Whether you call it adverse impact analysis, impact ratio analysis, or something else, selection analysis remains a critically important task for organizations staying within the law while emphasizing strategic decision-making. In this blog post, Roy Zambonino, senior solutions consultant at Affirmity, explores six reasons why it’s important to run these analyses, and the specific business problems they solve.
1) Adverse Impact Analysis Ensures Compliance With Federal EEO Laws
First and foremost, organizations want to stay on the right side of the law, and adverse impact analysis remains the best way to do so. Regardless of recent legal changes, the following key U.S. regulations governing fair employment practices remain:
- Title VII of the Civil Rights Act: This 1964 act prohibits employment discrimination based on race, color, religion, sex, and national origin. Adverse impact analysis allows organizations to uncover the potential discrimination of any of these groups during selection for hiring, promotion, or termination.
- The Uniform Guidelines on Employee Selection Procedures (UGESP): This set of federal regulations, adopted in 1978, provides a framework for how the Equal Employment Opportunity Commission (EEOC), Department of Labor, Department of Justice, and the Civil Service Commission assess selection activity to determine adverse impact. By performing adverse impact analyses, organizations are able to understand what the agencies are likely to see and the consequences that could follow.
Regulators, including the EEOC, expect organizations to regularly monitor and document selection outcomes. Therefore, employers that fail to perform adverse impact analysis risk non‑compliance and regulatory scrutiny.
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2) Adverse Impact Analysis Reduces Legal and Financial Risk
The loss of processes such as EO 11246-based Affirmative Action arguably makes it easier for organizations to drift (intentionally or unintentionally) into non-compliance. Whatever our feelings about OFCCP audits, they served as an early warning system for illegal employment practices. An audit was a daunting prospect, but it could validate your current processes, and even when a violation was found, it gave organizations a clear sign that something needed to change. Even the specter of potential auditing forced organizations to proactively follow best practices.
This auditing activity may be gone, but organizations face many of the same legal and financial risks they have always faced. Furthermore, the potential for discriminatory practices to go unchecked for longer periods of time heightens the likelihood that violations will be more severe by the time they are uncovered. Add to this the prospect of the DOJ’s False Claims Act enforcement, and the need to establish statistical proof of your fair practices remains as strong as ever.
Therefore, we strongly urge organizations to continue doing these types of analyses. Doing so will ensure there is nothing discriminatory in your processes that could attract a legitimate lawsuit—and also provide invaluable proof to refute any illegitimate claims.
In this way, adverse impact analysis is a vital risk‑mitigation tool that protects organizational reputation. The last thing you want is your company or individuals in your company to be on local or national news and associated with discrimination and bias. Furthermore, analysis protects organizational resources in the sense that, whenever a selection issue is uncovered, a number of different departments may have to get involved in correcting the issue—HR, legal, and potentially external counsel. This involvement may further increase costs over and above fines and loss of contracts.
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3) Adverse Impact Analysis Improves Fairness and Transparency in Decision-Making
Because adverse impact analysis helps employers understand how each stage of their hiring and promotion process affects different demographic groups, it has the potential to further a wider culture of fairness and transparency across your organization. If people see that you are actually taking the time to analyze activity, they’re more likely to feel confident that the decisions that your organization makes are in the collective best interest and rooted in objective analysis.
Adverse impact analysis can be used to evaluate the fairness of assessments, tests, interviews, and screens—you may have six or seven steps people must go through before they’re even considered for employment. Therefore, if potential and current employees are to cultivate a positive opinion of working for you, they need to be confident that you are the kind of employer who evaluates the process and tools used at each step.
Overall, a data-driven approach strengthens fairness and supports ethical employment practices. In time, it becomes a rooted part of your overall process and has positive effects downstream, removing unintentional bias from your decision-making and emphasizing consistent, equitable enterprise-wide practices that improve reputation and brand trust.
4) Adverse Impact Analysis Enhances the Predictiveness and Validity of Selection Tools
Far from becoming less relevant in recent years, adverse impact analysis has a lot to offer organizations keeping up with recent HR tech innovations and onboarding the latest talent selection systems.
