Exclusive B21 Survey: Background checks

Exclusive B21 Survey: Fear of violence cited as main reason majority of companies conduct employee background checks

Surprise: If your company doesn't hire an outside firm to conduct background checks on new hires, you're in the minority. Nearly two-thirds of companies surveyed by B21 engage outside firms. The main reason; concern over hiring a dangerous person who could harm others. Another major concern is that job candidates misrepresent the facts on resumes. Here are the survey results:

What is your company's attitude toward hiring outside firms to conduct background checks?

-We do it because we don't want to hire a dangerous person who could harm others -37%

-We do it to make sure there's no false information on resumes - 27%

-We don't do it because it's too expensive -- 26%

-We don't do it because we trust our instincts and internal resources - 8%

The case for hiring an outsider
Here are some reasons why so many companies now hire background check firms to screen new hires:

1. Getting references has become increasingly difficult. Not so long ago you could call up a candidate's former company and get meaningful feedback on how the person performed. Today, it's not uncommon to hit a stone wall when checking reference. Confirmation of employment and dates of service are all many employers are willing to give out. Which means, of course, that you could easily end up unknowingly hiring a person with a history of violence, sexual harassment or theft.

2. People lie on resumes. Studies show up to a third of candidates tell significant fibs and 80% are guilty of minor fictions.

3. Hiring misfires cost firms anywhere from three to six times the person's salary. The higher the salary level, the higher the multiple. We've seen "experts" quoted as saying it costs 10 to 20 times salary to replace a senior VP. Whatever the real number is, it's way more than the cost of making sure you get it right in the first place.

Risks when you conduct background checks
Here are two of the big ones:

1. Inconsistency: We've seen many cases where companies got sued because they were selective about who got checked and who didn't. If an employee in a protected class can demonstrate that your company tended to investigate people in one category but not another, you may be guilty of intentional or unintentional bias that could lead to a lawsuit. Usually the courts look for inconsistent application of tools like background checks among "similarly situated" employees. You shouldn't have a problem if you conduct background checks on all employees in your financial department but none in your marketing department. Or with high-level executives but not rank-and-file employees. As long as your motive is based on legitimate business reasons and not bias, the courts will defend the company.

2. Misuse of information: You aren't allowed to use all the information you dig up in a background check. You can only act upon information that's directly related to the job. If you're hiring for a job in your accounting department, the fact that someone had filed for bankruptcy recently might be  relevant. But if you were hiring someone to drive a truck, it would not be.

Why companies don't do background checks
Our survey showed that 27% said cost was the reason. But most firms charge a very affordable $150 - $250 per background check. We were pleased that only 8% of respondents said they trust their gut when making hires. Our experience is that instinct is a valuable tool, but only when used in conjunction with objective tools such as background checks, personality tests and intelligence tests.

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