Tell customers about your background check policy

The other night, a friend told me about a debate in his homeowners’ association. Some members wanted the association to require contractors to certify that they conduct criminal background checks on all new hires. Others think that’s extreme.

My friend asked me what I thought. I referred him to the Sue Weaver CAUSE website. They can make their point better than I can.

August 27, 2001, Sue Weaver was brutally raped and beaten to death by a twice convicted sex-offender hired to do service work in her home. Sue had contracted with a major department store to have the air ducts in her home cleaned. Burdine’s did not conduct criminal background checks on those workers they sent into their clients’ homes. Sue’s life is over. Had a criminal background check been done, Sue might still be alive today. The Sue Weaver C.A.U.S.E. was created to promote Consumer Awareness of Unsafe Service Employment.

The organization makes two very good points on the site. First, criminals often use their employment to find their next victim. And, second, “bonded and insured” doesn’t mean that a background check has been done.

That’s a good case. Make sure companies you do business with and who will send people into your home are looking out for your safety.

And, if your business does a criminal background check on everyone you hire, it’s something you should be telling your customers about. After all, you’re helping look out for their safety.

By making sure that a national criminal background check is part of the process for everyone you hire, you’re doing something to keep your employee and your customers safe. So tell people about it. It can also be a way to set yourself apart from your competition.

Lessons from the federal government

The Federal Drive, a show on Federal News Radio recently offered the following advice to job seekers: Background check in your future? Don’t lie! One of the things that I got out of the material is the difference between the federal government and other employers.

The show included comments from Debra Roth. She’s a partner in the firm of Shaw, Bransford and Roth, that specializes in Federal employment law. Here’s just one comment. “Lying to the federal government almost always, in current times, will get you criminal charges.”

That’s probably not true for your company. The biggest stick you’ve got is that lying on an application is cause for termination. But there is something that the feds do can make your hiring and background check process more effective.

The government uses questionnaires to gather information. That’s a good process for two reasons.

First, it assures that you ask the same questions in the same way every time. And the answers will be in the applicants own handwriting, so there’s no chance of “misquoting” as can happen when you ask the questions in an interview and write down the response.

Here’s another idea you can use. The feds use two different questionnaires.

There’s form SF 86 (Questionnaire for National Security Positions) and form SF 85 (Questionnaire for Non-sensitive Positions). You can do something similar.

Obviously, you don’t have any “national security positions” at your organization. But you do have positions with access to money or to confidential records.

Creating separate forms and process for sensitive (access to money or to confidential records) and non-sensitive positions allows you to ask different questions and run different checks based on the position. That should make your process more effective and consistent, which is a good thing in today’s lawsuit-happy world.

The danger of not checking

PI Newswire, a news service for private investigators, splashed the following headline across the screen of my computer. Jury Finds Housing Authority Negligent in Elderly Woman’s Murder after Tenant Background Check Misses Neighbor’s Criminal Past. Here’s part of the lead.

A jury recently ruled that negligence by the Housing Authority in a North Carolina city led to an elderly woman’s death at the hands of her crack cocaine addicted neighbor in 2007.

The sons of the woman asked for more than $10 million in damages. The “negligence” was not conducting a proper background check on the neighbor. If you’re a landlord or you hire people, there are three lessons about background checks you can learn from this story.

You can be sued for not conducting a proper background check if a person you select as a tenant or a person you hire commits a crime of violence. If you lose the case, the award could be huge.

“Proper” means doing a check using a reputable service like SentryLink that offers national coverage. The Housing Authority did a background check, but it was only of North Carolina records.

You should have a standard procedure to check out prospective tenants and employees. If you don’t, put that at the top of your To Do list. Your procedure should include background checks and other steps to keep the dangerous and deceitful away from the good people who rent from you or work for you.

Once you have a procedure, follow it. Use checklists and other simple aids to make sure you do all the steps in the proper order every time.

This isn’t just about preventing lawsuits. It’s about protecting the people who rent from you and the people who work for you.

Organizational justice

The April 2010 issue of Risk Management has a great article titled: Finding and Fixing Corporate Misconduct. After noting reports that misconduct had declined during 2009, the Corporate Executive Board (CEB) says the following.

According to the results from more than 300,000 employees in over 75 countries, this “decline” in misconduct during 2009 is actually misleading, as it pertains to less severe and risky behaviors such as the misuse of company resources or other ‘inappropriate behavior.’

In other words, no matter what you may have heard, there’s pretty good evidence that more serious forms of misconduct actually increased last year. What can you do about it?

The CEB says that you want to create a “culture of integrity.” And the most important thing to count on is what they call “Organizational Justice.” Basically, it’s the perception among employees that you mean business about your standards and rules.

The CEB suggests three steps for creating an atmosphere of organizational justice. Here they are with my idea of what that means in an everyday, practical sense.

(1) Equip managers to decisively deal with unethical behavior.

Equipping managers means giving them the tools to hire smart, including a background check for any position of trust and pre-employment or routine credit checks for appropriate positions. It also means supporting managers when they make tough calls.

