8pg- HR Case Study

Adverse Impact Analysis

Adverse impact happens when actions and decisions made by an organization have biased effects on protected groups of people or employees with or without the management intending to cause the bias (Phillips & Gully, 2015). Financially neutral work policies that do not discriminate employees but can have substantial disparate outcomes on protected groups of individuals as compared to other policies can cause adverse impact. Adverse impact can be determined by analyzing stock, concentration, and flow statistics. Going by the assessment of each job categories and employment patterns, there is adverse impact in Chern’s Company against different groups of employees because they have not been represented in significantly proportionate numbers relative to other groups of employees.

Disparate Impact Analysis

Stock Statistics

Stock statistics is a method of analyzing adverse impact. It involves making a comparison between the percentage number of minorities, men, women, or a protected group of individuals in a particular work category against their availability in a population with qualified individuals who are also interested in the same job (Phillips & Gully, 2015). If the rate at which the protected group is lower than the expected number depending on their availability in the population, then they are underutilized. In order to determine whether there was adverse impact using stock statistics at Chern’s, stock statistics is done for the minorities.

Table 1: Chern’s sales associates data in relation to the relevant population. Job category: Sales associates. Source: Phillips and Gully (2015).

An analysis of the data to determine whether one gender is underutilized involves a comparison between the percentages of females employed versus their availability in the population, and doing the same for male employees. From table 1, female employees are underutilized because female sales associates in the company (55%) are less than their availability (60%) in the qualified population. Males are over utilized because male sales associates (45%) are more than their availability in the qualified population (40%). Whites are underutilized because they make up 20% of the sales associates whereas their availability in the qualified population is 25%. Blacks are also underutilized because they make up 20% of the sales associates yet their availability in the qualified population is 25%. On the other side, Asians and Hispanics have been over utilized because they make up 32% and 28% of the sales associates respectively yet their availability in the qualified population is 25% for both of them. Therefore, according to stock statistics, females, whites, and blacks are underutilized, which indicates adverse impact against these groups.

Concentration Statistics

Concentration statistics measures adverse impact through a comparison of the percentage number of groups of workers in different jobs to check whether minorities, men, or women are flocked in specific job categories or not (Hornsby, 2005). Concentration statistics help to determine why differences occur in the distribution of different groups of workers in specific job categories. To analyze Chern’s concentration statistics, a comparison of a racial subgroup in specific job categories is conducted relative to all other racial subgroups in the same job categories, and comparing the representation of a racial subgroup with individual subgroups.

Table 2: Chern’s data on concentration of gender and racial subgroups in sales associates, department managers, and store managers positions. Source: Phillips and Gully (2015).

According to the provided data, female employees are more concentrated in sales associates position than males by 10%, which is obtained by deducting 45% from 55%, showing that women are concentrated in sales associates position. However, males are more concentrated in the department managers position than women by 40%, obtained by deducting 30% from 70%. Similarly, males are also more concentrated in store managers position by 20%, obtained from deducting 40% from 70%. This depicts adverse impact against males in the sales associates position whereas there is adverse impact against women in the department and store managers positions. In the ethnic subgroups, Asians are more concentrated in sales associates position with 32%, which is the greatest percentage among all the racial subgroups. However, they are the least concentrated in the store managers position among the racial subgroups at 16%. Whites and blacks are the least concentrated in the sales associates position at 20%, although blacks are the most concentrated in the store managers position at 40%. Hispanics are the most concentrated in the department managers position with the highest percentage of 35%. Among the racial subgroups, blacks are the least concentrated in two out of three job categories namely department and store managers positions, thereby making them the most affected by disparate impact.

Flow Statistics

Flow statistics assesses adverse impact by comparing selection rates, or the percentage number of applicants employed from available subgroups to check whether the rates differ substantially (Hanvey & Sady, 2016). The 80% or 4/5 rule, which holds that a selection rate for any group such as race or gender that is less than 4/5 of the highest group’s rate reflects adverse impact, while that which is more than 4/5 does not reflect adverse impact, is applied in flow statistics (Derous & Ryan, 2012).

Table 3: Chern’s data on sales associates for flow statistics: Source: Phillips and Gully (2015).

The selection rates for all the groups can be calculated using the formula:

(Number hired*100%)/Number of applicants

Men: (80*100)/1000=8%

Women: (160*100%)/1400=11.43%

Whites: (55*100)/600=9.17%

Blacks: (48*100)/600=8%

Asians: (67*100)/600=11.17%

Hispanics: (50*100)/600=8.33%

In terms of gender, women have a higher selection rate than men at 11.43%.

(4/5)*11.43%=9.144%

The rate of men’s selection (8%) is less than 4/5 of the rate of women’s selection (9.144%), indicating that there is adverse impact against male employees.

The next step is to determine 4/5 of the rate of the ethnic subgroup with the highest selection rate. Asians have the highest at 11.17%.

(4/5)*11.17%=8.936%

The groups whose percentage selection rates are below 8.936% are Blacks and Hispanics at 8% and 8.33% respectively. This indicates adverse impact against Blacks and Hispanics in the hiring process.

Conclusion and Recommendations

According to stock statistics, there is evidence of adverse impact against female employees. When it comes to ethnic subgroups, Whites and Blacks are underutilized in the sales associates position. An evaluation of concentration statistics indicate that males have been underutilized in sales associate position whereas women have been underutilized in the department managers position. This indicates adverse impact against males in the sales associates position, and against women in the department managers position. In terms of ethnic subgroups, Asians are underutilized in the store managers position whereas Whites and Blacks are underutilized in the sales associates position. Blacks are additionally underutilized in the store managers position. This makes Blacks the most affected by adverse impact. Last but not least, flow statistics show that men are affected by adverse impact in the hiring process in favor or women. Blacks and Hispanics are the ethnic subgroups that are affected by adverse impact in the selection process.

Chern’s can rectify the imbalance by employing more women, Whites, and Blacks in the sales associates position. More women should also be placed in the department managers position. Some Asians should be moved from sales associates and department managers positions to sales associate positions. Further, more blacks should be employed in the store managers position. Finally, more Blacks and Hispanics should be considered in the hiring process, and more women should be employed than their current number in the company.

References

Derous, E., & Ryan, A. M. (2012). Documenting the adverse impact of resume screening: degree of ethnic identification matters. International Journal Of Selection & Assessment, 20(4), 464-474.

Hanvey, C., & Sady, K. (Eds.). (2016). Practitioner's Guide to Legal Issues in Organizations. New York: Springer International Publishers.

Hornsby, J. S. (2005). Frontline HR: a handbook for the emerging manager. South-Western Pub.

Phillips, J., & Gully, S. M. (2015). Strategic Staffing, Global Edition (3rd ed.). New Jersey: Pearson.