Preventing Fraudulent Hires: Poor Decisions Can Be Costly

BY YVES LERMUSI, CEO CHECKSTER

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Thoroughly vetting candidates utilizing background and reference checks can seem like an upfront investment in resources, but it is well spent to help avoid potential fraud and other serious problems in the future.

September economic reports indicated that we are amid the lowest unemployment rates seen since December 1969, which in turn could potentially create a tighter labor market. The National Retail Federation is predicting that retailers could hire up to 590,000 seasonal workers this year. More than ever, hiring managers are no doubt feeling pressured to fill jobs fast, utilizing the bare minimum hiring requirements in order to get workers placed now. Therefore, the cost of an unfit or fraudulent hire can be substantial.

THE COST OF A POOR DECISION

An unengaged employee might show up late or not at all, influence other employees in negative ways thus lowering overall morale, give poor customer service or fall drastically short of retail sales goals. Worst of all, bad hires can contribute to inventory shrinkage by directly stealing merchandise, shorting registers, offering inappropriate discounts or failing to charge friends for items. It is estimated that inventory shrinkage costs U.S. retailers over $45 billion each year, and roughly 42% is perpetrated by employees. Needless to say, this has a sizable impact on profit margins. In fact, two of Checkster’s biggest retail clients that use the Reference Insights tool discovered that 26% of their candidates were deemed by their own references as low probability of rehire, meaning they wouldn’t likely hire them given the choice again. An average of 4% of those retail clients see their candidates flagged for suspected fraudulent activity during those reference checks.

PROCEED WITH CAUTION

There are countless cautionary tales about hiring the wrong person for a job, whether for a seasonal or permanent position, ranging from almost comical to downright scary.

On the lighter side, a recent article from The Atlantic described how over nine years a correctional officer at a juvenile detention facility stole upwards of a million dollars worth of meat from his employers. This may sound like hyperbole, but it’s actually true. What he ultimately did with it is hard to imagine. He was sentenced to 50 years in prison.

In an additional example, one of Checkster’s clients, Randstad Canada, was looking to place a candidate for an hourly job. The normal interview and background check were conducted, which came back clean, but it was the fraud alert from Checkster’s reference checks that showed something was amiss. As a result, the staffing service did not place the candidate. Two weeks later, the police contacted Randstad Canada wanting to talk to the individual they interviewed. The candidate was indeed an unfit hire and had apparently committed crimes but had no convictions as of yet. That was a close call.

In another extreme case with a different staffing agency, the firm used a standard background check for a candidate but failed to go a step further and utilize reference checking. The candidate was placed at a small business and tragically killed the owners of that company. It was later discovered that another staffing firm had already passed on this same candidate because a reference check returned low scores. With a more thorough examination of this person’s background, personality, and references, perhaps this individual never would have been placed for a job and this terrible event could have been avoided.

BEST PRACTICES FOR HIRING THE RIGHT HELP

Here are some tips to help attract your ideal worker:

  • Recruit existing customers who are already familiar with your brand and theoretically have developed a loyalty to the company and its products.
  • Ask your best employees for referrals. If they are a good fit for your company, they may have friends or family who will be too. The trusted employee is also already a reliable reference for the potential candidate.
  • Retirees can be a great resource. They have built-in flexibility and may love and excel at the social interactions that come with a seasonal retail job.
  • Conduct face-to-face or video chat interviews whenever possible. Particularly in retail, interpersonal skills and likability matter a lot, and cannot necessarily be coached, especially in the short term.
  • Screen, screen, and screen! The process of checking references will save hiring managers time, money, and stress in the long run.

Yves Lermusi, CEO, founded Checkster after seven years at Taleo (TLEO) as President of Taleo Research. Mr. Lermusi is a well-known public speaker and a Career and Talent industry commentator. He is often quoted in the leading business media worldwide, including Fortune, The Wall Street Journal, Financial Times, Business Week, and Time Magazine. His articles and commentary are published regularly in online publications and business magazines. Mr. Lermusi was named one of the “100 Most Influential People in the Recruiting Industry”.

Today, with a long customer list of Fortune 500 companies and providers of HR services, Checkster leverages the power of collective intelligence technology to empower talent and team leaders to make smarter, faster and more confident talent decisions. To download a free whitepaper, please visit: https://www.checkster.com/holidayhiring

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