That’s the sort of thing you read often on this blog. But the CEB’s next two steps are also important and don’t get nearly enough attention.

(2) Show the whole employee population-using real instances from within the company-that the company deals decisively with misconduct.

You can’t skirt this one. The only way that your people will know you’re serious is by what you do. Talk will only take you so far.

(3) Close the loop with employees who report misconduct so that they know that appropriate actions were taken.

There are two big reasons why honest employees don’t report wrongdoing. They may see it as dangerous. And they may see it as a waste of time. Keep them safe. Make sure they know that their conscientious behavior had a result.

At the end of the day, this is all about walking the walk. If you do that, it will make your talk about honesty and integrity more powerful. If you don’t that talk will just be empty words.

Why are they publishing those awful stories?

If you spend time online or watching television, you could get the idea that the media don’t want you to use credit checks as part of your hiring process. Here are two examples.

The Wall Street Journal ran an article titled: Bad Credit Derails Job Seekers. The lead told the story of Rosa, a single mother of three, who wasn’t hired because of (she thinks) a poor credit report.

MNBC had Bad Credit Sidelines Some Jobless Workers. They led with the story of a woman who “believes an unpaid medical bill cost her a full-time job.”

You’re going to see more stories like those two. And they come at a time when state legislatures are considering legislation that would ban the use of credit reports in hiring. There are three reasons why the media run stories like this.

It’s a feeding frenzy. When one medium is successful with a story, others crank out similar stories.

The media loves human interest stories, especially where the villain is a business of some kind and the victim can be portrayed as helpless. People read stories like that. They lure advertising which is how most media make their money.

Those are two reasons. You can’t do anything about either one.

But, there’s a legitimate issue here. The two stories above tell us that they let the report make the hiring decision.

If that’s true, then, if either business had dug into the reason for the poor credit report, they would have discovered issues that had nothing to do with responsibility. And, if they had done that, they might have come to a different decision.

That’s what you can do something about. You can’t stop the media from writing heartstring-tugging stories about job seekers done wrong because they had bad credit. But you can make sure that you do things right.

Follow the law. Follow good business practice. And use a pre-employment credit report as a source of information that can help you make a sound business hiring decision.

It takes a village to catch corporate fraud

The question, “Who blows the whistle on corporate fraud?” is also the title of an article that will be published in the Journal of Finance. To find the answer, the authors studied “all reported fraud cases in large U.S. companies between 1996 and 2004.” Here’s the answer they came up with.

“We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but takes a village, including several non-traditional players (employees, media, and industry regulators).”

That’s good news. It means that you’ve probably got honest employees on the payroll who may spot fraud, even if the government or the board of directors can’t do it.

But there’s also bad news here. Whistle-blowers are a rare breed indeed. Whistle-blowing is an act that takes courage. Many whistle-blowers suffer some kind of reprisal. So for one of your people to catch fraud they have to be honest, placed in a position where they can spot the fraud, able to identify it, and brave enough to bring it to your attention.

And you have no way of knowing how long fraud will go on before it gets caught. It might be only a little while. But it might be years.

So while that village might be your best bet to detect fraud, that’s just shouting “the horse is loose” after the horse is out of the barn and running hard. If you want to cut your fraud losses, prevention beats detection every time. There are three steps.

Hire smart. Use criminal background checks and credit checks as part of your process for everyone who will be in a position of trust.

Don’t stop with hiring. Use a similar process when you move someone into a position of trust. And consider making routine checks a requirement for anyone in such a position.

Set up good internal controls. Most of the time fraud happens because we make it easy for the bad guys. Your accountant can help make sure you’ve got good fraud prevention practices in place and working.

This is another one of those places where an ounce of prevention is worth a pound or two of cure.

Lessons from Sandra Bullock

Normally, the world of screening and security has me reading reports on fraud and stupid corporate stunts. Every now and then, though, my Google Alerts throw something juicier up on my screen. That’s what happened this week.

A blog named MomLogic published a post by Dr. Wendy Walsh with the title, “Sandra Didn’t Believe the Background Check.” The supermarket tabloids could not have done better.

Here are the basics of the tawdry story. When Sandra Bullock met Jesse James, her tattoo-sporting, biker husband, he was married, for the second time. His wife was pregnant. He had two children by his first wife.

Now several women have come forward claiming affairs with Jesse. Sandra Bullock is consulting divorce attorneys.

There’s no reference in the blog post to any actual background check. So what does one more Hollywood divorce have to do with background checks and with you? Here’s the answer from Dr. Walsh.

“It’s an old adage, but: If you want to predict someone’s future behavior, look no further than their past behavior. As Sigmund Freud so brilliantly observed, ‘Human beings have a compulsion to repeat.’”

That’s one reason we do background checks. Past behavior is the best predictor of future behavior. Background checks help you discover any past behavior that an applicant might not willingly share.

This is especially important when it looks like you’ve got just the right person and get excited about it. When that person looks like they might be the perfect employee or tenant it’s easy to get excited and overlook things.

