How Do You Assess Moral Character?
Despite Advances In Screening Techniques,
Companies Still Victims Of Bad Hires

By James E. Challenger, President
Challenger, Gray & Christmas, Inc.

A combination of executive misconduct, endless resume fraud, workplace violence, and the September 2001, terrorist attacks have raised suspicions among Americans dramatically.

Nowhere is this more evident than among the nation's employers, who are conducting a greater number of applicant and employee background checks than ever before.

However, are all of the new measures keeping bad people from being hired? In many cases, the answer is probably, "no".

In a survey taken among 100 human resource executives by Challenger, Gray & Christmas, Inc., researchers as many as 75 percent of companies say they are still vulnerable to bad hires, which could cost employers tens of thousands of dollars to reverse.

According to the survey, most companies are adept at rooting out applicants with criminal backgrounds or who lied about their identity or educational attainment. Only eight percent said educational background is the information most likely to be missed by the screening process.

However, when it comes to assessing the moral character of a candidate or how he or she will react to workplace stress, most organizations are stumped.

An overwhelming majority -- 75 percent -- said the most likely area to be missed by screening is the quality of the candidate's moral character. Fifty percent* said substance abuse is another area that is likely or very likely to be missed by employee screening.

With unethical and/or criminal behavior among high-level executives very much in the spotlight, companies are undoubtedly exploring more ways to judge a candidate's character so that they can prevent future financial, legal and public relations disasters. At the moment, however, such measurements appear to be out of reach for most employers.

Another problem area is the difficulty of obtaining meaningful employment records. While three-fourths of survey respondents said this information is unlikely or very unlikely to be missed by screening methods, many acknowledged that most former employers will only confirm that a person worked there between certain dates.

Beyond that basic information it becomes more difficult to ascertain useful background, such as how the person performed, whether he or she was frequently absent, the reason for his or her departure, etc.
As one executive noted in his response, it can be very hard to find out how a candidate reacts to workplace stress or how enthusiastic the person was in his or her former position.

With new technology and the Internet making background checks easier, faster and more economical than ever, the use of such tools is exploding.

Corporate customers of First Advantage Corporation, a leading screening services firm in St. Petersburg, Florida, pay an average of $32 for each basic screening package, which includes an identity check, credit check and a criminal background check. Depending on the scope and depth of the background check, employers can pay up to $100 per candidate.

Eighty percent of companies now check criminal records, up from 62 percent in 1996, according to a new survey by the Society for Human Resource Management. The percentage of companies doing general background checks increased from 66 percent in 1996 to 82 percent in 2003.

In addition to ease and cost, the increase can also be attributed to such factors as concern about workplace violence, resume fraud, corporate espionage and sabotage, and the increased security concerns resulting from September 11.

Some companies are even conducting background and credit checks on current employees. Such steps are usually only taken when the person is being promoted to a security-sensitive position or one in which the person handles finances.

However, without a reliable method of assessing moral character or general workplace proficiency, companies are still vulnerable to bad hires, which can be quite costly for employers.

When an employee simply does not work out, there is the cost of replacing him or her, which trade publication Recruiting Times estimates to be $7,000 for a salaried employee. It costs $10,000 to replace a mid-level employee and $40,000 to recruit a new senior executive.

Of course, the cost of replacing an employee who does not work out pales in comparison to the cost that could result from a bad employee who decides to steal from the company or has a violent outburst.

The Workplace Violence Research Institute says that court expenses, attorney fees, employee counseling, lost work time and lost productivity resulting from on-the-job violence cost employers $30.3 billion in 2003.

Meanwhile, a joint study by the American Management Association and the United States Chamber of Commerce found that 30 percent of all business failures are caused by employee theft.

*Combined percentages exceed 100 percent because respondents were allowed to give different selections the same ranking.

James E. Challenger, president of Challenger, Gray & Christmas, Inc., pioneered outplacement as an employer-paid benefit. His third book, The Challenger Guide, (Contemporary Books) is available in paperback.