Brad Scott, owner of Brad’s Auto Body in Clovis, Calif., hired a new bookkeeper in 2004. She was involved with the local church and the pastor spoke highly of her, so Scott brought her in to oversee the shop’s financials.
Scott began to witness his profit margins shrinking month after month. He noticed discrepancies of a few thousand dollars here and there, but couldn’t figure out what was going wrong. Three-and-a-half years after hiring the new bookkeeper, Scott was missing a whopping $909,600. The shop’s annual revenue is only $2.2 million.
“I looked hard at my financial data for four months with my accountant, attorney and paint representative,” Scott says. “Money was obviously going out the door somehow, but none of us could figure out why that was happening.”
The source of the problem finally came to light when Scott’s bank called to report suspicious activity on his account. Someone had credited $1,000 onto a credit card from Scott’s account. The bank representative said that’s often indicative of an inside job.
It turns out that Scott’s bookkeeper created false invoices from vendors, and wrote the checks out to herself. She also made payments on her American Express bill with Scott’s checks.
The bookkeeper spent all the money, which Scott says he’ll likely never get back. Worse yet, Scott found out during the trial that he could have avoided the troubling experience altogether by checking up on that woman before putting her to work.
She embezzled from her previous employer, too, and drove that company out of business. In fact, she had a court-ordered monitoring device attached to her leg right up until her first workday at Brad’s Auto Body.
With a simple criminal background check, or even just a call to the previous employer, that roughly $1 million would still be sitting in Scott’s account.
“Background investigations should be mandatory for all business owners,” Scott says. “It’s well worth your money.”
Sure, pre-employment background screening is one more step to add to your hiring process. But spending a little more time up front before you put someone to work—can help you avoid a tough predicament like Scott’s. Just as importantly, checking up on your employees’ personal, work and educational history is a critical strategy in helping you obtain a highly credible and trustworthy staff.
Find Credibility, Avoid Liability
It’s not uncommon for job applicants to be great interviewees who can’t deliver once they get on the job, says Daren Fristoe, president of The Fristoe Group Inc., a human resources firm that provides services to all of the Sherwin-Williams A-PLUS Network of shops. A bad hire can cost you money, time and productivity, and sour the culture of your business.
Michael Bragulla, CEO of Hartford, Conn.-based Integrated Benefit Partners, agrees. About 50 percent of new hires don’t work out, and 30 percent of U.S. businesses fail due to poor hiring tactics, he says.
Background screenings can help. Past legal or work problems can be indicators of how an employee will perform for you. Screening your employees also alleviates the pressure of having to rely on your own judgment in making a hiring decision. Unfortunately, that’s exactly what many business owners do, says Jim Webber, a human resources professional, employment law attorney, and owner of Jim Webber Training-Consulting-Investigations.
“Many people say they don’t need to do employee background screenings because they think they are great judges of character, and are capable of evaluating an employee’s quality during the interview process,” Webber says. “Then they’re constantly surprised when some employees turn out to be huge disasters.”
Background screenings can help you avoid legal problems, too. That’s because the Occupational Safety and Health Administration (OSHA) requires businesses to provide a safe environment for their employees.
Business owners can be held responsible for putting people at risk if an employee inflicts physical or emotional harm on customers or other employees, Webber says, if some degree of pre-employment screening could have avoided the situation.
And legal fees can be deadly for small businesses. Scott spent $200,000 to prosecute his bookkeeper in court.
Bragulla says you can check with the department of labor to understand hiring laws in your state.
Screening Options
Scott’s bad experience with his bookkeeper caused him to implement a thorough process for employee background checks. He now works with an agent from the Federal Bureau of Investigations (FBI) who does freelance investigations on the side.
“He does every kind of background check there is,” Scott says. “He even follows people around to get a feel for their behaviors.” Scott says a service like this typically costs about $500.
Clearly, most shop owners don’t need to hire a private investigator. But you do need to have a process in place to check up on workers you want to hire. With so many types of background checks out there, which ones are really necessary for shop owners to engage in?
The type of background check you should conduct depends on the position you’re hiring for, Webber says. “The more critical the position, the more extensive check you should do.”
— Daren Fristoe, president, The Fristoe Group Inc.
Bragulla suggests that shop owners do the following types of screenings:
• Criminal. One out of every 20 people will serve prison time during their life, Bragulla says.
A past criminal violation doesn’t necessarily mean someone will be a bad employee, Webber says. The more recently a problem occurred, and the more relevant the problem is to your particular workplace, the more important that information should be in your hiring decision.
• Credit. The average business in the U.S. loses about 6 percent of annual revenue to fraud, Bragulla says. Running a credit history can be a good gauge of an employee’s level of responsibility. If they’re not reliable in paying their own bills, they may not be reliable for your business.
Fristoe suggests only doing credit checks on employees who will have access to money and financial data. “If someone has bad credit or history of bankruptcy, they may not be a good fit for any position that deals with cash or fiduciary responsibility.”
You must have an employee sign an approved release_notes of information form before you conduct a credit check.
• Motor vehicle record. Collision shops constantly have employees moving cars around. This type of check is the only way to ensure employees have a valid driver’s license and a clean driving record, Fristoe says.
• Education certifications. Fifty-three percent of job applicants falsify or embellish information on their applications, Bragulla says. A simple phone call to an institution allows employers to verify that an applicant earned a degree or certification there.
Scott says he regularly gets job applicants who lie about their industry-related certifications, most notably, I-CAR training. Shop owners can go to the I-CAR website, i-car.com, to verify the training an applicant has.
• References. Always call an applicant’s professional references to verify where they worked in the past, what their duties were, and what their performance was like. It will help shop owners understand the applicant’s history of work stability, Fristoe says, adding that managers should focus on how recently and how frequently the employee used the skills in question.
Make sure you don’t ask references any questions that could be deemed discriminatory, Webber cautions. Don’t ask questions related to an employee’s race, gender, pregnancy history, disability, sexual orientation, national origin or religion, for example. It’s illegal to make hiring decisions based on those facts, and you could be slapped with a discrimination lawsuit if it appears as though you did.
Business owners do need to get permission from employees to run these types of background screenings, Fristoe says. The easiest way to ask employees for approval is to include this in your shop’s job application package as a signature item.
Resources to Help
Pre-employment background screenings vary in cost depending on how much information you want to dig up. There are several third-party companies that can handle this for you in less than 24 hours, Fristoe says.
Here are a few companies Bragulla and Fristoe recommend:
• Alcops
Keep in mind that applicants should not be automatically disqualified from employment just because something pops up on a background check. “But it should initiate a series of questions for you to ask an applicant before they are officially hired,” Bragulla says.
A Better Culture
Scott says implementing background screenings has allowed him to build a more credible and trustworthy staff.
A man recently applied for a body technician position at Brad’s Auto Body. Learning from the past, Scott called the applicant’s previous employer who told him the applicant drinks too much and often doesn’t show up for work because he constantly seems to be sitting in jail.
When confronted, the applicant admitted to having four driving under the influence (DUI) arrests on his criminal record, and that he didn’t even have a valid driver’s license as a result.
People like that could have a detrimental impact on your work environment, Fristoe says. Weeding out those bad seeds will make you more likely to find the trustworthy employees who will be better matches for your workplace.
And that can lead to improved employee retention, employee satisfaction, productivity, and most importantly, a better culture, Webber says. “It just makes for a much happier and healthier place to work.”