Most significantly, it’s highly likely that readers of this article will be using some form of artificial intelligence in their selection processes. For example, AI can be used to interpret verbal and nonverbal cues in a video interview, or to review a large quantity of applications. However, the degree to which such outcomes are explainable and free from bias is questionable. If you have onboarded such a tool in the last few years, how confident are you that it isn’t a cause of adverse impact in your procedures?
Ideally, organizations should be evaluating their tools, regardless of the claims that vendors make about them. Adverse impact analysis is a logical starting point, and among the select states already legislating on this issue are several that make running such an analysis a legal requirement. When adverse impact exists, employers must demonstrate that their selection procedures are job-related and consistent with business necessity. If specific systems are part of those procedures, they must also be tested.
Organizations should regularly validate the assessments or tests used in their selection processes, with a steps analysis deployed to determine when exactly adverse impact occurs. Overall, adverse impact analysis has long elevated the quality and rigor of talent selection systems, and as those systems continue to evolve, this analytical approach remains crucial.
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5) Adverse Impact Analysis Demonstrates Proactive HR and Compliance Governance
Boards, auditors, and compliance teams increasingly expect organizations to track and mitigate HR‑related risks because having such a proactive process in place gives you ample time to uncover issues and control the narrative. It’s better for everyone concerned if you already know what the issues are when someone external to the organization highlights them. It’s also better to be in a position to proactively work on correcting issues and monitor those corrective actions before those issues are discovered by external parties.
Regular adverse impact analysis provides:
- Documented evidence of compliance management
- Clear visibility into demographic outcomes
- Confidence that selection decisions are equitable and defensible
This ensures that you’re not at the mercy of a plaintiff or government agency narrative about what’s going on in your business. Furthermore, these analyses can be done under attorney-client privilege in order to ensure that proper confidential information remains confidential. We’re increasingly seeing organizations continue their legacy workforce analytics measures with this extra layer of competitive protection. Attorney-client privilege will also be important while federal policies continue their current pattern of volatility.
The bottom line here is that adverse impact analysis supports a culture of accountability and continuous improvement.
6) Adverse Impact Analysis Strengthens Workforce Diversity and Talent Pipeline Quality
Even with an eye to weathering current legal trends, organizations need to be ready for labor market changes in the next 5 to 10 years. Organizations are already grappling with an aging workforce and having to plan for a large amount of institutional knowledge leaving. Furthermore, with immigration into the U.S. seeing a historical reversal, the labor market is shrinking, leaving fewer people available to fill positions left by retirees.
In this moment, it’s critical that organizations can trust their talent selection processes to bring the right talent in, regardless of race, gender, or age.
Once again, adverse impact analyses are essential in this respect, helping organizations to:
- Identify bottlenecks affecting underrepresented groups
- Enhance equitable opportunities across the talent lifecycle
- Improve representation in leadership pipelines
Talent Decisions: Software for the New Era of Impact Analysis
So, you’ve heard why your organization needs to continue performing adverse impact analyses from a range of legal, financial, practical, cultural, and competitive perspectives. How, then, should you go about performing those analyses? Affirmity’s latest release, Talent Decisions, is a new software module for running adverse impact, step, and RIF analyses.
Though built upon many of the principles that went into our prior affirmative action and workforce insights planning products, Talent Decisions moves away from the rigid 11246 structure of job group, job title, and requisition IDs, and allows you to define your own grouping variables.
With Talent Decisions, our priority is allowing teams to go beyond compliance and help them proactively evaluate and defend hiring, promotion, and termination decisions, building a body of evidence that fortifies your organization against potential litigation.
To learn more, please contact us today or speak to your Affirmity account manager.
About the Author
Roy Zambonino is a senior solutions consultant at Affirmity. He is responsible for demonstrating and discussing Affirmity’s wide range of software, consulting services, and digital learning solutions with existing and prospective clients.
As a former project manager, Mr. Zambonino is able to draw upon the best practices he’s observed over the last 29+ years, helping prepare and implement programs. This work has involved companies ranging in size from a few hundred to several hundreds of thousands of employees, and spans across many industries, including retail, construction, healthcare, banking, and finance. Mr. Zambonino has a Bachelor’s and Master’s degree in Business Administration.