practical significance
What It Means
Practical significance is a framework for determining whether statistical differences in AI systems actually matter in real-world business contexts, especially for employment decisions. While a system might show statistically significant bias, practical significance asks whether that bias is large enough to constitute actual discrimination that affects people's lives and violates legal standards.
Why Chief AI Officers Care
CAIOs must ensure their AI hiring and promotion systems don't just pass statistical tests but also meet legal standards for fair employment practices. Courts and regulators increasingly use practical significance frameworks to evaluate whether AI-driven employment decisions create meaningful discrimination, making this a critical compliance consideration that could determine lawsuit outcomes.
Real-World Example
An AI recruitment system shows a statistically significant 2% lower callback rate for certain demographic groups across 100,000 applications, but practical significance analysis reveals this small difference doesn't meaningfully impact hiring outcomes compared to human recruiters' 15% variation rates, potentially making it legally defensible despite the statistical difference.
Common Confusion
People often confuse statistical significance with practical significance - just because an AI system shows measurable bias in testing doesn't automatically mean it violates employment law or requires immediate changes.
Industry-Specific Applications
See how this term applies to healthcare, finance, manufacturing, government, tech, and insurance.
Healthcare: In healthcare AI, practical significance determines whether statistically significant differences in algorithmic perform...
Finance: In finance, practical significance determines whether AI model biases in credit scoring, loan approvals, or insurance pr...
Premium content locked
Includes:
- 6 industry-specific applications
- Relevant regulations by sector
- Real compliance scenarios
- Implementation guidance
Technical Definitions
NISTNational Institute of Standards and Technology
"a conceptual framework for evaluating discrimination cases developed primarily on statistical evidence that is the subject of increasing interest and discussion by some in the equal employment opportunity (EEO) field."Source: DOL_Practical_Significance
Related Terms
Discuss This Term with Your AI Assistant
Ask how "practical significance" applies to your specific use case and regulatory context.
Start Free Trial