Background Checks Can Lead To Lack Of Hiring

by Dr Joe Duarte
March 16, 2010

When Incomplete Or Out Of Context Information Can Go Wrong
The conundrum for human resources departments is that hiring employees with blemishes on their records is like playing Russian roulette. And in the current hiring cycles, background checks can deliver the death blow to those about to be hired.

Even as the economy improves, "all the things you do, come back to you." For example, someone whose credit rating has fallen due to a job loss may not be rehired in the near future due to the credit ding and the fact that some employers are looking at bad credit as a sign of poor employee responsibility.

According to The Wall Street Journal: "Concerned about rising rates of employee theft and fiduciary issues, more employers are conducting credit background checks on applicants for some positions. Companies say the financial information can offer insight into a candidate's level of responsibility. But people whose previously solid credit has been damaged by the economic downturn say they are victims of circumstances beyond their control."

The real issue, though, is whether the potential hiree was living beyond their means and if they were, is that an indicator of potential ethical and moral problems that could lead to problems on the job.

Companies are conducting a ten year search of potential hiree backgrounds on a routine basis, a fact that suggests that these checks are not unthorough. And more of them are taking up the practice. According to The Journal: "Some 47% of employers say they check the credit history of applicants for certain positions, according to a survey by the Society for Human Resource Management of more than 430 organizations in late 2009. That's up from 42% of employers in 2006. Just 25% of employers in 1998 said they regularly or sometimes checked applicants' credit histories."

There have been enough complaints to lead to potential legislation. According to The Wall Street Journal: "Critics of the credit checks say they create a vicious cycle that prevents those who most need jobs from getting them. Lawmakers are pushing for change. U.S. Rep. Steve Cohen (D., Tenn.) has proposed a bill to prohibit the use of credit checks during the hiring or firing process, with certain exceptions. And some states have passed or proposed laws to restrict employers' use of credit checks."

Still, for now, it's a fact. Companies are not looking to hire anyone with a hazy background.

Conclusion

At first blush, it seems unfair to penalize someone who's had some bad luck or had things go against them by not hiring them. And this practice will likely have some effect on the pace of hiring, at least in some instances.

Yet, from an employer's standpoint, it makes sense, especially when statistics, and sometimes video evidence, shows that employee theft in some busineses, is on the rise.

Enron, Lehman Brothers, Bernie Madoff, and other recent stories, (see News For Thought, above) illustrate that the current environment is full of controversial and in some cases downright illegal practices and practitioners in business.

As a small business owner, it makes sense to consider adding background checks to the hiring process. The flip side, though, may be that fewer people get hired, which will likely have at least a mild to moderate effect on the pace of recovery.



IBM (NYSE: IBM) Is Lagging The Market

IBM (NYSE: IBM) is still forming a base, despite the rest of the market's recent action.

Chart Courtesy of StockCharts.com