Background Screening and Safe Hiring

Given the enormous cost of a bad hiring decision, it is no surprise employers want to boost the effectiveness of their hiring process.

by Lester S. Rosen

It is the ultimate nightmare for every human resources, security, or risk-management professional: Your phone rings late Friday afternoon as you wind up loose ends from yet another challenging week and are looking forward to a quiet weekend. A panic-stricken voice informs you that Pat in accounting has assaulted another co-worker and threatened to harm a supervisor. It turns out Pat was not only stealing money, but did not really have the experience claimed.

As the mess is being sorted out, everyone will be asking you the same question over and over. From the company CEO, CFO, and corporate attorney to managers, supervisors, and co-workers, there is one thing everyone wants to know: How did that person get hired in the first place?

If the matter turns into litigation, the legal fees for just one incident of workplace misconduct can easily soar into the six figures, and jury awards can be astounding. Your firm can be sued by injured co-workers, members of the public who were damaged, or even the bad employee who may claim wrongful termination. Once litigation starts, you will also find that in addition to your normal duties you now have a second and nearly full-time job--dealing with the discovery process in litigation and the organizational fallout.

Contrary to popular perception, there is no national database of criminal records that is available to private employers.

The statistics on the consequences of even one bad hire are chilling. The financial cost to businesses from theft, violence, and false credentials can be enormous. There are other costs that are hard to measure, such as the harm to employee morale or the firm's reputation. Industry statistics suggest the cost of even one bad hiring decision can exceed $100,000, taking into account the time spent recruiting, hiring, and training and the amount of time the job is left undone or done badly by an unqualified applicant.

Given the enormous price tag of a bad hiring decision, it is no surprise that employers of all sizes are turning to various tools to boost the effectiveness of their hiring process. The tools run from honesty and skills testing to behavior-based and group interview techniques.

Ultimately, none of these tools has proved effective in weeding out bad candidates, unless used in conjunction with a program of pre-employment background screening to obtain hard facts about a candidate.

Pre-employment background screening works in four critical ways:

• Just having background screening can discourage applicants with something to hide. A person with a criminal record or false resume will simply apply to a company that does not pre-screen.
• It limits uncertainty in the hiring process. Although using instinct in the hiring process can be important, basing a decision on hard information is even better.
• A screening program demonstrates that an employer has exercised due diligence, providing a great deal of legal protection in the event of a lawsuit.
• Having a screening program encourages applicants to be especially forthcoming in their interviews.

Pre-Screening Tools
Checking criminal records is a good example of a pre-screening process that helps promote safe hiring. It is estimated that 10 percent of job applicants have criminal conviction records relevant to the hiring process; without a screening program, it is a near-statistical certainty that a company is going to hire someone with a criminal record. Contrary to popular perception, there is no national database available to private employers. Criminal records are normally checked by having qualified researchers visit courthouses in counties where an applicant has lived or worked. Because there are more than 10,000 courthouses in America where records are kept, most employers outsource this task to qualified firms that specialize in pre-employment screening.

Another important tool is resume verification. Job applicants often use their resumes as a marketing tool, but the hiring company can find itself in trouble when resumes exceed the bounds of honesty. It is estimated that up to 30 percent of resumes contain material falsehoods that pertain to previous employment, education, and professional licenses. A professional screening firm can verify whether an applicant has the degrees or licenses claimed. Even if a past employer will not give details about job performance, just verifying the job dates and job title is crucially important. One of the most critical parts of the hiring process is to look for unexplained gaps in employment. That is important in order to help a screening firm check the appropriate courthouses while searching criminal records.

One of the most critical parts of the hiring process is to look for unexplained gaps in employment. These help a screening firm check the appropriate courthouses while searching criminal records.

Other tools can include credit reports (when relevant to the job), Social Security number traces, driving records, national wants and warrants, as well as civil and federal court records.

Common Employer Concerns
Even with all of the advantages of a screening program, many employers still have questions and concerns about implementing background checks. These are the seven most commons concerns that employers express:

Is it legal?
Employers have an absolute right to conduct lawful pre-employment screening in order to hire the best-qualified candidates. A federal law called the Fair Credit Reporting Act (FCRA) balances the right of employers to know whom they hire with an applicant's right of disclosure and privacy. Under that law, the employer first obtains the applicant's written consent to be screened. In the event negative information is found, the applicant must be given the opportunity to correct the record. Employers should set up a consistent policy so similarly situated applicants are treated the same. A qualified screening company will assist an employer with legal compliance issues.

Does it invade privacy?
No. Employers can find out about only those things that an applicant has done in his "public" life. For example, checking court records for criminal convictions or calling past employers or schools does not invade a zone of personal privacy. Employers are looking only at information that is a valid and non-discriminatory predictor of future job performance. To maintain privacy, most background firms have Internet systems with secured Web sites. Employers should also take steps to maintain confidentially within their organization, such has keeping reports in a separate file from the personnel files.

Is it cost-effective?
A pre-employment screening will typically cost less than the cost of a new employee on his or her first day on the job. That's pocket change compared to the damage one bad hire can cause. In addition, employers typically only screen an applicant if a decision has been made to extend an offer, and not all applicants. It is ironic that some firms will spend hours shopping for a computer bargain and at the same time try to save money by not adequately checking out a job applicant, which represents an enormous investment. The bottom line is that problem employees usually cause employee problems, and money is well spent to avoid problems in the first place.

Does it discourage good applicants?
Employers who engage in screening do not find that good applicants are deterred. Job applicants have a desire to work with qualified and safe co-workers in a profitable environment. A good candidate understands that background screening is a sound business practice that helps a firm's bottom line and is not an invasion of privacy or an intrusion.

Does it delay hiring?
No. Background screening is normally done in just 48 to 72 hours. Most of the information needed is not stored in databases but must be obtained by going to courthouses or calling up past employers or schools. Occasionally there can be delays that are out of anyone's control, such as previous employers who will not return calls, schools that are closed for vacation, or a court clerk who needs to retrieve a record from storage.

Furthermore, an organization that is careful in its hiring practices should find a lower rate of "hits" during background checks. There are a number of steps a firm should take to ensure safe hiring well before a name is submitted to a background company. These techniques include making it clear your firm does background checks in order to weed out bad applicants, knowing the "red flags" to look for in an application, and asking questions in interviews that will filter out problem candidates.

The bottom line is that problem employees usually cause employee problems, and money is well spent to avoid problems in the first place.

Is it difficult to implement?
For an overburdened HR, security, or risk-management department already handling numerous tasks, outsourcing background screening can be done very quickly and effectively. A qualified pre-employment screening firm can set up the entire program and provide all the necessary forms in a short period of time. Many firms have Internet-based systems that speed up the flow of information and allow an employer to track the progress of each applicant in real time.

How do we select a service provider?
An employer should look for a professional partner, not just an information vendor selling data at the lowest price. An employer should apply the same criteria that it would use in selecting any other provider of critical professional services. For example, if a employer were choosing a law firm for legal representation, it would not select the cheapest--it would clearly want to know it is selecting a firm that is competent, experienced, and knowledgeable, as well as reputable and reasonably priced. The same criteria should also apply to critical HR services. A screening firm should have an understanding of the legal implications of background checks, particularly the federal Fair Credit Reporting Act.

Both employers and applicants have learned that pre-employment screening is an absolute necessity in today's business world. More importantly, they've learned due diligence in hiring is a way to keep firms safe and profitable in these difficult times.