That’s when a step-by-step, check-the-boxes screening process that includes a background check can save you. That’s when a background check is your reality check.

Scarecrows and background checks

“Are you a scarecrow?” my mother would ask, usually arching one eyebrow. The correct response was, “No Ma’am.”

The scarecrow my mother was referring to was the one in the Wizard of Oz. If you’re not familiar with that tale, let me refresh your memory.

Dorothy, a young girl living in Kansas, is picked up by a tornado and whisked away to a different place. To get home, she will have to follow the yellow brick road to Oz where the Wizard can send her home.

Dorothy makes the trip with three friends who all want something from the Wizard. There is the Cowardly Lion who wants courage. There is the Tinman who wants a heart. And there is the Scarecrow. He wants a brain.

I wish my mother was still around to ask her Scarecrow question when I read about the case of Ray Fetcho. Fetcho was a nurse, beloved by the families of the dementia patients he has cared for more than three decades.

He just lost his job because he was arrested in 1976 for a misdemeanor connected to a night club act. He has no other criminal record. Here’s how the Sun Sentinel explains the situation.

“The state has been cracking down on caregivers with criminal records since a Sun Sentinel series last fall found people with the most serious offenses — rape, child abuse, even murder — had slipped through because of flaws in Florida’s background screening system.”

I would ask the state officials: “Are you a scarecrow?”

The state is making a mistake that lots of businesses make when they use background checks and pre-employment credit checks. They don’t use their brains.

They use draw simple black and white lines and create zero tolerance policies because they don’t want to take the time and effort to think. HR blogger Jason Seiden has it right: the case of Ray Fetcho.

Use background checks. They’ll help you make better hiring decisions. But they’ll only help. You have to use your brain. You cannot be a scarecrow.

Background checks for small businesses

The Wall Street Journal has been adapting articles from their forthcoming Small Business Guidebook and publishing them in the paper and on their site. Here’s a powerful paragraph from one of those articles, titled: How to Avoid Hiring a Bad Egg.

Small businesses, unfortunately, are particularly vulnerable to embezzlement and other kinds of employee theft because they lack the checks and balances of big corporations. One report by the Association of Certified Fraud Examiners found that the median loss for small firms with fewer than one hundred employees was $190,000. The most common schemes? Employees fraudulently writing company checks, skimming revenues and processing phony invoices.

Here’s the question for you. If you’re a small business, can you afford to lose almost $200,000?

If the answer is “No,” then start protecting yourself by improving your hiring. The Journal article includes several tips. The idea is to set up a hiring process that catches possible bad actors before you hire them.

Standardize your process. Take the same steps every time. Use the same forms. Use simple checklists to make sure you don’t miss anything.

Ask tough questions. Ask about gaps in work history. Ask about relations with the boss and co-workers. Ask about anything that might be a potential problem.

Check references. It’s amazing how many companies don’t do this.

Use background checks. The Journal puts it this way: “Preemployment checks can screen out applicants who may be unfit (or dangerous) for your workplace because of a criminal record.”

Have your attorney review your process to make sure that you comply with both state and federal laws. Then, make sure that the steps you must take to meet legal and regulatory requirements are part of a hiring checklist.

Hiring may not seem like your “real work,” but it is. Having a good process and following it rigorously is a way to keep from hiring that bad egg. It’s that ounce of prevention you’ve heard about.

Criminals at the court

In Farmington, New Mexico, the job description for a Court Services Coordinator (similar to a probation officer) lists the following. “Certified substance abuse counselor or five (5) years experience in the criminal justice system required.” That usually means “working for a criminal justice agency” not “as a criminal being processed by the system.”

But, it turned out that Court Services Coordinator Christos Derizotis had lots of experience in the criminal justice system that the city didn’t know about. According to an article in DUI Attorney headlined “City official fired over New Mexico DWI arrest,” it was only after Derizotis had been arrested for DUI that they discovered that had six prior DUI charges and:

“officials learned Derizotis had been convicted of battery, false imprisonment, criminal damage and impersonating a police officer in the past.”

But wait, as the late-night pitchmen say, there’s more. According to the Farmington Daily Times, Derizotis was also “sentenced to six years in the Federal correctional Institution La Tuna in Anthony, Texas, in 1985 for bank larceny.” He was paroled in 1989, but nine months later he was arrested again for violating the terms of his parole.

How did this happen? The Farmington paper suggests that it might have been a bit of favoritism. Derizotis is the son of a former Magistrate Judge.

They may be right, but I think the real explanation is much simpler. The city never ran a criminal background check on him. They only ran those on people applying for positions that handled money and information technology jobs.

According to the Farmington Daily Times, city human resources director, Donna Brooks said, “This will prompt us to do (criminal background checks) on probation type of people.” It should.

Doing regular criminal background checks on people who will occupy positions of trust is a way to head off embarrassment and make an informed decision about the candidate. If I were Ms. Brooks, I’d be thinking about where else the city ought to be conducting background checks.