Who Are You Really Hiring

J ames Baughman was imprisoned for stealing money from student funds while he was a California high school principal. He lied about earning a doctorate atStanford. He eventually became director of recruitment for Lucent Technologies. 

Al Dunlap was fired in 1973 by Max Phillips & Son after just seven weeksof employment. Three years later, he was fired by Nitec Paper Corporation–whichsoon went broke–over allegations of financial fraud. Twenty years later, hesurfaced as chairman and chief executive officer for Sunbeam Corporation.

George O’Leary lied on his résumé about earning a master’s degree ineducation from New York University. He lied about lettering in football forthree years at the University of New Hampshire. He later was hired as Notre Dame’sfootball coach.

Lucent, Sunbeam, and Notre Dame were not aware–at the time–that they hadhired a felon, an alleged books-cooker, and a liar to fill positions ofauthority. But these organizations could have learned about their employees’tainted backgrounds if they’d taken time to do a routine background check.

Open the help-wanted section of any major metropolitan daily and you’ll seeads for front-desk clerks, delivery drivers, and salespeople warning thatbackground checks are required. Drug tests, criminal-record checks, andemployment and education verification are de rigueur for the rank and file inmany companies. But when it comes to filling upper-level positions, there’s aclass system at work in corporate America. Instead of sifting through backgrounddata for the kind of debris that would prevent a clean hire, companies are alltoo willing to take executive-level applicants at their word.

“You’d think the logic would be that the higher the position, the morescreening companies would do,” says Les Rosen, attorney and president ofEmployment Screening Resources in Novato, California. “But from what we’veseen, that’s not true. Somehow, there is a sense of impropriety in challengingthe credentials of people higher up.”

Douglas Hahn, president of HRplus, a background-screening firm based inEvergreen, Colorado, agrees. “At some companies there is definitely a good ol’boy network that prevails,” he says. “Executives tend to hire their friends,and they hold the integrity of those friends above that of anybody else in thecompany. Unfortunately, that sometimes backfires.”

And those backfires can be devastating. While a low-level employee mightmanage to embezzle a few thousand dollars or steal some inventory, a singledishonest executive with the right influence and access to accounts can plunge acompany into the depths of bankruptcy, taking scores of jobs and billions ofdollars in retirement savings and shareholder investment along with it.

While it might be impossible to safeguard a company against every potential act of dishonesty, HR professionals can minimize the chances for unscrupulous behavior by understanding who it is they really are hiring.

While it might be impossible to safeguard a company against every potentialact of dishonesty, HR professionals can minimize the chances for unscrupulousbehavior by understanding who it is they really are hiring. This meansdeveloping background-checking procedures that are utilized at all levels of theorganization, including–and perhaps most especially–those at the very top.

Why checking execs is more important today
    Up until two years ago, a go-go economy compelled a lot of companies to hiremany employees quickly. The talent war was so brutal that businesses didn’thave time to slow down and check every detail of an applicant’s background.They had to find candidates, make an offer, and issue a company parking passbefore the competition could steal that person away. As a result, corners werecut, guidelines were overlooked, and unscrupulous people slipped through thecracks.

Renee Svec, marketing manager of HireCheck, Inc., an employment-screeningfirm in St. Petersburg, Florida, tells the story of a Fortune 500 company thathired a new executive and decided to forgo the background check. “Not longafter he was hired, the executive started coming on to a woman in hisdepartment,” Svec says. “The woman reported his behavior to the corporatesecurity department, which ran a background check and discovered that theexecutive had operated under several aliases and served more than one prisonterm for financial fraud.”

Today, there’s no reason why someone like this should be offered anexecutive-level position. The labor market has opened up considerably, and HRprofessionals now have time to check the background of each potential new hire.Furthermore, there’s a lot more motivation to do so. The events of September11 brought the threat of terrorism to the forefront. The scandals in theCatholic Church heightened awareness of sexual predators. Workplace violence isan ongoing concern, especially when unemployment rises. And the collapse of someof the country’s largest corporations has shown the enormous potential forfinancial fraud at the executive level.

If none of these factors sway you to do more digging into a candidate’spast, consider this startling fact: a full 44 percent of all résumés areinaccurate, according to Eric Boden, president and CEO of HireRight, a Web-basedemployment-screening company based in Irvine, California. The inaccuracies couldbe little white lies such as listing a volunteer position never held, or majorwhoppers such as lying about advanced degrees or former jobs. Regardless, withso many people being laid off and looking for work, the temptation to make one’srésumé more attractive is greater now than it has been in some time. Andoften, the people who pad their résumés are the people you’d least expect.

