Adverse what? Adverse impact is a term used to describe the unintended consequences of a recruitment process that unconsciously favours one demographic group over another – to the detriment of diversity.
The benefits of a diverse workforce for business performance are well documented in multiple studies. For example, in their comprehensive report “Diversity Wins”, which is based on data from more than 1,000 large organisations in 15 countries, including Denmark, McKinsey writes:
Our latest report shows not only that the business case remains robust but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time.
Diversity is not just about recruiting fairly for everyone regardless of race, gender, age, etc. It is also about attracting the most qualified employees, and they come in all shapes and sizes. Potential can unintentionally be overlooked when we are unaware of bias and adverse impact.
The 4/5 Rule determines whether your workplace has a recruitment problem
The four-fifths rule, or the 80% rule as it is often referred to, is a tool that can be used to determine whether there is adverse impact in the recruitment process.
The rule is relatively simple: If one group is hired or promoted at a rate that is less than 80% of the rate of the most represented group, it could be a sign that there is adverse impact in the recruitment or promotion processes.
This means that if, for example, 50% of male applicants are offered a position but only 30% of female applicants achieve the same results, there is a significant difference as the success rate of female applicants is only 60% of male applicants, which is below the four-fifths threshold.
It is important to emphasise that the four-fifths rule is not a definitive proof of adverse impact, but rather an indicator that can point to potential problem areas.
It is recommended to use the rule as part of a broader strategy to promote diversity and inclusion in the workplace, which also includes a structured and stringent recruitment process.
The stringent recruitment process that minimises adverse impact
We recommend using a structured recruitment process that you follow every time. If set up correctly, the approach will minimise adverse impact over time.
Reduction of adverse impact doesn’t take place immediately, but over time, as chance can affect results in the beginning, especially when it comes to a limited number of hires.
For example, the first few hires may happen to favour a certain group, although an equal distribution of the most qualified candidates over time would be more representative. A pattern of consistently favouring a certain gender or ethnicity may indicate a bias in the hiring process.
We have created a guide with five short steps to ensure best practice in your recruitment process.
In terms of adverse impact, the most important parts of the guide are the use of a job profile, match score and standardised questions.
By creating a job profile in our system that is based on objective data and free from bias, and by using match scores instead of gut feelings, you focus solely on the candidates’ relevant qualifications and competencies. This effectively eliminates the unconscious bias from the decision-making process.
Furthermore, when creating the job profile, you can already ensure that it does not have an adverse impact on gender, age or position level, i.e. that there is no systematic difference between how different groups (e.g. men and women) score on the job profile in question.
In addition, it is recommended to use the job profile to create a standardised question guide that can be used at the first interview. This ensures that all candidates are asked the same questions, minimising the risk of unconscious bias in the assessment of candidates and ensuring a fairer recruitment process.
