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Employment Screening

Mitigating Risk, Driving Down Cost

September 2010
Mollie Lombardi

~ Underwritten, in Part, by ~
September, 2010

Employment Screening: Mitigating Risk, Driving


Down Cost
The entire process of talent acquisition, from sourcing to selection to Research Brief
onboarding, is being influenced by a myriad of forces, including legal Aberdeen’s Research Briefs
compliance issues, an increased focus on quality of hire and the evolution of provide a detailed exploration
recruiting technologies. One aspect of the talent acquisition process that has of a key finding from a primary
taken on increasing importance as more and more applicants flock to job research study, including key
postings is employment background screening, and how it fits in with other performance indicators, Best-
recruitment technologies and processes to streamline and improve the in-Class insight, and vendor
hiring process. This Research Brief, based on over 400 survey respondents insight.
to Aberdeen’s 2010 Talent Acquisition Strategies study, looks at the
components of background screening that are most widely used, how they
are impacting hiring performance, and how organizations integrate
background screening with recruitment processes and recruitment
technologies such as Applicant Tracking Systems (ATS).

Screening is Fundamental to Best-in-Class Performance


When asked what kinds of technology they were currently using as part of Best-in-Class Definition
their talent acquisition process, over three quarters (78%) of survey Aberdeen’s August, 2010
respondents cited the use of screening solutions. And this number is even report, Talent Acquisition
higher for Best-in-Class companies (Figure 1). In fact, companies using Strategies: Candidate Experience
employment background screening are 43% more likely to achieve Best-in- and Relationship Management
Class results than those that are not. Come of Age!; defines Best-in-
Class as the top 20% of
Figure 1: Most Utilized Technologies Among the Best-in-Class performers along the following
metrics:

90% 83% Best-in-Class √ First-year retention of new


hires
Percentage of Respondents, n=380

80% 74%
70% √ Percentage of new-hires that
60% 51% were the top-choice
50% candidate
40%
√ Average year-over-year
30% decrease in time-to-fill
20% vacant positions
10%
0%
Employment screening Recruitment (i.e. Assessment (i.e. skill
(i.e. background checks, applicant tracking, hiring assessments, behavioral
drug screening) management) assessments, gap
analysis tools)

Source: Aberdeen Group, September 2010

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Employment Screening: Mitigating Risk, Driving Down Cost
Page 2

Background screening is a critical part of the hiring process for the majority
of organizations today, but it is even more essential in the current economy
for several reasons. Aberdeen’s research into the pressures impacting
organization’s hiring activities has revealed that a shortage of key skills is the
number one challenge, cited by 47% of organizations. This may seem
counter-intuitive at first given the news of continued high levels of
unemployment and a “jobless” economic recovery. However, Aberdeen’s
Fast Facts
data, coupled with many conversations with end-user organizations,
regarding this finding has revealed that finding the right talent - the talent √ Companies using
with the right mix of skills, behaviors and values to fit with the organization employment background
- is still a tall order. In fact, more applicants in the pool makes filtering and screening are 43% more
screening even more critical to ensure that time isn’t wasted on candidates likely to achieve Best-in-
Class results than those that
who aren’t a good fit or who might not be qualified for the position.
are not
In addition, competition among organizations for candidates with desired
skills remains fierce - a challenge cited by 34% of organizations. Because of
this, organizations need to ensure that the experience a candidate has in the
hiring process is a positive one in order to increase the likelihood of getting
to an accepted job offer. As a nearly ubiquitous step in the hiring process
for many companies, background screening can have a big impact on helping
to filter out miss-matched candidates and making sure the hiring process
runs as smoothly as possible. Done right, the use of background screening
has also shown an impact on overall quality of hire (the top metric
organizations are using to measure talent acquisition effectiveness); with an
average increase in that critical metric of 7% year-over-year for
organizations using screening, as compared to a 5% average increase among
those that do not use screening solutions.

What’s in a Screen?
So what is background screening exactly? Figure 2 highlights the most
common aspects of an employment screening solution.

Figure 2: Elements of Background Screening Solutions


Fast Facts
All Respondents
√ Quality of hire increased
100%
88% 7% year-over-year for
Percentage of Respondents, n=439

87%
organizations using
72% screening, as compared to a
75%
60% 57% 5% average increase among
those that do not use
50%
screening solutions

25%

0%
Domestic Previous Ref erence Drug I-9 verif ication
criminal employment / checking screening (U.S. only)
background education
checks verif ication
Source: Aberdeen Group, September 2010

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Employment Screening: Mitigating Risk, Driving Down Cost
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The need for background checking is key when it comes to managing the
risk inherent in hiring. Even the most seemingly ideal candidate can have
issues unearthed via a background check that may make them ineligible (or "Criminal background checks
undesirable) for hiring. And in today’s ultra-competitive environment, and drug tests are very
prospective employees may be more inclined to stretch the truth about important to us as we are a
highly secured company and
their educational backgrounds or previous employers and organizations
have strict requirements for
must protect themselves and their other employees and customers. hiring. Automating this process
Particularly in certain environments, these two elements are even more has saved us time."
critical. Table 1 shows that in financial services, healthcare, and public sector
verticals, these top two background screening elements are even more ~ Maureen McCormick, SPHR,
important. CBP, CCP, Manager of
Compensation & Benefits, PJM
Interconnection
Table 1: Prevalence of Background and Employer Verification
Criminal Background Employment /
Check Education Verification
Financial Services 93% 97%
Healthcare 94% 94%
Public Sector 100% 83%
Source: Aberdeen Group, September 2010

