Positive Effects of Employment Screening

Executive Summary

The Overseas Security Advisory Council (OSAC), in collaboration with Alliant International University (Alliant), coordinated a return-on-investment study of private sector pre-employment background investigations.

Similar endeavours by many organizations have fallen short of providing measurable empirical data that can be used as a strong argument for why companies conduct certain practices. While benchmarking is often considered the hallmark of security policy, there is little hard evidence to support the efficacy of many routine security provisions in use by most companies, universities, etc. Faced with the traditional challenges associated with measuring a sample of a large and diverse population of entities, and with the assistance of Alliant, OSAC launched a preliminary investigation into the practice and value of pre-employment background screening.

Objectives

Primarily, this study was conducted to benchmark the pre-employment background investigation practices in use by private sector companies, non-governmental organizations, academic and faith-based institutions. The secondary objective of this study was to employ quantifiable measures in order to obtain statistically significant correlations between background investigation practices and several negative workplace issues like employee fraud, theft, termination for misconduct, and the like.

The overarching goal was to produce a quality benchmarking report that could provide guidance regarding return on investment for background investigations.

Key Predictive Findings

Three-hundred eighty-five security representatives in private industry were included in the project, which found statistically significant relationships between the numbers of years included in an investigation and several outcome variables. Specifically, robust review of previous employment history leads to significant predictive outcomes.

• The further back in years an investigation into past employment endeavours, the study indicates fewer fraudulent and criminal activities will occur among employees.
• The same is true for terminations due to employee misconduct, workplace-related or external, and
• Finally, the further back in years an investigation into past employment, the fewer incidents or investigations related to workplace violence will occur.
• Other relationships (e.g. number of years investigating criminal history and terminations due to employee misconduct, etc.) were leaning in the same direction, but those variables have highly uneven distributions.1 If the researchers had been able to obtain more complete data from participants, it is likely the statistics would have shown similar significant predictive value as seen with the previous employment investigation variable.

The report concludes with additional benchmarking involving the comparison of background investigation practices among organizations of similar industries, as well as by type of employee.

Some Key Comparisons

• While it was determined that the extent of employment history investigated was negatively correlated to several detrimental workplace issues (more years investigated leads to less employee misconduct), most industries do not investigate all available previous employment history.

- Only 13% of “Health Care” entities investigate all employment history

- 23% of “Computer, Info-Tech & E-Commerce” companies

- 25% of “Engineering, Research, Development, & Nanotechnology” companies

- 31% of “Transportation/Supply Chain” companies

- 33% of “Financial (Including Credit Card)” companies;

- 44% of “Consulting, Outsourcing/Off-shoring” companies

- 69% of “Faith-based” organizations investigate all employment history

• The effect on employee misconduct and other negative issues like workplace violence and fraud appears significantly related to employment checks going back at least 7 years. So, arguably, doing an entire employment check may be unnecessary. Anecdotally, most companies do at least 7 years because of the common misperception that the Fair Credit Reporting Act (FCRA) only allows for 7 years to be used in pre-employment practices. This is one case where the misperception works in favor of most organizations; the results of this study suggest that doing fewer than 7 years has no practical benefit to the company while doing 7 or more has significant benefits.
• A staple of pre-employment background investigations (BI) is the criminal history check. All industries examined in this report indicated they conduct criminal history assessments. Still, a felony conviction does not necessarily result in a recommendation for disqualification.

- 75% of “Consulting, Outsourcing/Off-shoring” and “Computer, Info-Tech & E-Commerce”companies recommend disqualification for a felony hit.

- Similarly, 79% of Engineering, Research, Development, & Nanotechnology” companies, 77% of  “Health Care” entities and 71% of “Faith-based” organizations recommend disqualification for a felony hit.

- Alternatively, 92% of “Transportation/Supply Chain” companies recommend disqualification.

- “Financial and Credit Card” companies recommend disqualification of potential employees who have a felony hit on their record at a rate of 88%.

• Social networking is an emerging phenomenon. Once a refuge for teens and the technically-advanced, sites like Facebook, MySpace, and YouTube are growing rapidly in usage among all age groups of business professionals and blue-collar workers. With the abundance of information voluntarily posted by people across all walks of life, it makes sense that some background investigation teams are reviewing these sites for possible embarrassing information that could detrimentally affect the hiring process and, ultimately, the company or its brand.

- 22% of “Consulting, Outsourcing/Off-shoring” companies check into social networking sites. Of those, 55% indicate they would recommend disqualification based on something found on those sites.

- Perhaps counter intuitively, only 4% of “Computer, Info-Tech & E-Commerce” companies include these sites in their process, but none would recommend disqualification.

- Likewise, only 7% of “Transportation/Supply Chain” and 6% of “Engineering, Research, Development, & Nanotechnology” check social networking sites and not a single company in either industry indicated it would recommend disqualification based on content discovered on a social networking site.

- 20% of “Faith-based” organizations will check social networking sites and of those 33% would recommend disqualification based on their searches.

- Only 12% of “Financial and Credit Card” companies investigate social networking sites, but of those, 50% would disqualify.

- Bucking the trend, the respondents from the “Health Care” industry all reported not using social networking sites as part of their background investigation process.

Recommendations

The survey results allow for the following recommendations:

• Employee background investigations should be conducted to include verification of all jobs held over at least the previous 7 years.
• If possible, it is recommended that a candidate’s entire available employment history be examined. The integrity of an applicant can conceivably be linked to his truthfulness in regards to employment experience. It is not uncommon for applicants to list only jobs that reflect favourably on their potential employment. Therefore, as far as the possibility, global regulations and budgets allow, the researchers encourage checking the validity of the entirety of candidates’ available work history, with 7 years being the benchmark.
• Of those industries that employ the use of social networking sites as a source for background investigation, only the “Consulting” group had a majority of respondents who would recommend disqualification based on unfavourable information found on Facebook, MySpace, etc. So this begs the question: “Why do companies bother to investigate social networking sites if the information there would not affect a candidate’s prospects?”

a. If the answer is related to due diligence insofar as the data derived from these websites contributes to the overall assessment, the researchers recommend that more companies investigate social networking sites.

b. However, if the answer to why a company would search these sites but then disregard the information because it is unclear, undefined, or if using information gathered runs contradictory to a company’s human resource policies, then the researchers recommend not doing the investigations. Save time, save money, and do not run the risk of unprofessionally discriminating based on personal biases.

To read the full report click here.

1 In each case, greater number of years investigated (be it criminal history, employment or education) was trending to a lower outcome, such as fewer instances of employee fraud and fewer terminations for misconduct.

The Overseas Security Advisory Council(OSAC) would like to extend a special thanks to Siobhan O’Toole with Alliant International University for her invaluable assistance and expertise. Without her efforts, this survey would not have been possible. OSAC would also like to thank Corey Vitello for spearheading the initiative and his tireless efforts on this project. OSAC also wishes to extend appreciation to all of our constituents who took the time to complete the survey and provide the requested data.