Pre-Employment Screening 01/06/2008
Pre-employment Screening Practices in the Retail Sector
By: Walter E. Palmer, CFI, CPP, CFE Posted: November 10, 2007
#Nov07-54
The number of employers who conduct pre-employment background checks on job applicants has increased dramatically in recent years. Many studies attribute the increase to the events of 9/11, corporate corruption scandals such as Enron and WorldCom, and increased litigation costs and jury awards for negligent hiring. Other influential factors are turnover, recruitment costs, absenteeism, and resume/application fraud. This survey focuses on the current pre-employment background screening processes used in the retail industry.
An effective program relies on multiple screening methods to ensure relevant information about an applicant is reviewed before he or she is placed on the payroll. Screening processes such as assessments, drug tests, criminal history checks, and mutual associations should be considered when developing or reviewing a pre-employment screening program. Several of the surveyed companies have developed a tiered screening process with increasing costs as the applicant passes each level of the hiring process.
All of the companies surveyed outsourced their background screening program. Although it was outsourced, the program was managed by a loss prevention and/or a human resources manager. They also used the background company to provide most, if not all, of their background screening processes. This allowed them to leverage the price of the services.
This survey not only provides a collection of statistics and data but gives a few examples of how companies have structured certain process in their background screening program. According to a recent report from the Society for Human Resource Management, only 19 percent of large companies consider their current background screening process effective. Whether you are revamping your pre-employment screening program or developing a new one, this survey provides insight into the methods employed at ten large U.S. retailers.
Purpose and Approach
The purpose of the survey was to benchmark large retailers’ current pre-employment screening programs. The survey was sent to the most senior-level loss prevention executive in ten leading U.S. retailers. The surveyed retailers ranged in store count from 250 to over 3,000 locations and included both hardline and softline retailers. The survey focused on five types of screening processes—drug testing, assessments, credit checks, criminal history, and motor vehicle checks. The scope of the survey included store, distribution centers, and corporate levels at each retail company. The survey was conducted in March, 2007.
The survey did not attempt to evaluate the ROI from a pre-employment background screening program. While this is outside the scope of this survey, many retail companies have an internal ROI process measuring programs such a pre-employment screening.
The chart below is a summary of the responses to the five primary questions. Conducting an assessment is clearly the most common pre-employment screening method employed, followed by conducting a criminal background check.
Screening Type Store Distribution Center Corporate
Drug Screen 50% 60% 40%
Assessment 90% 40% 40%
Credit Check 0% 0% 33%
Criminal Background Check 70% 80% 70%
Motor Vehicle Record Check 0% 60% 40%
Do You Conduct Pre-employment Drug Screening?
The survey revealed that one half of the companies surveyed conducted pre-employment drug screening at the store level, sixty percent at the distribution center and forty percent at the corporate level.
Although this survey is focused on pre-employment screening, it is important to note that two-thirds of the respondents conducted some type of post-accident drug screening. Most notably, post-accident drug testing was more prevalent in the distribution centers where more accidents occur.
Are Assessments a Part of Your Pre-employment Screening Program?
Conducting an integrity, personality, or aptitude assessment can be an initial step in the screening process. These types of assessments are normally administered electronically or in the form of paper-and-pencil tests.
Ninety percent of the companies used an assessment at the store level. Assessments are most common at the store level since they can be administered with relatively low cost and provide an excellent first layer in the screening process. There were two companies that have kiosks in place for applicants to complete an assessment along with their application. One surveyed company stated they only perform an assessment on the final two candidates for a vacant position.
Do You Conduct Criminal Background Checks?
Criminal background checks was one of the most prevalent screening process conducted by the surveyed retailers. Seventy percent of the respondents indicated they conduct a criminal background check at the store level.
One retailer concluded that 40 percent of their turnover occurred within sixty days of employment and now conducts criminal background checks on associates who maintain employment past sixty days.
All of the retailers used a third party that conducted their criminal background checks. The criminal checks were conducted at the county level and went back five to seven years. Over two-thirds of the respondents indicated they also conduct a social security trace and a mutual association query in conjunction with the criminal background check. The social security trace validates the social security number provided is active.
