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Smart checks: Why the economic downturn has made background checks critical

Special Online Report As the owner/operator of a contracting firm, Greg has always done the hiring himself, relying on 20 years of experience to choose the right people. Most of the time, his system works, but not this time.


December 7, 2009
By Laurie Blake

This time, the woman he hired a couple of years ago to keep his books,
someone who had become a friend, had abused his trust and stolen
thousands of dollars from his business, leaving his financial records
in a mess. Not only has he lost money, but he has had to contact his
clients and admit that he has no idea whether they had paid his
invoices. It’s clear those clients are now wondering how he can meet
their requirements when he can’t even keep his own business in order.

It turns out that his bookkeeper had had a long-time gambling problem;
something that was fairly well-known among her circle of contacts, as
well as by her previous employer. But, Greg hadn’t heard about it — he
had not checked her out prior to hiring. Ruefully, Greg admits he is
well aware that many businesses, small and large, conduct background
checks into potential employees; in fact, he himself had undergone
background checks when working as a subcontractor for larger firms. He
had just never done it for his employees, or subcontracted installers,
believing it would take too much time and money. Not surprisingly,
Greg’s about to change that practice.

Sadly, this situation is based on a real story, although the names and
some particulars have been changed. Just as sadly, Greg’s experience is
not unique. According to a recent survey conducted by Vancouver-based BackCheck, the recent economic
turmoil has increased the likelihood that those applying to your
organization are hiding information, or outright lying, on their
resumes or during hiring interviews.

“Since September 2008, we have seen a dramatic rise in ”˜red flags’ on
background checks,” says Stephen Dinesen, BackCheck’s vice-president of
marketing and business development. “In better times, job hunters seem
to be more honest, perhaps feeling they can get any job, anywhere. But,
people have become desperate during this recession — and desperate
people do desperate things.”

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Pulling information from a white paper soon on BackCheck’s website, Dinesen points to one health care organization
that discovered its pre-recession red-flag rate of thirteen per cent
had jumped after September 2008 to almost twenty-three per cent. 
Another health care organization’s rate had tripled. Red flags in
banking and finance organizations in the BackCheck survey increased
from thirty to forty percent. Companies in the logistics business —
such as transportation, warehousing, etc. — have generally experienced
a red-flag increase of sixty per cent over the past year.

Dinesen notes that when his company comes in to do background checks in
an organization for the first time, the “red-flag” rate ”“ which
indicates a concern raised by the check ”“ is significantly higher in
the first one-to-three months than standard workplace averages, which
are normally in the 30 per cent range.

Jeff Wizceb of Chicago-based HR Plus agrees, noting that his firm has
discovered in analyzing its screening data through June this year, that
some 28 per cent turned up inaccuracies in employment history. “These
ranged from never having worked at a place to changing dates of
employment, most likely to conceal gaps in employment,” Wizceb notes.

So, what’s the situation in your own firm? Does the human resources
department or hiring manager have a hiring policy that includes
mandatory pre-employment screening? If not, then maybe it’s time to
convince them that not only will implementing such a policy bring
further objectivity to the hiring process, but it will very likely save
the company money, protect it from liability, and even enhance the
company’s brand.

Know who you’re hiring
Over the past 10 years, BackCheck’s Dinesen says that the background
checking business has been a growing and maturing one. He notes, for
instance, that when BackCheck first started, in 1997, few retailers
conducted checks, at least for their entry level positions. Now, there
are few major retailers that don’t.

Yet, there are still a good number of companies out there not using
pre-employment background checks as one of the tools in their hiring
process. Nino Calabrese, managing partner and executive vice-president,
King-Reed & Associates Inc. Investigations Canada), says his
company is often called in after the fact, for instance, when a theft
occurred. At that point, they are checking employees to identify who
might have been responsible. In a surprising number of cases, says
Calabrese, they find that the employee often came to the company
already having a criminal record — just like some 10 per cent of the
Canadian population.

“Employers have a duty of care to consider when hiring,” Calabrese
says, “to other employees, customers and clients, and even to the
business itself.” If companies do nothing to protect themselves, their
employees and their business, they are leaving themselves open to
liability and law suits.

When a company is considering the cost of background checks, both
Calabrese and Dinesen advise looking at the whole picture. The bad
apples that slip into a company’s employ because they were not checked
beforehand can cost the company more than money, which itself can run
into the thousands. Companies must also consider the effect on their
company’s good reputation as an employer and a good corporate citizen —
not to mention the detrimental effect on the company’s brand.

Interestingly, one of BackCheck’s retail clients discovered that after
implementing a full background check policy, it was able to cut its
annual turnover rate by 50 per cent, indicating that the process
allowed the retailer to weed out potential hires that were not the
right fit. In fact, Dinesen believes the discovery points to a further
conclusion — that the inclusion of full background checks added an
objective selection tool to the hiring process and forced a disciplined
approach on the retailer’s hiring managers.

What to check
Background checks can be as simple as the HR department staff calling
up past employers and requesting the potential employees provide a
“clearance letter” about criminal records from police. While this type
of process is certainly better than no check at all, King-Reed’s
Calabrese suggests that most HR departments or hiring managers often
don’t have the necessary time, or training, to conduct thorough
background checks.

Many companies find that outsourcing the process to professional
background checking firms allows companies to leverage the firm’s
contacts and relationships with law enforcement agencies, credit
bureaus and national/international databases.

“We know when and who to contact to get the best response,” Dinesen says.

Anyone being screened must give written consent, with most companies
including this provision right on their application forms. Just the
simple act of asking employees to check off the box giving permission
for the check can act as a deterrent. Despite this, Dinesen notes that
they find a surprising number of job hunters who still lie on their
resumes.

Once red flags are uncovered, there are various options hiring managers
can explore. Before implementing the process, it may be necessary for
the company to decide what things are important to worry about in
potential employees, and what it can safely accept. For instance, a
retailer may not be overly concerned that the job hunter doesn’t, in
fact, have the degree claimed, whereas an accounting firm would more
stringent about credentials. It’s up to the employer to set standards.
Many screening firms will have resources that can assist in determining
these standards.

Despite the obvious benefits of conducting pre-employment background
checks, King-Reed’s Calabrese, notes, “There’s a false illusion that
background checks are expensive and slow the hiring process.”
But, eliminating even one potential bad apple from the list of
candidates may save a company far more than money in the end, as Greg
the contractor had the misfortune to discover.

Laurie J. Blake is a Newmarket, Ontario-based freelance writer and the editor of Workplace Online: www.workplace-mag.com


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