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The Big AI

May 31, 2011
A friend of mine recently had a health scare. While the doctors were trying to diagnose her, people would whisper – do you think it is the “Big C?” It was like saying the word (cancer), might bring on some curse or cause everyone within earshot to be stricken with it. Many HR professionals act the same way when it comes to adverse impact. Discussions about adverse impact happen quietly and involve only the people who need to know. In the next few blogs, I’ll talk about the “Big AI” and do my best to make it less scary for everyone.

What is Adverse Impact?

One of the biggest misconceptions about adverse impact is that if you have it, it means that you are discriminating against a minority group. Let’s quickly review the official definition:

“a substantially different rate of selection in hiring, promotion or other employment decision which works against a minority demographic group.”

So, having adverse impact means that a substantially greater percentage of candidates from the majority group are being hired as compared to the percentage hired in a minority group. Does this mean that individuals in the majority group are being given preference or priority over the minority group members? No. If a valid hiring process is put into place and it is applied consistently to all candidates, then it does not indicate that any discrimination has occurred. It simply means that candidates from the different groups are passing the hiring steps at different rates.

However, having adverse impact does mean that there is the “potential” for discrimination in the hiring process and it could warrant investigation. If a candidate were to approach the Equal Employment Opportunity Commission (EEOC) to challenge a selection process, and that selection process shows adverse impact, that is enough evidence for the EEOC to look more closely into that organization’s hiring practices. Just having adverse impact does not prove any wrongdoing.

How do organizations determine if Adverse Impact exists?

Since having adverse impact can lead to investigations and potential legal challenges, it is important to know how to establish whether or not you have it. The two main ways of calculating AI are described below. These calculations would be done for each minority group or protected class.

    1. The standard method for determining the existence of Adverse Impact is the 4/5ths Rule as discussed in the Uniform Guidelines on Employee Selection Procedures (1978). Any organization that reports to the EEOC calculated comparative pass ratios in this manner: 4/5ths Rule – This method compares the pass rate of the majority group (e.g., White/Caucasian) to the pass rate of the protected class of interest (e.g., Hispanic).  This method essentially takes the majority pass rate and divides it by the pass rate of the protected class.  If the resulting ratio is less than .80 (or 4/5ths), there is evidence of Adverse Impact.

    1. For organizations that have government contracts and must be OFCCP compliant, a different calculation must be used. The OFCCP used the ZD rule to calculate Adverse Impact: This method compares the pass rates for the majority and minority group by using a statistical test (Z-test of independent proportions) to determine how many standard deviations difference there are between them. Adverse Impact exists if there is a statistically significant two standard deviation difference between the pass rates.

In the next blog, we’ll discuss what your organization can do if you find that you do have adverse impact against a specific group.

Amie Lawrence, Ph.D. Amie Lawrence, Ph.D. is the Manager of Product Development at PSI. She is an expert in the design, development and validation of psychological assessment tools. An integral member of PSI since 2000, Amie has led the development of numerous competency-based assessments, including online in-baskets, job simulations and motivational fit instruments.