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Study: The True Cost of Gender Bias in Hiring

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  • Writer's picturePeter Harris

Even a hint of gender bias in hiring decisions can contribute to troubling rates of discrimination and potential lost productivity that could represent significant financial costs for employers. Those are the findings of a new study conducted by Oregon State University.

Fortunately, their research also found that there is much less gender bias in today’s hiring decisions than was historically seen. Researchers reviewed about 30 years of studies into gender bias and hiring in the workplace. They found that a couple of decades ago, gender bias influenced roughly 4 percent of hires. Today bias influences 1 percent or fewer hires.

“The science shows that the effects of gender bias on hiring are very small,” Jay Hardy, an assistant professor of management at OSU, said. “In broad strokes, it seems like hiring decisions are actually pretty fair – certainly more fair than they used to be.”

Hardy and his colleagues ran a series of computer simulations to better understand the impact that even this reduced level of bias can have and what the impact could mean for companies. The researchers found that even a small amount of bias in hiring decisions can lead to discriminatory action against job candidates, putting companies at risk of costly legal action. They also found that biased hiring decisions can be expensive for companies because a lesser qualified candidate may not be as successful in the position.

Adding a poor-performing member to your team could be costing your company time, money, and morale. See The high cost of a bad hire.

It is always in an organization’s best interest to hire the most talented person for every role. Bias against a candidate’s gender, background, or any other factor unrelated to their abilities can cost companies productivity, innovation, and innovation. Furthermore, any hint of such predisposition toward one group of people leads to a more homogenous workforce, limiting the variety of input and perspectives contributing to future decision-making.

The model tested by Hardy and his associates found that a typical Fortune 500 company that hires 8,000 new employees a year with a 1 percent gender bias effect can expect 32 additional failed hires and many more sub-optimal hiring decisions, resulting in productivity losses of about $2.8 million per year.

The 4 percent bias effect would lead to an additional 192 failed hires and an additional $17 million in lost productivity.

Companies seeking to reduce gender bias in their hiring processes should find ways to remove human judgments from the process as much as possible, Hardy said. The over-reliance on job interviews as the ultimate test for new hires is one of the main problems. Harvey noted that job interviews are among the most common but least objective hiring tools that companies use.

“Hiring is always going to be an imperfect process because human beings are complicated,” Hardy said. “But the gold standard for any hiring manager should be to be as objective as possible in the hiring process.”

The findings were published today in the Journal of Management. Read more about this study, here.

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