Reference checking is also critical in the hiring process for understanding or


ascertaining how well the candidate will “fit” in the organization. In fact,
over the past two years of Aberdeen’s research on talent acquisition
strategies, organizational fit has been the number one qualifier for evaluating
quality of hire. Understanding more about an individual and how they
worked with past colleagues can be an important piece of the “fit” puzzle.
And using multiple aspects of screening can improve this quality even more.
In support of this, Aberdeen’s research shows that organizations that use
the three most common elements of screening (background checking,
employment/education verification and reference checking), actually
improve quality of hire more so than using screening in general (Figure 3).

Figure 3: Using Multiple Elements Improves Quality of Hire


9%
8%
8%
Percentage of Respondents, n=439

7%

6%
5% 5%
5%

4%

3%

2%

1%

0%
Using all three elements of Screening with NONE of Not using screening
screening the top three
Source: Aberdeen Group, September 2010
© 2010 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897
Employment Screening: Mitigating Risk, Driving Down Cost
Page 4

Assessments and Other Filters


Given the criticality of finding the right talent amid a sea of applicants,
organizations are looking to other kinds of filters in addition to the more
tactical aspects of background checks and drug screens. Many organizations
also utilize skill, behavioral or competency-based screening to further
determine “fit” and cut through the clutter in today’s large and varied
candidate pools. Aberdeen’s March 2010 research on Talent Management
Assessments found that, when compared to other companies, organizations
using assessments are:
• 24% more likely to have a ready and willing successor named for
each key position
And demonstrated a:
• 75% greater year-over-year improvement in hiring manager
satisfaction
• 75% year-over-year decrease in hiring costs
• 2.5 times greater year-over-year increase in profit per full time
equivalent
Organizations using background screening are almost twice as likely as those
who are not, to use these additional assessment tools when determining
who to hire (52% vs. 27% respectively). While the precise combination of
screening and assessment elements may vary somewhat depending on the
needs of the individual organization, employment background screening has
a huge impact on a company’s ability to screen out the mis-matches and
help them reduce the risk involved with making a bad hire.

Integration Drives Satisfaction


As critical as background screening is to organizations, it becomes even Definition: Integration
more powerful when it is integrated with an ATS. Of the organizations using √ Fully integrated – initiating
any kind of recruiting technology, 83% of Best-in-Class organizations a background check is a built
indicate that they use an ATS, and 59% of that top-performing group in step in the hiring
integrate their background screening solution with their ATS at least workflow, and applicant
partially (see sidebar for definition). This type of integration is resulting in information is sent directly
some impressive results in terms of the quality of talent brought on board to screening provider
and in improving the process itself by reducing the time to hire and the cost. automatically from the ATS
√ Partially integrated –
background screening is part
of the workflow, but it is a
manual or partially manual
process to send applicant
information to the provider

© 2010 Aberdeen Group. Telephone: 617 854 5200


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Employment Screening: Mitigating Risk, Driving Down Cost
Page 5

Figure 4: Results of Integrating Background Screening with ATS

Full Integration Full or Partial Integration No Integration


12.0%
10.1%
10.0%
Percentage of respondents, n=439

8.0%
8.0% 7.2%

6.0%

4.0%

2.0%
0.2%
0.0%
-0.2%
-2.0% -1.3%
-4.0% -2.8%
-3.4%
-6.0% -4.5%

Change in quality of hire Change in time to fill Change in cost per hire

Source: Aberdeen Group, September 2010

Integrating background screening into the hiring workflow within an ATS Fast Facts
improves the quality of the candidates coming thorough the door, improves √ Organizations with full
the efficiency of the hiring process by reducing time and cost to fill, and integration between their
improves satisfaction with the screening solution itself. Of organizations ATS and screening solution
with full integration between their ATS and their screening solution, 73% are 79% more likely to be
indicate that they are satisfied or extremely satisfied with their screening extremely satisfied with
solution. And those with full integration are 79% more likely to be their screening solution than
those without any
extremely satisfied with their screening solution than those without any
integration.
integration (34% vs. 19%). For those with full or partial integration, 66%
indicate satisfaction with their screening solution, whereas only 55% of
those with no integration between the two indicate the same.
Given the importance and prevalence of background checking, if you have
an existing ATS or other hiring management system or technology that "Automating background
automates the hiring workflow, integrating this critical step can bring even screening is part of an overall
greater benefit. The ability to integrate should be a consideration when efficiency process within HR. In
implementing either an ATS or background screening solution. this way, all information of the
candidate stays in the same soft
file. If at one point, one of my
Speed, Accuracy, and Value colleagues wants to approach
When it comes to selecting a partner for providing background screening, this candidate, they already
the speed with which the process is completed and the accuracy of the have a lot of information
results are far and away the top criteria. Price and value are also always a available."
concern with a solution that organizations view as a “must have,” but in the ~ Nathalie Strynckx, Talent
overall recruiting process, time and accuracy are the most essential issues. Acquisition Manager, Levi
Strauss

