Background checks are essential for employers to uncover resume lies or misrepresentations and to avoid the cost of a bad hire. Companies have other dependable options to ensure they are hiring qualified, high performing job candidates. Over the next five years, however, blockchain networks will hack the background check industry and provide companies instantaneous verification of credentials on resumes.
According to a survey by HireRight, 86 percent of employers have uncovered lies or misrepresentations on job applications. Seventy-two percent said background screening uncovered issues they would not have otherwise found.[i] For this reason, it is always wise to verify education, past employment, titles, pay, and criminal records (following federal and state laws).
I have found candidates who have misrepresented all the above, did not report criminal convictions, and even had falsified social security numbers. With the increase in security data breaches of personal information, it has become easier for people even to steal social security numbers. It is good to verify all of this, so you do not make a wrongful hire.
CareerBuilder research in 2017 found that 18 percent of employers have made a bad hire because they didn’t conduct a background check. Making a mistake in the hiring process can be quite costly, whether it is your internal process mistake or the mistake of your background check vendor. The study shows that the average cost of a bad hire is $17,000. (That said, I have found the bad hire cost is much higher among engineers, managers, and executives).
The study discovered that nearly 30 percent of employers made a bad hire because they received the wrong information about the candidate. Worse yet, 15 percent have been forced into litigation for not hiring someone because of what was found in a background check.[ii] (This type of problem can occur when a background check company makes erroneous reporting, an employer fails to hire someone who was arrested for a crime — but who never faced a criminal conviction, or they discovered personal information on social media that may be cause for a discrimination claim.)
Employers should only engage background check vendors that follow best practices. When selecting a background check vendor, be sure the vendor is accredited by the National Association of Professional Background Screeners. Also, test their process. I recommend asking a few employees (as volunteers) to go through the process and see how it works, how employee-friendly it is, and how long it takes. Finally, companies need to decide in advance which criminal convictions are relevant to pass over an applicant for specific jobs and the amount of time that has elapsed since the criminal conviction. For example, people with criminal convictions for SEC or accounting violations should not be hired in finance.
In the United States, background checks cannot be conducted until the offer is made, and they can take three days to two weeks, depending on the number of municipalities lived in by the candidate (or even longer for overseas background checks). Due to ban-the-box legislation, most companies (86 percent) now conduct background checks after the job interview, according to the survey, and 55 percent conduct a background check after a conditional offer is made.[iii]
While background checks are essential, companies have other screening options that can significantly improve their ability to hire outstanding new employees. When companies use structured interviews and validated tests that assess required technical skills, behaviors, and critical competencies, they have a much better understanding of a job candidates’ qualifications, what they achieved, and they have worked with others.
Structured interviews use detailed questions to carefully review a job candidate resumes and skills to understand their work histories accurately and if they have the competencies of your best performers. Companies should only use assessment tests that have been validated, which means the vendor has verified that the use of its tests, over other selection methods, has led to hiring outstanding job candidates.
By 2025, the background check industry will be hacked by blockchain networks that will allow an instantaneous check of college degrees, certifications, 1-9s, past employers, and criminal records. Blockchain networks are already being developed for artificial intelligence recruiting platforms such as ThisWay Global and for other HR applications by Competitive Edge Technology. These networks will also hack payroll, benefits, and training and development.
Mainstream banking is already developing blockchains to replace its aging infrastructure and create new business models. Companies such as Microsoft, Amazon, and IBM are making huge investments in blockchain to enhance their cloud business services.
For blockchain to be effective in human resources, it will require building a standard, safe, and reliable network of talent resumes, academic institutions, criminal record data bases, and work histories. While building such a network will be no small feat, the work has already begun. Watch for more developments and a network to be launched during the next five years.
Are you taking the right steps to avoid the cost of a bad hire?
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and works with companies to improve their recruiting, HR operations, leaders, teams, and cultures. Today’s blog has excerpts from his new book: Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. You can buy it online at Amazon, Barnes and Noble, Archway Publishing, and now The SHRMStore.
[i] Kathy Gurchiek, “Uptick in Hiring Highlights Importance of Background Screening,” Society for Human Resource Management (April 9, 2015); http://www.shrm.org/hrdisciplines/staffingmanagement/articles/pages/hiring-background-screening.aspx
[ii] Chad Brooks, “Get Your Facts Straight: The Truth About Background Checks,” Business News Daily (March 26, 2017, 8:16 AM EST); https://www.businessnewsdaily.com/9834-background-check-myths.html.