A Statistical Correction to 20 years of Banding

Abstract

Statistically based banding is often considered a viable method for minimizing adverse impact in test‐based employment decisions. By utilizing the standard error of the difference (SED), scores are equated based on the assumption that there is substantial unreliability in any single observed score. However, based on the derivations of Dudek, the formula commonly used to calculate the standard error of measurement (SEM) – a component that is typically used to calculate the SED – is incorrect. Specifically, utilizing the SEM when calculating the SED produces a band of observed scores around a true score, not a band of true scores around an observed score as would be appropriate for banding. This study compares the differences between banding‐based selection decisions when the appropriate SED formula – which utilizes the standard error of estimate – is and is not applied. Overall, results suggest that utilizing the appropriate formula for calculating the SED produces substantial variations in employment decisions. The potential legal and ethical implications of these discrepancies are discussed.

Personnel selection: A review of ways to maximize validity, diversity, and the applicant experience

“…Further, the most recent revision to the The Principles (2018) says very little about banding beyond that it generally will yield lower expected criterion outcomes and utility, but it may increase administrative ease, as well as diversity depending on how within‐band selections are made (p. 32). A few studies have examined formulaic issues with creating bands (e.g., Bobko et al., 2005; Gasperson et al., 2013). Interestingly, there has been little or no field research that directly examines the extent to which banding affects the criterion‐related validity of selection procedures.…”