Many businesses dont spend enough time and resources on crucial hiring decisions.
Companies expend far more resources on researching the purchase of software and hardware than on the hiring of employees. The result is that unknowing employers hire employees with criminal histories and other problem backgrounds.
When a client of our firm experienced a loss of intellectual property, we were called in to help determine what happened. We interviewed employees, searched computer files, looked at internal correspondence, telephone records and expense reports, and evaluated hiring practices. What we learned wasnt unusual. Growth in this dynamic business was not matched by commensurate changes in hiring policies and procedures.
The businesss hiring practices had permitted a professional thief (and others with criminal histories) to be hired. The thieves and their colleagues had used their positions to illicitly sell valuable proprietary information owned by the company and expose it to others. In a scenario I see played out all too often, the following things occurred:
- By hiring employees with troubled pasts, the company lost valuable trade secrets on which it had expended capital and time.
- The company suffered a damaged reputation because others inside and outside the firm learned of the theft. In an age in which Internet bulletin boards advertise each and every misstep of a firm, mistakes cannot be hidden.
- The damage to a companys reputation can affect the price of its stock, the morale of its employees, and its ability to attract superior candidates.
When a firm is young, often employers know many of the employees being hired, either directly or through referrals by friends and colleagues. With hard work and success, growth comes, and dozens or perhaps hundreds of new employees are hired. The focus naturally is on selecting the most talented people with the best experience or most promising education. Companies then spend vast sums of money on recruiting, bonuses, salaries and perks.
But, the focus also needs to be on hiring applicants with credentials that are accurately portrayed in resumes and who appropriately disclose prior criminal conduct. Otherwise, hundreds of thousands of dollars can be misspent, and a firms assets can be easily lost.
Many of the screening programs utilized by employers simply are not effective. The CEO of a publicly traded company recently told me that his firm screens prospective employees for prior criminal conduct. What that CEO may not have known is that screening for criminal conduct is often limited to either the potential employees most recent county or state of residence.
That level of scrutiny is insufficient if the potential employee committed fraud one or two or five years earlier and while living in another state. A criminal check submitted to the state police in Pennsylvania, for example, covers Pennsylvania only.
Even more scrutiny is necessary for mid- to upper-level hires. What if an applicant has been sued by a previous employer? The facts from that lawsuit against an executive-level hire might be important if the complaint relates to job performance. Yet litigation records are seldom sought for hires at any level. Other issues concerning executives are industry performance (reputation in the industry), gross resume fraud and related misconduct not revealed on a resume.
National media research often can detail impropriety in an employees background. Media accounts can discuss fraudulent conduct, unethical conduct and statements by a potential employee that are not consistent with the ethics of your business.
The good news is that employers can take steps to hire better employees and improve the bottom line.
Consider these six steps, designed to protect you from hiring problem employees:
1. Develop and follow simple screening policies and procedures designed to scrutinize resume claims, criminal histories and job qualifications. Check for criminal histories. Check references. Verify education.
2. Notify job applicants ahead of time that screenings will take place. This more than likely will result in the immediate reduction of resume fraud. It also will result in the reduction of other misstatements on job applications. Notification will result in self-screening of problem employees.
3. Determine which employees, once hired, will have access to valuable company secrets or to money, or to clients. Those with access to funds, proprietary information and the ability to harm your business must be evaluated with greater scrutiny than those without that access or ability. Consider media research or litigation record searches for higher-level employees.
4. Conduct screening to include all criminal activity for the past seven years. Limiting the search to the applicants most recent address or state saves money and time, but defeats the purpose of screening out problem employees with deep-rooted criminal histories.
5. Obtain permission from a prospective employee to obtain a credit history. Use it wisely. Problem employees often have financial difficulties that bear on their work abilities.
6. Whenever possible, obtain background materials about the prospective employee before he or she is hired. If that isnt possible, make the offer subject to a satisfactory review of the material by your firm.
By taking these steps and putting as much emphasis on screening as on recruiting, employers will increase profits, hire better employees, improve productivity and avoid time-wasting personnel issues that plague so many firms that dont do their pre-hiring homework.
How to reach: Jeffrey Klink, (412) 201-9123 or www.klinkfarley.com
Successful businesses examine possibilities, gather information, then make decisions, except, that is, when they become the plaintiffs or defendants in lawsuits. Then, it seems, everyday business acumen is lost in a maze of complaints, answers and cross-claims.
After businesses file legal pleadings, they typically seek the facts which are needed to determine a proper business strategy in a discovery process. But discovery is a misnomer if ever there was one.
There is an alternative to time-consuming and ineffective depositions, interrogatories and other often-unsuccessful methods of discovery: Conduct an independent investigation -- like federal prosecutors do -- before suits are filed, before answers are completed and while the lawsuit is pending. When deciding when to sue, when to settle and when to charge ahead, approach with good information.
Why did my colleagues in the Justice Department win nearly every case they tried? In fact, recent statistics show that assistant U.S. attorneys win almost 95 percent of their cases.
Many would argue it's because they have so many resources: subpoenas, grand juries, search warrants and hundreds of federal agents doing their bidding. Others say it's because the feds get to pick and choose what cases they bring. All are correct to an extent.
But the main reason is that many lawyers in the Justice Department seek the facts before making critical decisions. They conduct surveillance, review records and interview dozens of knowledgeable people before making decisions.
Business owners don't have a dozen FBI agents on the payroll, but they do have other investigative resources. Consider the following:
- Database firms sell valuable information about ownership of assets of potential defendants, as well as litigation histories, bankruptcies, SEC violations and corporation affiliations.
- Employees within your own business can possess valuable information about business dealings. But keep in mind that management teams often aren't as informed as those in the trenches.
- Former employees of other firms can supply a wealth of information.
- Public records are available from county courts, federal courts and myriad state and federal agencies. These can inform about property ownership, fraudulent activity, bad business dealings, environmental violations, etc.
- Media reports can provide substantive and impeaching evidence. Much like political candidates defeated by their prior positions, opponents in lawsuits can be held accountable for prior statements.
Whatever you do, don't rely on the discovery system to produce the information needed to decide whether to settle or propel ahead to trial. In many cases, discovery simply doesn't work.
One flaw is that traditional discovery relies to a great extent on the voluntary conduct of your opponents and others. (Unless challenged, deponents can and do lie, withhold documents and otherwise act to circumvent the rules.)
Conducting an investigation, independent of legal discovery, is an effective way of following a business model for conducting litigation. Consider, for example, how firms rent office space. They first get the facts -- a firm representative sees the space, considers its price, layout and lease terms, then determines whether it's the right opportunity.
It would be foolhardy in all but the most extreme cases for a business to rent 100,000 square feet of office space for $30 a square foot without first seeing the space, reviewing the proposed terms of the lease, then beginning a negotiation process. It should be equally unreasonable to file lawsuits, or respond to suits, without first educating yourself about the facts.
With a better understanding of the facts, you'll create a better -- and more productive -- working relationship with your law firm. You'll also make better decisions. And strategies will change.
In the end, if the facts and the law are with you, charge ahead. Otherwise, think twice. Jeff Klink is CEO of KlinkFarley, a Pittsburgh-based business investigation and intelligence firm serving corporations, technology companies and their counsel. Reach him at (412) 201-9123 or via e-mail at Pittsburgh@klinkfarley.com.