Two years ago, HireCheck was introducing its background-screening services toa management team at a hospital. The hospital administrator invited HireCheck torun some test searches on a few employees, and put her staff in charge ofselecting the sample employees. Thinking it would be fun to run a check on theirboss, the staff members chose the administrator as one of the test cases. Inconducting the background search, HireCheck discovered that the administratorhad falsified details of her educational background, which was grounds forimmediate dismissal.

The administrator’s termination–which was unwittingly effected by her ownhand–would be laughable if the problem of résumé deception weren’t sowidespread. But even if lying weren’t so commonplace, verifying an employee’sbackground is something that all companies should be doing. After all, it doesn’ttake a parking lot full of dishonest employees to create havoc for anorganization. A single well-placed unethical employee can plunder profits beforeanyone knows what’s under way.

What’s that, you say? Conducting extensive background checks on managementemployees is expensive? Better to save the $2,000 to $10,000 average cost andtrust your gut? A Toronto-based trucking company thought it was saving money bynot checking the background of a woman hired to manage its accounts department.The woman was impressive, after all, and seemed to have the right credentials.Over the course of two years, the employee siphoned $250,000 from the company’sgeneral accounts. Ultimately, she was prosecuted on criminal charges andsentenced to three years in jail. Had the trucking company taken the time tocall her previous employer, they would have discovered she’d also defraudedthat company to the tune of $100,000.

HR professionals have an obvious and important role to play in safeguarding company assets by hiring honest employees.

How to integrate background-checking at all levels
    HR professionals have an obvious and important role to play in safeguardingcompany assets by hiring honest employees. But conducting a thorough backgroundcheck on every employee is not easy, especially if it’s not already anaccepted part of the culture to do so. Here are some steps that HR people maywant to consider:

1. Lobby for the fact that integrity is important. In many companies, HR getsinvolved in hiring lower-level workers, but executive recruitment is handled bythose at the top, who tap into their own executive network. This is fine, but ifthe executive team wants to build and maintain a company that holds integrityand honesty in the highest regard, everyone should be subjected to the samelevel of background-checking once a job offer has been made–and it’s HR’sjob to argue for this.

“HR has got to lobby for the fact that high integrity should be arequirement for every job,” says Philip Sullivan, vice president ofrecruitment and placement at nSight, Inc., a staffing firm in Burlington,Massachusetts. One way to do this is to talk about the potential financialconsequences of not conducting thorough checks.

For instance, if Sunbeam had done a more thorough background check on AlDunlap, the company might have discovered the allegations of financial fraud inhis background and declined to hire him. It’s hard to say for sure, but ifDunlap had not been at the helm, Sunbeam might not have had to endure plummetingstock values, stockholder lawsuits, and eventual bankruptcy.

“If an executive wants to shortcut the process and hire a peer withoutconsenting to a background check,” Sullivan says, “HR has to make clear tothe executive that, in doing so, he or she is putting his or her own integrityat stake.”

2. Treat all employees fairly. All employees should be subject to a standardbackground-screening that includes a credit check; a review of motor vehicle andcriminal records; reference checks; and verification of employment, education,professional licenses, and Social Security number. However, Rosen says, “it isperfectly acceptable to have different levels of screening for differentpositions as long as everyone is treated fairly.” Someone on an assembly line,for example, would not necessarily receive the same level of scrutiny as apotential executive. But all assembly-line workers should be treated the sameway and all executives should be treated the same way. “What you want to do isconduct the screenings that are appropriate for the position,” he says.

3. Dig deeper with executive candidates. When hiring executives, Rosensuggests going beyond a standard security-screening and conducting something hecalls an “integrity check.” “The typical pre-employment screening is alow-cost risk-management tool that looks at verifiable, known factors,” hesays. An integrity check, however, is more investigative and entails looking atsuch things as involvement in lawsuits, the financial performance of the person’sprevious firm, and when and why the candidate might have appeared in local ornational newspapers.

4. Don’t rely solely on a candidate’s former employer. Although a numberof states have enacted legislation that protects employers in giving truthfulinformation about a former employee, labor lawyers still counsel HR people toonly verify facts of employment. Furthermore, in the age of consolidation andbig business, the central HR departments of many companies typically have onlysketchy records.

For these reasons, it is not enough to rely on a reference from a formeremployer. To do an in-depth search, HR people should ask the candidate’ssupplied references for the names of three other people who might know thecandidate.

5. Don’t rely solely on search firms. Search firms that don’t conduct athorough background check of candidates can be misled as easily as any employer.In March 1998, Robert Half International Inc. recruited T’Challa Ross as atemporary bookkeeper for Fox Associates Inc., a small advertising agency inChicago. She performed so well at the job that the company hired her permanently30 days later. Within months, Ross was taking blank checks from Fox and forgingsignatures. Within a year, she had embezzled more than $70,000. What makes thecase especially disturbing is that the staffing firm had failed to uncover thefact that just two months earlier, Ross had pleaded guilty to stealing $192,873from another employer and been sentenced to four years’ probation and 100hours of community service.

