is to consider the adverse impact 4 / 5 rule. The rule states that when the selection rate for a given group drops below an 80 percent ratio of the largest group, then there is an adverse impact on that group.

Many organizations have adopted this rule as practical means of watching for potential discrepancies in the hiring rates. As such, the 4 / 5 rule provides a sort of adverse impact ratio formula to help guide recruiters in avoiding unintentional, unfair hiring practices.

To apply this adverse impact formula, calculate the number of the minority group assessed divided by the number hired. Then do the same for the majority group. From here, divide the minority group by the majority. Should the resulting number be less than 80%, the minority group is interpreted as experiencing an adverse impact.

There are multiple adverse impact calculators you can use online, but to do it yourself simply use these steps.

  1. Choose a group to check - Minority group hired / minority group applicants = X

  2. Do the same for the majority group - Majority hired / majority applied = Y

  3. Divide X by Y - X / Y should at least equal 80%. Should the quotient be less than 80%, you have discovered adverse impact in your hiring practices.  
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Adverse Impact vs. Disparate Impact

When discussing adverse impact, it’s important to differentiate it from disparate impact discrimination. Although these two terms are often used interchangeably, there are some nuanced differences between the two. That’s why we’re going to take a quick look at adverse impact vs. disparate impact.

Both refer to unintentional discriminatory practices against protected groups. However, disparate impact is specifically a legal concept, and adverse impact is the result of disparate impact. Although the law strictly prohibitions this discrimination, it remains in practice.

The persistence of these problems occur because the practices that cause them appear fair and balanced. These practices are often formulated by individuals or groups that, even despite avoiding discrimination, may still possess unconscious biases against a given group. As such, it is easy for adverse impacts to go unnoticed.

The differences between disparate impact and disparate treatment, on the other hand, are easier to see. The key difference is that while disparate impact is unintentional, disparate treatment includes direct acts of a group being treated differently.

Here are some disparate impact vs. disparate treatment examples.

Two candidates are equally qualified on their resumes for a position. Both are given an opportunity to go through the screening process. However, during the interview, both are given very different questions and treatment. Should one of these individuals be of a particular protected class, this approach constitutes disparate treatment.

Here’s another example. Two workers have committed a violation that warrants a suspension. They both possess equal standing in the company, and both are equally guilty of the violation. However, should only one candidate be suspended while the other is fired entirely, this may also constitute disparate treatment.

Accessibility in Hiring

Ensuring accessibility in hiring is one of the best ways to combat adverse and disparate impact. Creating a more accessible hiring process means ensuring every candidate is able to perform during the hiring process with equal opportunity.

Qualifi’s on-demand phone interview platform is a tool that helps your team do exactly that. With an on-demand phone interview, a candidate only needs access to a phone to conduct their side of the interview at a time and place of their convenience. As such, this opens the interview process to more candidates that would otherwise be unavailable during traditional phone interview hours.

By ensuring an easy and accessible interview option during the hiring process, you reduce the possibility of unintentionally discriminating against protected groups and potentially improving the diversity of your company.

So, schedule your pilot today to experience firsthand how Qualifi mitigates bias and improves accessibility for a fairer way to hire.

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