Companies today are more committed than ever before to encouraging diversity in their hiring practices. Numerous research studies show that a diverse workforce expands a company’s ability to come up with more creative solutions and problem-solve more effectively due to the greater collective skills, abilities, and perspectives that a diverse workforce offers. Additionally, companies who employ and promote a diverse population maintain better employee engagement and higher retention rates because employees know they are valued for their unique perspectives and contributions. This encourages them to further invest themselves with the company. Human Resource and Recruiting leaders are going to great lengths to ensure diversity and inclusion in the design of their recruiting programs and hiring practices. So how do you know your efforts are working?
What is Adverse Impact?
Measuring your Adverse Impact KPI is one way to quantify your results as it relates to the success rate that your program is having with minority versus non-minority groups. In simple terms, this is how you determine whether or not your hiring practices have any “adverse impact”, also known as a “disparate impact” on a group based on their ethnicity, age, sexuality, gender, or other protected classes. The idea is to uncover any discriminatory effect even when the employment practices appear neutral. To understand more about how unconscious bias can creep into your hiring practices, check out the Catch ‘Em Keep “Em Podcast episode entitled “Avoiding Biases in Your Workplace“. According to the Society for Human Resource Management (SHRM), adverse impact may occur in hiring, promotion, training and development, transfer, layoff, and even performance appraisals.”
How do I measure Adverse Impact?
Adverse Impact in your hiring program is measured by what is known as the “four-fifths rule”. The rule allows you to understand the rate at which you are hiring specific groups and make comparisons in order to identify certain disparities. For example, if you have a total of 200 applicants, 115 non-minority compared to 85 minority, and 10 non-minority are hired verses 6 minority, the comparison would look like this:
10 of the 115 non-minority applicants are hired which is a rate of 8.69%. In the minority group, 6 of the 85 applicants are hired which is a rate of 7.05%. To pass the four-fifths rule, your rate of hiring within the minority group must be at least 80% of your rate of hiring in the non-minority group. In this case, 7.05 is 81% of 8.69, therefore, you pass the four-fifths rule.
Awareness around avoiding discriminatory practices at every stage of the employee lifecycle, we recommend visiting The Society for Human Resource Management (SHRM) and the Equal Employment Opportunity Commission (EEOC) to understand the laws and guidance they have provided. Remember that avoiding discriminatory practices is only the beginning. For your company to peak from both cultural and business impact perspectives, diversity and inclusion are a cornerstone of your foundation.
To learn more about how to measure the success of your recruiting and hiring practices, take a look at our recommendations on Recruiting KPI’s.