The problem with relying on staffing services is that they are typically not paid their contingency fee until a job candidate has been placed in the job. Thus, they have a vested interest in placing employees quickly.

The problem with relying on staffing services is that they are typically notpaid their contingency fee until a job candidate has been placed in the job.Thus, they have a vested interest in placing employees quickly. To ensure thatstaffing firms take the time to conduct thorough background checks, Eric Archer,president of Spherion Professional Recruiting Group, a professional servicesstaffing firm based in Fort Lauderdale, suggests a pricing mechanism whereby thestaffing firm is paid a fee based on two-thirds contingency and one-thirdretainer. “This shows sincerity on the part of the client who wants to hiresomeone, and it buys a commitment from the recruiting organization to conduct amore thorough search,” he says. This way, if a firm uncovers troubling aspectsof a candidate’s background that prevent his being hired, the staffing firmstill receives some compensation for the work involved.

6. Check everyone, including temps, part-timers, and contract employees. Afew years ago, the Los Angeles-based National Academy of Recording Arts andSciences was preparing for its annual Grammy Awards presentation. To help puttogether the labor-intensive show, the organization hired several temporaryworkers. One of them, unbeknownst to the academy’s HR people, was a reporterwho was posing as a temp in an effort to get inside the academy and gaininformation on the show’s winners. According to HR manager Shonda Grant, theruse was discovered before the reporter managed to get any privilegedinformation. But ever since then, the academy has required thorough backgroundchecks on all employees, including temporary, part-time, and contract workers.

In this era of heightened concern about terrorism and theft, manyorganizations are choosing to screen the backgrounds of everyone who works forthem. In the six months following September 11, for example, Eli Lilly and Company commissioned criminal-background checks of more than 7,000employees of outside vendors, including construction workers and fast-foodstaffers.

“There is a clear trend and more genuine concern from companies aboutchecking out all of their employees,” Boden says. “Companies are no longersolely concerned with establishing a defense against negligent hiring. They wantto be careful about who is being brought into the business.”

  7. Don’t have interviewers conduct background checks. As a formergrocery-store owner and now president of a background-screening firm, DouglasHahn has interviewed countless people for jobs, and what he’s learned is this:you cannot trust your own instincts. “I’ve been nailed so many times,” hesays. “At the grocery store, one of my most charismatic, friendly managers wasstealing me blind and I had no idea.”

Because Hahn has learned to not trust his gut, he always makes it a point tohave one person on his staff interview a candidate and another conduct thebackground check. “People become prejudiced,” he says. “You ask questionsdifferently if you’ve interviewed someone and liked them. For example, insteadof asking a reference if there is anything in a person’s history that wouldprevent you from giving him the keys to the vault, you might say, ‘There areno problems with this person, right?’”

At HireCheck, Renee Svec confirms that likable and charismatic employees canbe particularly challenging. “Recently, we were going to hire a key executivefor our office,” Svec says. The candidate had been referred by corporatehigher-ups who believed she had potential. Svec’s team met with the woman andthought she was terrific. The candidate had impressive credentials, an excellentemployment history, and professional licensing.

HireCheck offered her the job, contingent on a clean background check. “Basically,everything this woman claimed turned out to be completely false, and we wereamazed how she had the nerve to pursue a position with a background-checkingcompany,” Svec says. “Prior to that, she’d been our top candidate. She hadeverybody snookered.”

Given the fact that few companies conduct thorough background-screenings ontheir top-level candidates, chances are good that many more employers are beingduped. And sometimes the level of deceit isn’t uncovered until it is too late.”We don’t often do routine background checks on executives unless it’s fora merger or joint venture,” says Chris Mathers, vice president of KPMGForensic, Inc., in Toronto. “But when we do do them, it’s typically becausea company is about to terminate a person for wrongdoing and they’d neverchecked that person out in the first place.”

Mathers recently worked with an international company that had hired aHarvard graduate with “sterling” credentials. Almost immediately, thecompany started having problems with the employee, who would stay late at nightand engage in bizarre behavior. Eventually, he was caught trying to stealsoftware from the company for his own gain. “Before terminating him, wechecked with three previous employers, and all three said the guy was bad news,”Mathers says. “He was involved with substance abuse, had assaulted his wife,and had also been terminated at other jobs for stealing.

“Anyone who avoids checking employees does so at their own peril.”

Thoroughly checking someone’s background doesn’t guarantee that you’llprevent the kind of fraud that brought down Enron, WorldCom, and the othercorporate disgraces. But in the realm of human behavior, a little safeguardingcan go a long way.

Workforce, November 2002, pp. 28-32Subscribe Now!