Mutual association searches allow retailers to query databases for applicants who may have been dismissed by another retail company for dishonesty. Retail companies who participate in a mutual association agree to provide information on associates who were dismissed for dishonesty in their organization.
The possibility of conducting background checks on multiple criteria allows retailers to set up different approaches depending on the position or working environment. For instance, one company developed a tiered approach to their criminal background check based on level of position.
Another retailer had a similar tiered approach, but the criminal background check is conducted post-employment and is tiered on store, distribution center, and corporate level.
- Store Level—Managers
- Distribution Center Level—All hourly associates (only check county of residence)
- Corporate Level—Director level positions and above
The survey also asked who administers the criminal background check process. Eighty percent of the respondents indicated that it is a function of loss prevention and/or a collaborative effort with human resources. In this collaboration, two of the respondents explained that human resources initiated the criminal background check and forwarded any applicants with a criminal history within their established guidelines to loss prevention for further validation. This provides loss prevention an opportunity to investigate and confirm the derogatory information.
Are Credit Checks a Part of Your Screening Process?
None of the surveyed companies conducted a credit check on applicants at the store or distribution center level. Thirty-three percent of the companies conducted a credit check at the corporate level for finance or C-level positions.
One retailer responded that they conduct credit checks on all applicants at their call center. The senior-level loss prevention executive stated their associates process sales on credit cards from customers calling in and this access warrants a credit check. Another retailer responded they recently implemented a criminal background check for corporate employees who handle credit card data.
Do You Conduct Motor Vehicle Record Searches on Applicants Who May Drive a Company Vehicle?
Historically, retail associates at the store level do not drive a company vehicle, therefore this question was only asked at the distribution center and the corporate level (district and regional positions were categorized as corporate). Sixty percent of the respondents conduct a motor vehicle record check at their distribution centers. Some of the surveyed retailers use contracted delivery companies, so they defer the responsibility to their contractor. One of the respondents who indicated they conduct motor vehicle searches at the corporate level stated their insurance company mandated the searches be conducted on anyone who drives a company vehicle.
Summary
The findings in this survey revealed that each company had an established pre-employment screening program, but there were several variations in the methods and processes used. As the survey pointed out, one retailer began conducting criminal background checks on associates who completed sixty days of employment since forty percent of the company’s turnover occurred before associates reached this mark. While this method may not be a viable option for all retail companies, it provides a unique perspective on conducting criminal background checks.
Although this survey focused on pre-employment background checks, consideration should be given to incumbent background checks. Although an associate may pass a pre-employment background check, their history since employment may reveal negative information relevant to their position. If a retail company employs delivery drivers, they may want to review each driver’s motor vehicle record on an annual basis to ensure they are retaining the most qualified drivers.
Selecting the right pre-employment screening provider is vital to the success of the program. Many screening companies offer a customized package for their clients. The packages are a combination of screening processes, and the pricing is typically based on volume. One of our respondents indicated they have used the same background check provider for several years, but conduct an RFP on an annual basis to ensure they are getting the best pricing and service in the industry.
Retail companies have recognized the need to conduct background checks for quite some time. While the scope and method of pre-employment background screening programs may differ among retailers, the purpose remains the same—to hire the most qualified candidates. As the demand for background checks continues to increase, this survey provides some common practices in the retail industry that can be used as a benchmark for your organization.
If you would like further information or details regarding this survey, please contact the author.
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WALTER E. PALMER, CFI, CPP, CFE, is CEO/president of PCGsolutions, a loss prevention consulting, training, and education firm. He has twenty-plus years experience in retail loss prevention and is a frequent speaker at industry conferences and as a guest lecturer for Eastern Kentucky University’s executive lecture series. Palmer is active in professional development and training as member of the American Society for Training and Development, the International Society for Performance Improvement, and the American Management Association. He can be reached at 859-271-3140 or by email at wpalmer@PCGsolutions.com.