Bad Hires Kill Startups

Why employment screening is essential for early-stage businesses.

Bad hires are costly. Nearly 50 percent of businesses fail within the first four years, according to research by Intuit. Among the reasons for failing, bad hires rank at the to  of the list because of their negative financial impact. Issues such as employee fraud, inefficiency and incompetence, or even safety liabilities can stem from failing to implement effective background screening practices.

Early-stage businesses tend to be more susceptible to the woes of bad hires because they lack internal preventative infrastructure. When startups lack an employment screening process, they open themselves to fraud and safety risks. Unlike larger, more established businesses, startups cannot stomach the financial losses from embezzlement, ineffective employees, or workplace incidents and the resulting toxicity to the workforce, public and investors.

Adopting a Screening Program

One way for an early-stage business to avoid the potential pitfalls of bad hires is to take a proactive approach and create an employment background screening infrastructure.

There are a few basic guidelines for putting together an employment background screening program. First, there are different types of background checks that detail various kinds of information about an individual. With that said, there is no “silver bullet” method of screening. The best setup will depend on a company’s specific circumstances. The following are a few common types of background screening services that employers use:

  • Criminal record checks
  • Sex offender registry checks
  • Resume verification
  • Drug testing
  • Driving record checks

Criminal record and sex offender registry searches have typically been found to be the gold standard in risk avoidance. Other common screening tools, such as driving record checks and drug testing, are also beneficial for promoting workplace safety and mitigating risk.

Another method of reducing risk in the hiring process is to conduct checks on resumes. Approximately 80 percent of resumes contain misleading information, and roughly 20 percent contain falsified degrees.

Keeping It Legal

Complex regulations at the federal, state and local levels impact a company’s employment screening process. Neglecting to maintain compliance with these laws will cost your company through potential regulatory fines and/or lawsuits. Be sure you have a well-versed attorney review and approve your employment screening policy and practices before you implement them.

Each of the federal regulatory bodies that regulate the employment screening process have also created free resources for businesses to utilize. The Federal Trade Commission (FTC) and Equal Employment Opportunity Commission (EEOC) published a joint publication on adhering to the Fair Credit Reporting Act. That is the federal law that regulates background checks. The Department of Transportation (DOT) also provides detailed policy guidelines for drug and alcohol testing that are the gold standard for substance testing policies. Each of these resources can be found on their respective websites.

Better Hires. Better Business.

Although the legal compliance with employment screening is at times complex and can be intimidating for startups, building an employment screening infrastructure does yield a strong return on investment. Avoiding risk by promoting good hires will assist in the potential growth of your business.