© 2010 Aberdeen Group. Telephone: 617 854 5200


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Employment Screening: Mitigating Risk, Driving Down Cost
Page 6

Figure 5: Screening Vendor Selection Criteria


70%
62%
Percentage of Respondents, n=439

60% 54%

50%

40%

30% 24%

20%
10% 10%
10%

0%
Turn-around Accuracy / hit Cost Ability to prove Integration with
time rate return on recruitment
investment technology
Source: Aberdeen Group, September 2010
Accuracy is important on two fronts. One is for the company, which needs
to protect itself from any liability of hiring someone who does not meet
their qualifications, as well as protect itself from denying employment to
someone on the basis of their background check incorrectly. If a screen
comes back with inaccurate information on a candidate and employment is
denied, there can be risk associated as well. The other important front is for
a candidate if inaccurate information shows up on their background check.
When this kind of “false positive” is indicated, a good candidate may be lost
in the time and frustration invested in clearing up bad information. Accuracy
of the data coming from the screening vendor can have a big impact on both
parties in the job offer process.
Also, given the shortages of key skills noted earlier in this report, anything
an organization can do to make it easier to do business with from a
candidate perspective is important. Candidate relationship management
practices, such as maintaining engaging job portals, using candidate
relationship management tools to track communications, and having
recruiters actively maintain contact with past applicants, are all showing up
as key strategies for Best-in-Class companies in talent acquisition, and this
attention to the experience needs to continue after an offer has been
extended. Making the background check as smooth and painless for the
candidate as possible and ensuring that an incomplete background check
doesn’t stand in the way of an eager new employee from starting work is an
important factor.
Finally, just like in all aspects of business today, organizations need to manage
the costs of background screening, but for many the value of the screen helps
to balance that cost. The actual dollar spend is important, but if a screen can
be executed quickly and accurately, and help to make a hiring decision that
results in someone who performs better and doesn’t need to be replaced
right away the value of the process helps temper the focus on cost.
© 2010 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897
Employment Screening: Mitigating Risk, Driving Down Cost
Page 7

Key Insights
Organizations have a lot to consider when it comes to making the right
hiring decision. The competition for key skills is fierce, and competition in
the business marketplace is fierce as well, making it essential that companies
have the right staff in the right place at the right time to serve their
customers. There are a myriad of strategic questions, as well as tactical
issues involved in finding, hiring, and bringing on board the talent that’s best
for an organization. But the background screening process is an important
stage-gate for more and more organizations today for multiple reasons.
Companies must be able to mitigate their risk and legal exposure on a
compliance front, but they also need to execute in a way that is efficient and
that improves the outcome of the process.
The use of background screening has been shown to not only be a key
enabler of Best-in-Class talent acquisition, but also to help improve the
process even more dramatically when it’s integrated closely with the rest of
the hiring process. Organizations not yet using a background screening
solution, or those using them as a stand-alone solution, should consider
these integration issues when evaluating their strategy. Those using just one
aspect of screening should look to integrate more aspects, including criminal
background checks, previous employment / education verification, and
reference checking, to make the most of their investment and further
improve what the Best-in-Class deem their most important measure of
talent acquisition effectiveness: quality of hire.
For more information on this or other research topics, please visit
www.aberdeen.com.

Related Research
Talent Acquisition Strategies: Candidate Onboarding: The First Line of
Experience and Relationship Engagement; February 2010
Management Come of Age!; August Integrated Talent Management: Improving
2010 Business Results through Visibility and
Talent Assessment Strategies: A Decision Alignment; December 2009
Guide for Organizational Performance;
March 2010
Author: Mollie Lombardi, Senior Research Analyst, Human Capital Management
(mollie.lombardi@aberdeen.com)
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Employment Screening: Mitigating Risk, Driving Down Cost
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Featured Underwriters
This research report was made possible, in part, with the financial support
of our underwriters. These individuals and organizations share Aberdeen’s
vision of bringing fact based research to corporations worldwide at little or
no cost. Underwriters have no editorial or research rights, and the facts and
analysis of this report remain an exclusive production and product of
Aberdeen Group. Solution providers recognized as underwriters were
solicited after the fact and had no substantive influence on the direction of
this report. Their sponsorship has made it possible for Aberdeen Group to
make these findings available to readers at no charge.

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For additional information on HireRight:
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www.hireright.com

© 2010 Aberdeen Group. Telephone: 617 854 5200


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Employment Screening: Mitigating Risk, Driving Down Cost
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© 2010 Aberdeen Group. Telephone: 617 854 5200


www.aberdeen.com Fax: 617 723 7897