Article: The cost of a wrong hire: Why background screening is a must

Background Verification

The cost of a wrong hire: Why background screening is a must

Informalization and contractual employment, make companies more exposed to risk and hence there is an increasing requirement for companies to make more informed decisions, by being extra particular about background screening.
The cost of a wrong hire: Why background screening is a must

Today, India is counted among the most important emerging economies of the world. By 2030 India’s workforce will be larger than that of China. Most of the new entrants will be in the urban areas but an influx in jobs requires enhanced and more sophisticated employment procedures which in itself are raising more nuanced and different a cadre of challenges in recruitment and promotions internally.

Employers need to impose stringent procedures to hire new entrants since the stakes have never been this high. The wrong candidates could potentially cost companies financial setbacks, and tarnish brand image. In addition employers have increased their level of caution not only prior to hiring but during the period of employment when it comes to internal promotion etc.  Alternatively imposing strict screening measures ensures a reduction in attrition.  With the exit of employees, there is a loss in valuable training. One can stem high attrition rates by making the correct hires in the first place.

The Indian landscape has seen an increasing informalization of the workforce this has made the process of verification and screening challenging. To illustrate, the percentage share of contract workers in organized manufacturing sector has increased from 13 percent in 1995, to 34 percent in 2011. Informalization and contractual employment, make companies more exposed to risk and hence there is an increasing requirement for companies to make more informed decisions, by being extra particular about background screening.

Tight timelines, talent crunch, inadequate information and cost consciousness often tempt employers to bypass necessary background checks and verification. And in a market like India the ease with which documents can be forged makes verification a tedious process. For Instance, First Advantage’s Q1 2016 Trends report revealed that an estimated close to 7500 companies in India operate with fake employment and educational certificates.   

Global Norms Shaping Indian Landscape

With an increase in penetration of global companies in India, there is an expectation for the Indian based entities and partners to follow stringent global hiring procedures.  The positive impact that global penetration is having on Indian landscape in hiring practices is reversing the trend to carry out background checks not as corrective measure but preventive measure. Traditionally only when something goes wrong companies enforce more stringent checks, however with the advent of multinational companies, there is an increasing awareness to impose stringent background checks. Specifically the awareness is high in data based industries such as IT and financial services providing companies where clients have entrusted the companies with their personal data. The IT and financial services sector have recognized the threat and are leading the charge on embracing stringent background verification processes.

In a study conducted by First Advantage, the discrepancies found in manufacturing, ITES/BPO, Manufacturing, ITES/BPO and FMCG have shown a rise in Q1-16 in comparison to Q4-15. For instance the discrepancy in BFSI sector in Q4 2015 was 38 percent and in Q1 2016 it was 39 percent. While such discrepancies can be attributed to a recent increase in administration of screening, it can also be attributed to industry specific increased completion.

Changing Nature of Screening 

From a verification perspective employers are raising the standards of screening. There has been a shift in the mindset from expanding screening processes from quantitative to qualitative screening. The reason for doing such extensive background checks is because with increased competition, there is a greater requirement to hire better leaders, productive managers and people with more potential. There is an understanding that the recruitment done correctly could significantly improve the company’s performance, and at the same time hiring the wrong person could cost the company productivity, its culture and even its brand name.

The Indian Landscape; Changing Mindsets

Traditionally the number of years’ experience would be a sufficient requirement to establish competency for a promotion or a position. However with the onset of increased competition, across all industries employers are scrutinizing every aspect of an employee to boost productivity, improve brand reputation and avoid any fraud or breach of ethic. 

Discrepancies amongst lower level executives being higher in frequency, employers have only recently begun screening amongst higher executives. In addition there is a shift of screening in a qualitative and not in a restrictive quantitative basis, which means investigating the nature of the claims and not just the occurrence of the claims itself. 

As the screening processes are becoming more stringent they are also becoming more relevant and specific, recognizing that there might be minor discrepancies in a component that has no impact on the job. For example, a minor discrepancy in the finance would not impact a hire in the education sector. However, the same discrepancy in finance for hiring in the BFSI sector is a deterrent while hiring. 

Ethics & Integrity: The Future of Background Screening

Companies hiring very senior leadership have recognized that making fraudulent claims on their achievements can cost the company as much as discrepancies about educational qualifications cost the companies at a lower level. This is instilling a culture of integrity and ethics, from a lower to more senior level due to the rise in background checks on leadership roles at a very senior level. Companies are willing to pay for such detailed checks because money spent now, could save potential losses later. Verifying fraudulent claims about competency can cost companies huge losses financially and employers are recognizing a nuanced background check today, could help minimize risk, damage to brand and financial cost attached with new hires. A sincere background check also positions the employers as a responsible company, who cares for its employees as well as business partners, clients and vendors. 




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Topics: Background Verification, Assessments

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