Challenging Question: Adverse Impact / 4/5th Rule (PHR, SPHR, SHRM-CP, SHRM-SCP Exams)

Hello All!

Okay, so today we have a long post ahead of us, lol.

I will be explaining how to calculate adverse impact, which is pretty simple once you get a hang of it. 😊

First things first, I want you to read the brief explanation below from the EEOC  on how to determine if adverse impact has occurred in a selection process;

Adverse impact is determined by a four step process.

(1) calculate the rate of selection for each group (divide the number of persons selected from a group by the number of applicants from that group).

(2) observe which group has the highest selection rate.

(3) calculate the impact ratios, by comparing the selection rate for each group with that of the highest group (divide the selection rate for a group by the selection rate for the highest group).

(4) observe whether the selection rate for any group is substantially less (i.e., usually less than 4/5ths or 80%) than the selection rate for the highest group. If it is, adverse impact is indicated in most circumstances. See Section 4D.

For example:

Applicants	Hired	Selection Rate Percent Hired
80 White	48	48/80 or 60%
40 Black	12	12/40 or 30%

A comparison of the black selection rate (30%) with the white selection rate (60%) shows that the black rate is 30/60, or one-half (or 50%) of the white rate. Since the one-half (50%) is less than 4/5ths (80%) adverse impact is usually indicated.

The determination of adverse impact is not purely arithmetic however;  and other factors may be relevant.

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Question

The Rand Group has just completed a hiring process of digital marketers for its company expansion drive. Based on the table below, which group (s) did not suffer adverse impact?

GROUP	APPLICANTS	HIRED
Asian	36	6
Anglo Saxon	40	20
Hispanic	12	4
Native American	30	12

a.    Asian

b.    White

c.    Hispanic

d.    Native American

Explanation

Step 1. Calculate the rate for each group. Do this by dividing Hired by Applicants. Hired / Applicants. Multiply your answer by 100 to get the figures in percentages. You should get the percentages below in the selection rate box;

GROUP	APPLICANTS	HIRED	SELECTION RATE	80% OR 4/5 OF HIGHEST RATE
Asian	36	6	17%
Anglo Saxon	40	20	50%	40%
Hispanic	12	4	33%
Native American	30	12	40%

Step 2. Determine the group with the highest selection rate. Calculate the 4/5^th or 80% of the selection rate for the group with the highest rate. The Group with the highest selection rate is the Anglo Saxon group at 50%. The 4/5^th or 80% of the selection rate is (50% * 80%) OR (50% * 4/5) = 40%.

Step 3. Observe where the selection rate for any group is less than 4/5ths or 80% of the selection rate for the highest group. Remember, the 4/5^th or 80% of the highest selection group for our question is 40%. 

The groups which have a selection rate less than 40% are the Asian and Hispanic groups, therefore the Asian and Hispanic groups have potential adverse impact indications against them.

  

Step 4. Re-read the question. The question asks for the group that did not suffer adverse impact. This is the Native American group, because their selection rate is the same as the 4/5^th or 80% of the group with the highest selection rate. 

Note that option B states "White" and not Anglo Saxon as the question provides.

Let me know if you have any questions and I will be happy to answer.

I wish you success!